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Panama Economic Implications of the 1977 Treaties
The 1977 treaties and the related documents, which became
effective October 1, 1979, signaled important changes for the
Panamanian economy. The most obvious benefit was in receipts from
operation of the canal. Under the terms of the treaties, the
government of Panama receives from the Panama Canal Commission: a
fixed annuity of US$10 million; an annual payment of US$10 million
for public services such as police and fire protection, garbage
collection, and street maintenance, which Panama provides in the
canal operating areas and housing areas covered by the treaties; a
variable payment of US$0.30 per
Panama Canal net ton (see Glossary)
for each vessel transiting the canal (in 1986 this amounted to
US$57.6 million); and an additional annuity, not to exceed US$10
million, to be paid only when canal operations produce a profit. In
1986, for example, US$1.1 million was paid; in 1984, on the other
hand, canal operations registered a US$4.1-million loss, and no
payment was made.
The United States controls the tolls because of its majority
(five members) on the nine-member Panama Canal Commission, which
will operate the canal until December 31, 1999
(see The 1977 Treaties and Associated Agreements
, ch. 1). In order to encourage
use of the canal, tolls have remained relatively low, although high
enough to cover costs. (Under the United States law that
implemented the canal treaties, the canal must be operated on a
self-sustaining basis.) Maximum use of the canal is in Panama's
interest, because its annuity depends on transit tonnage. Tolls
were raised by nearly 30 percent in October 1979 and by an
additional 9.8 percent in March 1983.
Under treaty provisions, the canal administrator is an American
and his deputy is a Panamanian. In 1989, a Panamanian will become
administrator and the deputy an American. In order to prepare
Panama to assume operation of the canal in the year 2000, the
Panama Canal Commission has encouraged the hiring and training of
Panamanians for all types of canal-related work. The commission's
work force was approximately 82 percent Panamanian in 1987.
According to the treaty provisions, Panama also received
substantial assets in the former Canal Zone, including three large
ports (Colón, Cristóbal, and Balboa), the railroad across the
isthmus, two airfields, 147,700 hectares of land (including
housing, utility systems, and streets), a dry dock, large
maintenance and repair shops, and service facilities formerly
operated by the Panama Canal Company
(see
fig. 3). Ownership and
operation of the canal ports of Balboa and Cristóbal were
transferred to Panama in October 1979, but a portion of these port
facilities will continue to be used by the Panama Canal Commission
for canal operations until the year 2000. Panama also received
housing that belonged to the former Panama Canal Company, but will
continue to supply housing to the Panama Canal Commission and the
United States Department of Defense in decreasing amounts until
2000. Some assets and functions of the government of the former
Canal Zone, such as schools and hospitals, are maintained by the
United States Department of Defense. The Panama Canal Commission
continues to operate utilities in the zone areas that it received
under the treaty.
The 1977 treaties had important provisions concerning
employment and wages. Panamanians would gradually replace United
States citizens in the operation of the canal. Perhaps most
important was the provision that former Canal Zone employees who
became employees in Panama under the treaties were guaranteed wages
and conditions similar to those that their position in the zone had
commanded. In 1979 a zone employee received about twice the wages
of someone employed in a similar position
elsewhere in the economy. The canal areas will therefore continue
to exert a pull on other domestic wages, making the country less
competitive internationally.
Data as of December 1987
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