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Panama - Acknowledgments


The authors wish to acknowledge the contributions of the following individuals who, under the chairmanship of Richard F. Nyrop, wrote the 1980 edition of Panama: A Country Study. The authors of the 1980 edition were as follows: Jan Knippers Black, "Historical Setting"; Richard F. Nyrop, "The Society and Its Environment"; Darrel R. Eglin, "The Economy"; James D. Rudolph, "Government and Politics"; and Eugene K. Keefe, "National Security." Their work provided the organization and structure of much of the present volume, as well as substantial portions of the text.

The authors are grateful to individuals in various agencies of the United States government and in international and private institutions who gave of their time, research materials, and special knowledge to provide information and perspective. Officials at the World Bank were especially helpful in providing economic data. Similarly, officials of the United States Department of Defense, both in Washington and Panama, supplied up-to-date information on Panama's defense forces.

The authors also wish to thank those who contributed directly to the preparation of the manuscript. These include Richard F. Nyrop, who reviewed all drafts and served as liaison with the sponsoring agency; Barbara Auerbach, Ruth Nieland, Michael Pleasants, and Gage Ricard, who edited the chapters; Martha E. Hopkins, who managed editing and production; and Barbara Edgerton, Janie L. Gilchrist, Monica Shimmin, and Izella Watson, who did the word processing. Catherine Schwartzstein performed the final prepublication editorial review, and Margaret Varghese, of Communicators Connections compiled the index. Diann Johnson of the Library of Congress Printing and Processing Section performed phototypesetting, under the supervision of Peggy Pixley.

David P. Cabitto, who was assisted by Sandra K. Cotugno and Kimberly A. Lord, provided invaluable graphics support. Susan M. Lender reviewed the map drafts, which were prepared by Harriett R. Blood, Kimberly A. Lord, and Greenhorne and O'Mara, Inc. Paulette Marshall of the Library of Congress deserves special thanks for designing the illustrations for the book's cover and the title page of each chapter.

The authors also would like to thank several individuals who provided research support. Sisto Flores supplied information on ranks and insignia, Joan C. Barch wrote the section on geography, and Richard A. Haggerty supplied a variety of information for inclusion in both the text and the bibliography.

Finally, the authors acknowledge the generosity of the individuals and public and private agencies who allowed their photographs to be used in this study. We are indebted especially to those who contributed original work not previously published.


Panama - Preface


Like its predecessor, this study is an attempt to treat in a compact and objective manner the dominant social, political, economic, and military aspects of contemporary Panama. Sources of information included scholarly books, journals, and monographs, official reports of governments and international organizations, numerous periodicals, and interviews with individuals having special competence in Panamanian and Latin American affairs. Measurements are given in the metric system. The Bibliography lists published sources thought to be helpful to the reader.

Although there are numerous variations, Spanish surnames generally consist of two parts: the patrilineal name followed by the matrilineal. In the instance of Omar Torrijos Herrera, for example, Torrijos is his father's name, Herrera, his mother's maiden name. In non-formal use, the matrilineal name is often dropped. Thus, after the first mention, we have usually referred simply to Torrijos. A minority of individuals use only the patrilineal name.


Panama - History


The Conquest

Estimates vary greatly of the number of Indians who inhabited the isthmus when the Spanish explorers arrived. By some accounts, the population was considerably greater than that of contemporary Panama. Some Panamanian historians have suggested that there might have been a population of 500,000 Indians from some sixty "tribes," but other researchers have concluded that the Cuna alone numbered some 750,000.

Besides the Cuna, which constituted by far the largest group in the area, two other major groups, the Guaym� and the Choc�, have been identified by ethnologists. The Guaym�, of the highlands near the Costa Rican border, are believed to be related to Indians of the Nahuatlan and Mayan nations of Mexico and Central America. The Choc� on the Pacific side of Dari�n Province appear to be related to the Chibcha of Colombia.

Although the Cuna, now found mostly in the Comarca de San Blas, an indigenous territory or reserve considered part of Col�n Province for some official purposes, have been categorized as belonging to the Caribbean culture, their origin continues to be a subject of speculation. Various ethnologists have indicated the possibility of a linguistic connection between the name Cuna and certain Arawak and Carib tribal names. The possibility of cultural links with the Andean Indians has been postulated, and some scholars have noted linguistic and other affinities with the Chibcha. The implication in terms of settlement patterns is that the great valleys of Colombia, which trend toward the isthmus, determined migration in that direction.

Lines of affiliation have also been traced to the Cueva and Coiba tribes, although some anthropologists suggest that the Cuna might belong to a largely extinct linguistic group. Some Cuna believe themselves to be of Carib stock, while others trace their origin to creation by the god Olokkuppilele at Mount Tacarcuna, west of the mouth of the R�o Atrato in Colombia.

Among all three Indian groups--the Cuna, Guaym�, and Choc�-- land was communally owned and farmed. In addition to hunting and fishing, the Indians raised corn, cotton, cacao, various root crops and other vegetables, and fruits. They lived then--as many still do--in circular thatched huts and slept in hammocks. Villages specialized in producing certain goods, and traders moved among them along the rivers and coastal waters in dugout canoes. The Indians were skillful potters, stonecutters, goldsmiths, and silversmiths. The ornaments they wore, including breastplates and earrings of beaten gold, reinforced the Spanish myth of El Dorado, the city of gold.

Rodrigo de Bastidas, a wealthy notary public from Seville, was the first of many Spanish explorers to reach the isthmus. Sailing westward from Venezuela in 1501 in search of gold, he explored some 150 kilometers of the coastal area before heading for the West Indies. A year later, Christopher Columbus, on his fourth voyage to the New World, touched several points on the isthmus. One was a horseshoe-shaped harbor that he named Puerto Bello (beautiful port), later renamed Portobelo.

Vasco N��ez de Balboa, a member of Bastidas's crew, had settled in Hispaniola (present-day Dominican Republic and Haiti) but stowed away on a voyage to Panama in 1510 to escape his creditors. At that time, about 800 Spaniards lived on the isthmus, but soon the many jungle perils, doubtless including malaria and yellow fever, had killed all but 60 of them. Finally, the settlers at Antigua del Dari�n (Antigua), the first city to be duly constituted by the Spanish crown, deposed the crown's representative and elected Balboa and Martin Zamudio co-mayors.

Balboa proved to be a good administrator. He insisted that the settlers plant crops rather than depend solely on supply ships, and Antigua became a prosperous community. Like other conquistadors, Balboa led raids on Indian settlements, but unlike most, he proceeded to befriend the conquered tribes. He took the daughter of a chief as his lifelong mistress.

On September 1, 1513, Balboa set out with 190 Spaniards--among them Francisco Pizarro, who later conquered the Inca Empire in Peru--a pack of dogs, and 1,000 Indian slaves. After twenty-five days of hacking their way through the jungle, the party gazed on the vast expanse of the Pacific Ocean. Balboa, clad in full armor, waded into the water and claimed the sea and all the shores on which it washed for his God and his king.

Balboa returned to Antigua in January 1514 with all 190 soldiers and with cotton cloth, pearls, and 40,000 pesos in gold. Meanwhile, Balboa's enemies had denounced him in the Spanish court, and King Ferdinand appointed a new governor for the colony, then known as Castilla del Oro. The new governor, Pedro Arias de Avila, who became known as "Pedrarias the Cruel," charged Balboa with treason. In 1517 Balboa was arrested, brought to the court of Pedrarias, and executed.

In 1519 Pedrarias moved his capital away from the debilitating climate and unfriendly Indians of the Dari�n to a fishing village on the Pacific coast (about four kilometers east of the present-day capital). The Indians called the village Panama, meaning "plenty of fish." In the same year, Nombre de Dios, a deserted early settlement , was resettled and until the end of the sixteenth century served as the Caribbean port for trans-isthmian traffic. A trail known as the Camino Real, or royal road, linked Panama and Nombre de Dios. Along this trail, traces of which can still be followed, gold from Peru was carried by muleback to Spanish galleons waiting on the Atlantic coast.

The increasing importance of the isthmus for transporting treasure and the delay and difficulties posed by the Camino Real inspired surveys ordered by the Spanish crown in the 1520s and 1530s to ascertain the feasibility of constructing a canal. The idea was finally abandoned in mid-century by King Philip II (1556- 98), who concluded that if God had wanted a canal there, He would have built one.

Pedrarias's governorship proved to be disastrous. Hundreds of Spaniards died of disease and starvation in their brocaded silk clothing; thousands of Indians were robbed, enslaved, and massacred. Thousands more of the Indians succumbed to European diseases to which they had no natural immunity. After the atrocities of Pedrarias, most of the Indians fled to remote areas to avoid the Spaniards.

The regulations for colonial administration set forth by the Spanish king's Council of the Indies decreed that the Indians were to be protected and converted to Christianity. The colonies, however, were far from the seat of ultimate responsibility, and few administrators were guided by the humane spirit of those regulations. The Roman Catholic Church, and particularly the Franciscan order, showed some concern for the welfare of the Indians, but on the whole, church efforts were inadequate to the situation.

The Indians, nevertheless, found one effective benefactor among their Spanish oppressors. Bartolom� de las Casas, the first priest ordained in the West Indies, was outraged by the persecution of the Indians. He freed his own slaves, returned to Spain, and persuaded the council to adopt stronger measures against enslaving the Indians. He made one suggestion that he later regretted--that Africans, whom the Spaniards considered less than human, be imported to replace the Indians as slaves.

In 1517 King Charles V (1516-56) granted a concession for exporting 4,000 African slaves to the Antilles. Thus the slave trade began and flourished for more than 200 years. Panama was a major distribution point for slaves headed elsewhere on the mainland. The supply of Indian labor had been depleted by the midsixteenth century, however, and Panama began to absorb many of the slaves. A large number of slaves on the isthmus escaped into the jungle. They became known as cimarrones (sing., cimarr�n), meaning wild or unruly, because they attacked travelers along the Camino Real. An official census of Panama City in 1610 listed 548 citizens, 303 women, 156 children, 146 mulattoes, 148 Antillean blacks, and 3,500 African slaves.

The Spanish Colony

The period of free, though licensed, exploration gave way to a period in which the king exercised royal control by appointing governors and their staffs. All were to be paid from crown revenues expected from the royal profits on the colony. The king's representative was responsible for ensuring such returns; he tracked all gold, pearls, and income from trade and conquest; he weighed out and safeguarded the king's share.

Governors had some summary powers of justice, but audiencias (courts) were also established. The first such audiencia, in Santo Domingo, Hispaniola, had jurisdiction over the whole area of conquest. As settlement spread, other audiencias were set up. By a decree of 1538, all Spanish territory from Nicaragua to Cape Horn was to be administered from an audiencia in Panama. This audiencia lasted only until 1543 because of the impossibility of exercising jurisdiction over so vast an area. A new Panamanian audiencia, with jurisdiction over an area more nearly coinciding with the territory of present-day Panama, was established in 1563. The viceroy's position was revived for the rich empires of Mexico and Peru. After 1567 Panama was attached to the Viceroyalty of Peru but retained its own audiencia.

Beginning early in the sixteenth century, Nombre de Dios in Panama, Vera Cruz in Mexico, and Cartagena in Colombia were the only three ports in Spanish America authorized by the crown to trade with the homeland. By the mid-1560s, the system became regularized, and two fleets sailed annually from Spain, one to Mexico, and the other to southern ports. These fleets would then rendezvous at Havana and return together to C�diz, Spain. In principle, this rigid system remained in effect until the eighteenth century. From the middle of the seventeenth century, however, as the strength and prosperity of Spain declined, annual visits became the exception.

Shipments of bullion and goods were to be delivered to Panama on the Pacific side for transport over the isthmus and return to Spain. Panama's own contribution to the loading of the fleet was relatively small. Gold production was never great, and little exportable surplus of agricultural and forest products was available. Nothing was manufactured; in fact, Spain discouraged the production of finished goods. The colony's prosperity, therefore, fluctuated with the volume of trade, made up largely of Peruvian shipments. When the Inca gold was exhausted, great quantities of silver mined in Peru replaced gold in trade for 150 years, supplemented eventually by sugar, cotton, wine, indigo, cinchona, vanilla, and cacao.

Except for traffic in African slaves, foreign trade was forbidden unless the goods passed through Spain. Africans were brought to the colonies on contract (asiento) by Portuguese, English, Dutch, and French slavers, who were forbidden to trade in any other commodities. Spanish efforts to retain their monopoly on the rich profits from trade with their colonies provided a challenge to the rising maritime nations of Europe. Intermittent maritime warfare resulted in the Caribbean and later in the Pacific. The first serious interference with trade came from the English.

From 1572 to 1597, Francis Drake was associated with most of the assaults on Panama. Drake's activities demonstrated the indefensibility of the open roadstead of Nombre de Dios. In 1597 the Atlantic terminus of the trans-isthmian route was moved to Portobelo, one of the best natural harbors anywhere on the Spanish Main (the mainland of Spanish America).

Despite raids on shipments and ports, the registered legal import of precious metals increased threefold between 1550 and 1600. Panama's prosperity was at its peak during the first part of the seventeenth century. This was the time of the famous ferias (fairs, or exchange markets) of Portobelo, where European merchandise could be purchased to supply the commerce of the whole west coast south of Nicaragua. When a feria ended, Portobelo would revert to its quiet existence as a small seaport and garrison town.

Panama City also flourished on the profits of trade. Following reconstruction after a serious fire in 1644, contemporary accounts credit Panama City with 1,400 residences "of all types" (probably including slave huts); most business places, religious houses, and substantial residences were rebuilt of stone. Panama City was considered, after Mexico City and Lima, the most beautiful and opulent settlement in the West Indies.

Interest in a canal project was revived early in the seventeenth century by Philip III of Spain (1598-1621). The Council of the Indies dissuaded the king, arguing that a canal would draw attack from other European nations--an indication of the decline of Spanish sea power.

During the first quarter of the seventeenth century, trade between Spain and the isthmus remained undisturbed. At the same time, England, France, and the Netherlands, one or all almost constantly at war with Spain, began seizing colonies in the Caribbean. Such footholds in the West Indies encouraged the development of the buccaneers--English, French, Dutch, and Portuguese adventurers who preyed on Spanish shipping and ports with the tacit or open support of their governments. Because of their numbers and the closeness of their bases, the buccaneers were more effective against Spanish trade than the English had been during the previous century.

The volume of registered precious metal arriving in Spain fell from its peak in 1600; by 1660 volume was less than the amount registered a century before. Depletion of Peruvian mines, an increase in smuggling, and the buccaneers were causes of the decline.

Henry Morgan, a buccaneer who had held Portobelo for ransom in 1668, returned to Panama with a stronger force at the end of 1670. On January 29, 1671, Morgan appeared at Panama City. With 1,400 men he defeated the garrison of 2,600 in pitched battle outside the city, which he then looted. The officials and citizens fled, some to the country and others to Peru, having loaded their ships with the most important church and government funds and treasure. Panama City was destroyed by fire, probably from blown up powder stores, although the looters were blamed. After 4 weeks, Morgan left with 175 mule loads of loot and 600 prisoners. Two years later, a new city was founded at the location of the present-day capital and was heavily fortified.

The buccaneer scourge rapidly declined after 1688 mainly because of changing European alliances. By this time Spain was chronically bankrupt; its population had fallen; and it suffered internal government mismanagement and corruption.

Influenced by buccaneer reports about the ease with which the isthmus could be crossed--which suggested the possibility of digging a canal--William Paterson, founder and ex-governor of the Bank of England, organized a Scottish company to establish a colony in the San Blas area. Paterson landed on the Caribbean coast of the Dari�n late in 1698 with about 1,200 persons. Although well received by the Indians (as was anyone not Spanish), the colonists were poorly prepared for life in the tropics with its attendant diseases. Their notion of trade goods--European clothing, wigs, and English Bibles--was of little interest to the Indians. These colonists gave up after six months, unknowingly passing at sea reinforcements totaling another 1,600 people. The Spanish reacted to these new arrivals by establishing a blockade from the sea. The English capitulated and left in April 1700, having lost many lives, mostly from malnutrition and disease.

In Spain Bourbon kings replaced the Hapsburgs in 1700, and some liberalization of trade was introduced. These measures were too late for Panama, however. Spain's desperate efforts to maintain its colonial trade monopoly had been self-defeating. Cheaper goods supplied by England, France, and the Netherlands were welcomed by colonial officials and private traders alike. Dealing in contraband increased to the detriment of official trade. Fewer merchants came to the Portobelo feria to pay Spain's inflated prices because the foreign suppliers furnished cheaper goods at any port at which they could slip by or bribe the coastal guards. The situation worsened; only five of the previously annual fleets were dispatched to Latin America between 1715 and 1736, a circumstance that increased contraband operations.

Panama's temporary loss of its independent audiencia, from 1718 to 1722, and the country's attachment to the Viceroyalty of Peru were probably engineered by powerful Peruvian merchants. They resented the venality of Panamanian officials and their ineffectiveness in suppressing the pirates (outlaws of no flag, as distinct from the buccaneers of the seventeenth century). Panama's weakness was further shown by its inability to protect itself against an invasion by the Miskito Indians of Nicaragua, who attacked from Laguna de Chiriqu�. Another Indian uprising in the valley of the R�o Tuira caused the whites to abandon the Dari�n.

The final blow to Panama's shrinking control of the transit trade between Latin America and Spain came before the mid- eighteenth century. As a provision of the Treaty of Utrecht at the end of the War of the Spanish Succession in 1713, Britain secured the right to supply African slaves to the Spanish colonies (4,800 a year for 30 years) and also to send 1 ship a year to Portobelo. The slave trade provision evidently satisfied both countries, but the trade in goods did not. Smuggling by British ships continued, and a highly organized contraband trade based in Jamaica--with the collusion of Panamanian merchants--nearly wiped out the legal trade. By 1739 the importance of the isthmus to Spain had seriously declined; Spain again suppressed Panama's autonomy by making the region part of the Viceroyalty of New Granada (encompassing present-day Colombia, Venezula, Ecuador, and Panama).

In the same year, war broke out between Britain and Spain. A British military force took Portobelo and destroyed it. Panamanian historians maintain that this attack diverted Spanish trade from the trans-isthmian route. The Seville-C�diz monopoly of colonial trade had been breached by royal decrees earlier in the century, and precedent was thus furnished for the merchants of the Latin American colonies to agitate for direct trade with Spain and for intercolonial trade. After 1740 the Pacific coast ports were permitted to trade directly via ships rounding Cape Horn, and the Portobelo feria was never held again.

Relaxing the trading laws benefited both Spanish America and Spain, but Panama's economic decline was serious. Transit trade had for so long furnished the profits on which Panama had flourished that there had been no incentive to develop any other economic base. After the suppression of its audiencia in 1751, Panama became a quiet backwater, a geographically isolated appendage of New Granada, scarcely self-supporting even in food and producing little for export.

In 1793, near the close of the colonial period, the first recorded attempt at a comprehensive census of the area that had comprised the Panamanian audiencia was made. Incomplete and doubtless omitting most of the Indian and cimarr�n populat- ion, specifically excluding soldiers and priests, the census recorded 71,888 inhabitants, 7,857 of whom lived in Panama City. Other principal towns had populations ranging from 2,000 to a little over 5,000.

Social hierarchy in the colony was rigid. The most prestigious and rewarding positions were reserved for the peninsulares, those actually born in Spain. Criollos, those of Spanish ancestry but born in the colonies, occupied secondary posts in government and trade. Mestizos, usually offspring of Hispanic fathers and Indian mothers, engaged in farming, retail trade, and the provision of services. African and Indian slaves constituted an underclass. To the extent possible, Indians who escaped enslavement avoided Hispanic society altogether.

The church held a special place in society. Priests accompanied every expedition and were always counselors to the temporal leaders. The first bishop on the mainland came with Pedrarias. The bishop's authority, received from the king, made him in effect a vice governor. The bishopric was moved from Dari�n to Panama City in 1521. The relationship between church and government in the colony was closer than in Spain. Both the Roman Catholic Church and the monastic orders gained great wealth through tithes and land acquisition.


Panama - Independence from Spain


Lacking communication except by sea, which the Spanish generally controlled, Panama remained aloof from the early efforts of the Spanish colonies to separate from Spain. Revolutionaries of other colonies, however, did not hesitate to use Panama's strategic potential as a pawn in revolutionary maneuvers. General Francisco Miranda of Venezuela, who had been attracting support for revolutionary activities as early as 1797, offered a canal concession to Britain in return for aid. Thomas Jefferson, while minister to France, also showed interest in a canal, but the isolationist policies of the new United States and the absorption of energies and capital in continental expansion prevented serious consideration.

Patriots from Cartagena attempted to take Portobelo in 1814 and again in 1819, and a naval effort from liberated Chile succeeded in capturing the island of Taboga in the Bay of Panama. Panama's first act of separation from Spain came without violence. When Sim�n Bol�var's victory at Boyac� on August 7, 1819, clinched the liberation of New Granada, the Spanish viceroy fled Colombia for Panama, where he ruled harshly until his death in 1821. His replacement in Panama, a liberal constitutionalist, permitted a free press and the formation of patriotic associations. Raising troops locally, he soon sailed for Ecuador, leaving a native Panamanian, Colonel Edwin F�brega, as acting governor.

Panama City immediately initiated plans to declare independence, but the city of Los Santos preempted the move by proclaiming freedom from Spain on November 10, 1821. This act precipitated a meeting in Panama City on November 28, which is celebrated as the official date of independence. Considerable discussion followed as to whether Panama should remain part of Colombia (then comprising both the present-day country and Venezuela) or unite with Peru. The bishop of Panama, a native Peruvian who realized the commercial ties that could be developed with his country, argued for the latter solution but was voted down. A third possible course of action, a union with Mexico proposed by emissaries of that country, was rejected.

Panama thus became part of Colombia, then governed under the 1821 Constitution of C�cuta, and was designated a department with two provinces, Panam� and Veraguas. With the addition of Ecuador to the liberated area, the whole country became known as Gran Colombia. Panama sent a force of 700 men to join Bol�var in Peru, where the war of liberation continued.

The termination of hostilities against the royalists in 1824 failed to bring tranquillity to Gran Colombia. The constitution that Bol�var had drafted for Bolivia was put forward by him to be adopted in Gran Colombia. The country was divided principally over the proposal that a president would serve for life. The president would not be responsible to the legislature and would have power to select his vice president. Other provisions, generally centralist in their tendencies, were repugnant to some, while a few desired a monarchy. Panama escaped armed violence over the constitutional question but joined other regions in petitioning Bol�var to assume dictatorial powers until a convention could meet. Panama announced its union with Gran Colombia as a "Hanseatic State," i.e., as an autonomous area with special trading privileges until the convention was held.

In 1826 Bol�var honored Panama when he chose it as the site for a congress of the recently liberated Spanish colonies. Many leaders of the revolutions in Latin America considered the establishment of a single government for the former Spanish colonies the natural follow-up to driving out the peninsulares. Both Jos� de San Martin and Miranda proposed creating a single vast monarchy ruled by an emperor descended from the Incas. Bol�var, however, was the one who made the most serious attempt to unite the Spanish American republics.

Although the league or confederation envisioned by Bol�var was to foster the blessings of liberty and justice, a primary purpose was to secure the independence of the former colonies from renewed attacks by Spain and its allies. In this endeavor Bol�var sought Britain's protection. He was reluctant to invite representatives of the United States, even as observers, to the congress of plenipotentiaries lest their collaboration compromise the league's position with the British. Furthermore, Bol�var felt that the neutrality of the United States in the war between Spain and its former colonies would make its representation inappropriate. In addition, slavery in the United States would be an obstacle in discussing the abolition of the African slave trade. Bol�var nevertheless acquiesced when the governments of Colombia, Mexico, and Central America invited the United States to send observers.

Despite the sweeping implications of the Monroe Doctrine, President John Quincy Adams--in deciding to send delegates to the Panama conference--was not disposed to obligate the United States to defend its southern neighbors. Adams instructed his delegates to refrain from participating in deliberations concerning regional security and to emphasize discussions of maritime neutrality and commerce. Nevertheless, many members of the United States Congress opposed participation under any conditions. By the time participation was approved, the delegation had no time to reach the conference. The British and Dutch sent unofficial representatives.

The Congress of Panama, which convened in June and adjourned in July of 1826, was attended by four American states--Mexico, Central America, Colombia, and Peru. The "Treaty of Union, League, and Perpetual Confederation" drawn up at that congress would have bound all parties to mutual defense and to the peaceful settlement of disputes. Furthermore, because some feared that monarchical elements sympathetic to Spain and its allies might regain control of one of the new republics, the treaty included a provision that if a member state substantially changed its form of government, it would be excluded from the confederation and could be readmitted only with the unanimous consent of all other members.

The treaty was ratified only by Colombia and never became effective. Bol�var, having made several futile attempts to establish lesser federations, declared shortly before his death in 1830 that "America is ungovernable; those who served the revolution have plowed the sea." Despite his disillusion, however, he did not see United States protection as a substitute for collective security arrangements among the Spanish-speaking states. In fact, he is credited with having said, "The United States seems destined by Providence to plague America with misery in the name of Liberty."

Three abortive attempts to separate the isthmus from Colombia occurred between 1830 and 1840. The first was undertaken by an acting governor of Panama who opposed the policies of the president, but the Panamanian leader reincorporated the department of Panama at the urging of Bol�var, then on his deathbed. The second attempted separation was the scheme of an unpopular dictator, who was soon deposed and executed. The third secession, a response to civil war in Colombia, was declared by a popular assembly, but reintegration took place a year later.


Panama - The California Gold Rush and the Railroad


Even before the United States acquired California after the Mexican War (1846-48), many heading for California used the isthmus crossing in preference to the long and dangerous wagon route across the vast plains and rugged mountain ranges. Discovery of gold in 1848 increased traffic greatly. In 1847 a group of New York financiers organized the Panama Railroad Company. This company secured an exclusive concession from Colombia allowing construction of a crossing, which might be by road, rail, river, or a combination. After surveys, a railroad was chosen, and a new contract so specifying was obtained in 1850. The railroad track followed generally the line of the present canal. The first through train from the Atlantic to the Pacific side ran on the completed track on January 28, 1855.

The gold rush traffic, even before the completion of the railroad, restored Panama's prosperity. Between 1848 and 1869, about 375,000 persons crossed the isthmus from the Atlantic to the Pacific, and 225,000 crossed in the opposite direction. Prices for food and services were greatly inflated, producing enormous profits from meals and lodging.

The railroad also created a new city and port at the Atlantic terminus of the line. The town that immediately sprang up to accommodate the railroad offices, warehouses, docks, and shops and to lodge both railroad workers and passengers soon became, and remains, the second largest in the country. United States citizens named it Aspinwall, after one of the founders of the Panama Railroad Company, but the Panamanians christened it Col�n, in honor of Columbus. Both names were used for many years, but because the Panamanians insisted that no such place as Aspinwall existed and refused to deliver mail so addressed, the name Col�n prevailed.

The gold rush and the railroad also brought the United States "Wild West" to the isthmus. The forty-niners tended to be an unruly lot, usually bored as they waited for a ship to California, frequently drunk, and often armed. Many also displayed prejudice verging on contempt for other races and cultures. The so-called Watermelon War of 1856, in which at least sixteen persons were killed, was the most serious clash of races and cultures of the period.

In 1869 the first transcontinental railroad was completed in the United States. This development reduced passenger and freight traffic across the isthmus and diminished the amount of gold and silver shipped east. During the height of the gold rush, however, from 1855 to 1858, only one-tenth of the ordinary commercial freight was destined for or originated in California. The balance concerned trade of the North Americans with Europe and Asia. The railroad company, because of its exceptionally high return on a capitalization that never exceeded US$7 million, paid a total of nearly US$38 million in dividends between 1853 and 1905. Panama received US$25,000 from Colombia's annuity and benefited from transient trade and some inflow of capital.


Panama - The Uncompleted French Canal


Throughout the nineteenth century, governments and private investors in the United States, Britain, and France intermittently displayed interest in building a canal across the Western Hemisphere. Several sites were considered, but from the start the ones in Nicaragua and Panama received the most serious attention. President Andrew Jackson sent Charles A. Biddle as his emissary in the 1830s to investigate both routes, but the project was aborted when Biddle abandoned his government mission and negotiated instead with Colombian capitalists for a private concession.

Nevertheless, Colombia continued to express interest in negotiating with the United States on building a canal. A treaty was signed in 1846 between the two countries. The treaty removed the existing restrictive tariffs and gave the United States and its citizens the right of free transit of persons and goods over any road or canal that might be constructed in the isthmus. In addition, the United States guaranteed the neutrality of the isthmus and Colombia's sovereignty over it, with a view to ensuring uninterrupted transit for the duration of the treaty, which was to be twenty years or as long thereafter as the parties gave no notice to revise it. Called the Bidlack-Mallarino Treaty of 1846, it was actually ratified and became effective in 1848.

Because the canal interests of Britain and the United States had continued to clash, particularly in Nicaragua, Britain and the United States sought to ease tensions by entering into the ClaytonBulwer Treaty of 1850. The governments agreed specifically that neither would acquire rights to or construct a Nicaraguan canal without the participation of the other. This general principle was extended to any canal or railroad across Central America, to include the Isthmus of Tehuantepec in Mexico and Panama. In effect, since neither government was then willing or able to begin a canal, the treaty was for the time an instrument of neutrality.

Colombia's attempt to attract canal interest finally brought French attention to bear on Panama. After several surveys, a concession of exclusive rights was obtained from Colombia, and a company was formed in 1879 to construct a sea-level canal generally along the railroad route. Ferdinand de Lesseps, of Suez Canal fame, headed the company. The terms of the concession required completion in twelve years, with the possibility of a six-year extension at Colombia's discretion. The lease was for ninety years and was transferable, but not to any foreign government. The company also purchased most of the stock of the Panama Railroad Company, which, however, continued to be managed by Americans.

A ceremonious commencement of work was staged by de Lesseps on January 1, 1880, but serious earth moving did not start until the next year. As work progressed, engineers judged that a sea-level canal was impracticable. De Lesseps, a promoter but not an engineer, could not be convinced until work had gone on for six years. Actual labor on a lock canal did not start until late in 1888, by which time the company was in serious financial difficulty. At the peak of its operations the company employed about 10,000 workers.

De Lesseps had to contend not only with enemies who hampered financing by spreading rumors of failure and dumping stocks and bonds on the market but also with venal French politicians and bureaucrats who demanded large bribes for approving the issue of securities. His efforts to get the French government to guarantee his bonds were blocked by the United States, on the grounds that such action would lead to government control in violation of the Monroe Doctrine. The end result in January 1889 was the appointment of a receiver to liquidate the company, whereupon all work stopped.

Despite the French company's disastrous financial experience, an estimated two-fifths of the excavation necessary for the eventual canal had been completed. Many headquarters and hospital buildings were finished. Some of the machinery left on the site was usable later, and the railroad had been maintained. Another legacy of the French company's bankruptcy was a large labor force, now unemployed, mostly Antillean blacks. More than half were repatriated, but thousands remained, many of whom eventually worked on the United States canal.


Panama - The Spillover from Colombia's Civil Strife


During the last half of the nineteenth century, violent clashes between the supporters of the Liberal and Conservative parties in Colombia left the isthmus' affairs in constant turmoil. Local selfgovernment for the department of Panama was extended when the Liberals were in power and withdrawn when the Conservatives prevailed. The Catholic Church was disestablished under the Liberals and reestablished under the Conservatives. The fortunes of local partisans rose and fell abruptly and often violently.

According to one estimate, the period witnessed forty administrations of the Panamanian department, fifty riots and rebellions, five attempted secessions, and thirteen interventions by the United States, acting under the provisions of the BidlackMallarino Treaty. Partisan clashes and foreign intervention exacerbated racial antagonisms and economic problems and intensified grievances against the central government of Colombia.

Between 1863 and 1886, the isthmus had twenty-six presidents. Coups d'�tat, rebellions, and violence were almost continuous, staged by troops of the central government, by local citizens against centrally imposed edicts, and by factions out of power. The chaotic conditions that had prevailed under the federalist constitution of 1863 culminated in the 1884 election of Rafael Nu�ez as president of Colombia, supported by a coalition of moderate Liberals and Conservatives. Nu�ez called all factions to participate in a new constituent assembly, but his request was met by an armed revolt of the radical Liberals.

Early in 1885, a revolt headed by a radical Liberal general and centered in Panama City developed into a three-way fight. Col�n was virtually destroyed. United States forces landed at the request of the Colombian government but were too late to save the city. Millions of dollars in claims were submitted by companies and citizens of the United States, France, and Britain, but Colombia successfully pleaded its lack of responsibility.

Additional United States naval forces occupied both Col�n and Panama City and guarded the railroad to ensure uninterrupted transit until Colombian forces landed to protect the railroad. The new constitution of 1886 established the Republic of Colombia as a unitary state; departments were distinctly subordinate to the central government, and Panama was singled out as subject to the direct authority of the government. The United States consul general reported that three-quarters of the Panamanians wanted independence from Colombia and would revolt if they could get arms and be sure of freedom from United States intervention.

Panama was drawn into Colombia's War of a Thousand Days (1899- 1902) by rebellious radical Liberals who had taken refuge in Nicaragua. Like the rest of Colombia, opinion in Panama was divided, and revolts in the southwest had hardly been suppressed when Liberals from Nicaragua invaded the Pacific coastal region and nearly succeeded in taking Panama City in mid-1900. The fortunes of war varied, and although a local armistice gave supporters of the Colombian government temporary security in the Panama-Col�n region, the rebels were in control throughout the isthmus. Meanwhile, by early 1902 the rebels had been defeated in most of Colombia proper. At that point, the Colombian government asked the United States to intercede and bring about an armistice in Panama, which was arranged aboard the U.S.S. Wisconsin in the Bay of Panama in 1902.

Throughout the period of turmoil, the United States had retained its interest in building a canal through either Nicaragua or Panama. An obstacle to this goal was overcome in December 1901 when the United States and Britain signed the Hay-Pauncefote Treaty. This treaty nullified the provisions of the Clayton-Bulwer Treaty of 1850 and signified British acceptance of a canal constructed solely by or under the auspices of the United States with guarantees of neutrality.


Panama - The 1903 Treaty and Qualified Independence


Naval operations during the Spanish-American War (1898-1901) served to convince President Theodore Roosevelt that the United States needed to control a canal somewhere in the Western Hemisphere. This interest culminated in the Spooner Bill of June 29, 1902, providing for a canal through the isthmus of Panama, and the Hay-Herr�n Treaty of January 22, 1903, under which Colombia gave consent to such a project in the form of a 100-year lease on an area 10 kilometers wide. This treaty, however, was not ratified in Bogot�, and the United States, determined to construct a canal across the isthmus, intensively encouraged the Panamanian separatist movement.

By July 1903, when the course of internal Colombian opposition to the Hay-Herr�n Treaty became obvious, a revolutionary junta had been created in Panama. Jos� Augustin Arango, an attorney for the Panama Railroad Company, headed the junta. Manuel Amador Guerrero and Carlos C. Arosemena served on the junta from the start, and five other members, all from prominent Panamanian families, were added. Arango was considered the brains of the revolution, and Amador was the junta's active leader.

With financial assistance arranged by Philippe Bunau-Varilla, a French national representing the interests of de Lesseps's company, the native Panamanian leaders conspired to take advantage of United States interest in a new regime on the isthmus. In October and November 1903, the revolutionary junta, with the protection of United States naval forces, carried out a successful uprising against the Colombian government. Acting, paradoxically, under the Bidlack-Mallarino Treaty of 1846 between the United States and Colombia--which provided that United States forces could intervene in the event of disorder on the isthmus to guarantee Colombian sovereignty and open transit across the isthmus --the United States prevented a Colombian force from moving across the isthmus to Panama City to suppress the insurrection.

President Roosevelt recognized the new Panamanian junta as the de facto government on November 6, 1903; de jure recognition came on November 13. Five days later Bunau-Varilla, as the diplomatic representative of Panama (a role he had purchased through financial assistance to the rebels) concluded the Isthmian Canal Convention with Secretary of State John Hay in Washington. Bunau-Varilla had not lived in Panama for seventeen years before the incident, and he never returned. Nevertheless, while residing in the Waldorf-Astoria Hotel in New York City, he wrote the Panamanian declaration of independence and constitution and designed the Panamanian flag. Isthmian patriots particularly resented the haste with which BunauVarilla concluded the treaty, an effort partially designed to preclude any objections an arriving Panamanian delegation might raise. Nonetheless, the Panamanians, having no apparent alternative, ratified the treaty on December 2, and approval by the United States Senate came on February 23, 1904.

The rights granted to the United States in the so-called HayBunau -Varilla Treaty were extensive. They included a grant "in perpetuity of the use, occupation, and control" of a sixteenkilometer -wide strip of territory and extensions of three nautical miles into the sea from each terminal "for the construction, maintenance, operation, sanitation, and protection" of an isthmian canal.

Furthermore, the United States was entitled to acquire additional areas of land or water necessary for canal operations and held the option of exercising eminent domain in Panama City. Within this territory Washington gained "all the rights, power, and authority . . . which the United States would possess and exercise if it were the sovereign . . . to the entire exclusion" of Panama.

The Republic of Panama became a de facto protectorate of the larger country through two provisions whereby the United States guaranteed the independence of Panama and received in return the right to intervene in Panama's domestic affairs. For the rights it obtained, the United States was to pay the sum of US$10 million and an annuity, beginning 9 years after ratification, of US$250,000 in gold coin. The United States also purchased the rights and properties of the French canal company for US$40 million.

Colombia was the harshest critic of United States policy at the time. A reconciliatory treaty with the United States providing an indemnity of US$25 million was finally concluded between these two countries in 1921. Ironically, however, friction resulting from the events of 1903 was greatest between the United States and Panama. Major disagreements arose concerning the rights granted to the United States by the treaty of 1903 and the Panamanian constitution of 1904. The United States government subsequently interpreted these rights to mean that the United States could exercise complete sovereignty over all matters in the Canal Zone. Panama, although admitting that the clauses were vague and obscure, later held that the original concession of authority related only to the construction, operation, and defense of the canal and that rights and privileges not necessary to these functions had never been relinquished.


Panama - Organizing the New Republic


The provisional governing junta selected when independence was declared governed the new state until a constitution was adopted in 1904. Under its terms, Amador became Panama's first president.

The constitution was modeled, for the most part, after that of the United States, calling for separation of powers and direct elections for the presidency and the legislature, the National Assembly. The assembly, however, elected three persons to stand in the line of succession to the presidency. This provision remained in effect until 1946, when a new constitution provided for direct election of the vice president. The new republic was unitary; municipalities were to elect their own officials, but provincial authorities were to be appointed by the central government. The most controversial provision of the constitution was that which gave the United States the right to intervene to guarantee Panamanian sovereignty and to preserve order.

A two-party system of Liberals and Conservatives was inherited from Colombia, but the party labels had even less precise or ideological meaning in Panama than they had in the larger country. By the early 1920s, most of the Conservative leaders of the independence generation had died without leaving political heirs. Thus, cleavages in the Liberal Party led to a new system of personalistic parties in shifting coalitions, none of which enjoyed a mass base. Politics remained the exclusive preserve of the oligarchy, which tended to be composed of a few wealthy, white families.

Having successfully severed their ties with Colombia, the secessionists of Panama's central government were soon faced with a secessionist problem of their own. The Cuna of the San Blas Islands were unwilling to accept the authority of Panama, just as they had been unwilling to accept the authority of Colombia or Spain. The Panamanian government exercised no administrative control over the islands until 1915, when a departmental government was established; its main office was in El Porvenir. At that time, forces of the Colonial Police, composed of blacks, were stationed on several islands. Their presence, along with a number of other factors, led to a revolt in 1925.

In 1903 on the island of Nargan�, Charlie Robinson was elected chief. Having spent many years on a West Indian ship, he began a "civilizing" program. His cause was later taken up by a number of young men who had been educated in the cities on the mainland. These Young Turks advocated forcibly removing nose rings, substituting dresses for molas (see Glossary), and establishing dance halls like those in the cities. They were actively supported by the police, who arrested men who did not send their daughters to the dance hall; the police also allegedly raped some of the Indian women. By 1925 hatred for these modernizers and for the police was intense throughout the San Blas Islands.

The situation was further complicated by the factionalism that resulted when Panama separated from Colombia. The leader of one of these factions, Simral Coleman, with the help of a sympathetic American explorer, Richard Marsh, drew up a "declaration of independence" for the Cuna, and on February 25, 1925, the rebellion was underway. During the course of the rebellion, about twenty members of the police were killed. A few days later a United States cruiser appeared; with United States diplomatic and naval officials serving as intermediaries, a peace treaty was concluded. The most important outcome of this rebellion against Panama was a treaty that in effect recognized San Blas as a semiautonomous territory.


Panama - Building the Canal


When the United States canal builders arrived in 1904 to begin their momentous task, Panama City and Col�n were both small, squalid towns. A single railroad stretched between the towns, running alongside the muddy scars of the abortive French effort. The new builders were haunted by the ghosts of de Lesseps's failure and of the workers, some 25,000 of whom had died on the project. These new builders were able, however, to learn from de Lesseps's mistakes and to build on the foundations of the previous engineering. The most formidable task that the North Americans faced was that of ridding the area of deadly mosquitoes.

After a couple of false starts under a civilian commission, President Roosevelt turned the project over to the United States Army Corps of Engineers, guided by Colonel George Washington Goethals. Colonel William Crawford Gorgas was placed in charge of sanitation. In addition to the major killers--malaria and yellow fever--smallpox, typhoid, dysentery, and intestinal parasites threatened the newcomers.

Because the mosquito carrying yellow fever was found in urban areas, Gorgas concentrated his main efforts on the terminal cities. "Gorgas gangs" dug ditches to drain standing water and sprayed puddles with a film of oil. They screened and fumigated buildings, even invading churches to clean out the fonts of holy water. They installed a pure water supply and a modern system of sewage disposal. Goethals reportedly told Gorgas that every mosquito killed was costing the United States US$10. "I know, Colonel," Gorgas reportedly replied, "but what if one of those ten-dollar mosquitoes were to bite you?"

Gorgas's work is credited with saving at least 71,000 lives and some 40 million days of sickness. The cleaner, safer conditions enabled the canal diggers to attract a labor force. By 1913 approximately 65,000 men were on the payroll. Most were West Indians, although some 12,000 workers were recruited from southern Europe. Five thousand United States citizens filled the administrative, professional, and supervisory jobs. To provide these men with the comforts and amenities to which they were accustomed, a paternalistic community was organized in the Canal Zone.

The most challenging tasks involved in the actual digging of the canal were cutting through the mountain ridge at Culebra; building a huge dam at Gat�n to trap the R�o Chagres and form an artificial lake; and building three double sets of locks--Gatun Locks, Pedro Miguel Locks, and Miraflores Locks--to raise the ships to the lake, almost twenty-six meters above sea level, and then lower them. On August 15, 1914, the first ship made a complete passage through the canal.

By the time the canal project was completed, its economic impact had created a new middle class. In addition, new forms of discrimination occurred. Panamanian society had become segregated not only by class but by race and national origin as well. Furthermore, United States commercial competition and political intervention had already begun to generate resentment among Panamanians.


Panama - United States Intervention


In the very first year of the Hay-Bunau-Varilla Treaty, dissension had already arisen over the sovereignty issue. Acting on an understanding of its rights, the United States had applied special regulations to maritime traffic at the ports of entry to the canal and had established its own customs, tariffs, and postal services in the zone. These measures were opposed by the Panamanian government.

Mounting friction finally led Roosevelt to dispatch Secretary of War William Howard Taft to Panama in November 1904. His visit resulted in a compromise agreement, whereby the United States retained control of the ports of Anc�n and Crist�bal, but their facilities might be used by any ships entering Panama City and Col�n. The agreement also involved a reciprocal reduction of tariffs and the free passage of persons and goods from the Canal Zone into the republic. Compromises were reached in other areas, and both sides emerged with most of their grievances blunted if not wholly resolved.

Before the first year of independence had passed, the intervention issue also complicated relations. Threats to constitutional government in the republic by a Panamanian military leader, General Est�ban Huertas, had resulted, at the suggestion of the United States diplomatic mission, in disbanding the Panamanian army in 1904. The army was replaced by the National Police, whose mission was to carry out ordinary police work. By 1920 the United States had intervened four times in the civil life of the republic. These interventions involved little military conflict and were, with one exception, at the request of one Panamanian faction or another.

The internal dynamics of Panamanian politics encouraged appeals to the United States by any currently disgruntled faction for intervention to secure its allegedly infringed rights. United States diplomatic personnel in Panama also served as advisers to Panamanian officials, a policy resented by nationalists. In 1921 the issue of intervention was formally raised by the republic's government. When asked for a definitive, written interpretation of the pertinent treaty clauses, Secretary of State Charles Evans Hughes pointed to inherent difficulties and explained that the main objectives of the United States were to act against any threat to the Canal Zone or the lives and holdings of non-Panamanians in the two major cities.

Actual intervention took several forms. United States officials supervised elections at the request of incumbent governments. To protect lives of United States citizens and property in Chiriqu� Province, an occupation force was stationed there for two years over the protests of Panamanians who contended that the right of occupation could apply only to the two major cities. United States involvement in the 1925 rent riots in Panama City was also widely resented. After violent disturbances during October, and at the request of the Panamanian government, 600 troops with fixed bayonets dispersed mobs threatening to seize the city.

At the end of the 1920s, traditional United States policy toward intervention was revised. In 1928 Secretary of State Frank B. Kellogg reiterated his government's refusal to countenance illegal changes of government. In the same year, however, Washington declined to intervene during the national elections that placed Florencio H. Arosemena in office. The Arosemena government was noted for its corruption. But when a coup d'�tat was undertaken to unseat Arosemena, the United States once again declined to intervene. Though no official pronouncement of a shift in policy had been made, the 1931 coup d'�tat--the first successful one in the republic's history--marked a watershed in the history of United States intervention.

Meanwhile, popular sentiment on both sides calling for revisions to the treaty had resulted in the Kellogg-Alfaro Treaty of 1925. The United States in this instrument agreed to restrictions on private commercial operations in the Canal Zone and also agreed to a tightening of the regulations pertaining to the official commissaries. At the same time, however, the United States gained several concessions involving security. Panama agreed to automatic participation in any war involving the United States and to United States supervision and control of military operations within the republic. These and other clauses aroused strong opposition and, amid considerable tumult, the National Assembly on January 26, 1927, refused to consider the draft treaty.

The abortive Kellogg-Alfaro Treaty involved the two countries in a critical incident with the League of Nations. During the fall of 1927, the League Assembly insisted that Panama could not legally participate in the proposed arrangement with the United States. The assembly argued that an automatic declaration of war would violate Panama's obligations under the League Covenant to wait three months for an arbitral decision on any dispute before resorting to war. The discussion was largely academic inasmuch as the treaty had already been effectively rejected, but Panama proposed that the dispute over sovereignty in the Canal Zone be submitted to international arbitration. The United States denied that any issue needed arbitration.

A New Accommodation

In the late 1920s, United States policymakers noted that nationalist aspirations in Latin America were not producing desired results. United States occupation of the Dominican Republic, Haiti, and Nicaragua had not spawned exemplary political systems, nor had widespread intervention resulted in a receptive attitude toward United States trade and investments. As the subversive activities of Latin American Nazi and Fascist sympathizers gained momentum in the 1930s, the United States became concerned about the need for hemispheric solidarity.

The gradual reversal of United States policy was heralded in 1928 when the Clark Memorandum was issued, formally disavowing the Roosevelt Corollary to the Monroe Doctrine. In his inaugural address in 1933, President Franklin D. Roosevelt enunciated the Good Neighbor Policy. That same year, at the Seventh Inter-American Conference in Montevideo, the United States expressed a qualified acceptance of the principle of nonintervention; in 1936 the United States approved this principle without reservation.

In the 1930s, Panama, like most countries of the Western world, was suffering economic depression. Until that time, Panamanian politics had remained a competition among individuals and families within a gentleman's club--specifically, the Union Club of Panama City. The first exception to this succession was Harmodio Arias Madrid (unrelated to the aristocratic family of the same name) who was elected to the presidency in 1932. A mestizo from a poor family in the provinces, he had attended the London School of Economics and had gained prominence through writing a book that attacked the Monroe Doctrine.

Harmodio and his brother Arnulfo, a Harvard Medical School graduate, entered the political arena through a movement known as Community Action (Acci�n Communal). Its following was primarily mestizo middle class, and its mood was antioligarchy and anti- Yankee. Harmodio Arias was the first Panamanian president to institute relief efforts for the isolated and impoverished countryside. He later established the University of Panama, which became the focal point for the political articulation of middle-class interests and nationalistic zeal.

Thus, a certain asymmetry developed in the trends underway in the 1930s that worked in Panama's favor. While the United States was assuming a more conciliatory stance, Panamanians were losing patience, and a political base for virulent nationalism was emerging.

A dispute arose in 1932 over Panamanian opposition to the sale of 3.2-percent beer in the Canal Zone competing with Panamanian beers. Tension rose when the governor of the zone insisted on formally replying to the protests, despite the Panamanian government's well-known view that proper diplomatic relations should involve only the United States ambassador. In 1933 when unemployment in Panama reached a dangerous level and friction over the zone commissaries rekindled, President Harmodio Arias went to Washington.

The result was agreement on a number of issues. The United States pledged sympathetic consideration of future arbitration requests involving economic issues that did not affect the vital aspects of canal operation. Special efforts were to be made to protect Panamanian business interests from the smuggling of cheaply purchased commissary goods out of the zone. Washington also promised to seek appropriations from Congress to sponsor the repatriation of the numerous immigrant canal workers, who were aggravating the unemployment situation. Most important, however, was President Roosevelt's acceptance, in a joint statement with Harmodio Arias, that United States rights in the zone applied only for the purposes of "maintenance, operation, sanitation, and protection" of the canal. The resolution of this long-standing issue, along with a clear recognition of Panama as a sovereign nation, was a significant move in the direction of the Panamanian interpretation of the proper United States position in the isthmus.

This accord, though welcomed in Panama, came too early to deal with a major problem concerning the US$250,000 annuity. The devaluation of the United States dollar in 1934 reduced its gold content to 59.6 percent of its former value. This meant that the US$250,000 payment was nearly cut in half in the new devalued dollars. As a result, the Panamanian government refused to accept the annuity paid in the new dollars.

Roosevelt's visit to the republic in the summer of 1934 prepared the way for opening negotiations on this and other matters. A Panamanian mission arrived in Washington in November, and discussions on a replacement for the Hay-Bunau-Varilla Treaty continued through 1935. On March 2, 1936, Secretary of State Cordell Hull and Assistant Secretary of State Sumner Welles joined the Panamanian negotiators in signing a new treaty--the Hull-Alfaro Treaty--and three related conventions. The conventions regulated radio communications and provided for the United States to construct a new trans-isthmian highway connecting Panama City and Col�n.

The treaty provided a new context for relations between the two countries. It ended the protectorate by abrogating the 1903 treaty guarantee of the republic's independence and the concomitant right of intervention. Thereafter, the United States would substitute negotiation and purchase of land outside the zone for its former rights of expropriation. The dispute over the annuity was resolved by agreeing to fix it at 430,000 balboas (the balboa being equivalent to the devalued dollar) which increased the gold value of the original annuity by US$7,500. This was to be paid retroactively to 1934 when the republic had begun refusing the payments.

Various business and commercial provisions dealt with longstanding Panamanian complaints. Private commercial operations unconnected with canal operations were forbidden in the zone. This policy and the closing of the zone to foreign commerce were to provide Panamanian merchants with relief from competition. Free entry into the zone was provided for Panamanian goods, and the republic's customhouses were to be established at entrances to the zone to regulate the entry of goods finally destined for Panama.

The Hull-Alfaro revisions, though hailed by both governments, radically altered the special rights of the United States in the isthmus, and the United States Senate was reluctant to accept the alterations. Article X of the new treaty provided that in the event of any threat to the security of either nation, joint measures could be taken after consultation between the two. Only after an exchange of interpretative diplomatic notes had permitted Senator Key Pittman, chairman of the Foreign Relations Committee, to advise his colleagues that Panama was willing under this provision to permit the United States to act unilaterally, did the Senate give its consent on July 25, 1939.


Panama - The War Years


After ratifying the Hull-Alfaro Treaty in 1939, Panama and the United States began preparation for and collaboration in the coming war effort. Cooperation in this area proceeded smoothly for more than a year, with the republic participating in the series of conferences, declarations, and protocols that solidified the support of the hemisphere behind Washington's efforts to meet the threat of Axis aggression. This cooperation halted with the inauguration of Arnulfo Arias.

Arnulfo Arias has been elected to the presidency at least three times since 1940 (perhaps four or five if, as many believe, the vote counts of 1964 and 1984 were fraudulent), but he has never been allowed to serve a full term. He was first elected when he headed a mass movement known as Paname�ismo. Its essence was nationalism, which in Panama's situation meant opposition to United States hegemony. Arias aspired to rid the country of non-Hispanics, which meant not only North Americans, but also West Indians, Chinese, Hindus, and Jews. He also seemed susceptible to the influence of Nazi and Fascist agents on the eve of the United States declaration of war against the Axis.

North Americans were by no means the only ones in Panama who were anxious to be rid of Arias. Even his brother, Harmodio, urged the United States embassy to move against the leader. United States officials made no attempt to conceal their relief when the National Police, in October 1941, took advantage of Arias's temporary absence from the country to depose him.

Arnulfo Arias had promulgated a new constitution in 1941, which was designed to extend his term of office. In 1945 a clash between Arias's successor, Ricardo Adolfo de la Guardia, and the National Assembly, led to the calling of a constituent assembly that elected a new president, Enrique A. Jim�nez, and drew up a new constitution. The constitution of 1946 erased the innovations introduced by Arias and restored traditional concepts and structures of government.

In preparation for war, the United States had requested 999- year leases on more than 100 bases and sites. Arias balked, but ultimately approved a lease on one site after the United States threatened to occupy the land it wanted. De la Guardia proved more accommodating; he agreed to lease the United States 134 sites in the republic but not for 999 years. He would extend the leases only for the duration of the war plus one year beyond the signing of the peace treaty.

The United States transferred Panama City's water and sewer systems to the city administration and granted new economic assistance, but it refused to deport the West Indians and other non-Hispanics or to pay high rents for the sites. Among the major facilities granted to the United States under the agreement of 1942 were the airfield at R�o Hato, the naval base on Isla Taboga, and several radar stations.

The end of the war brought another misunderstanding between the two countries. Although the peace treaty had not entered into effect, Panama demanded that the bases be relinquished, resting its claim on a subsidiary provision of the agreement permitting renegotiation after the cessation of hostilities. Overriding the desire of the United States War Department to hold most of the bases for an indefinite period, the Department of State took cognizance of growing nationalist dissatisfaction and in December 1946 sent Ambassador Frank T. Hines to propose a twenty-year extension of the leases on thirteen facilities. President Jim�nez authorized a draft treaty over the opposition of the foreign minister and exacerbated latent resentment. When the National Assembly met in 1947 to consider ratification, a mob of 10,000 Panamanians armed with stones, machetes, and guns expressed opposition. Under these circumstances the deputies voted unanimously to reject the treaty. By 1948 the United States had evacuated all occupied bases and sites outside the Canal Zone.

The upheaval of 1947 was instigated in large measure by university students. Their clash with the National Police on that occasion, in which both students and policemen were killed, marked the beginning of a period of intense animosity between the two groups. The incident was also the first in which United States intentions were thwarted by a massive expression of Panamanian rage.


Panama - The National Guard in Ascendance


A temporary shift in power from the civilian aristocracy to the National Police occurred immediately after World War II. Between 1948 and 1952, National Police Commander Jos� Antonio Rem�n installed and removed presidents with unencumbered ease. Among his behind-the-scenes manipulations were the denial to Arnulfo Arias of the presidency he apparently had won in 1948, the installation of Arias in the presidency in 1949, and the engineering of Arias's removal from office in 1951. Meanwhile, Rem�n increased salaries and fringe benefits for his forces and modernized training methods and equipment; in effect, he transformed the National Police from a police into a paramilitary force. In the spheres of security and public order, he achieved his long-sought goal by transforming the National Police into the National Guard in 1953 and introduced greater militarization into the country's only armed force. The missions and functions were little changed by the new title, but for Rem�n, this change was a step toward a national army.

From several preexisting parties and factions, Rem�n also organized the National Patriotic Coalition (Coalici�n Patri�tico Nacional--CPN). He ran successfully as its candidate for the presidency in 1952. Rem�n followed national tradition by enriching himself through political office. He broke with tradition, however, by promoting social reform and economic development. His agricultural and industrial programs temporarily reduced the country's overwhelming economic dependence on the canal and the zone.

Rem�n's reformist regime was short-lived, however. In 1955 he was machine-gunned to death at the racetrack outside Panama City. The first vice president, Jos� Ram�n Guizado, was impeached for the crime and jailed, but he was never tried, and the motivation for his alleged act remained unclear. Some investigators believed that the impeachment of Guizado was a smokescreen to distract attention from others implicated in the assassination, including United States organized crime figure "Lucky" Luciano, dissident police officers, and both Arias families. The second vice president, Ricardo Arias (of the aristocratic Arias family), served out the remainder of the presidential term and dismantled many of Rem�n's reforms.

Rem�n did not live to see the culmination of the major treaty revision he initiated. In 1953 Rem�n had visited Washington to discuss basic revisions of the 1936 treaty. Among other things, Panamanian officials wanted a larger share of the canal tolls, and merchants continued to be unhappy with the competition from the nonprofit commissaries in the Canal Zone. Rem�n also demanded that the discriminatory wage differential in the zone, which favored United States citizens over Panamanians, be abolished.

After lengthy negotiations a Treaty of Mutual Understanding and Cooperation was signed on January 23, 1955. Under its provisions commercial activities not essential to the operation of the canal were to be cut back. The annuity was enlarged to US$1,930,000. The principle of "one basic wage scale for all . . . employees . . . in the Canal Zone" was accepted and implemented. Panama's request for the replacement of the "perpetuity" clause by a ninety-nine-year renewable lease was rejected, however, as was the proposal that its citizens accused of violations in the zone be tried by joint United States-Panamanian tribunals.

Panama's contribution to the 1955 treaty was its consent to the United States occupation of the bases outside of the Canal Zone that it had withheld a few years earlier. Approximately 8,000 hectares of the republic's territory were leased rent-free for 15 years for United States military maneuvers. The R�o Hato base, a particularly important installation in defense planning, was thus regained for the United States Air Force. Because the revisions had the strong support of President Ricardo Arias, the National Assembly approved them with little hesitation.


Panama - The Politics of Frustrated Nationalism


The CPN placed another candidate, Ernesto de la Guardia, in the presidency in 1956. The Rem�n government had required parties to enroll 45,000 members to receive official recognition. This membership requirement, subsequently relaxed to 5,000, had excluded all opposition parties from the 1956 elections except the National Liberal Party (Partido Liberal Nacional--PLN) which traced its lineage to the original Liberal Party.

De la Guardia was a conservative businessman and a member of the oligarchy. By Panamanian standards, he was by no means anti- Yankee, but his administration presided over a new low in United States-Panamanian relations. The Egyptian nationalization of the Suez Canal in 1956 raised new hopes in the republic, because the two canals were frequently compared in the world press. Despite Panama's large maritime fleet (the sixth greatest in the world), Britain and the United States did not invite Panama to a special conference of the major world maritime powers in London to discuss Suez. Expressing resentment, Panama joined the communist and neutral nations in a rival Suez proposal. United States secretary of state John Foster Dulles's unqualified statement on the Suez issue on September 28, 1956--that the United States did not fear similar nationalization of the Panama Canal because the United States possessed "rights of sovereignty" there-- worsened matters.

Panamanian public opinion was further inflamed by a United States Department of the Army statement in the summer of 1956 that implied that the 1955 treaty had not in fact envisaged a total equalization of wage rates. The United States attempted to clarify the issue by explaining that the only exception to the "equal pay for equal labor" principle would be a 25-percent differential that would apply to all citizens brought from the continental United States.

Tension mounted in the ensuing years. In May 1958 students demonstrating against the United States clashed with the National Guard. The violence of these riots, in which nine died, was a forecast of the far more serious difficulties that followed a year later. In November 1959 anti-United States demonstrations occurred during the two Panamanian independence holidays. Aroused by the media, particularly by articles in newspapers owned by Harmodio Arias, Panamanians began to threaten a "peaceful invasion" of the Canal Zone, to raise the flag of the republic there as tangible evidence of Panama's sovereignty. Fearful that Panamanian mobs might actually force entry into the Canal Zone, the United States called out its troops. Several hundred Panamanians crossed barbedwire restraints and clashed with Canal Zone police and troops. A second wave of Panamanian citizens was repulsed by the National Guard, supported by United States troops.

Extensive and violent disorder followed. A mob smashed the windows of the United States Information Agency library. The United States flag was torn from the ambassador's residence and trampled. Aware that public hostility was getting out of hand, political leaders attempted to regain control over their followers but were unsuccessful. Relations between the two governments were severely strained. United States authorities erected a fence on the border of the Canal Zone, and United States citizens residing in the Canal Zone observed a voluntary boycott of Panamanian merchants, who traditionally depended heavily on these patrons.

On March 1, 1960--Constitution Day--student and labor groups threatened another march into the Canal Zone. The widespread disorders of the previous fall had had a sobering effect on the political elite, who seriously feared that new rioting might be transformed into a revolutionary movement against the social system itself. Both major coalitions contesting the coming elections sought to avoid further difficulties, and influential merchants, who had been hard hit by the November 1959 riots, were apprehensive. Reports that the United States was willing to recommend flying the republic's flag in a special site in the Canal Zone served to ease tensions. Thus, serious disorders were averted.

De la Guardia's administration had been overwhelmed by the rioting and other problems, and the CPN, lacking effective opposition in the National Assembly, began to disintegrate. Most dissenting factions joined the PLN in the National Opposition Union, which in 1960 succeeded in electing its candidate, Roberto Chiari, to the presidency. De la Guardia became the first postwar president to finish a full four-year term in office, and Chiari had the distinction of being the first opposition candidate ever elected to the presidency.

Chiari attempted to convince his fellow oligarchs that change was inevitable. He cautioned that if they refused to accept moderate reform, they would be vulnerable to sweeping change imposed by uncontrollable radical forces. The tradition-oriented deputies who constituted a majority in the National Assembly did not heed his warning. His proposed reform program was simply ignored. In foreign affairs, Chiari's message to the Assembly on October 1, 1961, called for a new revision of the Canal Zone arrangement. When Chiari visited Washington on June 12 to 13, 1962, he and President John F. Kennedy agreed to appoint high-level representatives to discuss controversies between their countries regarding the Canal Zone. The results of the discussions were disclosed in a joint communique issued on July 23, 1963.

Agreement had been reached on the creation of the Bi-National Labor Advisory Committee to consider disputes arising between Panamanian employees and zone authorities. The United States had agreed to withhold taxes from its Panamanian employees to be remitted to the Panamanian government. Pending congressional approval, the United States agreed to extend to Panamanian employees the health and life insurance benefits available to United States citizens in the zone.

Several other controversial matters, however, remained unresolved. The United States agreed to increase the wages of Panamanian employees in the zone, but not as much as the Panamanian government requested. No agreement was reached in response to Panamanian requests for jurisdiction over a corridor through the zone linking the two halves of the country.

Meanwhile, the United States had initiated a new aid program for all of Latin America--the Alliance for Progress. Under this approach to hemisphere relations, President Kennedy envisioned a long-range program to raise living standards and advance social and economic development. No regular United States government development loans or grants had been available to Panama through the late 1950s. The Alliance for Progress, therefore, was the first major effort of the United States to improve basic living conditions. Panama was to share in the initial, large-scale loans to support self-help housing. Nevertheless, pressure for major revisions of the treaties and resentment of United States recalcitrance continued to move.


Panama - The 1964 Riots


Public demonstrations and riots arising from popular resentment over United States policies and the overwhelming presence of United States citizens and institutions had not been uncommon, but the rioting that occurred in January 1964 was uncommonly serious. The incident began with a symbolic dispute over the flying of the Panamanian flag in the Canal Zone.

For some time the dispute had been seriously complicated by differences of opinion on that issue between the Department of Defense and the Department of State. On the one hand, the military opposed accepting a Panamanian flag, emphasizing the strategic importance of unimpaired United States control in the Canal Zone and the dangerous precedent that appeasement of the rioters' demands would set for future United States-Panamanian relations. The Department of State, on the other hand, supported the flag proposal as a reasonable concession to Panamanian demands and a method of avoiding major international embarrassment. Diplomatic officials also feared that the stability of Panamanian political institutions themselves might be threatened by extensive violence and mob action over the flag issue.

The United States finally agreed to raise the Panamanian and United States flags side by side at one location. The special ceremony on September 21, 1960, at the Shaler Triangle was attended by the new governor of the zone, Major General William A. Carter, along with all high United States military and diplomatic officers and the entire Panamanian cabinet. Even this incident, however, which marked official recognition of Panama's "titular" sovereignty, was marred when the United States rejected de la Guardia's request to allow him to raise the flag personally. De la Guardia, as a retaliatory measure, refused to attend the ceremony and extended invitations to the presidential reception after the ceremony only to the United States ambassador and his senior diplomatic aides; United States Canal Zone and military officials were excluded.

Panamanians remained dissatisfied as their flag appeared at only one location in the Canal Zone, while the United States flag flew alone at numerous other sites. An agreement was finally reached that at several points in the Canal Zone the United States and Panamanian flags would be flown side by side. United States citizens residing in the Canal Zone were reluctant to abide by this agreement, however, and the students of an American high school, with adult encouragement, on two consecutive days hoisted the American flag alone in front of their school.

Word of the gesture soon spread across the border, and on the evening of the second day, January 9, 1964, nearly 200 Panamanian students marched into the Canal Zone with their flag. A struggle ensued, and the Panamanian flag was torn. After that provocation, thousands of Panamanians stormed the border fence. The rioting lasted 3 days, and resulted in more than 20 deaths, serious injuries to several hundred persons, and more than US$2 million of property damage.

At the outbreak of the fighting, Panama charged the United States with aggression. Panama severed relations with the United States and appealed to the Organization of American States (OAS) and the United Nations (UN). On January 10 the OAS referred the case to the Inter-American Peace Committee. When the UN Security Council met, United States ambassador Adlai E. Stevenson noted that the Inter-American Peace Committee had already scheduled an on-the- spot investigation and urged that the problem be considered in the regional forum. A proposal by the Brazilian delegate that the president of the Security Council address an appeal to the two parties to exercise restraint was agreed on, and the UN took no further action.

The United States had hoped to confine the controversy to the Inter-American Peace Committee. But when negotiations broke down, Panama insisted that the Organ of Consultation under the 1947 Inter-American Treaty of Reciprocal Assistance (the so-called Rio Treaty) be convoked. The OAS Council, acting provisionally as the Organ of Consultation, appointed an investigating committee consisting of all the members of the Council except the two disputants. A joint declaration recommended by the Committee was signed by the two countries in April, and diplomatic relations were restored. The controversy smoldered for almost a year, however, until President Lyndon B. Johnson announced that plans for a new canal would be drawn up and that an entirely new treaty would be negotiated.

Negotiations were carried on throughout the first half of the presidency of Chiari's successor, Marcos Aurelio Robles. When the terms of three draft treaties--concerning the existing lock canal, a possible sea-level canal, and defense matters--were revealed in 1967, Panamanian public reaction was adverse. The new treaties would have abolished the resented "in perpetuity" clause in favor of an expiration date of December 13, 1999, or the date of the completion of a new sea-level canal if that were earlier. Furthermore, they would have compensated the Panamanian government on the basis of tonnage shipped through the canal, an arrangement that could have increased the annuity to more than US$20 million.

The intensity of Panamanian nationalism, however, was such that many contended that the United States should abandon involvement in Panama altogether. Proposals for the continued United States military bases in the Canal Zone, for the right of the United States to deploy troops and armaments anywhere in the republic, and for a joint board of nine governors for the zone, five of which were to be appointed by the United States, were particularly unpopular. Robles initially attempted to defend the terms of the drafts. When he failed to obtain treaty ratification and he learned that his own coalition would be at a disadvantage in the upcoming elections, he declared that further negotiations would be necessary.


Panama - The Oligarchy under Fire


In the mid-1960s, the oligarchy was still tenuously in charge of Panama's political system. Members of the middle class, consisting largely of teachers and government workers, occasionally gained political prominence. Aspiring to upper-class stations, they failed to unite with the lower classes to displace the oligarchy. Students were the most vocal element of the middle class and the group most disposed to speak for the inarticulate poor; as graduates, however, they were generally coopted by the system.

A great chasm separated the rural section from the urban population of the two major cities. Only the rural wageworkers, concentrated in the provinces of Bocas del Toro and Chiriqu�, appeared to follow events in the capital and to express themselves on issues of national policy. Among the urban lower classes, antagonism between the Spanish speakers and the English- and French-speaking blacks inhibited organization in pursuit of common interests.

Literacy was high--about 77 percent--despite the scarcity of secondary schools in the rural areas. Voter turnout also tended to be high, despite the unreliability of vote counts. (A popular saying is "He who counts the votes elects.") Concentration on the sins of the United States had served as a safety valve, diverting attention from the injustices of the domestic system.

The multi-party system that existed until the coup d'�tat of 1968 served to regulate competition for political power among the leading families. Individual parties characteristically served as the personal machines of leaders, whose clients (supporters or dependents) anticipated jobs or other advantages if their candidate were successful. Of the major parties competing in the 1960s, only the highly factionalized PLN had a history of more than two decades. The only parties that had developed clearly identifiable programs were the small Socialist Party and the Christian Democratic Party (Partido Dem�crato Cristiano---PDC). The only party with a mass base was the Paname�ista Party (Partido Paname�ista---PP), the electoral vehicle of the erratic former president, Arnulfo Arias. The Paname�ista Party appealed to the frustrated, but lacked a clearly recognizable ideology or program.

Seven candidates competed in the 1964 presidential elections, although only three were serious contenders. Robles, who had served as minister of the presidency in Chiari's cabinet, was the candidate of the National Opposition Union, comprising the PLN and seven smaller parties. After lengthy backstage maneuvers, Robles was endorsed by the outgoing president. Juan de Arco Galindo, a former member of the National Assembly and public works minister and brother-in-law of former President de la Guardia, was the candidate of the National Opposition Alliance (Alianza Nacional de Oposici�n) coalition, comprising seven parties headed by the CPN. Arnulfo Arias was supported by the PP, already the largest single party in the country.

As usual, the status of the canal was a principal issue in the campaign. Both the liberal and the CPN coalitions cultivated nationalist sentiment by denouncing the United States. Arias, abandoning his earlier nationalistic theme, assumed a cooperative and conciliatory stance toward the United States. Arias attracted lower-class support by denouncing the oligarchy. The Electoral Tribunal announced that Robles had defeated Arias by a margin of more than 10,000 votes of the 317,312 votes cast. The CPN coalition trailed far behind the top two contenders. Arias supporters, who had won a majority of the National Assembly seats, attributed Robles's victory to the "miracle of Los Santos"; they claimed that enough corpses voted for Robles in that province to enable him to carry the election.

The problems confronting Robles were not unlike those of his predecessors but were aggravated by the consequences of the 1964 riots. In addition to the hardships and resentments resulting from the losses of life and property, the riots had the effect of dramatically increasing the already serious unemployment in the metropolitan areas. Despite his nationalistic rhetoric during the campaign, the new president was dependent on United States economic and technical assistance to develop projects that Chiari's government, also with United States assistance, had initiated. Chiari emphasized building schools and low-cost housing. He endorsed a limited agrarian-reform program. Like his predecessor, Robles sought to increase the efficiency of tax collection rather than raise taxes.

By 1967 the coalitions were being reshuffled in preparation for the 1968 elections. By the time Arias announced his candidacy, he had split both the coalitions that had participated in the 1964 elections and had secured the support of several factions in a coalition headed by the Paname�ista Party. Robles's endorsement went to David Samudio of the PLN. A civil engineer and architect of middle-class background, Samudio had served as an assemblyman and had held several cabinet posts, including that of finance minister under Robles. In addition to the PLN, he was supported by the Labor and Agrarian Party (Partido Laborista Agrario--PALA) and other splinter groups. (Party labels are deceptive; the PALA, for example, had neither an agrarian base nor organized labor support.) A PDC candidate, Antonio Gonz�lez Revilla, also entered the race.

Because many of Arias's supporters believed that the 1964 election had been rigged, the principal issue in the 1968 campaign became the prospective validity of the election itself. The credibility crisis became acute in February 1968 when the president of the Electoral Tribunal, a Samudio supporter, closed the central registration office in a dispute with the other two members of the tribunal, Arias supporters, over electoral procedures. The government brought suit before the Supreme Court for their dismissal, on the grounds that each man had a son who was a candidate for elective office. Thereupon Gonz�lez Revilla, with the backing of Arias, petitioned the National Assembly to begin impeachment proceedings against Robles for illegal interferences in electoral matters. Among other issues, Robles was accused of diverting public funds to Samudio's campaign.

The National Assembly met in special session and appointed a commission to gather evidence. Robles, in turn, obtained a judgment from a municipal court that the assembly was acting unconstitutionally. The National Assembly chose to ignore a stay order issued by the municipal court pending the reconvening of the Supreme Court on April 1, and on March 14 it voted for impeachment. On March 24, the National Assembly found Robles guilty and declared him deposed. Robles and the National Guard ignored the proceedings, maintaining that they would abide by the decision of the Supreme Court when it reconvened.

The Supreme Court, with only one dissenting vote, ruled the impeachment proceedings unconstitutional. The Electoral Tribunal subsequently ruled that thirty of the parliamentary deputies involved in the impeachment proceedings were ineligible for reelection. Robles, with the support of the National Guard, retained the presidency.

The election took place on May 12, 1968, as scheduled, and tension mounted over the succeeding eighteen days as the Election Board and the Electoral Tribunal delayed announcing the results. Finally the Election Board declared that Arias had carried the election by 175,432 votes to 133,887 for Samudio and 11,371 for Gonz�lez Revilla. The Electoral Tribunal, senior to the Board and still loyal to Robles, protested, but the commander of the National Guard, Brigadier General Bol�var Vallarino, despite past animosity toward Arias, supported the conclusion of the Board.

Arias took office on October 1, demanding the immediate return of the Canal Zone to Panamanian jurisdiction and announcing a change in the leadership of the National Guard. He attempted to remove the two most senior officers, Vallarino and Colonel Jos� Mar�a Pinilla, and appoint Colonel Bol�var Urrutia to command the force. On October 11 the Guard, for the third time, removed Arias from the presidency. With seven of his eight ministers and twentyfour members of the National Assembly, Arias took refuge in the Canal Zone.


Panama - The Government of Torrijos


The overthrow of Arias provoked student demonstrations and rioting in some of the slum areas of Panama City. The peasants in Chiriqu� Province battled guardsmen sporadically for several months, but the Guard retained control. Urrutia was initially arrested but was later persuaded to join in the two-man provisional junta headed by Pinilla. Vallarino remained in retirement. The original cabinet appointed by the junta was rather broad based and included several Samudio supporters and one Arias supporter. After the first three months, however, five civilian cabinet members resigned, accusing the new government of dictatorial practices.

The provisional junta moved swiftly to consolidate government control. Several hundred actual or potential political leaders were arrested on charges of corruption or subversion. Others went into voluntary or imposed exile, and property owners were threatened with expropriation. The National Assembly and all political parties were disbanded, and the University of Panama was closed for several months while its faculty and student body were purged. The communications media were brought under control through censorship, intervention in management, or expropriation.

Pinilla, who assumed the title of president, had declared that his government was provisional and that free elections were to be scheduled. In January 1969, however, power actually rested in the hands of Omar Torrijos and Boris Mart�nez, commander and chief of staff, respectively, of the Guard. In early March, a speech by Martinez promising agrarian reform and other measures radical enough to alarm landowners and entrepreneurs provoked a coup within the coup. Torrijos assumed full control, and Martinez and three of his supporters in the military government were exiled.

Torrijos stated that "there would be less impulsiveness" in government without Martinez. Torrijos did not denounce the proposed reforms, but he assured Panamanian and United States investors that their interests were not threatened.

Torrijos, now a brigadier general, became even more firmly entrenched in power after thwarting a coup attempted by Colonels Amado Sanjur, Luis Q. Nentzen Franco, and Ramiro Silvera in December 1969. While Torrijos was in Mexico, the three colonels declared him deposed. Torrijos rushed back to Panama, gathered supporters at the garrison in David, and marched triumphantly into the capital. The colonels followed earlier competitors of Torrijos into exile. Because the governing junta (Colonel Pinilla and his deputy, Colonel Urrutia) had not opposed the abortive coup, Torrijos replaced them with two civilians, Demetrio B. Lakas, an engineer well liked among businessmen, and Arturo Sucre, a lawyer and former director of the national lottery. Lakas was designated "provisional president," and Sucre was appointed his deputy.

In late 1969 a close associate of Torrijos announced the formation of the New Panama Movement. This movement was originally intended to organize peasants, workers, and other social groups and was patterned after that of Mexico's Institutional Revolutionary Party. No organizational structure was established, however, and by 1971 the idea had been abandoned. The government party was revived under a different name, the Democratic Revolutionary Party (Partido Revolucionario Democr�tico--PRD) in the late 1970s.

A sweeping cabinet reorganization and comments of high-ranking officials in 1971 portended a shift in domestic policy. Torrijos expressed admiration for the socialist trends in the military governments of Peru and Bolivia. He also established a mutually supportive relationship with Cuba's Fidel Castro. Torrijos carefully distanced himself from the Panamanian Marxist left. The political label he appeared to wear most comfortably was "populist." In 1970 he declared, "Having finished with the oligarchy, the Panamanian has his own worth with no importance to his origin, his cradle, or where he was born."

Torrijos worked on building a popular base for his government, forming an alliance among the National Guard and the various sectors of society that had been the objects of social injustice at the hands of the oligarchy, particularly the long-neglected campesinos. He regularly traveled by helicopter to villages throughout the interior to hear their problems and to explain his new programs.

In addition to the National Guard and the campesinos, the populist alliance that Torrijos formed as a power base included students, the People's Party (Partido del Pueblo--PdP), and portions of the working classes. Support for Torrijos varied among interest groups and over time. The alliance contained groups, most notably the Guard and students, that were traditionally antagonistic toward one another and groups that traditionally had little concern with national politics, e.g., the rural sector. Nationalism, in the form of support of the efforts of the Torrijos regime to obtain control over the canal through a new treaty with the United States, provided the glue for maintaining political consensus.

In the early 1970s, the strength of the alliance was impressive. Disloyal or potentially disloyal elements within the National Guard and student groups were purged; increased salaries, perquisites, and positions of political power were offered to the loyal majority. The adherence of the middle classes was procured partly through more jobs. In return for its support, the PdP was allowed to operate openly when all other political parties were outlawed.

The Torrijos effort to secure political support in the rural sector was an innovation in Panamanian politics. With the exception of militant banana workers in the western provinces of Chiriqu� and Bocas del Toro, the campesinos traditionally have had little concern with national political issues. Unlike much of Latin America, in Panama the elite is almost totally urban based, rather than being a landed aristocracy.

No elections were held under the military government until April 1970, when the town of San Miguelito, incorporated as the country's sixty-fourth municipal district, was allowed to elect a mayor, treasurer, and municipal council. Candidates nominated by trade groups and other nonpartisan bodies were elected indirectly by a council that had been elected by neighborhood councils. Subsequently, the new system was extended throughout the country, and in 1972 the 505-member National Assembly of Municipal Representatives met in Panama City to confirm Torrijos's role as head of government and to approve a new constitution. The new document greatly expanded governmental powers at the expense of civil liberties. The state also was empowered to "oversee the rational distribution of land" and, in general, to regulate or initiate economic activities. In an obvious reference to the Canal Zone, the Constitution also declared the ceding of national territory to any foreign country to be illegal.

The governmental initiatives in the economy, legitimated by the new Constitution, were already underway. The government had announced in early 1969 its intention to implement 1962 legislation by distributing 700,000 hectares of land within 3 years to 61,300 families. Acquisition and distribution progressed much more slowly than anticipated, however.

Nevertheless, major programs were undertaken. Primary attention and government assistance went to farmers grouped in organizations that were initially described as cooperatives but were in fact commercial farming operations by state-owned firms. The government also established companies to operate banana plantations--partly because a substantial amount of the land obtained under the land- reform laws was most suited to banana cultivation and had belonged to international fruit companies.

Educational reforms instituted by Torrijos emphasized vocational and technical training at the expense of law, liberal arts, and the humanities. The programs introduced on an experimental basis in some elementary and secondary schools resembled the Cuban system of "basic schools in the countryside." New schools were established in rural areas in which half the student's time was devoted to instruction in farming. Agricultural methods and other practical skills were taught to urban students as well, and ultimately the new curriculum was to become obligatory even in private schools. Although the changes were being instituted gradually, they met strong resistance from the upper-middle classes and particularly from teachers.

Far-reaching reforms were also undertaken in health care. A program of integrated medical care became available to the extended family of anyone who had been employed for the minimal period required to qualify for social security. A wide range of services was available not only to the worker's spouse and children, but to parents, aunts, uncles, cousins--to any dependent relative. Whereas in the past medical facilities had been limited almost entirely to Panama City, under Torrijos hospitals were built in several provincial cities. Clinics were established throughout the countryside. Medical-school graduates were required to spend at least two years in a rural internship servicing the scattered clinics.

Torrijos also undertook an ambitious program of public works. The construction of new roads and bridges contributed particularly to greater prosperity in the rural areas. Although Torrijos showed greater interest in rural development than in urban problems, he also promoted urban housing and office construction in Panama City. These projects were funded, in part, by both increased personal and corporate taxes and increased efficiency in tax collection. The 1972 enactment of a new labor code attempted to fuse the urban working class into the populist alliance. Among other things the code provided obligatory collective agreements, obligatory payroll deduction of union fees, the establishment of a superior labor tribunal, and the incorporation of some 15,000 additional workers, including street vendors and peddlers, into labor unions. At the same time, the government attempted unsuccessfully to unite the nation's three major labor confederations into a single, government-sponsored organization.

Meanwhile, Torrijos lured foreign investment by offering tax incentives and provisions for the unlimited repatriation of capital. In particular, international banking was encouraged to locate in Panama, to make the country a regional financial center. A law adopted in 1970 facilitated offshore banking. Numerous banks, largely foreign owned, were licensed to operate in Panama; some were authorized solely for external transactions. Funds borrowed abroad could be loaned to foreign borrowers without being taxed by Panama.

Most of the reforms benefiting workers and peasants were undertaken between 1971 and 1973. Economic problems beginning in 1973 led to some backtracking on social programs. A new labor law passed in 1976, for example, withdrew much of the protection provided by the 1972 labor code, including compulsory collective bargaining. The causes of these economic difficulties included such external factors as the decline in world trade, and thus canal traffic. Domestic problems included a decline in agricultural production that many analysts attributed to the failure of the economic measures of the Torrijos government. The combination of a steady decline in per capita gross national product (GNP), inflation, unemployment, and massive foreign debts adversely affected all sectors of society and contributed heavily to the gradual erosion of the populist alliance that had firmly supported Torrijos in the early 1970s.

Increasingly, corruption in governing circles and within the National Guard also had become an issue in both national and international arenas. Torrijos's opponents were quick to note that his relatives appeared in large numbers on the public payroll.


Panama - The Treaty Negotiations


During the first two years after the overthrow of Arias, while the Guard consolidated its control of the government and Torrijos rooted out his competitors within the Guard, the canal issue was downplayed and generally held in abeyance. By 1971, however, the negotiation of new treaties had reemerged as the primary goal of the Torrijos regime.

In the 1970s, about 5 percent of world trade, by volume, some 20 to 30 ships daily, were passing through the canal. Tolls had been kept artificially low, averaging a little more than US$10,000 for the 8- to 10-hour passage, and thus entailing a United States government subsidy. Nevertheless, canal use was declining in the 1970s, because of alternate routes, vessels being too large to transit the canal, and the decline in world trade.

The canal, nevertheless, was clearly vital to Panama's economy. Some 30 percent of Panama's foreign trade passed through the canal. About 25 percent of the country's foreign exchange earnings and 13 percent of its GNP were associated with canal activities. The level of traffic and the revenue thereby generated were key factors in the country's economic life.

Under the 1903 treaty, the governor of the Canal Zone was appointed by the president of the United States and reported to the secretary of war. The governor also served as president of the Canal Zone Company, and reported to a board of directors appointed by the secretary of war. United States jurisdiction in the zone was complete, and residence was restricted to United States government employees and their families. On the eve of the adoption of new treaties in 1977, residents of the Canal Zone included some 40,000 United States citizens, two-thirds of whom were military personnel and their dependents, and about 7,500 Panamanians. The Canal Zone was, in effect, a United States military outpost with its attendant prosperous economy, which stood in stark contrast to the poverty on the other side of its fences.

By the 1960s military activities in the zone were under the direction of the United States Southern Command (SOUTHCOM). The primary mission of SOUTHCOM was defending the canal. In addition, SOUTHCOM served as the nerve center for a wide range of military activities in Latin America, including communications, training Latin American military personnel, overseeing United States military assistance advisory groups, and conducting joint military exercises with Latin American armed forces.

Negotiations for a new set of treaties were resumed in June 1971, but little was accomplished until March 1973 when, at the urging of Panama, the UN Security Council called a special meeting in Panama City. A resolution calling on the United States to negotiate a "just and equitable" treaty was vetoed by the United States on the grounds that the disposition of the canal was a bilateral matter. Panama had succeeded, however, in dramatizing the issue and gaining international support.

The United States signaled renewed interest in the negotiations in late 1973, when Ambassador Ellsworth Bunker was dispatched to Panama as a special envoy. In early 1974, Secretary of State Henry Kissinger and Panamanian foreign minister Juan Antonio Tack announced their agreement on eight principles to serve as a guide in negotiating a "just and equitable treaty eliminating once and for all the causes of conflict between the two countries." The principles included recognition of Panamanian sovereignty in the Canal Zone; immediate enhancement of economic benefits to Panama; a fixed expiration date for United States control of the canal; increased Panamanian participation in the operation and defense of the canal; and continuation of United States participation in defending the canal.

American attention was distracted later in 1974 by the Watergate scandal, impeachment proceedings, and ultimately the resignation of President Richard M. Nixon. Negotiations with Panama were accelerated by President Gerald R. Ford in mid-1975 but became deadlocked on four central issues: the duration of the treaty; the amount of canal revenues to go to Panama; the amount of territory United States military bases would occupy during the life of the treaty; and the United States demand for a renewable forty- or fifty-year lease of bases to defend the canal. Panama was particularly concerned with the open-ended presence of United States military bases and held that the emerging United States position retained the bitterly opposed "perpetuity" provision of the 1903 treaty and thus violated the spirit of the 1974 KissingerTack principles. The sensitivity of the issue during negotiations was illustrated in September 1975 when Kissinger's public declaration that "the United States must maintain the right, unilaterally, to defend the Panama Canal for an indefinite future" provoked a furor in Panama. A group of some 600 angry students stoned the United States embassy.

Negotiations remained stalled during the United States election campaign of 1976 when the canal issue, particularly the question of how the United States could continue to guarantee its security under new treaty arrangements, became a major topic of debate. Torrijos replaced Foreign Minister Tack with Aquilino Boyd in April 1976, and early the next year Boyd was replaced by Nicol�s Gonz�lez Revilla. R�mulo Escobar Bethancourt, meanwhile, became Panama's chief negotiator. Panama's growing economic difficulties made the conclusion of a new treaty, accompanied by increased economic benefits, increasingly vital.

The new Panamanian negotiating team was thus encouraged by the high priority that President Jimmy Carter placed on rapidly concluding a new treaty. Carter added Sol Linowitz, former ambassador to the OAS, to the United States negotiating team shortly after taking office in January 1977. Carter held that United States interests would be protected by possessing "an assured capacity or capability" to guarantee that the canal would remain open and neutral after Panama assumed control. This view contrasted with previous United States demands for an ongoing physical military presence and led to the negotiation of two separate treaties. This changed point of view, together with United States willingness to provide a considerable amount of bilateral development aid in addition to the revenues associated with Panama's participation in the operation of the canal, were central to the August 10, 1977 announcement that agreement had been reached on two new treaties.


Panama - The 1977 Treaties


On September 7, 1977, Carter and Torrijos met in Washington to sign the treaties in a ceremony that also was attended by representatives of twenty-six other nations of the Western Hemisphere. The Panama Canal Treaty, the major document signed on September 7, abrogated the 1903 treaty and all other previous bilateral agreements concerning the canal. The treaty was to enter into force six months after the exchange of instruments of ratification and to expire at noon on December 31, 1999. The Panama Canal Company and the Canal Zone government would cease to operate and Panama would assume complete legal jurisdiction over the former Canal Zone immediately, although the United States would retain jurisdiction over its citizens during a thirty-month transition period. Panama would grant the United States rights to operate, maintain, and manage the canal through a new United States government agency, the Panama Canal Commission. The commission would be supervised by a board of five members from the United States and four from Panama; the ratio was fixed for the duration of the treaty. The commission would have a United States administrator and Panamanian deputy administrator until January 1, 1990, when the nationalities of these two positions would be reversed. Panamanian nationals would constitute a growing number of commission employees in preparation for their assumption of full responsibility in 2000. Another binational body, the Panama Canal Consultative Committee, was created to advise the respective governments on policy matters affecting the canal's operation.

Article IV of the treaty related to the protection and defense of the canal and mandated both nations to participate in that effort, though the United States was to hold the primary responsibility during the life of the treaty. The Combined Board, composed of an equal number of senior military representatives from each country, was established and its members charged with consulting their respective governments on matters relating to protection and defense of the canal. Guidelines for employment within the Panama Canal Commission were set forth in Article X, which stipulated that the United States would establish a training program to ensure that an increasing number of Panamanian nationals acquired the skills needed to operate and maintain the canal. By 1982 the number of United States employees of the commission was to be at least 20 percent lower than the number working for the Panama Canal Company in 1977. Both nations pledged to assist their own nationals who lost jobs because of the new arrangements in finding employment. The right to collective bargaining and affiliation with international labor organizations by commission employees was guaranteed.

Under the provisions of Article XII, the United States and Panama agreed to study jointly the feasibility of a sea-level canal and, if deemed necessary, to negotiate terms for its construction. Payments to Panama from the commission ("a just and equitable return on the national resources which it has dedicated to the . . . canal") were set forth in Article XIII. These included a fixed annuity of US$10 million, an annual contingency payment of up to US$10 million to be paid out of any commission profits, and US$0.30 per Panama Canal net ton of cargo that passed through the canal, paid out of canal tolls. The latter figure was to be periodically adjusted for inflation and was expected to net Panama between US$40 and US$70 million annually during the life of the treaty. In addition, Article III stipulated that Panama would receive a further US$10 million annually for services (police, fire protection, street cleaning, traffic management, and garbage collection) it would provide in the canal operating areas.

The second treaty, the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, or simply the Neutrality Treaty, was a much shorter document. Because it had no fixed termination date, this treaty was the major source of controversy. Under its provisions, the United States and Panama agreed to guarantee the canal's neutrality "in order that both in time of peace and in time of war it shall remain secure and open to peaceful transit by the vessels of all nations on terms of entire equality." In times of war, however, United States and Panamanian warships were entitled to "expeditious" transit of the canal under the provisions of Article VI. A protocol was attached to the Neutrality Treaty, and all nations of the world were invited to subscribe to its provisions.

At the same ceremony in Washington, representatives of the United States and Panama signed a series of fourteen executive agreements associated with the treaties. These included two Agreements in Implementation of Articles III and IV of the Panama Canal Treaty that detailed provisions concerning operation, management, protection, and defense, outlined in the main treaty. Most importantly, these two agreements defined the areas to be held by the United States until 2000 to operate and defend the canal. These areas were distinguished from military areas to be used jointly by the United States and Panama until that time, military areas to be held initially by the United States but turned over to Panama before 2000, and areas that were turned over to Panama on October 1, 1979.

One foreign observer calculated that 64 percent of the former Canal Zone, or 106,700 hectares, came under Panamanian control in 1979; another 18 percent, or 29,460 hectares, would constitute the "canal operating area" and remain under control of the Panama Canal Commission until 2000; and the remaining 18 percent would constitute the various military installations controlled by the United States until 2000. The agreements also established the Coordinating Committee, consisting of one representative of each country, to coordinate the implementation of the agreement with respect to Article III of the Panama Canal Treaty, and an analogous Joint Committee to perform the defense-related functions called for in the agreement with respect to Article IV of the treaty.

Ancillary agreements signed on September 7 allowed the United States to conduct certain activities in Panama until 2000, including the training of Latin American military personnel at four schools located within the former Canal Zone; provided for cooperation to protect wildlife within the area; and outlined future United States economic and military assistance. This latter agreement, subject to the availability of congressionally approved funds, provided for United States loan guarantees, up to US$75 million over a 5-year period, for housing; a US$20-million loan guarantee by the United States Overseas Private Investment Corporation for financing projects in the Panamanian private sector; loans, loan guarantees, and insurance, up to a limit of US$200 million between 1977 and 1982, provided by the United States Export-Import Bank for financing Panamanian purchases of United States exports; and up to US$50 million in foreign military sales credits over a 10-year period.

The speeches of Carter and Torrijos at the signing ceremony revealed the differing attitudes toward the new accords by the two leaders. Carter declared his unqualified support of the new treaties. The statement by Torrijos was more ambiguous, however. While he stated that the signing of the new treaties "attests to the end of many struggles by several generations of Panamanian patriots," he noted Panamanian criticism of several aspects of the new accords, particularly of the Neutrality Treaty: Mr. President, I want you to know that this treaty, which I shall sign and which repeals a treaty not signed by any Panamanian, does not enjoy the approval of all our people, because the twenty-three years agreed upon as a transition period are 8,395 days, because during this time there will still be military bases which make my country a strategic reprisal target, and because we are agreeing to a treaty of neutrality which places us under the protective umbrella of the Pentagon. This pact could, if it is not administered judiciously by future generations, become an instrument of permanent intervention.

Torrijos was so concerned with the ambiguity of the Neutrality Treaty, because of Panamanian sensitivity to the question of United States military intervention, that, at his urging, he and President Carter signed the Statement of Understanding on October 14, 1977, to clarify the meaning of the permanent United States rights. This statement, most of which was subsequently included as an amendment to the Neutrality Treaty and incorporated into its instrument of ratification, included a declaration that the United States "right to act against any aggression or threat directed against the Canal . . . does not mean, nor shall it be interpreted as the right of intervention of the United States in the internal affairs of Panama." Despite this clarification, the plebiscite that took place the next week and served as the legal means of ratification in Panama, saw only two-thirds of Panamanians registering their approval of the new treaties, a number considerably smaller than that hoped for by the government.

Ratification in the United States necessitated the approval of two-thirds of the Senate. The debates, the longest in Senate history, began on February 7, 1978. The Neutrality Treaty was approved on March 16, and the main treaty on April 18, when the debate finally ended. To win the necessary sixty-seven Senate votes, Carter agreed to the inclusion of a number of amendments, conditions, reservations, and understandings that were passed during the Senate debates and subsequently included in the instruments of ratification signed by Carter and Torrijos in June.

Notable among the Senate modifications of the Neutrality Treaty were two amendments incorporating the October 1977 Statement of Understanding, and interpreting the "expeditious" transit of United States and Panamanian warships in times of war as being preferential. Another modification, commonly known as the DeConcini Condition, stated that "if the Canal is closed, or its operations are interfered with [the United States and Panama shall each] have the right to take such steps as each deems necessary, ... including the use of military force in the Republic of Panama, to reopen the Canal or restore the operations of the Canal." Modifications of the Panama Canal Treaty included a reservation requiring statutory authorization for payments to Panama set forth in Article XIII and another stating that any action taken by the United States to secure accessibility to the Canal "shall not have as its purpose or be interpreted as a right of intervention in the internal affairs of the Republic of Panama or interference with its political independence or sovereign integrity." Reservations attached to both treaties made the United States provision of economic and military assistance, as detailed in the ancillary agreements attached to the treaties, nonobligatory.

The inclusion of these modifications, which were never ratified in Panama, was received there by a storm of protest. Torrijos expressed his concern in 2 letters, the first to Carter and another sent to 115 heads of state through their representatives at the UN. A series of student protests took place in front of the United States embassy. The DeConcini Condition was the major object of protest. Although the reservation to the Panama Canal Treaty was designed to mollify Panamanian fears that the DeConcini Condition marked a return to the United States gunboat diplomacy of the early twentieth century, this provision would expire in 2000, whereas the DeConcini Condition, because it was attached to the Neutrality Treaty, would remain in force permanently.

Despite his continuing concern with the ambiguity of the treaties with respect to the United States role in defense of the canal after 2000, the close Senate vote made Torrijos aware that he could not secure any further modification at that time. On June 16, 1978, he and Carter signed the instruments of ratification of each treaty in a ceremony in Panama City. Nevertheless, Torrijos added the following statement to both Panamanian instruments: "The Republic of Panama will reject, in unity and with decisiveness and firmness, any attempt by any country to intervene in its internal or external affairs." The instruments of ratification became effective on June 1, 1979, and the treaties entered into force on October 1, 1979.


Panama - Torrijos Tries Democracy


Ironically, the successful conclusion of negotiations with the United States and the signing of the Panama Canal treaties in August 1977 added to the growing political difficulties in Panama. Virtually all observers of Panamanian politics in the late 1970s agreed that the situation in the late 1970s could only be understood in terms of the central role traditionally played by nationalism in forming Panamanian political consensus. Before August 1977, opponents of Torrijos were reluctant to challenge his leadership because of his progress in gaining control over the Canal Zone. The signing of the treaties eliminated that restraint; in short, after August 1977, Panamanian resentment could no longer be focused exclusively on the United States.

The widespread feeling among Panamanians that the 1977 treaties were unacceptable, despite their being approved by a two-thirds majority in the October 1977 plebiscite, contributed to growing opposition to the government. Critics pointed especially to the amendments imposed by the United States Senate after the October 1977 plebiscite, which they felt substantially altered the spirit of the treaties. Furthermore, political opponents of Torrijos argued that the government purposely limited the information available on the treaties and then asked the people to vote "yes" or "no," in a plebiscite that the opposition maintained was conducted fraudulently.

Another factor contributing to the erosion of the populist alliance built by Torrijos during the early 1970s was the graduated and controlled process of "democratization" undertaken by the Torrijos government after signing the new canal treaties. In October 1978, a decade after the government declared political parties illegal in the aftermath of the 1968 military coup d'�tat, the 1972 Constitution was reformed to implement a new electoral law and legalize political parties. In the spirit of opening the political system that accompanied the ratification of the Panama Canal treaties, exiled political leaders, including former President Arnulfo Arias, were allowed to return to the country, and a flurry of political activity was evident during the subsequent eighteen months. Foremost among the activities were efforts to obtain the 30,000 signatures legally required to register a party for the October 1980 elections.

The 1978 amendments to the 1972 Constitution markedly decreased the powers of the executive branch of government and increased those of the legislature, but the executive remained the dominant branch. From October 1972 until October 1978, Torrijos had acted as the chief executive under the titles of head of government and "Maximum Leader of the Panamanian Revolution." After the 1978 amendments took effect, Torrijos gave up his position as head of government but retained control of the National Guard and continued to play an important role in the government's decision-making process. Before stepping down, Torrijos had agreed to democratize Panama's political system, in order to gain United States support for the canal treaties. In October 1978, the National Assembly elected a thirty-eight-year-old lawyer and former education minister, Aristides Royo, to the presidency and Ricardo de la Espriella to the vice presidency, each for a six-year term.

The PRD--a potpourri of middle-class elements, peasant and labor groups, and marginal segments of Panamanian society--was the first party to be officially recognized under the registration process that began in 1979. Wide speculation held that the PRD would nominate Torrijos as its candidate for the presidential race planned for 1984. Moreover, many assumed that with government backing, the PRD would have a substantial advantage in the electoral process.

In March 1979, a coalition of eight parties called the National Opposition Front (Frente Nacional de Oposici�n--FRENO) was formed to battle the PRD in the 1980 legislative elections, the first free elections to be held in a decade. FRENO was composed of parties on both the right and the left of center in the political spectrum, including the strongly nationalistic, anti-Yankee Authentic Paname�ista Party (Partido Paname�ista Aut�ntico--PPA), which was led by the aged but still popular former president, Arnulfo Arias; the PLN; the reform-oriented PDC; and the Social Democratic Party (Partido Social Democr�tico--PSD), which was left of center and reform-oriented. Three right-of-center parties--the Republican Party (Partido Republicano--PR), the Third Nationalist Party, and PALA--had also joined the FRENO coalition. The Independent Democratic Movement, a small, moderately left-of-center party, completed the coalition. Such diverse ideologies in the opposition party suggested a marriage of convenience. FRENO opposed the Panama Canal treaties and called for their revision on terms more favorable to Panama.

All qualified parties competed in the 1980 legislative elections, but these elections posed no threat to Torrijos's power base because political parties vied for only nineteen of the fiftyseven seats in the legislature. The other two-thirds of the representatives were appointed, in essence by Torrijos's supporters. The PRD won twelve of the available nineteen seats; the PLN won five seats, and the PDC, one. The remaining seat was won by an independent candidate running with the support of a communist party, the Panamanian People's Party (Partido Paname�o del Pueblo-- PPP). The PPP had failed to acquire the signatures required for a place on the ballot. Despite the lopsided victory of the progovernment party and the weakness of the National Legislative Council (budgeting and appropriations were controlled by President Royo, who had been handpicked by Torrijos), this election represented a small step toward restoring democratic political processes. The election also demonstrated that Panama's political party system was too fragmented to form a viable united front against the government.


Panama - Torrijos's Sudden Death


Omar Torrijos was killed in an airplane crash in western Panama on July 31, 1981. His death deprived Central America of a potential moderating influence when that region was facing increased destabilization, including revolutions in Nicaragua and El Salvador. His death also created a power vacuum in his own country and ended a twelve-year "dictatorship with a heart," as Torrijos liked to call his rule. He was succeeded immediately as Guard commander by the chief of staff, Colonel Florencio Florez Aguilar, a Torrijos loyalist. Although Florez adopted a low profile and allowed President Royo to exercise more of his constitutional authority, Royo soon alienated the Torrijos clique, the private sector, and the Guard's general staff, all of whom rejected his leadership style and his strongly nationalistic, anti-United States rhetoric. Royo had become the leader of leftist elements within the government, and he used his position to accuse the United States of hundreds of technical violations in the implementation of the canal treaties. The general staff considered the Guard to be the country's principal guarantor of national stability and began to challenge the president's political authority. Royo attempted to use the PRD as his power base, but the fighting between leftists and conservatives within the party became too intense to control. Meanwhile, the country's many and diverse political parties, although discontented with the regime, were unable to form a viable and solid opposition.

Torrijos had been the unifying influence in Panama's political system. He had kept Royo in the presidency, the PRD functioning, and the Guard united. The groups were loyal to him but distrustful of each other.

Florez completed twenty-six years of military service in March 1982 and was forced to retire. He was replaced by his own chief of staff, General Rub�n Dar�o Paredes, who considered himself to be Torrijos's rightful successor and the embodiment of change and unity (Torrijos had been grooming Paredes for political office since 1975). In a press interview, Paredes stated that he had become "what some people sometimes call a strong man." Without delay the new Guard commander asserted himself in Panamanian politics and formulated plans to run for the presidency in 1984. Many suspected that Paredes had struck a deal with Colonel Manuel Antonio Noriega Moreno, who had been the assistant chief of staff for intelligence since 1970, whereby Noriega would assume command of the Guard and Paredes would become president in 1984. Paredes publicly blamed Royo for the rapidly deteriorating economy and the pocketing of millions of dollars from the nation's social security system by government officials.

In July 1982, growing labor unrest led to an outbreak of strikes and public demonstrations against the Royo administration. Paredes, claiming that "the people wanted change," intervened to remove Royo from the presidency. With National Guard backing, Paredes forced Royo and most of his cabinet to resign on July 30, 1982, almost one year to the day after the death of Torrijos. Royo was succeeded by Vice President Ricardo de la Espriella, a United States-educated former banking official. De la Espriella wasted no time in referring to the National Guard as a "partner in power."

In August 1982, President de la Espriella formed a new cabinet that included independents and members of the Liberal Party and the PRD; Jorge Illueca Sibauste, Royo's foreign minister, became the new vice president. Meanwhile, Colonel Armando Contreras became chief of staff of the National Guard. Colonel Noriega continued to hold the powerful position of assistant chief of staff for intelligence--the Panamanian government's only intelligence arm. In December 1982, Noriega became chief of staff of the National Guard.


Panama - Noriega Takes Control


In November 1982, a commission was established to draft a series of proposed amendments to the 1972 Constitution. The PRD supported the amendments and claimed that they would limit the power of the Guard and help the country return to a fully democratic system of government. These amendments reduced the term of the president from six to five years, created a second vice presidency, banned participation in elections by active members of the Guard, and provided for the direct election of all members of the legislature (renamed the Legislative Assembly) after nomination by legitimate political parties. These amendments were approved in a national referendum held on April 24, 1983, when they were considered to be a positive step toward lessening the power of the National Guard. In reality, however, the National Guard leadership would surrender only the power it was willing to surrender.

General Paredes, in keeping with the new constitutional provision that no active Guard member could participate in an election, reluctantly retired from the Guard in August 1983. He was succeeded immediately by Noriega, who was promoted to brigadier general. During the same month, Paredes was nominated as the PRD candidate for president. National elections were only five months away, and Paredes appeared to be the leading presidential contender. Nevertheless, in early September, President de la Espriella purged his cabinet of Paredes loyalists, and Noriega declared that he would not publicly support any candidate for president. These events convinced Paredes that he had no official government or military backing for his candidacy. He withdrew from the presidential race on September 6, 1983, less than a month after retiring from the Guard. Although Paredes subsequently gained the support of the Popular Nationalist Party (Partido Nacionalista Popular--PNP) and was able to appear on the 1984 ballot, he was no longer a major presidential contender. Constitutional reforms notwithstanding, the reality of Panamanian politics dictated that no candidate could become president without the backing of the National Guard and, especially, its commander.

With Paredes out of the way, Noriega was free to consolidate power. One of his first acts was to have the Legislative Assembly approve a bill to restructure the National Guard, which thereafter would operate under the name of Panama Defense Forces (Fuerzas de Defensa de Panam�--FDP). Nominally, the president of the republic would head the FDP, but real power would be in the hands of Noriega, who assumed the new title of commander in chief of the FDP.

Meanwhile, the PRD--the military-supported party--was left without a candidate. To strengthen its base for the upcoming election, the PRD created a coalition of six political parties called the National Democratic Union (Uni�n Nacional Democr�tica-- UNADE), which included the PALA, PLN, and PR, as well as the smaller PP and the left-of-center Broad Popular Front (Frente Amplio Popular--FRAMPO). With the approval of the military, UNADE selected Nicol�s Ardito Barletta Vallarino to be its presidential candidate. Ardito Barletta, a University of Chicago-trained economist and former minister of planning, had been a vice president of the World Bank for six years before his nomination in February 1984. Ardito Barletta was considered well qualified for the presidency, but he lacked his own power base.

Opposing Ardito Barletta and the UNADE coalition was the Democratic Opposition Alliance (Alianza Democr�tica de Oposici�n-- ADO) and its candidate, the veteran politician, Arnulfo Arias. ADO, formed by the PPA, the PDC, the center-right National Liberal Republican Movement (Movimiento Liberal Republicano Nacional-- MOLIRENA), and an assortment of leftist parties, was a diverse coalition made up of rural peasants (especially from Arias's home province of Chiriqu�) and lower- and middle-class elements that opposed military rule and government corruption. During the campaign, Arias emphasized the need to reduce military influence in Panamanian politics. He called for the removal of the defense bill passed in September 1983, which had given the FDP control over all security forces and services.

The campaign proved to be bitterly contested, with both sides predicting victory by a large margin. Arias and his backers claimed that Ardito Barletta was conducting the campaign unfairly. Indeed, UNADE took advantage of being the pro-government coalition, and used government vehicles and funds to help conduct its campaign. In addition, most of the media--television, radio stations, and newspapers--favored the government coalition. For example, only one of the country's five daily newspapers supported the ADO.

Voting day, May 6, 1984, was peaceful. Violence broke out the next day between supporters of the two main candidates in front of the Legislative Palace, where votes were being counted. One person was killed, and forty others were injured. Irregularities and errors in the voter registration and in the vote count led to credible charges of electoral misconduct and fraud. Thousands of people, who believed that they had registered properly, showed up at the polling places only to discover that their names had been inexplicably left off the voting list. Large-scale vote-buying, especially in rural areas, was reported.

More serious problems developed during the next several days. Very few official vote tallies were being delivered from the precinct and district levels to the National Board of Vote Examiners, with no apparent reason for the delay. The vote count proceeded slowly amid a climate of suspicion and rumor. On May 9, the vote tabulation was suspended. On May 11, the members of the National Board of Vote Examiners declared that they could not fulfill their function because of 2,124 allegations of fraud, and they turned the process over to the Electoral Tribunal. The opposition coalition publicized evidence showing that many votes had been destroyed before they had been counted. These charges and all subsequent challenges by the opposition were rejected by the tribunal, even though the head of the three-man tribunal demanded a further investigation into the allegations. The election results were made public on May 16. Ardito Barletta won the election with 300,748 votes; Arias came in second with 299,035; retired General Paredes received 15,976. The military-supported candidate had won the election, and the threat to the political power of the FDP had been circumvented.

The United States government acknowledged that the election results were questionable but declared that Ardito Barletta's victory must be seen as an important forward step in Panama's transition to democracy. Relations between the United States and Panama worsened later in the year because of Panama's displeasure at the alleged slowness with which the United States-controlled Panama Canal Commission was replacing American workers with Panamanians.

The resignation of President Ricardo de la Espriella and his cabinet on February 13, 1984 was barely noticed during the intense election campaign. De la Espriella was forced out by Noriega. De la Espriella had opposed the military's manipulation of the election and strongly advocated free elections for 1984. During his brief tenure, de la Espriella had failed to institute any significant policy changes, and his presidency was lackluster. De la Espriella was succeeded immediately by Vice President Jorge Illueca, who formed a new cabinet.

Ardito Barletta, a straitlaced and soft-spoken technocrat, took office on October 11, 1984. He quickly launched an attack on the country's economic problems and sought help from the International Monetary Fund (IMF) to refinance part of the country's US$3.7-billion debt--the world's highest on a per-capita basis. He promised to modernize the government's bureaucracy and implement an economic program that would create a 5-percent annual growth rate. On November 13--to meet IMF requirements for a US$603-million loan renegotiation--he announced economic austerity measures, including a 7-percent tax on all services and reduced budgets for cabinet ministries and autonomous government agencies. He revoked some of the measures ten days later in response to massive protests and strikes by labor, student, and professional organizations.

Negative popular reaction to Ardito Barletta's efforts to revive the country's stagnant economy troubled opposition politicians, the military, and many of his own UNADE supporters. Ardito Barletta's headstrong administrative style also offended Panamanian politicians who had a customary backslapping and back- room style of politicking. Moreover, Arditto Barletta's economic program conflicted with the military's traditional use of high government spending to keep the poor and the political left placated.

On August 12, 1985, Noriega stated that the situation in the country was "totally anarchic and out of control;" he also criticized Ardito Barletta for running an incompetent government. Observers speculated that another reason--and probably the real one--for the ouster of Ardito Barletta was FDP opposition to the president's plan to investigate the murder of Dr. Hugo Spadafora, a prominent critic of the Panamanian military. Shortly before his death, Spadafora had announced that he had evidence linking Noriega to drug trafficking and illegal arms dealing. Relatives of Spadafora claimed that witnesses had seen him in the custody of Panamanian security forces in the Costa Rican border area immediately before his decapitated body was found on September 14, just a few miles north of the Panamanian border.

Because of uneasiness within the FDP over the Spadafora affair, Noriega, using Ardito Barletta's ineffectiveness as an excuse, pressured Ardito Barletta to resign, which he did on September 27, 1985, after only eleven months in office. Ardito Barletta was succeeded the next day by his first vice president, Eric Arturo Delvalle Henr�quez, who announced a new cabinet on October 3, 1985.


Panama - The Society and Its Environment


PANAMANIAN SOCIETY OF the 1980s reflected the country's unusual geographical position as a transit zone. Panama's role as a crossing point had long subjected the isthmus to a variety of outside influences not typically associated with Latin America. The population included East Asian, South Asian, European, North American, and Middle Eastern immigrants and their offspring, who came to Panama to take advantage of the commercial opportunities connected with the Panama Canal. Black Antilleans, descendants of Caribbean laborers who worked on the construction of the canal, formed the largest single minority group; as English-speaking Protestants, they were set apart from the majority by both language and religion. Tribal Indians, often isolated from the larger society, constituted roughly 5 percent of the population in the 1980s. They were distinguished by language, their indigenous belief systems, and a variety of other cultural practices.

Spanish-speaking Roman Catholics formed a large majority. They were often termed mestizos--a term originally denoting mixed Indian and Spanish parentage that was used in an unrestrictive fashion to refer to almost anyone having mixed racial inheritance who conformed to the norms of Hispanic culture.

Ethnicity was broadly associated with class and status, to the extent that white elements were more apparent at the top of the social pyramid and recognizably black and Indian features at the bottom. Members of the elite placed a high value on purported racial purity; extensive ties of intermarriage within the group tended to reinforce this self-image.

Class structure was marked by divisions based on wealth, occupation, education, family background, and culture, in addition to race. The roots of the traditional elite's control lay in the colonial era. The fundamental social distinction was that between wealthier, whiter settlers who managed to purchase political positions from the Spanish crown and poorer mestizos who could not. Landholding formed the basis for the elite's wealth, political office for their power. When the isthmus became more pivotal as a transit zone after completion of the canal, elite control became less focused on landholding and more concerned with food processing and transportation facilities. Occasionally a successful immigrant family acquired wealth as the decades passed. Nevertheless, the older families' control of the country's politics remained virtually intact until the 1968 military coup.

The relationship between landowners and tenants or squatters, between cattle ranchers and subsistence farmers, was the dynamic that underlay social relations in rural Panama in the twentieth century. Cattle ranching had expanded to meet the growing demand for meat in cities. Small farmers cleared the tropical forest for cattle ranchers, planted it for one to two seasons, and then moved on to repeat the process elsewhere. As the population and the demand for meat increased, so too did the rate of movement onto previously unsettled lands, creating a "moving agricultural frontier."

Migration, both to cities and to less settled regions in the country, was a critical component in contemporary social relations. City and countryside were linked because the urban-based elite owned ranches or plantations, farmers and ranchers provisioned cities, and migration was an experience common to tens of thousands of Panamanians. Land and an expanding urban economy were essential to absorb surplus labor from heavily populated regions of the countryside. It remained to be seen how the social system would function in the face of high urban unemployment in the more straitened economic circumstances of the late 1980s.




Panama is located on the narrowest and lowest part of the Isthmus of Panama that links North America and South America. This S-shaped part of the isthmus is situated between 7� and 10� north latitude and 77� and 83� west longitude. Slightly smaller than South Carolina, Panama encompasses approximately 77,082 square kilometers, is 772 kilometers in length, and is between 60 and 177 kilometers in width.

Panama's two coastlines are referred to as the Caribbean (or Atlantic) and Pacific, rather than the north and south coasts. To the east is Colombia and to the west Costa Rica. Because of the location and contour of the country, directions expressed in terms of the compass are often surprising. For example, a transit of the Panama Canal from the Pacific to the Caribbean involves travel not to the east but to the northwest, and in Panama City the sunrise is to the east over the Pacific.

The country is divided into nine provinces, plus the Comarca de San Blas, which for statistical purposes is treated as part of Col�n Province in most official documents. The provincial borders have not changed since they were determined at independence in 1903. The provinces are divided into districts, which in turn are subdivided into sections called corregimientos. Configurations of the corregimientos are changed periodically to accommodate population changes as revealed in the census reports.

The country's two international boundaries, with Colombia and Costa Rica, have been clearly demarcated, and in the late 1980s there were no outstanding disputes. The country claims the seabed of the continental shelf, which has been defined by Panama to extend to the 500-meter submarine contour. In addition, a 1958 law asserts jurisdiction over 12 nautical miles from the coastlines, and in 1968 the government announced a claim to a 200-nautical-mile Exclusive Economic Zone.

The Caribbean coastline is marked by several good natural harbors. However, Crist�bal, at the Caribbean terminus of the canal, had the only important port facilities in the late 1980s. The numerous islands of the Archipi�lago de Bocas del Toro, near the Costa Rican border, provide an extensive natural roadstead and shield the banana port of Almirante. The over 350 San Blas Islands, near Colombia, are strung out for more than 160 kilometers along the sheltered Caribbean coastline.

The major port on the Pacific coastline is Balboa. The principal islands are those of the Archipi�lago de las Perlas in the middle of the Gulf of Panama, the penal colony on the Isla de Coiba in the Golfo de Chiriqu�, and the decorative island of Taboga, a tourist attraction that can be seen from Panama City. In all, there are some 1,000 islands off the Pacific coast.

The Pacific coastal waters are extraordinarily shallow. Depths of 180 meters are reached only outside the perimeters of both the Gulf of Panama and the Golfo de Chiriqu�, and wide mud flats extend up to 70 kilometers seaward from the coastlines. As a consequence, the tidal range is extreme. A variation of about 70 centimeters between high and low water on the Caribbean coast contrasts sharply with over 700 centimeters on the Pacific coast, and some 130 kilometers up the R�o Tuira the range is still over 500 centimeters.

The dominant feature of the country's landform is the central spine of mountains and hills that forms the continental divide. The divide does not form part of the great mountain chains of North America, and only near the Colombian border are there highlands related to the Andean system of South America. The spine that forms the divide is the highly eroded arch of an uplift from the sea bottom, in which peaks were formed by volcanic intrusions.

The mountain range of the divide is called the Cordillera de Talamanca near the Costa Rican border. Farther east it becomes the Serran�a de Tabasar�, and the portion of it closer to the lower saddle of the isthmus, where the canal is located, is often called the Sierra de Veraguas. As a whole, the range between Costa Rica and the canal is generally referred to by Panamanian geographers as the Cordillera Central.

The highest point in the country is the Volc�n Bar� (formerly known as the Volc�n de Chiriqu�), which rises to almost 3,500 meters. The apex of a highland that includes the nation's richest soil, the Volc�n Bar� is still referred to as a volcano, although it has been inactive for millennia.

Nearly 500 rivers lace Panama's rugged landscape. Mostly unnavigable, many originate as swift highland streams, meander in valleys, and form coastal deltas. However, the R�o Chepo and the R�o Chagres are sources of hydroelectric power.

The R�o Chagres is one of the longest and most vital of the approximately 150 rivers that flow into the Caribbean. Part of this river was dammed to create Gatun Lake, which forms a major part of the transit route between the locks near each end of the canal. Both Gatun Lake and Madden Lake (also filled with water from the R�o Chagres) provide hydroelectricity for the area of the former Canal Zone.

The R�o Chepo, another major source of hydroelectric power, is one of the more than 300 rivers emptying into the Pacific. These Pacific-oriented rivers are longer and slower running than those of the Caribbean side. Their basins are also more extensive. One of the longest is the R�o Tuira, which flows into the Golfo de San Miguel and is the nation's only river navigable by larger vessels.

Panama has a tropical climate. Temperatures are uniformly high- -as is the relative humidity--and there is little seasonal variation. Diurnal ranges are low; on a typical dry-season day in the capital city, the early morning minimum may be 24�C and the afternoon maximum 29�C. The temperature seldom exceeds 32�C for more than a short time.

Temperatures on the Pacific side of the isthmus are somewhat lower than on the Caribbean, and breezes tend to rise after dusk in most parts of the country. Temperatures are markedly cooler in the higher parts of the mountain ranges, and frosts occur in the Cordillera de Talamanca in western Panama.

Climatic regions are determined less on the basis of temperature than on rainfall, which varies regionally from less than 1.3 to more than 3 meters per year. Almost all of the rain falls during the rainy season, which is usually from April to December, but varies in length from seven to nine months. The cycle of rainfall is determined primarily by two factors: moisture from the Caribbean, which is transported by north and northeast winds prevailing during most of the year, and the continental divide, which acts as a rainshield for the Pacific lowlands. A third influence that is present during the late autumn is the southwest wind off the Pacific. This wind brings some precipitation to the Pacific lowlands, modified by the highlands of the Pen�nsula de Azuero, which form a partial rainshield for much of central Panama. In general, rainfall is much heavier on the Caribbean than on the Pacific side of the continental divide. The annual average in Panama City is little more than half of that in Col�n. Although rainy-season thunderstorms are common, the country is outside the hurricane track.

Panama's tropical environment supports an abundance of plants. Forests dominate, interrupted in places by grasslands, scrub, and crops. Although nearly 40 percent of Panama is still wooded, deforestation is a continuing threat to the rain-drenched woodlands. Tree cover has been reduced by more than 50 percent since the 1940s. Subsistence farming, widely practiced from the northeastern jungles to the southwestern grasslands, consists largely of corn, bean, and tuber plots. Mangrove swamps occur along parts of both coasts, with banana plantations occupying deltas near Costa Rica. In many places, a multi-canopied rain forest abuts the swamp on one side of the country and extends to the lower reaches of slopes in the other.


Panama - Population


Regions of Settlement

Panama has no generally recognized group of geographic regions, and no single set of names is in common use. One system often used by Panamanian geographers, however, portrays the country as divided into five regions that reflect population concentration and economic development as well as geography.

Dari�n, the largest and most sparsely populated of the regions, extends from the hinterlands of Panama City and Col�n to the Colombian border, comprising more than one-third of the national territory. In addition to the province of Dari�n, it includes the Comarca de San Blas and the eastern part of Panam� Province. Dari�n--a name that was once applied to the entire isthmus--is a land of rain forest and swamp.

The Central Isthmus does not have precisely definable boundaries. Geographically, it is the low saddle of land that bisects the isthmus at the canal. It extends on the Pacific side from the Dari�n as far west as the town of La Chorrera. On the Atlantic, it includes small villages and clustered farms around Gatun Lake. East of the canal it terminates gradually as the population grows sparse, and the jungles and swamps of the Dari�n region begin. More a concept than a region, the Central Isthmus, with a width of about 100 kilometers, is the densely populated historical transportation route between the Atlantic and the Pacific and includes most of Col�n Province.

Central Panama lies to the southwest of the canal and is made up of all or most of the provinces of Veraguas, Cocl�, Herrera, and Los Santos. Located between the continental divide and the Pacific, the area is sometimes referred to as the Central Provinces. The sparsely populated Santa Fe District of Veraguas Province is located across the continental divide on the Atlantic side, however, and a frontier part of Cocl� is also on the Atlantic side of the divide.

The hills and lowlands of Central Panama, dotted with farms and ranches, include most of the country's rural population. Its heartland is a heavily populated rural arc that frames the Bah�a de Parita and includes most of the country's largest market towns, including the provincial capitals of Penonom�, Santiago, Chitr�, and Las Tablas. This agriculturally productive area has a relatively long dry season and is known as the dry zone of Panama.

The remaining part of the Pacific side of the divide is taken up by Chiriqu� Province. Some geographers regard it and Central Panama as a single region. But, the lowlands of the two areas are separated by the hills of the Pen�nsula de Las Palmas, and the big province of Chiriqu� has sufficient individuality to warrant consideration as a separate region. The second largest and second most populous of the nine provinces, Chiriqu� is to some extent a territory of pioneers as well as one of considerable economic importance. It is only in Chiriqu� that the frontiers of settlement have pushed up well into the interior highlands, and the population has a particular sense of regional identity. A native of Chiriqu� can be expected to identify himself, above all, as a Chiricano.

Atlantic Panama includes all of Bocas del Toro Province, the Caribbean coastal portions of Veraguas and Cocl�, and the western districts of Col�n. It is home to a scant 5 percent of the population, and its only important population concentrations are near the Costa Rican border where banana plantations are located.

Size and Growth

In mid-1987, Panama's population was estimated at 2.3 million, when 40 percent of the population was under 15 years of age. This high proportion suggested continued pressure on the educational system to provide instruction and on the economy to create jobs in the next two decades. Population had increased more than 600 percent since the country's first census in 1911. The annual rate of increase ranged from less than 0.5 percent in the economically depressed 1920s to more than 3 percent in the decade from 1910 to 1920 and in the 1960s. Demographers projected an annual growth rate of 2.2 percent in the 1980s, declining to 1.9 percent by 1990-95.

Provincial growth rates in the 1970s ranged from a low of 0.5 percent in Los Santos to a high of 3.5 percent in Panam�. The population in Bocas del Toro, both in remote and rural areas, grew at an average annual rate of approximately 3.1 percent. This high growth rate was due to a significant influx of migrants in response to the development of the Cerro Colorado copper project in the eastern part of that province. Population density was seventy-five persons per square kilometer. The highest densities and the region of the most concentrated urbanization were located in the corridor along the former Canal Zone from Col�n to Panama City.

The crude death rate was 5 persons per 1,000 in the mid-1980s, a decline of nearly 50 percent from the mid-1960s. The crude birth rate was 27 per 1,000, a drop of one-third during the same period. Organized family planning began in 1966 with the establishment of the Panamanian Family Planning Organization, a private group. By 1969 the Ministry of Health was actively involved in family planning; clinics, information, and instruction were becoming more available to the population as a whole. By the late 1970s and early 1980s, more than 60 percent of women of childbearing age were using some form of contraception.

<> Ethnic Groups

Updated population figures for Panama.


Panama - Ethnic Groups


Because the isthmus holds a central position as a transit zone, Panama has long enjoyed a measure of ethnic diversity. This diversity, combined with a variety of regions and environments, has given rise to a number of distinct subcultures. But in the late 1980s, these subcultures were often diffuse in the sense that individuals were frequently difficult to classify as members of one group or the other, and statistics about the groups' respective sizes were rarely precise. Panamanians nonetheless recognized racial and ethnic distinctions, and considered them social realities of considerable importance.

Broadly speaking, Panamanians viewed their society as composed of three principal groups: the Spanish-speaking, Roman Catholic mestizo majority; the English-speaking, Protestant Antillean blacks; and tribal Indians. Small numbers of those of foreign extraction--Chinese, Jews, Arabs, Greeks, South Asians, Lebanese, West Europeans, and North Americans--were also present. They generally lived in the largest cities, and most were involved in the retail trade and commerce. There were a few retired United States citizens--mostly former Canal Zone officials--residing in Chiriqu�. The Chinese were a major source of labor on the transisthmian railroad, completed in the mid-nineteenth century. Most went on to California in the gold rush beginning in 1848; of those who remained, most owned retail shops. They suffered considerable discrimination in the early 1940s under the nationalistic government of President Arnulfo Arias Madrid, who sought to rid Panama of non-Hispanics.

There were also small groups of Hispanic blacks, blacks (playeros), and Hispanic Indians (cholos) along the Atlantic coast lowlands and in the Dari�n. Their settlements, dating from the end of the colonial era, were concentrated along coasts and rivers. They had long relied on mixed farming and livestock raising, adapted to the particular exigencies of the tropical forest environment. In the mid-twentieth century, they began marketing small quantities of livestock, tropical fruits, rice, and coffee. In the 1980s, they were under pressure from the mestizo population, as farmers from the central provinces expanded into these previously isolated regions.

<> Antillean Blacks
<> Indians
<> Cuna



Panama - Antillean Blacks


Black laborers from the British West Indies came to Panama by the tens of thousands in the first half of the twentieth century. Most were involved in the effort to improve the isthmus transportation system, but many came to work on the country's banana plantations as well. By 1910, the Panama Canal Company had employed more than 50,000 workers, three-quarters of whom were Antillean blacks. They formed the nucleus of a community separated from the larger society by race, language, religion, and culture.

Since World War II, immigration from the Caribbean islands has been negligible. Roughly 7 to 8 percent of the population were Antillean blacks in the 1980s. Their share in the total population was decreasing, as younger generations descended from the original immigrants became increasingly assimilated into the Hispanic national society.

The Antillean community continued to be marked by its immigrant, West Indian origins in the 1980s. Some observers noted that Antillean families and gender ideals reflected West Indian patterns and that Antillean women were less submissive than their mestizo counterparts. The Antilleans were originally united by their persistent loyalty to the British crown, to which they had owed allegiance in the home islands. Many migrated to Panama with the intention of returning home as soon as they had earned enough money to permit them to retire. This apparently transient status, coupled with cultural differences, further separated them from the local populace. Another alienating factor was the hostility of Hispanic Panamanians, which increased as the Antilleans prolonged their stay and became entrenched in the canal labor force. They faced racial discrimination from North Americans as well. Their precarious status was underscored by the fact that the 1941 constitution deprived them of their Panamanian citizenship (it was restored by the 1946 constitution). The hostility they faced welded them into a minority united by the cultural antagonisms they confronted.

The cleavage between older and younger generations was particularly marked. Younger Antilleans who opted for inclusion in the Hispanic society at large generally rejected their parents' religion and language in so doing. Newer generations educated in Panamanian schools and speaking Spanish well identified with the national society, enjoying a measure of acceptance there. Nevertheless, there remained substantial numbers of older Antilleans who were trained in schools in the former Canal Zone and spoke English as a first language. They were adrift without strong ties to either the West Indian or the Panamanian Hispanic culture. Isolated from mainstream Panamanian society and increasingly removed from their Antillean origins, they existed, in a sense, on the margins of three societies.

In common with most middle- and many lower-class Panamanians, Antillean blacks valued education as a means of advancement. Parents ardently hoped to give their children as good an education as possible because education and occupation underlay the social hierarchy of the Antillean community. At the top of that hierarchy were ministers of the mainline Protestant religions, professionals such as doctors and lawyers, and white-collar workers. Nonetheless, even a menial worker could hope for respect and some social standing if he or she adhered to middle-class West Indian forms of marriage and family life, membership in an established church, and sobriety. The National Guard, formerly known as the National Police and subsequently called the Panama Defense Forces (Fuerzas de Defensa de Panam�--FDP), served as a means of integration into the national society and upward mobility for poorer blacks (Antilleans and Hispanics), who were recruited in the 1930s and 1940s when few other avenues of advancement were open to them.

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Panama - Indians


According to the 1980 census, Panama's indigenous population numbered slightly over 93,000, or 5 percent of the total population. Censuses showed Indians to be a declining proportion of the total population; they had accounted for nearly 6 percent of all Panamanians in 1960. The figures were only a rough estimate of the numbers of Indians in Panama, however. Precise numbers and even the exact status of several smaller tribes were uncertain, in part because many Indians were in the process of assimilation. Language, although the most certain means of identifying a person as an Indian, was by itself an unreliable guide. There were small groups of people who spoke only Spanish and yet preserved other indigenous practices and were considered Indians by their neighbors. The Guaym�, for example, showed little concern about linguistic purity and had adopted a wide variety of words of Spanish origin; nonetheless, they assiduously preserved indigenous religious belief and practice. By contrast, the far more acculturated T�rraba would not use foreign words, even for nonindigenous items.

The Indian population was concentrated in the more remote regions of the country, and for most tribes, isolation was a critical element in their cultural survival. The Guaym�, numbering roughly 50,000 to 55,000, or slightly more than half of the Indian population, inhabited the remote regions of northwest Panama. The Cuna (also referred to as the Kuna) were concentrated mainly along the Caribbean coast east of Col�n; their population was approximately 30,000, about one-third of all Indians.

In addition, there were a number of smaller groups scattered in the remote mountains of western Panama and the interior of Dari�n. The Choc� (or Embera) occupied the southeastern portion of Dari�n along the border with Colombia. Most were bilingual in Spanish and Choc�, and they reportedly had intermarried extensively with Colombian blacks. They appeared to be in a state of advanced acculturation.

The Bribri were a small section of the Talamanca tribe of Costa Rica. They had substantial contact with outsiders. Many were employed on banana plantations in Costa Rica, and Protestant missionaries were active among them, having made significant numbers of converts.

The B�kat� lived in eastern Bocas del Toro along the R�o Calov�bora. Linguistically, B�kat� speech was similar to Guaym�, but the two languages were not mutually intelligible. The tribe had not been as exposed to outsiders as had the Guaym�. In the late 1970s, there were virtually no roads through B�kat� territory; by the mid-1980s, there was a small dirt road passable only in dry weather.

The T�rraba were another small tribe, living in the environs of the R�o Teribe. In the twentieth century, the tribe suffered major population swings. It was decimated by recurrent tuberculosis epidemics between 1910 and 1930, but population expanded rapidly with the availability of better medical care after the 1950s. Contact with outsiders also increased. A Seventh Day Adventist mission was active in the tribe for years, and there was substantial acculturation with the dominant mestizo culture. By the late 1980s, the T�rraba had abandoned most of their native crafts production, and their knowledge of the region's natural history was declining. They even looted their ancestral burial mounds for gold to sell. They refused employment on nearby banana plantations until the early 1970s, when a flood swept away most of the alluvial soil they had farmed. The Guaym� attempted to include the T�rraba in Guaym� territory, but the T�rraba stoutly resisted these efforts.

All of the tribes were under the jurisdiction of both the provincial and national governments. The Indigenous Policy Section of the Ministry of Government and Justice bore primary responsibility for coordinating programs that affected Indians, serving as a liaison between the tribes and the national government. There were a number of special administrative arrangements made for those districts in which Indians constituted the majority of the population. The 1972 Constitution required the government to establish reserves (comarcas) for indigenous tribes, but the extent to which this mandate had been implemented varied. By the mid-1980s, the Cuna were established in the Comarca de San Blas and the Choc� had government approval for official recognition of their own comarca in Dari�n. The Guaym� and the government continued negotiations about the extent of Guaym� territory. The Guaym� contended that government proposals would leave about half the tribe outside the boundaries of the reserve.

Indian education has frequently been under the de facto control of missionaries. The national government made a late entry into the field, but by the late 1970s there were nearly 200 Indian schools with nearly 15,000 students. Nevertheless, illiteracy among Indians over 10 years of age was almost 80 percent, in comparison with less than 20 percent in the population at large.

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Panama - Cuna


The vast majority of Cuna Indians inhabited the San Blas Islands, with an estimated 3,000 additional Cuna living in small scattered settlements in Dari�n and in Colombia. The San Blas Islands are clusters of small coral islands, each only a few feet above sea level, along Panama's northeast coast. They contain some fifty densely settled Cuna villages. The density of settlement was one indication of a dramatic increase in population. Official census figures showed a population increase of nearly 60 percent between 1950 and 1980. The 1980 census revealed that village size ranged from 37 to nearly 1,500 inhabitants; half the total population was accounted for in 19 villages ranging in population from 300 to 1,000, with one-third in settlements of more than 1,000. The census seriously undercounted the total Cuna population, however, because it excluded absent workers, whose numbers were significant, given the prevalence of out-migration for wage labor.

Before settling on the San Blas Islands, the Cuna lived in inland settlements concentrated on rivers and streams throughout the Dari�n. Their contacts with outsiders were confined to trade with pirates and limited interaction with two abortive European colonies attempted in the region in the late seventeenth and early eighteenth centuries. Then, a 1787 treaty with Spain began roughly a century of profitable trade, and the Cuna specialized in coconut farming, which continues to produce their main cash crop. Pressure from mestizo and Choc� Indians migrating into the Dari�n from Colombia toward the end of the nineteenth century, gradually pushed the Cuna toward the coast and the villages they still occupied in the late 1980s.

The Cuna's contact with outsiders remained limited and circumscribed until around 1910. Panamanian settlement was focused along the isthmus, and the Colombian government was, in every significant sense, very distant. Although the Cuna themselves traded with passing ships, they did not permit the crews to debark. An individual Cuna might, however, serve a stint as a sailor, and groups would take a large canoe full of trading goods to Col�n.

The Cuna were extensively dependent on outside sources for goods--indigenously produced items played little role in farming and fishing. In contrast to many rural mestizos and Indians elsewhere in Panama, the terms on which they bought outside manufactures were relatively favorable. The Cuna dealt only in cash; they bought from many suppliers; and Cuna themselves owned retail stores in San Blas.

By the early years of the twentieth century, the modern settlement pattern of the San Blas Cuna was well defined. Settlements varied in scale from temporary working camps of one to two families to permanent communities numbering in the hundreds. Social life then, as now, was organized around the twin foci of household and village. Descent was reckoned bilaterally, individuals tracing their ancestors and their progeny through both males and females. The household was the most significant grouping of kin. A 1976 survey found that households numbered on average 9.9 persons, with multiple family households the rule. Larger groupings of kin had no formal role in social relations. Adult siblings were rarely close, and contacts between more distant relatives, such as cousins, were even more diffuse.

Cuna households, in their ideal form, were composed of a senior couple, their unmarried children, and their married daughters and sons-in-law and their offspring. The head of the household directed the work of those residing there; a son-in-law's position was extremely subordinate, particularly during the early years of his marriage. After several years of marriage, husbands usually tried to establish their own households, but the shortage of suitable land made this difficult.

Women were a major force in household decisions. Their sewing and household activities were respected work. Men dominated the public-political sphere of Cuna life, however, and women were overwhelmingly subordinate to men outside their homes. Only a few women had been elected to public office, but daughters of leaders sometimes held government appointments.

Politics and kinship were separate aspects of Cuna life. Kin, even close relatives, did not necessarily support one another on specific issues. Although the children of past leaders enjoyed some advantage in pursuing a career in politics, kinship did not define succession to political office.

Villages had formal, ranked elective political offices, including the chiefs and the chiefs' spokespersons (also known as interpreters). Most communities also had a set of committees charged with specific tasks. Chiefs (except in the most acculturated communities where the chiefs did not sing) derived their authority from their knowledge of the sacred chants, and the spokespersons derived theirs from their ability to interpret the chants for the people. Elected officials conducted elaborate meetings dealing with both religious and secular affairs. The number of officials, the presence or absence of a specifically designated meeting place, and the number and complexity of the meetings themselves were all measures of a village's stature.

Meetings or gatherings fell into two categories: chanting or singing gatherings attended by all members of a village, and talking gatherings attended by adult men only. Singing gatherings were highly formalized, combining both indigenous and Spanish elements. The ritualized dialogue that chiefs chanted to their followers was common Indian practice throughout much of Latin America. Much of the actual vocabulary reflected Spanish influence. For example, the Cuna word for chief's spokesperson, arkar, is probably a corruption of the Spanish, alcalde.

Talking gatherings focused on exchanging information and taking care of matters that demanded action--relating travel experiences, requesting permission to leave, or resolving disputes, for example. Resolution was reached through consensus in a gradual process directed by the chief or chiefs. Votes were rarely taken, and then only in the more acculturated communities. Agreement was evident when no further contrary opinions were stated. Historically, if an agreement could not be reached the community would split up.

Cuna also held general congresses as frequently as several times per year. Each village sent a delegation; the size varied but typically at least one chief and a chief's spokesperson were included. The rules of procedure were highly formalized. As with local gatherings, the emphasis was on reaching a consensus of the group rather than acquiring the votes necessary for a majority. And, again, agreement was evident when no further contrary opinions were stated or when they were shouted down by the rest of the delegates.

Villages had considerable discretionary powers and they regulated who could settle there. Most refused to accept Colombian Cuna displaced by cattle ranchers. Others expressed disapproval of landless San Blasinos (residents of San Blas) from other villages marrying into their village. The power of villages to grant or withhold travel permits was used as a sanction against misconduct and a weapon in political disputes. Women were rarely permitted to travel outside San Blas, and until the mid-1960s, many villages required an absentee worker to come home for harvest and planting or pay for a substitute.

Villages varied in their willingness to accept innovations. In general, the Cuna of eastern San Blas were more conservative, while those of the western and central parts more readily accepted outside influences. Modernist villages sent more workers to the larger society; conservative communities tended to rely more extensively on agricultural income for their livelihood. Village politics were concerned with questions of inheritance, boundary disputes, land sales, and property theft.

Land was privately held. As population increased, landholding and inheritance were more critical. In theory, all children had an equal right to inherit their parents' fields. In practice, though, most land passed from father to son. Sons, after fulfilling the labor obligations to their in-laws, farmed with their fathers.

Some coconut groves were held in common by the descendants of the original owner; common ownership gave these groups of descendants a strategic importance in controlling resources. Cooperative societies played a significant role in various economic ventures and had a major impact on coconut production, transporting, and selling.

Slash-and-burn farming on uninhabited islands and the mainland was the major economic activity, providing most subsistence. Bananas were the primary subsistence crop; coconuts, the main cash crop. Sources of nonagricultural income included migrant wage labor, the sale of hand-sewn items by Cuna women, and tourism. Most of the tourists were day visitors, but there were several resorts in the San Blas Islands owned by Cuna, United States citizens, and Panamanians. The Cuna also owned retail stores on the San Blas Islands.

Migrant wage labor was the most common source of nonfarm income. The Cuna have a long history as migrant laborers, beginning with their service as sailors on passing ships in the nineteenth century. In the early decades of the twentieth century, Cuna did short stints in Panama City, Col�n, and on banana plantations. Later they worked in the Canal Zone. The United Fruit Company banana plantations in Changuinola and Almirante were frequent destinations for Cuna. The company viewed the Cuna as exemplary employees, and a few were promoted to managerial or semi-managerial positions as of the late 1980s. Migrant labor was a part of the experience of almost every young male Cuna in his late teens or early twenties. In contrast with most of rural Panama, however, women left San Blas very infrequently. A mid-1970s survey found that less than 4 percent of San Blas women of all ages were living away.

Missionary activity among the Cuna began with the Roman Catholics in 1907 and Protestant denominations in 1913. Non- Panamanian Protestants were banned in 1925. A small Baptist mission returned with legal guarantees of freedom of confession in the 1950s. The presence of missionaries was a bone of contention between modernist and traditional Cuna for decades. Christianity spread unevenly through the archipelago, and the San Blasinos often resisted it tenaciously. Converts were often lax in their adherence to the new creeds; indigenous belief and practice remained prominent. The Baptist mission, noted one anthropologist, was "thoroughly Kuna-ized."

Ritual was a major focus of Cuna concern and a significant part of the relations between non-kin. It formed the basis for community solidarity and esprit. A man gained prestige through his mastery of rituals and chants. Virtually the entire village took part in female puberty rites, which were held several times each year; much social interaction followed ritualized patterns closely.

Lavish sharing was an esteemed virtue; stinginess was disparaged. Thus, the Cuna continued to celebrate community solidarity through feasting, gift giving, and ritual. The community offered food to visitors and entertained at public expense. The plethora of celebrations in the Cuna calendar offered ample occasions to display their generosity.

Many Cuna recognized the value of literacy, and schools had a long history in the archipelago. In the nineteenth century, some Cuna learned to read and write during periods of migrant labor. By the early 1900s, there were a few primary schools in San Blas. There was some resistance among the more conservative elements in Cuna society, but in general education encountered far less opposition than did missionaries' proselytizing. In the 1980s, most settlements of any size had a primary school; there were also several secondary schools. It was not uncommon for Cuna to migrate to further their education--there was a contingent of Cuna at the University of Panama, and a few had studied abroad. On islands with the longest history of schooling, illiteracy rates among those ten years of age and older were in the range of 15 percent in the late 1970s. The 4 villages that had refused schools until the late 1960s and early 1970s averaged nearly 95 percent illiterate. Overall, more than half the Cuna population over ten years of age was literate, and a comparable proportion of those aged seven to fifteen were in school.

Cuna relations with outsiders, especially the Panamanian government, have frequently been stormy. In general, however, the Cuna have managed to hold their own more effectively than most indigenous peoples. Early in the twentieth century, there were several Cuna confederacies, each under the aegis of the main village's chief. The chiefs negotiated with outsiders on behalf of the villages within their alliance.

In 1930 the national government recognized the semiautonomous status of the San Blas Cuna; eight years later the government formed the official Cuna reserve, the Comarca de San Blas. The Carta Org�nica, legislated by Law 16 of 1953, established the administrative structure of the reservation.

Tensions between the state and the Cuna increased under the rule of Omar Torrijos Herrera (1968-81) as the government attempted to alter Cuna political institutions. Cuna were unhappy over the appointment of Hispanics rather than Cuna to sensitive posts. Relations reached a low point during the controversy surrounding government plans to promote tourism in the region, threatening San Blas's status as a reserve. The conflict ended, however, with the reaffirmation of the reserve's status. The extent of Cuna disagreements with the national government was reflected in their vote in the 1977 referendum on the Panama Canal treaties: San Blas was the only electoral district to reject the treaties. For the Cuna, this action was less a statement about the fate of the former Canal Zone or Panamanian sovereignty than their rather strongly held views about their autonomy. Although many government-sponsored reforms were incorporated into Cuna political institutions, the San Blasinos continued to exercise a significant measure of autonomy.

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Panama - Guaymi


The Guaymi Indians were concentrated in the more remote regions of Bocas del Toro, Chiriqu�, and Veraguas. Because their territory was divided by the Cordillera Central, the Guaymi resided in two sections that were climatically and ecologically distinct. On the Pacific side, small hamlets were scattered throughout the more remote regions of Chiriqu� and Veraguas; on the Atlantic side, the people remained in riverine and coastal environments.

Contact was recorded between outsiders and Guaymi in the seventeenth and eighteenth centuries. Spanish colonial policy tried to group the Indians into settlements (reducciones) controlled by missionaries. This policy enjoyed only limited success in the area of modern Panama. Although some Indians converted to Christianity and gradually merged with the surrounding rural mestizo populace, most simply retreated to more remote territories.

Roman Catholic missionaries had sporadic contact with the Guaymi after the colonial era. Protestant missionaries--mostly Methodists and Seventh- Day Adventists--were active on the fringes of Guaymi territory on the Atlantic side, beginning in the early twentieth century. The Guaymi were impressed by missionaries because most missionaries, unlike mestizos, did not try to take advantage of them in economic dealings.

Present-day contact was most intense in Veraguas, where the mestizo farmers were expanding into previously remote lands at a rapid rate. Guaymi in Bocas del Toro and Chiriqu� were less affected. The entry of these outsiders effectively partitioned Guaymi lands. There was a rise in the proportion of tribal members bilingual in Spanish and Guaymi, substantial numbers of whom eventually abandoned Guaymi and disclaimed their Indian identity.

Government schools, especially along the Atlantic portion of Guaymi territory, attracted Indian settlements. Many parents were anxious for their children to attend at least primary school. They arranged for their children to board as servants with Antillean black families living in town, so that the children could attend classes. The outcome was a substantial number of Guaymi young adults who were trilingual in Guaymi, Spanish, and English.

Guaymi subsistence relied on crop raising, small-scale livestock production, hunting, and fishing. In contrast to the slash-and-burn agriculture practiced by the majority mestizo population, Guaymi agriculture was more similar to the type of exploitation practiced in the pre-Columbian era. It placed less reliance on machete and match, and more emphasis on the gradual selective clearing and weeding of plots at the seedling stage of crop growth. The Guaymi burned some trees (that did not have to be felled), but generally left more vegetation to decay. This strategy did not subject the fragile tropical soils to the intense leaching that often follows clear cutting and burning of the tropical forest. The Guaymi agricultural system relied upon an intimate and detailed knowledge of the forest flora. The Guaymi marked seasons not as much by changes in temperature and precipitation as by differences in plants. They noted the times of the year by observing when various plants matured. As an agricultural system it was highly diversified, and the wide range of crop varieties planted conferred resistance to the diverse pests that afflict more specialized farming systems. As an example, Guaymi banana trees produced fruit for sale during all the years that blight had essentially shut down the commercial banana plantations in the region.

Like much of rural Panama, Guaymi territories were subjected to considerable pressure. The length of time land was left fallow decreased. In addition, there were few stands of even well- established secondary forest, let alone untouched tropical forest. In the more intensively used regions, cultivators noted the proliferation of the short, coarse grasses that are the bane of traditional slash-and-burn agricultural systems.

The decline in stands of virgin and secondary forest led to a decrease in wildlife, which affected the Guaymi diet. Domestic livestock grew in importance as a source of protein because larger animals, such as tapir, deer, and peccary, once plentiful, were available only occasionally. Smaller livestock, such as poultry, was extremely vulnerable to disease and predation. Pigs and cattle were raised, but they were among the most consistently saleable products available; as a result, the Guaymi had to choose between protein and cash income. Overall, the diet was quite starchy, with bananas, manioc, and yams the main food items.

Wildlife was adversely affected by modern hunting techniques, also. Traditional hunting and fishing techniques had a minimal impact on the species involved. However, the small-caliber rifles, flashlights, and underwater gear used by Guaymi in the modern era were far more destructive.

The link of most Guaymi to the market economy was similar to that of many poorer rural mestizos. The Indians bought such items as clothing, cooking utensils, axes, blankets, alcohol, sewing machines, wristwatches, and radios. They earned the money for these purchases through period wage labor and the sale of livestock, crops, and crafts (the most unpredictable source of income).

Most Guaymi young men had some experience as wage laborers, although their opportunities were usually limited and uncertain. Some acquired permanent or semipermanent jobs. A few managed to get skilled employment as mechanics or overseers. Fewer still became teachers. The principal employers for Guaymi were the surrounding banana plantations and cattle ranches. Because government policy after the 1950s limited the hiring of foreign laborers on the plantations, Guaymi formed a major part of the banana plantation work force. A number of Indian families settled in towns to work on the plantations. Nonetheless, the wages Guaymi earned proved illusory since most, if not all, of their earnings were spent on living expenses while away from home.

The Guaymi link to the national economy not only provided cash for the purchase of a variety of consumer goods but also acted as a safety valve, relieving the pressure on land. Their dependence on this link was evident during the 1960s, when the Guaymi endured a real hardship because of a decline in demand for labor on banana plantations.

Settlement patterns among the Guaymi were intimately linked to kinship and social organization. Hamlets, each typically representing a single extended family, were scattered throughout the territory. There were no larger settlements of any permanence serving as trading or ceremonial centers. A few mestizo towns on the fringes of Guaymi territory served as trading posts.

Each hamlet was ideally composed of a group of consanguineally related males, their wives, and their unmarried children. Nevertheless, this general rule glossed over residence patterns of considerable fluidity and complexity. At least at some points in an individual's life, he or she resided in a three-generation household. Households, however, took many forms, including nuclear families; polygynous households; groups of brothers, their wives, and unmarried children; a couple, their unmarried children, and married sons and their wives and children; or a mother, her married sons, and their wives and children.

A hamlet defined an individual's social identity, and access to land and livelihood was gained through residence in a specific hamlet. Typically, a person's closest kin resided there. The wide variety of family forms represented in hamlets reflected the diverse ways individual Guaymi used the ties of kinship to gain access to land. Depending on the availability of plots, an individual couple might live with the husband's family (the ideal), the wife's kin, the husband's mother (if his parents did not live together), the husband's mother's kin, or his father's mother's kin.

Guaymi had pronounced notions about which tasks were appropriately male or female; but men would build fires, cook, and care for children if necessary and women would, as the occasion demanded, weed and chop firewood. Women were never supposed to clear forest, herd cattle, or hunt. Nonetheless, a measure of expediency dictated who actually performed the required duties. Because most men migrated to look for employment, a significant segment of the agricultural work force was absent for lengthy periods of time. Consequently, women assumed a larger share of the farmwork during those absences. Their own male kinsmen helped with the heavier tasks. Children began assisting their parents at approximately eight years of age. By the time a girl was fourteen to fifteen years old and a boy seventeen to eighteen, they were expected to do the work of an adult.

Sharing of food and labor was an important form of exchange among kin. If a hamlet needed food, a woman or child would be sent to solicit food from relatives. Kin also formed a common labor pool for virtually all agricultural work. Guaymi did not hire each other as wage laborers. Non-kin assisted each other only for specific festive or communal works. Within the hamlet, all able-bodied family members were expected to contribute labor. Kin from different hamlets exchanged labor on a day-by-day basis. Individuals were careful not to incur too many obligations so as not to compromise their own household's agricultural production. Those who received assistance were obliged to provide food, meat, and chicha (a kind of beer) for all the workers. Moreover, there was supposed to be enough food to send a bit home with each worker.

Marriage was the primary means by which Guaymi created social ties to other (non-kin) Guaymi. The ramifications of marriage exchanges extended far beyond the couple concerned. The selection of a spouse was the choice of an allied group and reflected broader concerns such as access to land and wealth, resolution of longstanding disputes, or acquisition of an ally in a previously nonaligned party.

Fathers usually arranged marriages for children. An agreement was marked by a visit of the groom and his parents to the home of the prospective bride and her family. The marriage itself was fixed through a series of visits between the two households involved. No formal ceremony marked the event. Ideally, marriage arrangements were to be balanced exchanges between two kin groups.

Initially the young couple resided with the bride's parents because a son-in-law owed his parents-in-law labor. Thus, a bride usually did not leave her natal hamlet for at least a year. For the husband, persuading his wife to leave her family and join his was a major, and often insurmountable, hurdle. If the marriage conformed to the ideal of a balanced exchange, however, a husband's task was considerably easier in that his wife had to join him or her brother would not receive a wife.

Young men in groups without daughters to exchange in marriage were at a disadvantage. Although they could (and did) ask for wives without giving a sister in return, the fathers of the brides gained significantly. A son-in-law whose family did not provide a bride to his wife's family faced longer labor obligations to his in-laws and uncertainty about when, or if, his wife would join him and his family.

A minority of all marriages were polygynous. Traditionally, a man's ability to support more than one wife was testimony to his wealth and prestige. Co-wives were often sisters. A man could marry his wife's younger sister after he had established a household and acquired sufficient resources to support two families. Wives lived together until their sons matured and married. At that time, an extended household would reconstitute itself around a woman and her married sons and their wives and children. Younger wives in polygynous marriages had a tendency to leave their husbands as they aged. A reasonably successful Guaymi man might expect to begin his married life in a monogamous union, have several wives as he grew more wealthy, and finish his life again in a monogamous marriage.

In general, there were few external indications of differences in wealth, and there was no formal ranking of status in Guaymi society. Prestige accrued to the individual Guaymi male who was able to demonstrate largesse in meeting his obligations to kin and in-laws. A young man began to gain the respect of his in-laws by providing them well with food and labor. He further demonstrated his abilities by farming his own plots well enough to provide for his family and those of his kin who visited.

An individual might also gain prestige through his ability to settle differences. Historically, disputes between Guaymi were settled at public meetings chaired by a person skilled in arbitration. An individual's prestige was in proportion to his ability to reach a consensus among the parties involved in the dispute. In present-day Guaymi society, a government-appointed representative decided the case. Guaymi gained prestige by proposing settlements more acceptable to the disputants than those of the government representative. As an individual's reputation spread, other disputants sought him out to arbitrate. The entire process emphasized the extent to which indigenous political structures were acephalous and loosely organized. There were no durable, well-organized, non-kin groups that functioned in the political sphere; decision making was largely informal and consensual.

In the 1980s, government plans to develop the Cerro Colorado copper mine, along the Cordillera Central in eastern Chiriqu� Province, gave impetus to the efforts of some Guaymi to organize politically. Most of the mining project as well as a planned slurry pipeline, a highway, and the Changuinola I Hydroelectric Project were in territory occupied by the Guaymi. Guaymi attended a number of congresses to protect their claims to land and publicize their misgivings about the projects. The Guaymi were concerned about the government's apparent lack of interest in their plight, about the impact on their lands, and their productivity, and about the effect of dam construction on fishing and water supplies. Guaymi were also worried that proposed cash indemnification payments for lands or damages would be of little benefit to them in the long run. As of late 1987, however, the matter had not been fully resolved.

More about the <>Ethnic Groups of Panama.




Family and Kin

In the late 1980s, family and kin continued to play a central role in the social lives of most Panamanians. An individual without kin to turn to for protection and aid was in a precarious position. Loyalty to one's kin was an ingrained value, and family ties were considered one's surest defense against a hostile and uncertain world. This loyalty often outweighed that given to a spouse; indeed, a man frequently gave priority to his responsibility to his parents or siblings over that extended to his wife.

Co-resident parents, children, and others living with them constituted the basic unit of kinship. Family members relied upon each other for assistance in major undertakings throughout life. Extended kin were important as well. Grandparents, uncles, aunts, and cousins faithfully gathered to mark birthdays and holidays together. Married children visited their parents frequently--even daily. In some small remote villages and in some classes (such as the elite), generations of intermarriage created a high measure of interrelatedness, and almost everyone could trace a kinship link with everyone else. Co-residence, nonetheless, remained the basis for the most enduring ties an individual formed.

A significant portion of all marriage unions were consensual rather than contractual. A formal marriage ceremony often represented the culmination of a life together for many mestizo and Antillean couples. It served as a mark of economic success. Grown children sometimes promoted their parents' formal marriage. Alternatively, a priest might encourage it for an elderly sick person, as a prerequisite for receiving the rite of the anointing of the sick.

The stability of consensual marriages varied considerably. In rural areas where campesinos' livelihood was reasonably secure and population relatively stable, social controls bolstered informal unions. Mestizos themselves made no distinction between the obligations and duties of couples in a consensual or a legal marriage. Children suffered little social stigma if their parents were not legally married. If the union was unstable and there were children, the paternal grandparents sometimes took in both mother and children. Or, a woman might return to her mother's or her parents' household, leaving behind her children so that she could work. Nevertheless, there were a significant number of femaleheaded families, particularly in cities and among the poorest segment of the population.

Formally constituted legal marriage was the rule among the more prosperous campesinos, cattle ranchers, the urban middle class, and the elite. Marriage played a significant role for the elite in defining and maintaining the family's status. A concern for genealogy, imputed racial purity, and wealth were major considerations. Repeated intermarriage made the older elite families into a broadly interrelated web of kin. As one upper-class wife noted, ". . . no member of my family marries anyone whose greatgrandparents were unknown to us."

Men were expected to be sexually active outside of marriage. Keeping a mistress was acceptable in virtually every class. Among the wealthier classes, a man's relationship with his mistress could take on a quasi-formal, permanent quality. An elite male could entertain his mistress on all but the most formal social occasions, and he could expect to receive friends at the apartment he had provided for her. Furthermore, he would recognize and support the children she bore him.

The ideal focus for a woman, by contrast, was home, family, and children. Children were a woman's main goal and consolation in life. The tie between mother and child was virtually sacrosanct, and filial love and respect deeply held duties. Whatever her husband's extramarital activities, a woman's fidelity had to be above reproach. An elite or middle-class woman derived considerable solace from her status as a man's legal wife. Nevertheless, middleclass and more educated women often found their traditional role and the division of labor irksome, and were particularly offended by the diversion of family funds into their husbands' pursuit of pleasure.

Campesinos, too, divided social life into its properly male and female spheres: "The man is in the fields, the woman is in the home." As a corollary, men were "of the street" and able to visit at will. Women who circulated too freely were likened to prostitutes; men who performed female tasks were thought to be dominated by their wives.

Childrearing practices reinforced the traditional male and female roles and values to a greater or lesser degree among all classes. Boys were permitted considerably more latitude and freedom than girls. Girls were typically tightly supervised, their companions screened, and their activities monitored.

Because children were deeply desired, their birth was celebrated, and a baptism was a major family event. The selection of godparents (padrinos) was an important step that could have a pronounced influence on the child's welfare and future. It resulted in a quasi-kinship relationship that carried with it moral, ceremonial, and religious significance, and broadened family ties of trust, loyalty, and support.

Parents tried to choose for their children godparents whom they respected, and trusted, and who were as high on the social scale as possible. A certain degree of formality and ceremony was expected of godparents in social interaction, but the bonds primarily involved protective responsibility and a willingness to render assistance in adversity.

Campesinos followed two distinct patterns in choosing godparents. The parents might choose a person of wealth, power, or prestige, thereby gaining an influential protector. Such a contact could give a parent the confidence to launch a child into an alien outside world, in which he or she might have little personal status or experience. By contrast, among some campesinos there was strong informal pressure in the opposite direction. They believed it was inappropriate to ask someone of higher economic status to act as a godparent, so they sought out instead a relative or friend, especially one who lived in the same area. The choice here tended to reinforce existing social ties and loyalties.

<> Rural Society
<> Migration
<> Urban Society
<> The Elite
<> The Middle Class
<> The Lower Class


Panama - Rural Society


The opening of the trans-isthmian railroad in the mid- nineteenth century and the Panama Canal early in the twentieth century reinforced the distinctions basic to Panamanian society: the dichotomies between rural and urban inhabitants; small-scale, mixed agriculturalists and larger cattle ranchers; the landless and landowners; and mestizos and whites. By the late 1980s, urban-based control over rural lands was considerable. The metropolitan elite not only had substantial rural landholdings, but monopolized pivotal political posts as well. Wealthy city dwellers also controlled food-processing and transportation facilities. For the bulk of the mestizo peasants, though, limited population and ample reserves of land made elite control of resources less onerous than it might have been, as did the fact that urban elites tended to view their holdings less as agricultural enterprises than as estates in the countryside.

Traditional slash-and-burn agriculture was the basis of rural livelihood for most human settlement on the isthmus. All able-bodied household members were expected to contribute to the family's support. The peasant family was a single production and consumption unit. There was a marked division of labor by sex, and most of the work associated with crops and planting was done by men. Mestizos recognized the significant contribution children made to the agricultural output of a household. Boys and girls gradually assumed responsibilities for assisting with the duties deemed appropriate to their gender. As children, especially boys, grew older, they received part of the income from the sale of crops or part of a field that was "in their name."

Agricultural production was geared to the household's consumption. A family typically kept some livestock and planted a variety of foodstuffs, of which maize was the principal crop. Peasants gained temporary access to land by entering an agreement to clear and maintain cattle pasture for absentee landowners. A family would agree to clear a stand of forest (ideally secondary growth) and plant it in crops for one to two years. At the end of the cycle, they would often seed the plot with grasses before moving on to a new site. Peasants also owed landowners a minimal number of days in labor each year. They faced further demands on their labor to build and maintain communal buildings, such as churches and schools, and to assist with certain public works required by the government.

Since the 1950s, however, traditional slash-and-burn farming and the system of social relations it supports have been in the throes of change. Increasing population pressure, the rapid expansion of cattle ranching, and production of a variety of other cash crops in the interior provinces have put pressure on the land base necessary to maintain slash-and-burn agriculture while preserving the tropical forest. Improved transportation has been accompanied by a rapid expansion in cattle ranching in regions hitherto inaccessible. The process as a whole has meant an increasing consolidation of landholdings and displacement of traditional small-scale farmers engaged in mixed crop and livestock production. The number of farms classified as family owned and operated has declined, in favor of larger units worked by agricultural laborers. This pattern has been accompanied by an increase in and intensification of land disputes.

The consolidation process has been particularly intense in the lowlands of the Pacific coast and in Col�n Province southwest of the city of Col�n. In these regions, the expansion of the road network and the increasing number of all-weather roads have given potential cattle ranchers access to the large urban beef markets in Col�n and Panama City. Cattle ranches grew five-fold in size in the hinterlands of Col�n Province in the 1960s. Similar forces had a comparable impact on the Pacific coast, where cattle ranching increased by more than 400 percent from the 1950s through the 1970s, and land values tripled.

The increased demands on the land base affected peasant farmers on many levels. Growing population pressure and the felling of most untouched stands of tropical forest meant a decrease of hunting and, therefore, of animal protein in the family diet. Peccary, deer, and iguana, once relatively common supplements to the mestizo diet, were less available. The same process limited the forest products available for home construction and firewood. Ironically, the expansion in cattle ranching limited the ability of small-scale farmers to keep larger livestock. The purchase price of cattle rose; and, because increased planting meant that animals could not forage as freely as before, they had to be penned or fenced. Finally, where drought-resistant pasture grasses were seeded, the forest itself regenerated much more slowly--limiting still further the land's ability to support an expanding population of both cattle ranchers and small farmers.

The decline in the land available for slash-and-burn agriculture and the increase in cash cropping also drew peasants more deeply into commercialized agriculture in the 1980s. At the same time that small farmers faced declining harvests and increased pressure on the family's subsistence base, they were forced to compete in markets for cash crops where the price was largely determined by larger-scale producers. Most of their production of cash crops was sporadic and in response to unpredictable situations. Difficulties in marketing placed small producers at a further disadvantage.

Sugarcane provides an instructive example. Farmers often planted sugarcane as a second-year crop in the fields they had cleared. The crop was pressed on the draft-animal presses some families owned and used for home consumption. As transportation improved, more small farmers gained access to large-scale, commercial sugarcane mills and had the option of growing sugarcane on contract for the mills. Although this opportunity offered the cultivator a possible source of more reliable income, small farmers were disadvantaged in a number of ways. Planting cane precludes using a plot for foodstuffs during the second year of cultivation. In addition, it requires hired labor, and small-scale producers were hard pressed to offer wages competitive with those that larger farmers or the mills themselves could pay. Finally, small farmers were unable to control the timing of their harvesting, which is essential for gaining optimal yields, because producers had to cut and transport their harvest whenever they were able to contract laborers and truckers for hauling the crop to the mill.

By the late 1980s, peasant families had become vastly more dependent on the money economy. In many regions, consumer goods replaced the traditional craft items produced at home, and hired labor was used in preference to labor exchange among households. Neighbors previously linked through myriad ties of exchange and interdependence were now bound by their common link with external markets. The amount of cash purchases families had to make rose dramatically: corrugated roofing replaced thatch, metal cookware replaced gourds and wooden utensils, nails served instead of vines as fasteners, and, in rare instances, gas stoves were used instead of wood-burning ranges.

Peasant families had a variety of subsidiary sources of income at their disposal. Men and women alike had opportunities to earn a little cash income. Women husked and cleaned rice for neighbors who could afford to pay, sewed, made hats, cooked, and washed clothes, while men made furniture. Those fortunate enough to own draft animals or trucks hauled goods for other farmers. Depending on location, season, and a variety of other factors, there was occasional demand for casual laborers. Such options represented a "safety net" that farmers took advantage of when crops failed or harvests were short. Nevertheless, nonfarming sources of income did not represent a viable alternative to agriculture for most families.

The general increase in cash in circulation affected various segments of the rural population differently. Younger or more highly educated and trained workers were able to compete for better-paying jobs and thus outearn their parents. Despite this, the impact on family life was cushioned because parents never counted on controlling their grown children. In one sense, families were better off because well-employed children were better able to assist their elderly parents. Where the increased cash purchases included milled rice, women were spared the arduous task of husking and milling rice themselves. Educational opportunities benefited all able to take advantage of them. Women gained in particular from the increase in employment opportunities for primary-school teachers.

In addition to peasant farmers and ranchers, Panama had the core of a rural educated middle class by the mid-twentieth century. Frequently educated at the teachers' college in Santiago, in the province of Veraguas, these educated sons and daughters of more prosperous agriculturalists and small merchants were of marginal influence in comparison with the urban elite. Long excluded from any effective role in the nation's politics, they proved a bulwark of support for the Torrijos regime.

Land reform legislation drafted under the influence of the Alliance for Progress in the early 1960s recognized the peasants' right to land. Nevertheless, the law's consequences in the countryside were often unforeseen. The plots allocated under the law were usually too small to support slash-and-burn agriculture; they did not allow sufficient land for fallowing. And, for a substantial portion of peasant families, the cash outlay required to purchase land was prohibitive. Although the relatively poor were unable to assume such debts, the more prosperous were. Some of the more successful emigrants to the city managed to acquire land through land reform and rented it to farmers under terms equivalent to those previously available through larger absentee owners.

In the late 1960s and early 1970s, the government attempted to model its land reform efforts on a collective farming system borrowed from Chile. The government acquired tax-delinquent properties and set up a variety of collectively operated agro-enterprises. The collectives enjoyed mixed success, however. They tended to be heavily mechanized and dependent on outside infusions of technical assistance and capital, while they generated only minimal employment. The most dramatic successes were achieved in regions like Veraguas Province where small farmers competed with cattle ranchers for land. Collectives were less successful in areas where smallholdings predominated.

Where small farmers held title to their lands--an infrequent pattern in traditional rural Panama--they often sold their lands to the larger, more heavily capitalized cattle ranches. The numbers of landless, or nearly landless, cultivators in search of plots to "borrow" for a season's planting rose. Substantial numbers of these displaced small farmers chose migration as an alternative.

Mestizo migrants from regions where cattle ranching was expanding entered the lowlands of the Atlantic coast and the Dari�n Peninsula in increasing numbers. Migrants arrived and cleared forest land (generally away from the rivers favored by the region's earlier black, Indian, Hispanic Indian, and Hispanic black settlers). The process then repeated itself: the new settlers remained for a few years until improved roads brought more cattle ranchers; the colonos (internal migrants) who originally cleared the forest then sold their lands and moved yet deeper into the tropical forest.


Panama - Migration


Migration has played an increasingly significant role in the lives of Panamanians and has followed a distinct pattern throughout the twentieth century. Population movement has been into those districts and provinces enjoying a period of economic prosperity, typically associated with the canal. As the economic boom peters out, the migrant population moves back to the primarily agricultural districts, to be reabsorbed into subsistence farming or small-scale businesses and services in the country's predominantly rural interior. The pattern has been repeated several times with the ebb and flow of economic activity. In the late 1980s, it remained to be seen what adaptations migrants would make given the shrinking rural land base.

The 1911 census provides a baseline for population movements throughout the century. At that time, the provinces of Chiriqu� and Panam� accounted for nearly 40 percent of the total population. Chiriqu�'s growth was the result of migrants from Colombia in the nineteenth century; Panam�'s came as a result of the canal construction begun just after the turn of the century. The central provinces--Veraguas, Cocl�, Los Santos, and Herrera (in order of population)--accounted for slightly more than 40 percent of the total. The entire region had been populated along the coasts since the colonial era and had grown in response to increased demand for foodstuffs in Panama City and Col�n in the second half of the nineteenth century. The decade following the census saw dramatic population growth in response to the United States presence and the building of the Panama Canal. The need to feed the massive numbers of black Antillean laborers who came to work on the construction project generated a boom in agriculture.

Subsequent censuses revealed a specific pattern of rural-rural and rural-urban migration. Some rural districts of a province lost population, while others even relatively close grew rapidly. The pattern reversed itself during periods of economic stagnation. Then, migrants retreated into subsistence agriculture in regions that had enjoyed limited participation in the previous boom. Between 1910 and 1920, for example, the Chepigana District in Dari�n was in the midst of a boom and enjoyed a significant influx of population, while the neighboring Pinogana District lost population. Their roles were reversed in the following decade.

The 1920s represented such a period of stagnation. The regions of highest growth in the previous decade grew much more slowly--if they grew at all. Col�n and Bocas del Toro were the most heavily affected. Panam� Province continued to grow at rates slightly in excess of the national average; nonetheless, a large number of foreign workers left, as did a significant portion of the small business owners who had provisioned them and who were ruined by the decline in clientele.

Rural regions absorbed these surplus laborers and served as centers of population growth throughout the 1920s. Some such as Veraguas and Dari�n grew in excess of 5 percent annually during the intercensal period. District capitals in predominantly rural provinces tended to enjoy significant growth as well, probably as a result of their administrative functions, and the rise of banana plantations in Chiriqu� attracted workers from throughout Central America.

The pattern reversed again in the late 1930s and mid-1940s. The immediate pre-World War II period as well as the war itself were times of significant economic expansion for the country as a whole. The province of Panam� headed the country in population growth, and the entire western portion of the province was a region of economic expansion. Col�n, by contrast, lost in importance. Its annual rate of increase, 1.44 percent, was barely half the national average. The decline in Col�n's fortunes reflected the centralization of economic and administrative activity in Panama City. Furthermore, Col�n's importance as a port on the Atlantic diminished with the construction of the Trans-isthmian Highway (also known as the Boyd- Roosevelt Highway).

The economic expansion accompanying World War II eliminated problems associated with the increase in large-scale agro- enterprises in the interior. Although substantial numbers of small farmers were displaced, they were readily absorbed by the demand for labor in cities and the countryside. Even in the period of economic contraction following the war, cities in predominantly rural provinces enjoyed significant growth. The war fueled the development of small-scale industrial and processing activities throughout the country. The dimensions of this growth were such that large numbers of rural youngsters--sons and daughters of small farmers--remained in the provinces in which they were born rather than migrating to Panama City or the Canal Zone.

World War II also saw Panama's last major influx of foreign workers. Most of these workers left with the economic slowdown at the war's end. As in previous periods of economic contraction, increasing numbers of displaced migrants took refuge in subsistence farming. The late 1940s was a time of growth for the rural regions of the country.

Overall, population grew at an annual rate of 2.9 percent in the 1950s; Panama was in the midst of a demographic transition as birth rates remained high while death rates dropped. The press of the population on the land base reached critical proportions. Peasants, displaced by the spread of large-scale agro-enterprises in the country, found it more and more difficult to find unoccupied land to put into production. At the same time, rural-urban migrants found it increasingly difficult simply to return home and resume farming during periods of economic contraction.

The pressure on the land base was acute enough to precipitate significant conflict over holdings in the 1950s and 1960s. In the province of Panam�, peasants invaded and seized the land around Gatun Lake as well as some regions of the districts of La Chorrera, Capira, and Chaime. Although many of these squatters were successful in maintaining their claim on the holdings, most peasants in other parts of the country were not so fortunate. The expansion of large cattle ranches in much of Los Santos and Veraguas continued the migratory process begun earlier, and peasants were pushed farther and farther along the agricultural frontier.

Substantial numbers of these displaced peasants migrated to less settled regions in Chiriqu�, Los Santos, and Veraguas. Likewise, banana plantations in Chiriqu� and Bocas del Toro drew significant numbers of migrants. The principal destination for much of the rural populace, however, was Greater Panama City.

Nearly two-thirds of all migrants had as their destination the heavily urban province of Panam�--a proportion that has remained roughly constant since the 1950s. In terms of absolute numbers, Los Santos and Veraguas were the major contributors to the migration stream: together they accounted for one-third of all migrants. The relatively depressed districts around Col�n contributed large numbers of migrants, as did a number of districts in Chiriqu� and Bocas del Toro. Based on rates of out-migration rather than absolute numbers, Los Santos, Dari�n, and Cocl� were the main places of origin.

Within the province of Panam�, the greater metropolitan area of Panama City attracted most migrants. The districts surrounding the city averaged a growth rate of more than 10 percent per year in the 1960s and 1970s. Panama City played a significant role in the migration patterns of virtually every other province in the country. Over 90 percent of the migrants from Dari�n went there, as did roughly 80 percent of those from Cocl�, Col�n, Los Santos, and Veraguas. In the relatively prosperous mid-1960s to mid-1970s, most migrants managed to find employment. Many joined the ranks of peddlers and other small-scale self-employed individuals.

The manufacturing sector expanded significantly during the 1960s, resulting in a doubling of the industrial labor force. The service sector--traditionally the country's most dynamic--was fueled by the expansion of manufacturing as well as Panama's pivotal position as a transit zone. The service sector absorbed more than half the increase in the economically active population and grew at a rate of more than 6 percent annually. For the city- bound migrant, that meant jobs in public and domestic service and construction. Nevertheless, some observers expected the rate of migration to the metropolitan region to decline with economic reverses in the 1980s and the increase in opportunities in other regions, such as the Cerro Colorado copper project in Chiriqu�.

Overall, the migration stream in the 1970s was composed of three components: rural-urban migrants (accounting for more than half of all migrants), urban-urban migrants (roughly one-quarter of all migrants), and urban-rural migrants (nearly 20 percent of those questioned about their place of residence five years earlier had been living in a city). The exact proportion and significance of urban-rural migration were difficult to judge. Approximately half the migrants were former residents of the smaller cities of the interior and presumably had left their farms for seasonal work in a nearby city or to attend school. Nearly one-third of these return migrants had lived in Panama City and its environs. Many were specialized workers; others were peasants unable to find permanent employment in the city; still others were children sent home to be cared for by kin.

Those people who migrated were, as a whole, young. In the 1970s nearly 75 percent of them were under 35 years of age; among rural- urban migrants, the percentage rose to more than 80 percent. School-age migrants represented a significant group in the migration stream. Although many simply accompanied their parents on moves, a significant minority were sent by their rural families for education in nearby cities. Men formed the majority among rural- urban migrants to Col�n; women, however, accounted for a slight majority of all rural-urban migrants. This tendency was most marked in migration of women to cities in the interior, but was also found among migrants to Panama City. In general, observers attributed the high rate of female migration to the metropolitan region to the opportunities for employment available for young women there. Unemployment was lower among urban females than among their rural counterparts, whereas the reverse was true for males.


Panama - Urban Society


Since the 1950s, Panama has been in the midst of massive urban expansion. In 1960 slightly more than one-third of the total population was classified as urban; by the early 1980s, the figure had risen to 55 percent. Between 1970 and 1980, overall population increased by 2.5 percent per year, urban population by 2.8 percent, and the metropolitan population surrounding Panama City by 3.7 percent. Regional cities shared in the general urban expansion: the number of people in Santiago grew at 4.1 percent annually; David, 3.7 percent; and Chitr�, 3.3 percent. Economically depressed Col�n lagged with an annual increase of less than 0.5 a percent. Economic activity and population density in Panama were concentrated along two main axes: the Pan-American Highway (also known as the the Inter-American Highway) on the Pacific corridor from La Chorrera to Tocumen and the Trans-isthmian Highway from Panama City to Col�n.

Far and away the most significant focus of urban development was the path following the former Canal Zone that stretches from Col�n on the Atlantic coast to Panama City on the Pacific. In the mid-1980s, the region accounted for more than half the total population of the country and over two-thirds of all those classified as inhabitants of cities. It also included most nonagricultural economic activity: 76 percent of manufacturing, 85 percent of construction, 95 percent of transportation, and 84 percent of communications. Growth was not spread evenly throughout the region, and since the 1950s, Panama City and its environs had eclipsed Col�n. Col�n remained the only significant urban center on Panama's Atlantic coast, but by the early 1980s, substantial numbers of that city's business and professional community had emigrated in response to Panama City's expanding economy.

In terms of sheer numbers, most of the urban expansion was concentrated in slum tenements and, since the 1950s, in squatter settlements around the major cities. As was the case in most urban trends, Panama City led the way. In 1958 there were 11 identifiable slums or squatter settlements housing 18,000 people associated with the city; by the mid-1970s, there were some 34 slum communities and their population had mushroomed more than five-fold. Surveys indicated that 80 percent of slum and squatter settlement inhabitants were migrants to the city.

Many of the tenements took the form of two-story frame houses built as pre-World War I temporary housing for the canal labor force. They continued to be occupied, although in the early 1980s they were in an advanced state of decay. When one part of a building collapsed, slum dwellers continued to live in those sections of the building that remained standing. The structures were frequently condemned, which merely added to their attractiveness for impoverished city dwellers, because the rent therefore dropped to nothing. Squatter settlements offered their own inducements. If squatters were able to maintain their claims to land, the settlements tended to improve and gained amenities over time. Because they were essentially rent-free, they gave their inhabitants considerable advantages over costly and over-crowded, if more centrally located, tenements. A substantial portion of the squatters settled on government land, and there were numerous programs to permit them to purchase their housing sites. The Torrijos regime allocated funds for low-income housing projects, and there were efforts to upgrade the amenities available to the urban poor. By the 1980s, about 96 percent of the urban population had access to potable water and nearly 70 percent had electricity. Despite indications of some slowing in the rate of rural-urban migration in the 1980s, migrants represented a major strain on public services and the economy's ability to generate employment.

Although rural society was relatively homogeneous and simple in the social distinctions it made, urban Panama was not. It was ethnically and socially diverse and highly stratified. City dwellers took note of ethnic or racial heritage, family background, income (and source of income), religion, culture, education, and political influences as key characteristics in classifying individuals.

But, in the late 1980s, the boundaries among the elite, the middle class, and the lower class were neither especially well defined nor impervious. The ambitious and lucky city dweller could aspire to better significantly his or her social and economic status. Neither were the distinctions between rural and urban inhabitants absolute. City and countryside were linked in numerous ways; given the frequency with which migrants moved, this year's urban worker was last year's and (not uncommonly) next year's peasant. There was considerable social mobility, principally from the lower to the middle class and generally on an individual rather than a group basis. Wealth, occupation, education, and family affiliation were the main factors affecting such mobility.


Panama - The Elite


Urban society in the late 1980s included virtually all members of the elite. Centered mainly in the capital, this class was composed of old families of Spanish descent and a few, newer families of immigrants. All elite families were wealthy, but the assets of the immigrant families were more tightly linked with commerce and Panama's twentieth-century development as a transit zone. Older families were inclined to think of themselves an aristocracy based on birth and breeding. Newer families, lacking such illustrious antecedents, had less prestige and social status. Until the advent of Torrijos, whose power base was the National Guard, an oligarchy of older elite families virtually controlled the country's politics under the auspices of the Liberal Party.

The upper class was a small, close-knit group that had developed strong ties of association and kinship over the years. Prominent family names recurred frequently in the news of the nation: Arias, Arosemena, Alem�n, Chiari, Goyt�a, and de la Guardia. People without a claim to such a family background could gain acceptance, at least for their children, by marriage into an elite family.

Since colonial times, education had been recognized as a mark of status; hence, almost all men of elite status received a university education. Most attended private schools either at home or abroad, and many studied a profession, with law and medicine the most favored. The practice of a profession was viewed not as a means of livelihood, but as a status symbol and an adjunct to a political career. The elite maintained a dual cultural allegiance, because families usually sent their sons to Western Europe or the United States to complete their education. Increasing numbers of women also attended college, but most families did not see such education as essential.

Politics was the quintessential career for a young man of elite background. The old, aristocratic families had long provided the republic's presidents, its cabinet ministers, and many members of the legislatures. Young women were increasingly finding employment in public administration and commerce in the 1980s.

Older elite families were closely interrelated and were careful to avoid racially mixed unions. Antillean blacks enjoyed little success in attaining elite status, although a wealthy, Spanishspeaking , Roman Catholic black could gain acceptance. There was an increasing degree of admixture with mestizo and more recent immigrant elements. Many such families entered the elite and intermarried with members of the older families. In a sense, commercial success had in large measure become a substitute for an illustrious family background. "Money whitens everyone" was a popular saying describing the phenomenon.


Panama - The Middle Class


The middle class was predominantly mestizo, but it included such diverse elements as the children and grandchildren of black Antilleans, the descendants of Chinese laborers on the railroad, Jews, more recent immigrants from Europe and the Middle East, and a few former elite families fallen on hard times. Like the elite, the middle class was largely urban, although many small cities and towns of the interior had their own middle-class families. The middle class encompassed small businessmen, professionals, managerial and technical personnel, and government administrators. Its membership was defined by those who, by economic assets or social status, were not identifiably elite but who were still markedly better off than the lower class. As a whole, the middle class benefited from the economic prosperity of the 1960s and early 1970s, as well as the general expansion in educational opportunities in the late twentieth century.

Members of the middle class who had held such status for any length of time were rarely content to remain fixed on the social scale. Emulating elite norms and attitudes, they exerted great effort to continue their climb up the social ladder. They were aware of the importance of education and occupation in determining status and the compensatory role these variables could play in the absence of family wealth or social background. Middle-class parents made great sacrifices to send their children to the best schools possible. Young men were encouraged to acquire a profession, and young women were steered toward office jobs in government or business. In contrast with the elite, the middle class viewed teaching as an appropriate occupation for a young woman.

Nationalist sentiment served to unify the diverse elements of the middle class in the decades following World War II. University students, who were predominantly middle class in family background, typified both the intense nationalism and the political activism of the middle class. Political observers noted a sharp class cleavage in the political consciousness of the Spanish-speaking natives and the more recent, unassimilated immigrant families. Middle-class immigrants tended to be preoccupied with commercial pursuits and largely conservative or passive in their politics.


Panama - The Lower Class


The lower class constituted the bulk of the country's urban population. As a group, it was stratified by employment and race. In terms of livelihood it was made up of unskilled or semiskilled workers, including artisans, vendors, manual laborers, and servants. The basic cleavages were between those who were wage earners and the self-employed, and those employed in the former Canal Zone, who constituted a "labor elite" earning twice the average of the metropolitan region as a whole.

Self-employment offered a precarious existence to most who pursued it, but served as an alternative for those unable to find other work when the economy contracted in the late 1970s and 1980s. Unemployment ran in excess of 10 percent in the late 1970s and early 1980s, and much of it was concentrated in the metropolitan region, which accounted for approximately four-fifths of the country's jobless. In poorer neighborhoods, the rate ran closer to 25 percent, and among low-income families, roughly 40 percent were unemployed.

Because the majority of rural-urban migrants to the metropolitan region were women, women outnumbered men in many larger urban areas. Many came in search of work as domestics. Young, single mothers constituted a significant proportion of the urban population; in Col�n, for example, they represented one-third of all families. Women suffered higher unemployment rates than did men, and their earnings, when they were employed, averaged less than half those of males.

Ethnically, the lower class had three principal components: mestizo migrants from the countryside, children and grandchildren of Antillean blacks, and Hispanicized blacks--descendants of former slaves. The split between Antillean blacks and the rest of the populace was particularly marked. Although there was some social mixing and intermarriage, religious and cultural differences isolated the Antilleans. They were gradually becoming more Hispanicized, but the first generation usually remained oriented toward its Caribbean origins, and the second and third generations were under North American influence through exposure to United States citizens in the former Canal Zone where most were employed. Although some Antillean blacks were middle class, most remained in the lower class.

Increasing numbers of urban lower-class parents were sending their children to school. A secondary-school diploma, in particular, served as a permit to compete for white-collar jobs and elevation to middle-class status. This kind of mobility was on the rise throughout the 1960s and 1970s. Mestizos were better able to take advantage of these opportunities than most, but Antilleans who were educated and conformed to Hispanic cultural norms enjoyed considerable mobility as well. The National Guard, and later the FDP, have been an avenue of advancement for both Hispanic and Antillean blacks. A substantial portion of the enlisted personnel have come from the ranks of the black urban poor and, increasingly, the rural mestizo population. Enlisted personnel could hope to advance to the officer corps. Under the Torrijos regime, many troop commanders were promoted from the ranks.




The Constitution prescribes that there shall be no prejudice with respect to religious freedom, and the practice of all forms of worship is authorized. However, the Constitution recognizes that the Roman Catholic faith is the country's predominant religion and contains a provision that it be taught in the public schools. Such instruction or other religious activity is not, however, compulsory .

The Constitution does not specifically provide for the separation of church and state, but it implies the independent functioning of each. Members of the clergy may not hold civil or military public office, except such posts as may be concerned with social welfare or public instruction. The Constitution stipulates that senior officials of the church hierarchy in Panama must be native-born citizens.

The majority of Panamanians in the late 1980s were at least nominal Roman Catholics. The Antillean black community, however, was largely Protestant. Indians followed their own indigenous belief systems, although both Protestant and Catholic missionaries were active among the various tribes. Roman Catholicism permeated the social environment culturally as well as religiously. The devout regarded church attendance and the observance of religious duties as regular features of everyday life, and even the most casual or nominal Roman Catholics adjusted the orientation of their daily lives to the prevailing norms of the religious calendar. Although some sacraments were observed more scrupulously than others, baptism was almost universal, and the last rites of the church were administered to many who during their lives had been indifferent to the precepts of the faith or its religious rituals.

In the mid-1980s, when nearly 90 percent of the population was Roman Catholic, there were fewer than 300 priests in the country. Virtually every town had its Roman Catholic church, but many did not have a priest in residence. Many rural inhabitants in the more remote areas received only an occasional visit from a busy priest who traveled among a number of isolated villages.

Religious attitudes, customs, and beliefs differed somewhat between urban and rural areas, although many members of the urban working class, often recent migrants from rural regions, presumably retained their folk beliefs. According to one anthropologist, the belief system of the campesinos centered on God, the Devil, the saints, and the Virgin. Christ was viewed as more or less the chief saint, but as peripheral to the lives of men. The Virgin Mary served as an inspiration and model to women, but there was no comparable model for men.

Although the campesinos believed that each individual "is born with a destiny set by God," they also believed that the destiny could be altered if the individual succumbed to the constant blandishments and enticements of the Devil. The rural dwellers possessed a clear sense of reward and punishment that centered on All Souls' Day. On that day all who died during the previous year are summoned to judgment before God and the Devil. The life record of each person is recited by Saint Peter, and the good and bad deeds are weighed out on a Roman balance scale, thus determining the person's afterlife.

Throughout the society, birth and death were marked by religious rites observed by all but a very few. One of the first social functions in which newly born members of the family participated was the sacrament of baptism, which symbolized their entry into society and brought them into the church community. In the cities, church facilities were readily available, but in rural areas families often had to travel some distance to the nearest parish center for the ceremony. The trip was considered of great importance and was willingly undertaken. In fact, baptism was generally considered the most significant religious rite.

If the family lived near a church that had a priest in regular attendance, children received an early exposure to the formal teachings of the church and were usually taken to mass regularly by their mothers. As they grew older, they took an increasing part in church liturgy and by the age of ten were usually full participants in such activities as catechism classes, communion, and confession. As they approached manhood, boys tended to drift away from the church and from conscientious observation of church ritual. Few young men attended services regularly, and even fewer took an active part in the religious life of the community, although they continued to consider themselves Roman Catholics.

Girls, on the other hand, were encouraged to continue their religious devotions and observe the moral tenets of their faith. Women were more involved in the church than men, and the community and clerics accepted this as a basic axiom. There was social pressure on women to become involved in church affairs, and most women, particularly in urban areas, responded. As a rule, they attended mass regularly and took an active part in church and church-sponsored activities. Religious gatherings and observances were among the principal forms of diversion for women outside the home, and to a great extent these activities were social as much as devotional.




Public education began in Panama soon after independence from Colombia in 1903. The first efforts were guided by an extremely paternalistic view of the goals of education, as evidenced in comments made in a 1913 meeting of the First Panamanian Educational Assembly, "The cultural heritage given to the child should be determined by the social position he will or should occupy. For this reason education should be different in accordance with the social class to which the student should be related." This elitist focus changed rapidly under United States influence.

By the 1920s, Panamanian education subscribed to a progressive educational system, explicitly designed to assist the able and ambitious individual in search of upward social mobility. Successive national governments gave a high priority to the development of a system of (at least) universal primary education; in the late 1930s, as much as one-fourth of the national budget went to education. Between 1920 and 1934, primary-school enrollment doubled. Adult illiteracy, more than 70 percent in 1923, dropped to roughly half the adult population in scarcely more than a decade.

By the early 1950s, adult illiteracy had dropped to 28 percent, but the rate of gain had also declined and further improvements were slow in coming. The 1950s saw essentially no improvement; adult illiteracy was 27 percent in 1960. There were notable gains in the 1960s, however, and the rate of adult illiteracy dropped 8 percentage points by 1970. According to 1980 estimates, only 13 percent of Panamanians over 10 years of age were illiterate. Men and women were approximately equally represented among the literate. The most notable disparity was between urban and rural Panama; 94 percent of city-dwelling adults were literate, but fewer than two-thirds of those in the countryside were--a figure that also represented continued high illiteracy rates among the country's Indian population.

From the 1950s through the early 1980s, educational enrollments expanded faster than the rate of population growth as a whole and, for most of that period, faster than the school-aged population. The steepest increases came in secondary and higher educational enrollments, which increased ten and more than thirty times respectively. By the mid-1980s, primaryschool enrollment rates were roughly 113 percent of the primaryschool -aged population. Male and female enrollments were relatively equal overall, although there were significant regional variations.

Enrollments at upper levels of schooling had increased strikingly both in relative and absolute terms since 1960. Between 1960 and the mid-1980s, secondary-school enrollments expanded some four-and-a-half times and higher education, nearly twelve-fold. In 1965 fewer than one-third of children of secondary school age were in school, and only 7 percent of people aged 20 to 24 years. In the mid-1980s, almost two-thirds of secondary-school-aged children were enrolled, and about 20 percent of individuals aged 20 to 24 years were in institutions of higher education.

School attendance was compulsory for children from ages six through fifteen years, or until the completion of primary school. A six-year primary cycle was followed by two types of secondaryschool programs: an academic-oriented program and a vocational-type program. The academic program, which represented nearly threequarters of all secondary-school enrollment, involved two threeyear cycles. The lower cycle was of a general or exploratory nature, with a standard curriculum that included Spanish, social studies, religion, art, and music. The upper cycle consisted of two academic courses of study: in arts and sciences, leading to entrance to the university, or a less rigorous course of study, representing the end of a student's formal education (fewer than 4 percent of students pursued this course of studies in the mid1980s ).

In addition to the academic program, there was a vocationaltype secondary-school program that offered professional or technical courses aimed specifically at giving students the technical skills needed for employment following graduation. In the mid-1980s, roughly one-quarter of all secondary students pursued this type of course. Like the more academic-oriented secondaryschool program, the vocational-type program was divided into two cycles. Students could choose their studies from a variety of specializations, including agriculture, art, commerce, and industrial trades.

Admission to the university normally required the bachillerato (graduation certificate or baccalaureate), awarded on completion of the upper cycle of the academic course of studies, although the University of Panama had some latitude in determining admissions standards. The bachillerato was generally considered an essential component of middle-class status. Public secondary schools that offered the baccalaureate degree also offered the lower cycle. They were generally located in provincial capital cities. The oldest, largest, and most highly regarded of these was the National Institute in Panama City. The University of Panama grew out of it, and the school had produced so many public figures that it was known as the Nest of Eagles (Nido de Aguilas). It tended to draw its student body from upwardly mobile rather than long-established elements of the elite. Its students were well known for their political activism.

Higher education on the isthmus dates from the founding of a Jesuit university in 1749; that institution closed with the order's expulsion from the New World in 1767. Another college, the Colegio del Istmo, was started early in the nineteenth century, but the school did not prosper, and Panamanians who wished to pursue a higher education were required to go abroad or to Colombia until 1935, when the University of Panama was founded. In the mid-1980s, most postsecondary schooling took place within the university. Other institutions, such as the School of Nursing and the Superior Center for Bilingual Secretaries, accounted for less than 3 percent of enrollment at this educational level.

Nearly three-quarters of all university students attended the University of Panama in the 1980s. The university had, as well, a number of regional centers and extensions representing a small portion of the school's enrollment and faculty. The University of Santa Mar�a la Antigua, a private Roman Catholic institution established in 1965, enrolled another 5,000 to 6,000 students in the 1980s. A third university, the Technical University, was founded in 1981. It accounted for approximately 7,000 students. A substantial portion of the well-to-do continued to study abroad.

Most education was publicly funded and organized. In addition to the University of Santa Mar�a la Antigua, there were some private primary and secondary schools. Typically located in cities and considered very prestigious, they accounted for 5 to 7 percent of primary-school enrollment and approximately 25 percent of secondary-school students in the mid-1980s.

Education continued to claim a large share of government budgets. It represented 15 to 20 percent of the national government's expenditures in the early to mid-1980s. Most funding went to primary schooling, although both secondary and higher education received proportionately higher funding per student. Primary schools received roughly one-third of government education spending, secondary and higher education approximately 20 percent each. Budgets from 1979 through 1983 allocated on average B220 per primary school student, B274 per secondary school student, and B922 per university student.

The growth in enrollment was accompanied by a concomitant (if not always adequate) expansion in school facilities and increase in teaching staff. Teacher education was a high priority in the 1970s and 1980s, a reflection of the generally poor training teachers had received in the past. Schools increased at every level during the early 1980s; secondary schools made the most notable gains, more than doubling. Pupil-teacher ratios for all levels were in the range of nineteen to twenty-six pupils per teacher in the mid-1980s.




The Ministry of Health bore primary responsibility for public health programs in the late 1980s. At the district and regional levels, medical directors were responsible for maintaining healthcare services at health-care centers and hospitals and monitoring outreach programs for the communities surrounding these facilities. The Social Security Institute also maintained a medical fund for its members and ran a number of health-care facilities, which members could use for free and others for a nominal fee. In practice there was a history of conflict between Social Security Institute and Ministry of Health personnel at the district and regional levels. Since 1973 the Social Security Institute and the Ministry of Health had attempted--with limited success--to coordinate what were in essence two public health-care systems, in an effort to eliminate redundancy.

Despite the bureaucratic conflicts, a number of health indicators showed significant improvement. Life expectancy at birth in 1985 was seventy-one years--an increase of nearly ten years since 1965. Infant mortality rates in 1984 were less than one-third their 1960 levels, and the childhood death rate stood at less than 20 percent of the 1960 level. The number of physicians per capita had nearly tripled.

The Department of Environmental Health was charged with administering rural health programs and maintaining a safe water supply for communities of fewer than 500 inhabitants--roughly onethird of the total population. The National Water and Sewage Institute and the Ministry of Public Works shared responsibility for urban water supplies.

By 1980 approximately 85 percent of the population had access to potable water and 89 percent to sanitation facilities. In rural Panama in the early 1980s, roughly 70 percent of the population had potable water and approximately 80 percent had sanitation facilities. The quality of water and sewage disposal varied considerably, however. Water transmission was less than reliable on the fringes of urban centers. In rural areas, much depended on the community's dedication to maintaining sanitation facilities and an operating water system. Many water treatment facilities were poorly maintained and overloaded, because of the intense urban growth the country had experienced since the end of World War II. In rural Panama, latrines and septic tanks tended to be over-used and undermaintained . The system as a whole stood in need of substantial renovation and repair in the late 1980s.

Public health, especially for rural Panamanians, was a high priority. Under the slogan "Health for All by the Year 2000," in the early 1970s the government embarked on an ambitious program to improve the delivery of health services and sanitation in rural areas. The program aimed at changing the emphasis from curative, hospital-based medical care to community-based preventive medicine. The 1970s and early 1980s saw substantial improvements in a wide variety of areas. Village health committees attempted to communicate the perceived needs of the villagers to health-care officials. The program enjoyed its most notable successes in the early 1970s with the construction of water delivery systems and latrines in a number of previously unserved rural areas. Village health committees also organized community health-education courses, immunization campaigns, and medical team visits to isolated villages. They were assisted by associations or federations of these village health committees at the district or regional level. These federations were able to lend money to villages for the construction of sanitation facilities, assist them in contacting Ministry of Health personnel for specific projects, and help with the financing for medical visits to villages.

Village health committees were most successful in regions where land and income were relatively equitably distributed. The regional medical director was pivotal; where he or she assigned a high priority to preventive health care, the village communities continued to receive adequate support. However, many committees were inoperative by the mid-1980s. In general, rural health-care funding had been adversely affected by government cutbacks. Facilities tended to be heavily used and poorly maintained.

In the early 1980s, there continued to be marked disparities in health care between urban and rural regions. Medical facilities, including nearly all laboratory and special-care facilities, were concentrated in the capital city. In 1983 roughly 87 percent of the hospital beds were in publicly owned and operated institutions, mostly located in Panama City; one-quarter of all hospitals were in the capital. Medical facilities and personnel were concentrated beyond what might reasonably be expected, even given the capital city's share of total population. Panama City had roughly 2.5 times the national average of hospital beds and doctors per capita and nearly 3 times the number of nurses per capita. The effect of this distribution was seen in continued regional disparities in health indicators. Rural Panama registered disproportionately high infant and maternal mortality rates. Rural babies were roughly 20 percent more likely to die than their urban counterparts; childbearing was 5 times more likely to be fatal in rural Panama than in cities. In the early 1980s, the infant-mortality rate of Panam� Province was one-third that of Bocas del Toro and one-fourth that of Dari�n.

Panama's social security system covered most permanent employees. Its principal disbursements were for retirement and health care. Permanent employees paid taxes to the Social Security Institute; the self-employed contributed on the basis of income as reported on income-tax returns. Agricultural workers were generally exempted. Changes in 1975 lowered the age at which workers could retire and altered the basis on which benefits were calculated. The general effect of the changes was to encourage the retirement of those best paid and best covered. It did little to benefit the most disadvantaged workers.


Panama - The Economy


SEVERAL DISTINCTIVE FEATURES characterized Panama's economy in the late 1980s; the most striking was its internationally oriented services sector, which in 1985 accounted for over 73 percent of the gross domestic product (GDP), the highest such percentage in the world. That distinctiveness was best symbolized by the Panama Canal, which has dominated the country's economy in the twentieth century. The scope of the services sector has expanded and broadened through increased government services and initiatives such as the Col�n Free Zone (CFZ), a trans-isthmian oil pipeline, and the International Financial Center.

Another distinguishing feature was Panama's paper currency, the United States dollar. The local currency, the balboa, was tied to the United States dollar but was available only in coins. Panama's money supply was determined by the United States Federal Reserve System; therefore, the country could neither print money nor devalue the currency. Because its monetary instruments are limited, Panama has avoided the cycle of exchange-rate devaluations and the accelerating inflation that have typified most Latin American economies. The balboa has remained on par with the United States dollar, and Panama has enjoyed the lowest average annual rate of inflation in Latin America--7.1 percent in the 1970s, and only 3.7 percent between 1980 and 1985.

The third economic distinction is that the Panamanians have one of the highest levels of per capita income in the developing world. Construction of the Panama Canal across the isthmus in the early 1900s and expanding world commerce have combined to foster rapid economic growth in the country throughout the twentieth century. By 1985, per capita gross national product (GNP) reached US$2,100, twice the average in Central American countries, greater than all South American countries except for Venezuela (US$3,080) and Argentina (US$2,130), and on a level with Mexico (US$2,080). Panamanians, however, have not shared equally in the rising living standards, because the distribution of income has been highly skewed.

The military leaders who seized control of the government in 1968 under the leadership of General Omar Torrijos Herrera instituted economic policies that aimed at greater equity as well as integration of various facets of the country's fragmented economy. By the time of Torrijos's death in July 1981, they had achieved some remarkable results, but at the expense of a low rate of private investment, increased urban unemployment, continued rural poverty, and growing external public debt. A document entitled Towards a More Human Economy was published in 1985 by Panama's Archbishop Marcos Gregorio McGrath, revealing a society in which 38 percent of the families lived in poverty and in which 22 percent of the population failed to earn at least US$200 a month--the minimum amount considered necessary to purchase a basic basket of goods. The document went on to criticize many measures taken by the Torrijos government in the 1970s. At the same time, however, the publication recognized that remarkable progress had been made in other areas, such as a decline in infant mortality rates, a rise in the literacy rate, and social security coverage for 60 percent of the population as compared with only 12 percent in 1960. Indeed, the economic policies instituted by the Torrijos regime (1968-81) were pivotal in Panama's history, but the results were mixed.





Since the early 1500s, Panamanians have relied on the country's comparative advantage--its geography. Exploitation of this advantage began soon after the Spanish arrived, when the conquistadors used Panama to transship gold and silver from Peru to Spain. Ports on each coast and a trail between them handled much of Spain's colonial trade from which the inhabitants of the port cities prospered. This was the beginning of the country's historical dependence on world commerce for prosperity and imports. Agriculture received little attention until the twentieth century, and by the 1980s had--for much of the population--barely developed beyond indigenous Indian techniques. Industry developed slowly because the flow of goods from Europe and later from North America created a disincentive for local production.

Panama has been affected by the cyclical nature of international trade. The economy stagnated in the 1700s as colonial exchange via the isthmus declined. In the mid-1800s, Panama's economy boomed as a result of increased cargo and passengers associated with the California gold rush. A railroad across the isthmus, completed in 1855, prolonged economic growth for about fifteen years until completion of the first transcontinental railroad in the United States caused trans-isthmian traffic to decline. France's efforts to construct a canal across the isthmus in the 1880s and efforts by the United States in the early 1900s stimulated the Panamanian economy.

The United States completed the canal in 1914, and canal traffic expanded by an average of 15 percent a year between 1915 and 1930. The stimulus was strongly felt in Panama City and Col�n, the terminal cities of the canal. The world depression of the 1930s reduced international trade and canal traffic, however, causing extensive unemployment in the terminal cities and generating a flow of workers to subsistence farming. During World War II, canal traffic did not increase, but the economy boomed as the convoy system and the presence of United States forces, sent to defend the canal, increased foreign spending in the canal cities. The end of the war was followed by an economic depression and another exodus of unemployed people into agriculture. The government initiated a modest public works program, instituted price supports for major crops, and increased protection for selected agricultural and industrial products.

The postwar depression gave way to rapid economic expansion between 1950 and 1970, when GDP increased by an average of 6.4 percent a year, one of the highest sustained growth rates in the world. All sectors contributed to the growth. Agricultural output rose, boosted by greater fishing activities (especially shrimp), the development of high-value fruit and vegetable production, and the rapid growth of banana exports after disease-resistant trees were planted. Commerce evolved into a relatively sophisticated wholesale and retail system. Banking, tourism, and the export of services to the Canal Zone grew rapidly. Most importantly, an increase in world trade provided a major stimulus to use of the canal and to the economy.

In the 1970s and 1980s, Panama's growth fluctuated with the vagaries of the world economy. After 1973, economic expansion slowed considerably as the result of a number of international and domestic factors. Real GDP growth averaged 3.5 percent a year between 1973 and 1979. In the early 1980s, the economy rebounded with GDP growth rates of 15.4 percent in 1980, 4.2 percent in 1981, and 5.6 percent in 1982. The acute recession in Latin America after 1982, however, wreaked havoc on Panama's economy. GDP growth in 1983 was a mere 0.4 percent; in 1984 it was negative 0.4 percent. In 1985 Panama experienced economic recovery with 4.1-percent GDP growth; the corresponding figure for 1986 was estimated to be 2.8 percent.

Changing Structure of the Economy

The structure of Panama's economy in the twentieth century has been characterized by the dichotomy of a large internationally oriented services sector and a small inward-looking goods sector. The major change in that structure has been the rapid growth of the services sector. In 1950 services accounted for about 57 percent of GDP; that share rose to 63 percent in 1965 and to over 73 percent in 1985. Given Panama's geographic location, modern infrastructure, and an educated population trained in commercial and financial activity, services will likely remain the leading sector of the economy.

In contrast, the goods sector has declined in relative terms. Although efforts have been made to stimulate agriculture and industry--and both registered substantial growth--their share of GDP has fallen as that of the services sector has risen. In the late 1980s, one of the greatest challenges facing Panamanian policymakers was that of using the services sector as a springboard for growth, primarily in industry but also in agriculture.

During the Torrijos administration, the economy was stimulated in several areas. The principal stimulus to the services sector was banking, articularly offshore banking. Transportation also increased rapidly, along with expansion of the road network. Substantial investments were made in the communications system in an effort to meet international standards expected by the extensive network of foreign businesses. Storage and warehousing grew rapidly in response to the economy's own needs and particularly to the foreign business conducted in the CFZ.

Industrialization progressed rapidly after 1950, with industrial production rising from 10 percent of GDP in 1950 to 19 percent in 1965. This expansion was based primarily on import substitution. Industry continued to grow at an average annual rate of 5.9 percent from 1965 through 1980, but registered negative 2.2- percent average annual growth between 1980 and 1985.

As a result of the lack of growth as well as the rapid rise of the services sector, industrial production had dropped slightly as a percentage of GDP in 1985--to just under 18 percent. Manufacturing accounted for about half of the industrial sector, followed by construction, energy, and mining. Given the small size of the domestic market, observers believed that future industrial growth would rely primarily on foreign markets. Success, therefore, would depend to a large extent on Panama's ability to make its industry internationally oriented and competitive.

Although the agricultural sector continued to expand and to employ the largest number of workers, its share of GDP declined substantially, from 29 percent in 1950 to 18 percent in 1965 and about 9 percent in 1985. This sector grew at a respectable average annual rate of 2.4 percent between 1965 and 1980, and 2.7 percent between 1980 and 1985, but it could not keep pace with the rapid growth rate of the services sector. Bananas, shrimp, and sugar continued to lead the list of export items. The expansion of the agricultural sector hinged on exports and product diversification.

Recent Economic Performance

The Torrijos era (1968-81) stands as a dividing point in Panama's economic history. Under Torrijos, the state took a more active role in the economy and initiated ambitious social projects. The public sector expanded to an unprecedented degree, as did the fiscal deficit and the external debt. In the 1980s, Panama was forced to address some of the excesses of the 1970s, and to adjust its policies, often under the aegis of the International Monetary Fund (IMF) and the World Bank.

In the 1960s, Panama experienced buoyant growth in virtually all areas of the economy as a result of the boom in canal-related activities and the growth in private investment. GDP expanded at an average of 8 percent per year. Employment grew at 3.5 percent per year, well above the population growth of about 3 percent a year. Most of the new jobs were generated by the private sector.

In the 1970s, Panama's average annual growth rate of GDP fell to 3.4 percent. Many factors contributed to the decline. In the international arena, reduced canal use (especially after the Vietnam war), rising oil prices, international inflation, and recession in the major industrial countries had a negative impact on Panama's economy. Domestically, investment fell in response to government policies of agrarian reform, expropriation of private power companies, creation of state industries, protection of labor, controls on housing, subsidies, and high support prices. In addition, the prolonged negotiations between the United States and Panama over the canal adversely affected investor confidence. The government sought to regain private investment by investing in large infrastructure projects and by expanding or acquiring productive enterprises. Two-thirds of the new jobs created in the 1970s were in the public sector. The public-sector deficit expanded, and the government was forced to borrow money from abroad. By 1980 the external debt had reached 80 percent of GDP.

In 1982 Panama, like most of Latin America, felt the impact of the world recession. Once again, the government sought to remedy the declining private-sector investment through increased public expenditures. In the same year, the public-sector deficit reached 11 percent of GDP. In 1983 and 1984, the government imposed a severe austerity program, which had the imprimatur of the IMF. Public investment was reduced by 20 percent in 1983 and by a further 8 percent in 1984. The public deficit was also cut, to about 6 percent of GDP in both years. In addition, the government undertook structural adjustment measures in the areas of industry and agriculture and instituted changes to streamline the public sector. The simultaneous recession and reduction in public expenditures caused GDP to fall in 1984, the first decline in more than twenty years. In the following years, however, Panama, avoiding the economic slump that plagued most Latin American countries, experienced moderate growth.




The government has played a limited role in economic matters throughout most of Panama's history, restricting its activities to infrastructural development and creating a climate conducive to private investment. The government's role expanded dramatically after 1968, when the National Guard, now called the Panama Defense Forces (Fuerzas de Defensa de Panam�--FDP), took control of the government under Torrijos's leadership. Members of the National Guard tended to be provincial, racially mixed, and lower- or middle-class in background and thus provided an outlook different from that of the urban-oriented elite that had dominated Panamanian politics in the twentieth century.

The National Guard implemented policies that attempted to reduce the most glaring discrepancies between the urban and rural economies. In 1968 economic activity was heavily concentrated in the two provinces of Panam� and Col�n, which accounted for over two-thirds of GDP, and an even larger share of the country's manufacturing, construction, trade, transport, and communications. Residents of the metropolitan areas had access to relatively well-developed education, health, and other services. Their consumption pattern was closer to that of affluent developed countries; they owned most of the country's cars, refrigerators, telephones, and television sets. Their tastes and aspirations were patterned on those of United States citizens in the Canal Zone and the many international visitors. In contrast, rural residents had access to far fewer services, and their living conditions were substantially below those of urbanites. The majority of the population in the countryside had incomes of less than one-third of those in Panama City and Col�n, and many had little more than one-tenth. The economic policies of the military leaders aimed at continued high growth of the urban economy, from which resources could be channeled to the poorer elements of the society to bring about greater economic and social integration.

High growth of service industries in the terminal cities was considered essential because of several constraints: canal-related activities were not expected to provide much of a growth stimulus; import substitution opportunities in manufacturing had been largely exhausted; and expansion of banana exports appeared limited by international conditions. Panama became a regional financial center after 1970, when the government created the International Financial Center. Tourism was bolstered by construction of additional airports, a convention center, new hotels, and resorts. The CFZ was upgraded, and transportation and warehousing facilities were also improved.

Under Torrijos the government became more active in the goods sectors. In agriculture, land reform was accelerated, and cooperative farming was promoted. In industry, state-owned companies expanded, most notably in sugar refining, cement production, and electric power. Torrijos intervened more forcefully in other areas of the economy, such as in the setting of wages and prices; a 1972 labor code increased job security and promoted union organization.

These measures created a more equitable society, but often at the expense of efficiency and overall growth. Government expenditure rose sharply, and the public sector became bloated with a proliferation of new government agencies. In the service sector, construction declined in the mid-1970s, in part because of the disincentive created by rent controls. In agriculture, considerable improvements in social conditions were not accompanied by increased incomes. Moreover, greater government participation and prolonged canal negotiations created difficulties and uncertainties for private investors, and private investment declined precipitously.

After 1975 the government became more pragmatic and modified its programs to stimulate economic activity. Incentives to investors were increased. The 1972 labor code was modified in 1976 to meet some of the objections by employers. A freeze on collective bargaining agreements was established that in effect prohibited wage increases. Government-set prices were raised to encourage production.

Under a structural adjustment program in 1983 and 1984, Panama reduced the scope of the public sector in the economy. In March 1986, and as preconditions for two structural adjustment loans from the World Bank, the government passed several major laws that revised its labor code, removed protective tariffs, changed the price structure for agricultural goods, and encouraged foreign investment. In August 1986 the government launched a privatization program and proposed the sale of state assets worth US$13 million.

Monetary Policy

Panama's monetary system is unique. United States dollar notes serve as the paper currency and are legal tender in Panama. The local currency is the balboa, which, since its creation in 1904, has remained tied to and equal to the United States dollar. Panama issues only coins corresponding in size and metallic content to United States coins. No foreign exchange restrictions existed in Panama in the mid-1980s.

With no need for a bank to issue and protect the paper currency, Panama did not have a central bank. The National Bank of Panama (Banco Nacional de Panam�--BNP), a state-owned commercial bank, was responsible for nonmonetary aspects of central banking. The BNP was assisted by the National Banking Commission, which was created along with the country's International Financial Center, and was charged with licensing and supervising banks. In 1985 the level of M1 (currency and demand deposits) was US$410 million, while M2 (M1 plus time deposits) was US$1.95 billion.

In a sense, Panama could not have a monetary policy, because it lacked the instruments to implement such a policy, such as money creation and exchange-rate manipulation. In effect, Panama's money supply was determined by the balance of payments, by movements in interest rates, and by the United States, which controlled the number of dollars available for the country's international transactions.

Panama's monetary system has benefited the country in numerous ways. The country has enjoyed almost automatic monetary and price stability. International transactions have been facilitated by the use of the United States dollar. No short-term transfer problems are associated with the balance of payments. The foreign exchange constraint felt by most developing countries has been obviated by the dollars circulating in the economy and the ability to borrow.

In the late 1980s, the financial system consisted largely of banking. Panamanian businesses relied relatively little on public stock or bond issues. No formal stock exchange existed; supervised, independent brokers handled the limited trading in regulated financial certificates, stocks, and bonds. In addition, some insurance companies, savings and loan associations, and unregulated consumer-finance companies were formed. The country's social security fund invested in government bonds and various development projects.

Fiscal Policy

Panama's financial stability and international credit standing were determined not by monetary policy, but principally by fiscal policy and balance of payments. Fiscal policy was thus more important for Panama than for most other countries, and as a result, public-sector deficits were especially problematic for the government.

From 1971 through 1975, the annual average for the consolidated public-sector deficit was 6.5 percent of GDP. That figure nearly doubled to 12.9 percent between 1976 and 1980, at the height of government spending on infrastructure and ambitious social programs. In the 1980s, the figure has declined, from 10.8 percent in 1982 to 5.8 percent in 1984. The 1982 figure represented an aberration, brought about by the political uncertainty and lack of fiscal restraint following Torrijos's death. Most impressively, the deficit was reduced to 2.5 percent of GDP in 1985, a figure even lower than the 3.5 percent targeted by the IMF. The reduction was brought about by increased revenues, reduced expenditures, and streamlined administration.

Budget Process

Panama developed an efficient and centralized budgetary system in the mid-1960s. By law, the budget had to balance, so increasing recourse was made to handle some expenditures outside the budget. One such device was the creation of autonomous government agencies. These agencies increased in numbers and importance in the 1960s and 1970s. Their areas of operation included banking, the national electrical system, welfare, tourism, and gambling. Their budgets were excluded from that of the central government, although various transfers were made.

The collection of direct taxes (on income, businesses, and corporations) was relatively efficient in Panama. Direct taxes totalled 7 percent of GDP in 1983. Although this figure is high compared with those of other countries in the region, direct taxes have brought stability to Panama's budget system and avoided the fluctuations that occurred in neighboring countries, which were more dependent on import and sales taxes. In the late 1980s, only a fraction of Panama's revenue was derived from taxes levied on foreign trade.




A 1985 World Bank study concluded that in spite of a relatively well-educated work force, unemployment was Panama's "gravest economic and social problem." The unemployment rate climbed steadily, from 8.1 percent in 1978 to 11.8 percent in 1985. The study predicted that the unemployment situation would further deteriorate unless the government took forceful measures to change structural rigidities in the labor code and market. Legislation approved in March 1986 addressed some of the rigidities in the 1972 labor code. Those changes may have been responsible, at least in part, for the lowering of the unemployment rate in 1986 to 10 percent.


As a result of declining birth rates and stabilizing mortality rates, Panama's overall population growth rate fell from an annual average of 2.6 percent between 1965 and 1980 to 2.2 percent between 1980 and 1985. The working-age population (15 years and over) increased from 1,011,700 in 1978 to 1,256,800 in 1985, at a rate of approximately 4 percent a year. From 1970 through 1984, the rate of job creation was less than half the growth rate of GDP. Analysts have estimated that the economy would have to grow indefinitely by 7.5 percent a year to absorb new entrants into the labor market--a level almost impossible to sustain and far above Panama's average annual growth rates in the past.

Panama's experience suggested that a government's ability to improve the employment situation through direct intervention in the labor market is severely limited. In the 1960s, an average of 13,000 new jobs were created each year. During the recession in the 1970s, unemployment rose dramatically. In late 1977, the government sought to reverse the deteriorating employment situation with an emergency jobs program. As a result, 28,000 new jobs were created within a year--20,000 of which were in the public sector. The employment program drained government resources, however, and in 1980 it was terminated. Only 11,000 jobs were created annually between 1979 and 1982.

In 1985 the sectoral distribution of the labor force reflected shifts that had taken place since the 1960s. The services sector, led by financial services, continued to grow and accounted for 57.4 percent of the total labor force in 1985. Agriculture (including forestry and fishing) consistently experienced a relative decline, but still furnished 26.5 percent of the jobs. Industry's share of the labor force grew slightly between 1965 and 1980, but dropped to 16.1 percent in 1985.

The public-sector share of total employment rose slightly from 11 percent in 1963 to 13.1 percent in 1970. With the expansion of the public sector in the 1970s under Torrijos and the Emergency Employment Program in 1977, that share peaked at 25.1 percent in 1979. In 1982 the public sector still accounted for 25 percent of total employment.

Wage Policy and Labor Code

Panama's salaries were high by regional standards in the mid1980s . In a 1982 study comparing salaries in manufacturing, Costa Rica's average monthly salary was only 41 percent that of Panama's; Guatemala's, 71 percent, and Honduras's, 84 percent. In 1985 the average monthly salary in Panama was US$450, but that figure was influenced by salaries in the canal area, which averaged US$1,300 per month. In 1985 the minimum wage in the metropolitan area was US$0.82 per hour; that wage was adjusted for location and type of industry.

In the 1970s, the government became heavily involved in labor matters and intervened actively to increase wages. Although a labor code had existed for many years, only the minimum wage provisions were consistently enforced. In 1971 two decrees were issued; the first imposed an education tax and the second required employers to pay workers an extra month's wage each year.

In early 1972 a broad labor code, patterned after that of Mexico, substantially changed labor-management relations. Workers' security, benefits, and bargaining power were increased considerably. Collective bargaining and unionization were encouraged and resulted in rapid growth of union membership.

Although the 1972 labor code contributed to political stability in the 1970s, it substantially raised costs for employers, especially those in labor-intensive activities. The code also created disincentives to further hiring and private investment. Employers were prohibited from reducing a worker's salary. Therefore, piecework and assembly-type industries could not reward workers on the basis of productivity. As a partial result of these rigidities, Panama's labor costs were among the highest in the Caribbean Basin. According to a 1984 World Bank report, the annual cost of running a textile plant with 500 workers was US$588,300 in Haiti; US$789,800 in Costa Rica; US$919,700 in the Dominican Republic; US$1,048,500 in Colombia; US$1,057,600 in Mexico; and US$1,156,700 in Panama. Only Jamaica's costs were higher (US$1,828,300).

The labor code caused the effective cost of wages to rise, fueling inflation and discouraging private investment. The government, unable to devalue the currency, was forced to address the root of the problem--high labor costs. Law 95, which became effective in 1977, modified provisions of the labor code that related to job security and benefits. Previously, employers could only dismiss workers during their first two years on the job; that term was extended to five years. New provisions inhibited union actions, such as strikes, and imposed a two-year moratorium on collective bargaining agreements, which froze wages.

As a condition for the disbursement of a structural adjustment loan, the World Bank in 1985 recommended making the code more flexible. Panama's then-President Nicol�s Ardito Barletta Vallarino (October 1984-September 1985) fully backed the World Bank recommendations. Opposition from unions and from within his own party, the Democratic Revolutionary Party (Partido Revolucionario Democr�tico--PRD), forced Ardito Barletta to withdraw the proposed changes and contributed to his resignation. His successor, Eric Arturo Delvalle Henr�quez, was more successful. In March 1986, the Legislative Assembly approved major reforms in the labor code, in spite of widespread protests and a ten-day work stoppage by the unions. The changes included production-based wages, uniform rates of overtime pay, piecework provisions, removal of protective measures in industry, and flexible agricultural pricing. On the whole, the labor code modifications were aimed at making Panama's industry and agriculture more competitive internationally and expanding employment opportunities. Nonetheless, the economy was deemed likely to continue to experience high unemployment, especially in the metropolitan area, where unemployment rates tended to be much higher than the national average.

Income Distribution

One of Torrijos's major goals was to address the problem of unequal income distribution, which during the 1960s was one of the most skewed in the world. In 1970 the richest quintile (20 percent) of the households received 61.8 percent of the income; in stark contrast, the poorest quintile received only 2 percent of the income. Results of a study conducted in 1983 by the Panamanian government suggested that the Torrijos policies did, in fact, make income distribution more equitable. The income share of the richest quintile fell to nearly 50 percent, while all other income groups increased their share: the fourth quintile (second-to-richest) from 20 percent to 23 percent; the third quintile from 11 percent to 15 percent; the second quintile from 5 percent to 9 percent; and the first (poorest) quintile to 3 percent. Nevertheless, despite the program's success, the 1983 study confirmed a continuing pattern of a relatively prosperous metropolitan area and poor rural provinces.




The Panama Canal continued to play a central role in world trade and Panama's economy in the mid-1980s. Some 5 percent of the world's trade in goods passed through the canal, contributing 9 percent of Panamanian GDP in 1983. This canal's location at one of the crossroads of international trade has spawned a plethora of other service-oriented activities, such as storage, ship repair, break bulk (the unloading of a portion or all of a ship's cargo), transshipment, bunkering, and distribution and services to ship travelers. The dynamism of the canal also was instrumental in the development of the CFZ, the trans-isthmian pipeline, and offshore financing. Evidence suggests, however, that the canal's relative importance to world trade is likely to continue to experience a small relative decline in the future, which has led Panama, together with the United States and Japan, to study alternatives for improving or replacing the canal.

Role of the Canal From 1903 to 1977

In 1903 the United States secured the right, by treaty, to build a canal across Panama. The United States rejected plans to build a sea-level canal similar to that attempted by the French and opted instead for a system based on locks. Construction began in 1907 and was facilitated by medical work that largely eradicated yellow fever and reduced the incidence of malaria.

Construction of the canal involved damming the R�o Chagres to create the huge Gatun Lake in the middle of the isthmus. Channels were dug from each coast, and locks were built to raise and lower ships between sea level and Gatun Lake. Three sets of locks were constructed: Gatun Locks on the Atlantic side, and the Pedro Miguel and Miraflores Locks on the Pacific side. The lock chambers were 303 meters long by 33 meters wide, which limited vessel size to approximately 287 meters in length and 32 meters in width. Distance through the canal is eighty-two kilometers, and in 1987 transit took about fifteen hours, nearly half of which was spent in waiting. The canal began commercial operations in 1914.

The United States operated the canal and set tolls from the beginning of operation. Tolls covered operation costs but were kept low to encourage canal use. Direct benefits to Panama were minimal, consisting of annual annuity payments that increased infrequently, usually in response to Panamanian demands. In the 1975 to 1977 period, the annuity payments reached US$2.3 million a year. Indirect benefits to Panama's economy were substantial, however, and included the jobs of its citizens working in the Canal Zone, value of goods and services sold to the Canal Zone and to passing ships, and expenditures by visitors.

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 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. 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 (Col�n, Crist�bal, 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. Ownership and operation of the canal ports of Balboa and Crist�bal 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.

Current Use and Future of the Canal

In both the short and the long term, the impact of the 1977 treaties on the economy will depend to a large extent on canal traffic. Since 1979, when the treaties went into effect, the amount of canal traffic has stagnated. In 1979 the canal was transited by 13,056 ships; by 1984 that number had fallen to 11,230--the lowest number in 2 decades. Cargo tonnage also dropped during the same period, from about 154 million to about 140 million tons. Despite the decline in the number of ships and cargo tonnage, toll revenues expanded over the period from US$208 million to US$298 million, because of the toll increase in March 1983.

The decline in canal traffic was in large measure a result of the opening of the trans-isthmian oil pipeline, which carries Alaskan North Slope oil. In 1983 the pipeline diverted 30 million tons of oil from the canal. In terms of Panama's economy, the diversion of oil from the canal to the pipeline did not cause alarm as it was little more than a transfer of services.

Some observers expressed concern that the canal had seen its best days and that it would decline in importance over the long run. Latin American trade, much of which passes through the canal, has stagnated because of prolonged regional recession and balance of payments constraints resulting from the regional debt crisis. Many supertankers and bulk cargo carriers are too big for the canal. Even some smaller vessels sought to avoid the delays associated with transiting the canal. Increased tolls also lowered the demand for canal usage. Many coal and banana producers shunned the canal and shipped to Europe from the Caribbean Basin and to the Pacific Basin from the west coast of Latin America. In addition, the canal faced competition from Mexican and United States land bridges (roads or railroads linking Atlantic and Pacific ports). Standardized cargo containers have made land bridges an increasingly attractive option, even though the distances involved are much greater (the United States land bridge is over 5,600 kilometers long) than across the canal. The concern over the future of the canal was partially allayed by the increase in total canal traffic between 1984 and 1986. In 1986 11,925 ships transited the canal, carrying 139 million long tons of cargo and generating US$321 million in tolls and revenues. In 1987 canal tolls and revenues totaled US$330. The increase in 1986 was due in large measure to increased automobile trade.

In 1982 Panama joined the United States and Japan, the two principal users of the canal, in an agreement to establish a tripartite commission aimed at studying improvements in or alternatives to the canal. The US$20-million study was expected to be ready in 1991. One modest proposal, at a cost of US$200 million, was that of widening the canal at the Gaillard Cut, its narrowest channel. The Gaillard Cut measured approximately 100 meters when the canal opened in 1914, and in the 1960s it was broadened to about 165 meters. The proposal called for doubling the width of the Gaillard Cut. A more extensive plan, at a cost of US$500 million, proposed widening the entire canal by 16 meters to allow for uninterrupted 2-way traffic along the waterway. The canal's existing capacity was forty-two vessels a day; the less expensive proposal would accommodate fifty ships. The most ambitious plan, however, was that for a second, sea-level canal, which could handle even the largest supertankers without the use of locks. This plan's estimated cost was US$20 billion, considered prohibitive in the light of foreseeable toll revenues. Alternatives to a second canal included an improved railroad system, an express highway for container traffic, and additional pipelines.




For centuries, agriculture was the dominant economic activity for most of Panama's population. After construction of the canal, agriculture declined; its share of GDP fell from 29 percent in 1950 to just over 9 percent in 1985. Agriculture has always employed a disproportionate share of the population because of its laborintensive nature. Nevertheless, the percentage of the labor force in agriculture has also dropped, from 46 percent in 1965 to 26 percent in 1984.

In 1985 crops accounted for 63.3 percent of value added in agriculture, followed by livestock (29.5 percent), fishing (4.3 percent), and forestry (2.9 percent). Despite its relative decline, agriculture was the main supplier of commodities for export, accounting for over 54 percent of total export earnings in 1985. The agricultural sector satisfied most of the domestic demand. The principal food imports were wheat and wheat products, because climatic conditions precluded wheat cultivation. In 1985 the value of food imports was US$108.7 million (8.8 percent of total imports), only half that of food exports.

Between 1969 and 1977, the government undertook agrarian reform and attempted to redistribute land. The expanded role of the state in agriculture improved social conditions in rural areas, but longterm economic effects of the agrarian reform were modest. In the early and mid-1980s, the government sought to reverse the decline of agriculture by diversifying agricultural production, lowering protection barriers, and reducing the state's role in agriculture. In March 1986, the government instituted major changes in the agricultural incentives law and removed price controls, trade restrictions, farm subsidies, and other supports.

Land Use

Panama's land area totals approximately 7.7 million hectares, of which forests account for 4.1 million hectares, followed by pasture land (1.2 million hectares), and permanently cultivated fields (582,000 hectares). About 2 percent of the land was used for roads and urban areas. Nearly all of the cultivated and pasture land was originally forested. A large amount of virgin land has been opened up for cultivation by the Pan-American Highway.

Panama's climate and geology impose major constraints on the development of agriculture. Heavy rainfall throughout the year prevents cultivation of most crops on the Atlantic side of the continental divide. The Pacific side has a dry season (December to April) and accounts for most of the cultivated land. The mountainous terrain also restricts cropping. In addition, the country does not have highquality soils. Most of the areas classified as cultivable are so considered on the assumption that farmers will practice conservation measures, but many do not. The topsoil is thin in most areas, and erosion is a serious problem. Most of the nearly level areas conducive to cultivation are in the provinces of Los Santos, Cocl�, Veraguas, and Chiriqu�.

A further constraint on production is the practice of slash-and-burn cultivation, in which trees, brush, and weeds are cut and then burned on the patch of ground selected for cultivation. Indians utilized the slash-and-burn method for centuries, and the Spanish made few changes in techniques. In the 1980s, most farmers practiced a slash-and-burn type of shifting cultivation. The thin and poor-quality topsoil yielded an initially good harvest, followed by a smaller harvest the second year. Typically, the land was cultivated for only two years, and then the farmer repeated the process on another plot, allowing the first plot to rest ten years before refarming.

Much of the farming was of a subsistence nature and accomplished with a minimum of equipment. Plowing was generally not practiced on subsistence farms; the seeds were placed in holes made by a stick. Tree cutting, land clearing, weeding, and harvesting were accomplished with a few kinds of knives, principally the machete and the axe, which comprised the major farm implements.

Land Tenure and Agrarian Reform

Before the 1950s, land was readily available to anyone who was willing to clear and plant a plot. The cutting and clearing of forests greatly accelerated as the population increased. By the 1960s, subsistence farmers sometimes reduced the rest period of cleared plots from ten years of fallow to as few as five years because of the inavailablity of farm land. The reduced fallow period diminished soil fertility and harvests. Consequently, cropped acreage peaked during the 1960s. The hard life and low income farmers accelerated the exodus of workers from the countryside to the cities.

The long period when new land was easily obtainable contributed to a casual attitude toward land titles. In 1980, only 32.9 percent of the 151,283 farms had such titles. The decline in available agricultural land has made land titling more necessary. Moreover, insecure tenure has been a particularly severe constraint to improved techniques and to commercial crop production. The cost of titling a piece of land, however, has been too high for most subsistence farmers.

Between 1969 and 1977, the government attempted to redistribute land. In the late 1980s, however, the distribution of land and farm incomes remained very unequal. In 1980, 58.9 percent of farms had an annual income below US$200. The issue of unequal land distribution, however, has not been as explosive in Panama as in many other Latin American countries. This was because of the service-oriented nature of the economy and because about half of the population lived in or near Panama City. Also, about 95 percent of all farm land was owner-operated, and virtually all rural families owned or occupied a plot.

In an effort to redistribute land, the government acquired 500,000 hectares of land and expropriated an additional 20 percent of the land. About three-quarters of the land acquired was in the provinces of Veraguas and Panam�. By 1978 over 18,000 families (about 12 percent of rural families in the 1970 census) had access to either individual plots or collectively held land as a result of the redistribution. The land acquisition created uncertainty, however, and adversely affected private investment in agriculture, slowing production in the 1970s.

As part of its agrarian reform, the government placed heavy emphasis on organizing farmers into collectives for agricultural development. Several organizational forms were available, the two most important being asentamientos (settlements) and juntas agrarias de producci�n (agrarian production associations). The distinctions between the two were minor and became even more blurred with time. Both encouraged pooling of land and cooperative activity. In some instances, land was worked collectively. Other organizational forms included marketing cooperatives, state farms, and specialized producers' cooperatives for milk, chickens, or pigs. Growth of these agricultural organizations slowed by the mid-1970s, and some disbanded, as emphasis shifted to consolidation.

The cost of agrarian reform was high. The government channeled large amounts of economic aid to organized farmers. Rural credit was greatly increased; farm machinery was made available; improved seeds and other inputs were supplied; and technical assistance was provided. Cooperative farm yields increased, but these higher yields were not impressive, considering the level of investment. Despite the high costs of the government programs, incomes of cooperative farmers remained low. After the mid-1970s, the government changed its policy toward cooperatives and stressed efficiency and productivity instead of equity.

Although the economic results of agrarian reform were disappointing, the social conditions of most farmers improved. The number of rural residents with access to safe water increased by 50 percent between 1970 and 1978. Improved sewerage facilities, community health programs, and rural clinics reduced mortality rates considerably. Major expansion of educational facilities, including education programs for rural residents, helped rural Panamanians become better educated and more mobile.


The crops category is the largest within agriculture, but its share has fallen slightly, from 66.1 percent in 1980 to 63.3 percent in 1985. During that period, crop production was erratic, and annual growth averaged a mere 1.7 percent. The major crops and foreign exchange earners were bananas and sugar. In the 1980s, however, crop production became increasingly diversified. The production of corn, coffee, beans, and tobacco has increased, as has that of such nontraditional products as melons and flowers. Fruits (especially citrus), cacao (the bean from which cocoa is derived), plantains, vegetables, and potatoes were produced on a minor scale; nevertheless, they were important cash crops for small farms.

Bananas were the leading export item, and in 1985 accounted for 23 percent (US$78 million) of total exports. In that year, the Chiriqu� Land Company, a subsidiary of United Brands (formerly United Fruit Company), produced 70 percent of all bananas, followed by private Panamanian producers (25 percent) and the state-owned Corporaci�n Bananera del Atl�ntico (5 percent). The volume of bananas produced in Panama peaked in 1978 and slowly declined in the 1980s. Observers doubted that United Brands would expand its production in Panama because bananas could be produced more cheaply in Costa Rica and Ecuador.

The history of banana production in Panama virtually coincides with that of United Brands, which has been in Panama since 1899. The company built railroads, port facilities, and storage areas for the processing and export of bananas. In the 1930s, a disease seriously curtailed banana production. In the 1950s diseaseresistant plants were developed, and production increased rapidly. In the early 1970s, a "banana war" erupted when banana-producing countries disagreed among themselves and with United Brands about an export tax on bananas. Panama threatened to take over United Brands' plantations. An agreement was reached in 1976 to tax banana exports. In that year, the tax provided the government with US$10 million, nearly 4 percent of all revenues. In addition, United Brands sold all 43,000 hectares of land that it owned in Panama to the government; payment was in tax credits. The government leased back to United Brands over 15,000 hectares for banana production and export operations. Part of the excess land went to the government's newly established banana companies.

Sugar has traditionally been Panama's second largest crop in terms of production and export value. Panama consumed about half its sugar output and exported most of the rest to the United States. The production of sugar in Panama increased during the 1970s, peaked in 1982 at 260,000 tons, and fell to 165,000 tons in 1986. The dramatic decline after 1982 was because of low world prices and the rapid reduction in the United States quota from 81,200 tons in 1983 to 26,390 tons in 1987. Annual sugar exports earned an average US$40 million from 1975 through 1981 but fell steadily from US$41.3 million in 1983 to US$33 million in 1984, US$27.3 million in 1985, and US$22 million in 1986.

The state has been heavily involved in Panama's sugar production. Under the 1983-84 structural adjustment program, however, the state has privatized, closed, and tried to sell numerous sugar mills. Nonetheless, of the six major sugar mills in Panama, four were still under state control in 1987. The largest was the Corporaci�n Azucarera La Victoria, which in 1985 accounted for 64 percent of total sugar production. Several small mills operated throughout the country, but their output was for domestic consumption only.

The production of coffee has steadily expanded, from 7,000 tons in 1981 to 11,000 tons in 1985. Coffee was Panama's third-largest crop export earner. In 1985 it earned US$15.6 million, which was 4.6 percent of total export earnings.

Rice and corn production also increased in the early 1980s. Panama imported rice in the 1970s but by the mid-1980s experienced a surplus, as a result of the expansion of production in the early 1980s, from 178,000 tons in 1982 to 200,000 tons in 1985. Panama produced 75,000 tons of corn in 1985, but in the same year it imported about 40 percent of the corn it consumed, some of which was used for poultry feed. The government granted incentives to increase corn production.

<> Livestock


Panama - Livestock


Panama was virtually self-sufficient in livestock production, which included cattle, pigs, chickens, eggs, and milk. Beef was by far the most important product and output was growing slowly in the 1980s. Between 1981 and 1985, the number of cattle slaughtered rose from 239,000 to 295,000; during the same period, the total stock of cattle increased only slightly, from 1.43 million head to 1.44 million head. Milk production remained steady between 1981 and 1985, averaging 89,140,400 liters a year.

Cattle raising for both meat and milk was common on land on the Pacific watershed and was concentrated in the provinces of Chiriqu�, Los Santos, and Veraguas. Most ranches produced both meat and milk, although some specialized in dairy farming. The majority of ranches had fewer than 100 hectares. Cattle were almost entirely grass fed. The grasslands were not particularly productive, lacking added nutrients and other improvements; on average, more than one hectare is required for each head of cattle. Low government credits, competition from regional cattle producers (especially Colombia), and United States market restrictions have hindered the growth of Panama's cattle production.

From 1982 to 1985, poultry production grew rapidly, from 4.5 million chickens to 6.1 million. During the same period, annual egg production also increased, from 28,859 dozen to 31,205 dozen. Pork production has remained steady; the number of pigs in 1985 totalled 210,000.




Industrial development has been uneven in Panama. Between 1965 and 1980, industry grew at an average annual rate of 5.9 percent; between 1980 and 1985, that rate was negative 2.2 percent. In 1985 industry accounted for nearly 18 percent of GDP. Within the industrial sector, manufacturing (based primarily on the processing of agricultural products) and mining contributed 9.1 percent to GDP, followed by construction (4.7 percent) and energy (3.4 percent).

Several factors contributed to the rapid expansion of industry between 1950 and 1970. A 1950 law granted liberal incentives and protection from imports to investors, including those in manufacturing. An agreement in 1955 phased out a number of manufacturing activities in the Canal Zone and opened a market for such Panamanian products as bakery goods, soft drinks, meats, and bottled milk. Foreign investment went into relatively large plants for oil refining, food processing, and utilities. The government invested in the infrastructure, especially in roads and the power supply. A building boom increased the demand for construction materials and furniture, further stimulating manufacturing. Management gained experience during the period, and labor productivity increased.

The stagnation in industrial growth during the 1970s resulted from external and internal causes that reduced private investment. Externally, the rise of oil prices, recession in the industrialized countries, and uncertainty relating to the future status of the canal clouded the investment climate. Domestically, a recession reduced construction activity and lowered the demand for manufactured goods. The government built cement and sugar mills to compete with privately owned mills; it also implemented an agrarian reform program, instituted a liberal labor code, and enforced rent control laws. These measures created apprehension on the part of investors, and although the government granted tax holidays, export incentives, and protection from imports, private investment declined. A key goal of the structural adjustment program of the mid-1980s was to increase private investment in industry and to make Panama's industry competitive internationally.


In 1984 the value added in manufacturing totaled US$344 million, distributed approximately as follows: food and agriculture, 42 percent; textiles and clothing, 11 percent; chemicals, 8 percent; machinery and transport equipment, 1 percent; and other manufacturing, 37 percent. Manufacturing was almost completely oriented toward the domestic market; manufactured goods accounted for a mere 2.5 percent of the value of exports of goods and nonfactor services. Production was concentrated in Panama City (over 60 percent of establishments), with smaller industrial centers at David (10 percent) and Col�n (5 percent).

Industrial development has faced the serious constraints of the small size of the domestic market, lack of economies of scale, high labor and unit costs, and government policies of high protection against imports. The greatest growth in manufacturing occurred in response to import- substitution industrialization in the 1960s and 1970s. By the 1980s, however, the "easy phase" of importsubstitution industrialization was over; a second phase, that of industrial deepening, was more difficult to carry out in such a small economy. The economy's obvious limitations in manufacturing have been partially offset by an educated labor force, highly developed internal and external transport and communication links, extensive financial facilities, the country's centralized location, and relatively few restrictions to foreign investment. The Panama Canal treaties provided additional space for expanding the CFZ, an ideal location for light industry and assembly plants.

During the 1970s, the public sector took the lead in manufacturing by building a cement plant, sugar mills, and iron and steel works. The structural adjustment program of the mid-1980s sought to reduce the state's role in the economy and to make the private sector the engine of manufacturing growth. The industrial incentives legislation of March 1986 encouraged manufacturers to be export-oriented by removing tax exemptions for those firms that produced for the domestic market. The legislation also provided for maintaining tax exemptions on imported inputs, income, sales, and capital assets for those firms that produced exports. The legislation also lowered import barriers over a period of five years in an effort to increase the productivity and competitiveness of local manufacturing. In addition, new companies were given tariff reductions of up to 60 percent for the first 7 years, and 40 percent thereafter.

Since the early 1970s, industrial expansion and job creation have lagged behind the growth of the labor force. In the 1960s, an average of 2,400 jobs was created each year in manufacturing. The rigidities of the industrial incentives law in 1970 and the labor code in 1972 contributed to a decline in manufacturing employment; an average of only 530 new jobs were created each year in manufacturing during the 1970s. The changes introduced in the labor code in March 1986 sought to reverse the antiemployment bias in manufacturing. The slight reduction in the overall unemployment rate in 1986 may be partially attributed to the labor code revisions.

Despite government measures to stimulate manufacturing, Panama's becoming a major industrial center seemed unlikely. Under the CBI, some potential arose for the development of twin-plant operations, especially in association with firms in Puerto Rico, where labor costs were higher than in Panama. In general, however, Panama was unable to compete effectively with Mexico, given the latter country's low labor costs and proximity to the United States market. Also, the possibility existed that industries from East Asia, especially clothing manufacturers, might increasingly relocate to Panama, in an attempt to circumvent United States quotas. This possibility was limited by uncertainty over the United States response. The United States Department of Commerce had called for the reduction of United States imports from Panama, precisely in those products manufactured by Asian investors.


Despite the variety of mineral deposits and the potential of copper production, the contribution of mining to GDP was negligible, accounting for only US$2.5 million in 1985, down from a 1982 peak of US$4.1 million (both figures at 1970 market prices). The production was restricted to the extraction of limestone, clays, and sea salt. A state company, Cemento Bayano, produced limestone and clay, and operated a cement plant with an annual capacity of 330,000 tons.

In the 1970s, several copper deposits were discovered. The largest was Cerro Colorado, in Chiriqu�, which if developed would be one of the largest copper mines in the world. Commercial development of the Cerro Colorado project was in the hands of the state-owned Corporaci�n de Desarrollo Minero Cerro Colorado, which had a 51-percent stake in the operation, and of R�o Tinto-Zinc, with 49 percent. In the 1970s, ore reserves at Cerro Colorado were estimated at nearly 1.4 billion tons (0.78 copper content). In the late 1970s, the cost of developing the mines was estimated at US$l.5 billion, nearly equal to total GDP at that time. Commercial exploitation was postponed because of low copper prices on the world market but could be undertaken if copper prices rose substantially.


Energy is generally considered a part of industry, to the extent that it is an intermediate input in the production process. In Panama, however, the largest shares of energy are sold to the consumer and to commerce. Therefore, a significant portion of energy used in Panama should be considered a part of the services sector; for the sake of this analysis, however, energy is placed under industry, following conventional practice.

Panama's energy production has increased substantially, from an average annual growth rate of 6.9 percent between 1965 and 1980 to 11.1 percent between 1980 and 1985. The expansion of hydroelectric generating capability has been responsible for most of the growth. Per capita energy consumption has increased, from 576 kilograms of oil equivalent in 1965 to 634 kilograms in 1985. This figure is higher than that of Nicaragua (259 kilograms) and Costa Rica (534 kilograms) but lower than that of Colombia (755 kilograms) and Mexico (1,290 kilograms).

Panama depended on petroleum for 80 percent of its domestic energy needs in the late 1980s. Petroleum exploration has been underway since 1920, but without success; as a result, the country is dependent on imported petroleum. Saudi Arabia and Venezuela were the primary suppliers until 1981, when Mexico replaced Saudi Arabia and joined Venezuela in the San Jos� Agreement of 1980, under which the two countries supply oil to Caribbean Basin countries on concessionary terms. Panama nearly halved its imports of oil between 1977 (20.5 million barrels) and 1983 (11.8 million) in response to rising oil prices. Oil imports have declined as a share of the total value of imports, from 33 percent in 1977 to 19 percent in 1985; in the latter year, the value of oil imports was US$19.2 million.

The country's only oil refinery, near Col�n, has a capacity of 100,000 barrels per day. Since 1976 it has been operating far below capacity, because greater use has been made of hydroelectricity. Refinery products supplied the domestic fuel for thermal power plants, most of the transportation system, and other minor uses. In 1977 about 64 percent of the imported crude was reexported after refining, mostly to ships' bunkers; by 1983 that figure had fallen to 35 percent. The government has approved the construction of a second refinery, also near Col�n, with a capacity of 75,000 barrels per day.

Hydroelectricity accounted for 10 percent of energy consumption and was the country's main domestic energy resource in the late 1980s. Panama has been substituting hydroelectric power generation for petroleum-based thermal generation since the late 1970s. By 1980, some 30 sites had been identified on the country's numerous rivers, which, if developed, could generate 1,900 megawatts of power. The capacity for generating electricity was 300 megawatts in 1979; in 1984 it had increased to 980 megawatts, of which 650 megawatts was hydroelectric and 330 was thermal. The increase was due in large measure to the Edwin F�brega Dam, on the R�o Chiriqu�, which began operation in 1984 with a generating capacity of 300 megawatts.

In 1985 the Institute of Hydraulic Resources and Electrification, responsible for power generation and distribution, initiated a five-year program to expand Panama's electrical generating capacity. At the time, there were 275,429 electricity consumers. A major goal of the program was to increase the distribution of electricity to an additional 12,000 people in rural areas.

Other energy sources, such as bagasse, charcoal, and wood, accounted for the remainder of energy demand. Firewood supplied half of the country's energy requirements as late as the 1950s but declined rapidly thereafter, partly because of the deforestation it engendered. Bagasse was used as fuel at sugar mills. Coal reserves were discovered in the Bocas del Toro region in the 1970s, near the border with Costa Rica. If commercially exploitable, the coal in the region could be used for generating electricity. In August 1985, the government announced plans to explore the reserves, with funding from the United States Agency for International Development and the United States Geological Survey.




In the 1980s, Panama has struggled to adjust to the constraints imposed on its economy by a high external debt. To compensate for a deficit in the capital account, its current account has registered a surplus since 1983, because the service sector has maintained a surplus. Debt has remained high in per capita terms, but the actual debt burden has fallen.


The value of Panama's merchandise exports has always lagged behind imports. The level of imports relative to the size of the economy has remained large. Panama's consumption standards have been high for a developing country. In the early 1900s, nearly everything consumed in the metropolitan areas was imported because little agricultural surplus and virtually no manufacturing existed. By the mid-1980s, the country was largely self-sufficient in foods except for wheat, temperate-zone fruits and vegetables, and oils and fats. Domestic manufacturing provided a growing share of consumer goods, but the country still imported a wide range of commodities.

With the decline of commodity prices on world markets in the 1980s, the terms of trade have steadily moved against Panama. Based on a terms of trade index of 100 in 1980, Panama's index stood at 82 in 1985, meaning that it had to export considerably more in order to import the same value of goods it had previously imported.

Panama controlled trade by issuing import and export licenses. Since 1983 tariffs have gradually replaced quantitative restrictions on imports. Taxes were levied on some imports, and incentives were given to nontraditional exports through tax credit certificates.

In 1985 merchandise exports totalled US$414.50 million (excluding reexports from the CFZ) down from US$526.10 million in 1980. Refined petroleum topped the list of export items, at US$100.60 million, but its net contribution to the trade balance was much smaller, given that Panama's crude oil is imported. Bananas, traditionally the largest export item, accounted for US$78.1 million in exports, followed by shrimp (US$53.4 million), manufactured goods (US$45 million), sugar (US$33.3 million), coffee (US$15.6 million), and clothing (US$11.5 million).

About 75 percent of Panama's exports went to industrial countries; Latin America received the other 25 percent. The United States was by far the largest single market, and in 1985 received 60.5 percent of Panama's exports. Most of the remaining exports went to Costa Rica (7.5 percent), the Federal Republic of Germany (West Germany) (5.5 percent), Belgium (4.9 percent), and Italy (4.5 percent). The CBI was expected to increase Panama's exports to the United States. The CBI seeks to provide long-term trade, aid, and investment incentives to promote the economic revitalization of the Caribbean Basin. The most significant incentive is twelve-year, duty-free access of most goods to the United States market. Some omitted goods were footwear, textiles, leather and general apparel, canned tuna, petroleum and petroleum products, rubber and plastic gloves, luggage, and handbags. In addition, special rules limited the eligibility of sugar for duty-free treatment. Twenty countries, including Panama, were granted this access in January 1984. In 1987 judging the long-term CBI benefits for Panama was premature. Critics charged that few new trade benefits would accrue from the CBI beyond those under the Generalized System of Preferences, which already accommodated 87 percent of Caribbean Basin exports to the United States. In the initial years of CBI implementation, the share of Panama's exports going to the United States remained unchanged.

In 1985 Panama's merchandise imports amounted to US$1.34 billion, or about 30 percent of GDP. In that year, manufactured goods were the largest import item (US$348.6 million), followed by crude oil (US$271.8 million), machinery and transport equipment (US$266.7 million), chemicals (US$158.0 million), and food products (US$142.6 million). Crude oil has traditionally been the largest import item, but in the 1980s its share of imports fell as petroleum prices declined and hydroelectric energy capacity increased.

About one-third of Panama's imports came from the United States, another third from other industrial countries, and onethird from Latin America. In 1985 Panama's imports came from the United States (30.8 percent), Japan (8.9 percent), Mexico (8.2 percent), Venezuela (6.8 percent), and Ecuador (7.2 percent). Mexico and Venezuela supplied 70 percent of Panama's crude oil under the San Jos� Agreement.


Panama - Government


IN LATE 1987, PANAMA'S political system was unable to respond to the problems confronting the nation. Protests over the role in the government played by the Panama Defense Forces (Fuerzas de Defensa de Panam�--FDP) and their commander, General Manuel Antonio Noriega Moreno, had produced economic disruption and the appearance of political instability and had contributed to serious strains in relations with the United States. With no immediate resolution of the conflict likely, Panama appeared to be in its most severe political crisis since the 1968 coup, which had made the military the dominant political force in the nation.

The October 1968 coup marked the third time that the military had ousted Arnulfo Arias Madrid from the presidency of Panama. It differed from previous coups, however, in that it installed a military regime that promoted a mixture of populist and nationalist policies, while at the same time assiduously courting international business. Led, until his death in 1981, by the charismatic General Omar Torrijos Herrera, the military used limited but effective repression to prevent civilian opposition groups from returning to power. Torrijos also created the Democratic Revolutionary Party (Partido Revolucionario Democr�tico--PRD), which became the official ruling party.

The death of Torrijos, in an airplane crash on July 31, 1981, precipitated a prolonged struggle for power. In a little more than four years Panama had three FDP commanders and five civilian presidents. At the same time, both domestic and international pressures for a return to civilian rule increased steadily. Constitutional revisions in 1983, followed by presidential and legislative elections in 1984, were supposed to promote this process. The elections, however, were tainted by widespread allegations of fraud. Whatever credibility the newly installed civilian government had was undermined further in September 1985, when President Nicol�s Ardito Barletta Vallarino was forced out of office by General Noriega and the FDP. In the following two years, political tensions continued to increase, fueled by negative publicity abroad, by the murder of a prominent opposition political figure, Dr. hugo Spadatora, by the open break between General Noriega and his most prominent rival within the military, Colonel Roberto D�az Herrera, and by serious economic problems, notably a major international debt burden and major capital flight.

The era of military rule had not been without its positive accomplishments. Most notable was the successful negotiation of the 1977 Panama Canal treaties with the United States. These treaties, which went into effect on October 1, 1979, ended the separate territorial status of the Panama Canal Zone and provided for Panama's full control over all canal operations at the end of the century. Under the military, Panama also had emerged as a major international banking center, had become a more prominent actor in world affairs, exemplified by its position as one of the original "Core Four" mediators (along with Mexico, Venezuela, and Colombia) in the Contadora negotiating process seeking to mediate the conflicts in Central America, and had implemented numerous social reforms, raising the standard of living for many of its citizens. In late 1987, however, many of these accomplishments appeared jeopardized by the continuing crisis in civil-military relations and the inability of the Panamanian government to maintain a peaceful evolution toward a more open, democratic political system.

<> The Media




In 1987 Panama was governed under the Constitution of 1972 as amended by the Reform Acts of 1978 and the Constitutional Act of 1983. This was Panama's fourth constitution, previous constitutions having been adopted in 1904, 1941, and 1946. The differences among these constitutions have been matters of emphasis and have reflected the political circumstances existing at the time of their formulation.

The 1904 constitution, in Article 136, gave the United States the right to "intervene in any part of Panama, to reestablish public peace and constitutional order." Reflecting provisions of the Hay-Bunau-Varilla Treaty, this confirmed Panama's status as a de facto protectorate of the United States. Article 136, along with other provisions of the Hay-Bunau-Varilla Treaty, such as that giving the United States the right to add additional territory to the Canal Zone whenever it believed this was necessary for defensive purposes, rankled Panamanian nationalists for more than three decades.

In 1939 the United States abrogated its right of intervention in internal Panamanian affairs with the ratification of the HullAlfaro Treaty. The 1941 constitution, enacted during Arnulfo Arias's first, brief presidential term, not only ended Panama's constitutionally mandated protectorate status, but also reflected the president's peculiar political views. Power was concentrated in the hands of the president whose term, along with that of members of the legislature, was extended from four to six years. Citizenship requirements were added that discriminated against the nation's English-speaking black community and other non-Hispanic minorities.

In October 1941, President Arias was deposed by the National Police (the predecessor of the National Guard and FDP), and the presidency was assumed by Ricardo Adolfo de la Guardia. In 1946 President de la Guardia promulgated a new constitution, which was basically a return to the 1904 document without the offensive Article 136. The 1946 constitution lasted for twenty-six years. Following the 1968 military coup, eleven constitutional guarantees, including freedom of speech, press, and travel, were suspended for several months, and some were not restored fully until after the adoption of the 1972 Constitution. The 1972 Constitution was promulgated by General Torrijos and reflected the dominance of the political system by the general and the military.

Article 277 of the 1972 Constitution designated Torrijos as the "Maximum Leader of the Panamanian Revolution," granting him extraordinary powers for a period of six years, including the power to appoint most government officials and to direct foreign relations. On October 11, 1978, this and other temporary provisions of the 1972 Constitution expired, and a series of amendments, ratified by the Torrijos-controlled National Assembly of Municipal Representatives, became law. These amendments called for a gradual return to democratic political processes between 1978 and 1984 and were designed, in part, to assuage United States concerns over the undemocratic nature of the Panamanian political system.

In 1983 a commission representing various political parties was created to amend further the Constitution in preparation for the 1984 elections. The sixteen-member commission changed nearly half of the Constitution's articles, producing several significant alterations. Article 2 had given the military a special political role, but all mention of this was omitted in the revised draft. The legislature was also revamped. The National Legislative Council was eliminated, and the unwieldy, government-controlled National Assembly of Municipal Representatives, which had 505 representatives, one from each corregimiento (municipal subdistrict), became the Legislative Assembly, with 67 members apportioned on the basis of population and directly elected. The independence of the judiciary and the Electoral Tribunal were strengthened, the term of the president was reduced to five years, and two vice presidents were to be elected. Guarantees of civil liberties were strengthened, and official support for candidates in elections was, at least in theory, severely restricted.

The amended Constitution contains 312 articles. Power emanates from the people and is exercised by the three branches of government, each of which is "limited and separate," but all of which, in theory, work together in "harmonious collaboration." The national territory is defined as "the land area, the territorial sea, the submarine continental shelf, the subsoil, and air space between Costa Rica and Colombia." Any ceding, leasing, or other alienation of this territory to any other state is expressly forbidden. Spanish is the country's national language.

Citizenship may be acquired by birth or naturalization. Articles 17 through 50 guarantee a broad range of individual rights, including property rights, but Article 51 gives the president power to suspend many of these by declaring a "state of emergency." Articles 52 through 124 establish the role of the state in protecting the family, regulating labor conditions, promoting education and culture, providing assistance for health and other areas of social security, promoting agriculture, and protecting the environment.

After the elaboration of the composition, powers, and duties of the various organs of the governmental system, the Constitution ends with descriptions of the state's responsibilities with respect to the national economy, public administration, and national security. Engaging in economic activities, for example, is primarily the function of private individuals, but the state will "orient, direct, regulate, replace, or create according to social necessities . . . with the object of increasing national wealth and to ensure its benefits for the largest possible number of the nation's inhabitants." Article 308 provides for amending the Constitution, either through approval of amendments without modification by an absolute majority of two successive elected assemblies or approval with modifications by two assemblies and subsequent ratification of the modified text by a national referendum.

Panama's successive constitutions have been respected in varying degrees by the republic's governments. Since the 1968 coup, opponents of various governments have accused them of violating the spirit and, at times, the letter of the Constitution and of invoking the state of emergency provisions for purely political purposes. Creating public confidence in the rule of law established by the Constitution presented the government with one of its major challenges in the late 1980s.




The Executive

As is the case throughout most of Latin America, constitutional power in Panama--although distributed among three branches of government--is concentrated in the executive branch. The 1978 and 1983 amendments to the Constitution decreased the powers of the executive and increased those of the legislature, but the executive branch of government remains the dominant power in the governmental system as defined by the Constitution.

The executive organ is headed by the president and two vice presidents. They, together with the twelve ministers of state, make up the Cabinet Council, which is given several important powers, including decreeing a state of emergency and suspending constitutional guarantees, nominating members of the Supreme Court, and overseeing national finances, including the national debt. These officials, together with the FDP commander, attorney general, solicitor general, president of the Legislative Assembly, directors general of various autonomous and semiautonomous state agencies, and president of the provincial councils, make up the General Council of State, which has purely advisory functions.

The president and the two vice presidents, who must be nativeborn Panamanians and at least thirty-five years of age, are elected to five-year terms by direct popular vote. Candidates may not be related directly to the incumbent president or have served as president or vice president during the two preceding terms. Should the president resign or be otherwise removed from office, as was the case with President Ardito Barletta in 1985, he is replaced by the first vice president, and there is no provision for filling the vacancy thus created in the vice presidential ranks.

Under the Constitution, the president has the exclusive right to appoint or remove ministers of state, maintain public order, appoint one of the three members of the Electoral Tribunal, conduct foreign relations, and veto laws passed by the Legislative Assembly. In theory a veto may be overridden by a two-thirds majority vote of the assembly. In addition, many powers are exercised by the president jointly with the appropriate individual cabinet member, including appointing the FDP high command, appointing and removing provincial governors, preparing the budget, negotiating contracts for public works, appointing officials to the various autonomous and semiautonomous state agencies, and granting pardons. The president's power to appoint and remove cabinet members would seem to make the requirement for operating with the consent of the cabinet largely a formality, but the FDP and its allies in the PRD frequently have dictated the composition of the cabinet, using this as a means to exercise control over the president.

The two vice presidencies are relatively powerless positions, but since three vice presidents have succeeded to the presidency during the 1980s, the posts are not insignificant. The first vice president acts as chief executive in the absence of the president, and both have votes in the Cabinet Council.

The ministers of state include the ministers of agriculture, commerce and industries, education, finance, foreign relations, government and justice, health, housing, labor and social welfare, planning and economic policy, presidency, and the public works. There is no ministry directly representing or having jurisdiction over the FDP. Nevertheless, the minister of government and justice has nominal authority over the FDP's police functions, along with control over prisons, civil aviation, and internal communications, making this one of the most powerful cabinet posts. This ministry also supervises local government in the Comarca de San Blas as well as in the nine provinces, thus exerting central government control over local affairs.

The Legislature

The 1983 amendments to Panama's Constitution created a new legislative organ, the Legislative Assembly, a unicameral body with sixty-seven members, each of whom has an alternate. Members and alternates are elected for five-year terms that run concurrently with those of the president and vice presidents. To be eligible for election, an individual must be at least twenty-one years of age and be a Panamanian citizen either by birth or by naturalization with fifteen years of residence in Panama subsequent to naturalization. The legislature holds two four-month sessions each year and may also be called into special session by the president.

In theory, the assembly has extensive powers. It can create, modify, or repeal laws, ratify treaties, declare war, decree amnesty for political offenses, establish the national currency, raise taxes, ratify government contracts, approve the national budget, and impeach members of the executive or judicial branches. There are, however, significant limitations on these powers, both in law and in practice. Members are nominated for election by parties, and the parties may revoke their status as legislators. This gives the official government party, the PRD, and its allies the power to ensure conformity with government policy and prevent defections from its ranks. Moreover, there are no provisions for legislative control over the military. The legislature also is severely limited in its ability to control the budget. Under Article 268 of the Constitution, the assembly is prohibited from adding to the budget submitted by the executive without the approval of the Cabinet Council. It may not repeal taxes included in the budget unless, at the same time, it creates new taxes to make up any revenue lost.

Differences in practice are also important. Since its creation, the assembly has never rejected an executive nomination for a government post, refused to ratify a treaty, or turned down an executive request for grants of extraordinary powers or for the establishment or prolongation of a state of emergency. The opposition, which held twenty-two seats in late 1987, has used the assembly as a forum to attack government policies and to criticize the role played in the administration by the FDP, but it has been unable to block or even seriously delay any government project. Assembly debates normally are broadcast live, but during the disturbances of June 1987, speeches by opposition members frequently were not carried on the radio.

The lack of institutional independence also has inhibited the development of local or special interest representation within the assembly. The tight control over the selection of candidates and their subsequent performance as legislators by their respective parties works against such representation, as does the dominance of the executive branch. This control is further strengthened by the fact that elections are held only every five years and occur in conjunction with presidential elections.

Should political conditions change in Panama and the dominant role of the military be significantly reduced, the Legislative Assembly has the potential to emerge as a significant participant in the national political process, but its powers would still be less extensive than those exercised by the executive branch. Under the circumstances existing in late 1987, it lacked both the power and the will to block, or even significantly modify, government projects and served largely as a public debating forum for government supporters and opponents.

The Judiciary

The Constitution establishes the Supreme Court as the highest judicial body in the land. Judges must be Panamanian by birth, be at least thirty-five years of age, hold a university degree in law, and have practiced or taught law for at least ten years. The number of members of the court is not fixed by the Constitution. In late 1987, there were nine justices, divided into three chambers, for civil, penal, and administrative cases, with three justices in each chamber. Judges (and their alternates) are nominated by the Cabinet Council and subject to confirmation by the Legislative Assembly. They serve for a term of ten years. Article 200 of the Constitution provides for the replacement of two judges every two years. The court also selects its own president every two years.

The Constitution defines the Supreme Court as the guardian of "the integrity of the Constitution." In consultation with the attorney general, it has the power to determine the constitutionality of all laws, decrees, agreements, and other governmental acts. The court also has jurisdiction over cases involving actions or failure to act by public officials at all levels. There are no appeals from decisions by the court.

Other legislation defines the system of lower courts. The nation is divided into three judicial districts: the first encompasses the provinces of Panam�, Col�n, and Dari�n; the second, Veraguas, Los Santos, Herrera, and Cocl�; the third, Bocas del Toro and Chiriqu�. Directly under the Supreme Court are four superior tribunals, two for the first judicial district and one each for the second and third districts. Within each province there are two circuit courts, one for civil and one for criminal cases. The lowest regular courts are the municipal courts located in each of the nation's sixty-five municipal subdivisions. In the tribunals, the judges are nominated by the Supreme Court, while lower judges are appointed by the courts immediately above them.

The Constitution also creates a Public Ministry, headed by the attorney general, who is assisted by the solicitor general, the district and municipal attorneys, and other officials designated by law. The attorney general and the solicitor general are appointed in the same way as Supreme Court justices, but serve for no fixed term. Lower-ranking officials are appointed by those immediately above them. The functions of the Public Ministry include supervising the conduct of public officials, serving as legal advisers to other government officials, prosecuting violations of the Constitution and other laws, and arraigning before the Supreme Court officials over whom the Court "has jurisdiction." This provision pointedly excludes members of the FDP.

Several constitutional provisions are designed to protect the independence of the judiciary. These include articles that declare that "magistrates and judges are independent in the exercise of their functions and are subject only to the Constitution and the law;" that "positions in the Judicial Organ are incompatible with any participation in politics other than voting;" that judges cannot be detained or arrested except with a "written order by the judicial authority competent to judge them;" that the Supreme Court and the attorney general control the preparation of the budget for the judicial organ; and that judges "cannot be removed, suspended, or transferred from the exercise of their functions except in cases and according to the procedures prescribed by law."

The major defect in the judicial system lies in the manner in which appointments are made to the judiciary. Appointments of judges and of the attorney general are subject to the approval of the Legislative Assembly, but that body has functioned as a rubber stamp for candidates selected by the executive. Lower-level appointments, made by superiors within the judicial organ, are not subject to assembly approval. In addition, the first two Supreme Court justices appointed after the 1984 elections were both former attorneys general, closely associated with the government and even involved in some of its most controversial actions, such as the investigation of the murder of opposition leader Spadafora. As a result, the opposition has denounced regularly the judicial system for being a political organ controlled by the FDP and the PRD. Numerous external observers, including the Inter-American Commission on Human Rights of the Organization of American States (OAS), the United States Department of State, and various human rights organizations, also have criticized the lack of independence of the Panamanian judiciary and of the Public Ministry.

State Agencies and the Regulation of Public Employees

In addition to the three branches of government, the state apparatus includes numerous independent or quasi-independent agencies and institutions that function in a variety of ways. The most important of these is the three-member Electoral Tribunal. The Constitution provides that the executive, legislative, and judicial branches of government will each select one of the members of this body. The tribunal is charged with conducting elections, tabulating and certifying their results, regulating, applying, and interpreting electoral laws, and passing judgment on all allegations of violations of these laws. The tribunal also conducts the registration of voters and the certification of registered political parties and has jurisdiction over legal disputes involving internal party elections. Its decisions are final and may be appealed only in cases where the tribunal is charged with having violated constitutional provisions. Although the tribunal may pass judgment on charges of violations of electoral laws and procedures, the prosecution of those charged with such violations is in the hands of the electoral prosecutor, an individual independent of the tribunal who is appointed by the president for a single term of ten years.

While autonomous in theory, in practice the Electoral Tribunal has consistently followed the dictates of the government and the FDP. This was exemplified most clearly in the decision to certify the results of the 1984 elections, dismissing all charges of fraud and other irregularities. The position of the electoral prosecutor is even more subject to administrative control. The opposition parties consistently have attacked the lack of independence of the tribunal and the prosecutor and have refused to participate in tribunal-controlled projects aimed at reforming the electoral code in preparation for the 1989 elections. President Eric Arturo Delvalle Henr�quez urged broad participation in such efforts and promised to appoint a member of the opposition to the tribunal, but such actions did not satisfy the opposition. The tribunal, itself, has declared that it is not provided adequate funds for the tasks with which it is charged.

The Constitution also provides for an independent comptroller general who serves for a term equal to that of the president and who may be removed only by the Supreme Court. The comptroller is charged with overseeing government revenues and expenditures and investigating the operations of government bodies. Although independent in theory, in practice holders of this office have virtually never challenged government policy.

Quasi-independent governmental commissions and agencies include the National Bank of Panama; the Institute of Hydraulic Resources and Electrification, which is in charge of the nation's electrical utility; the Col�n Free Zone; and the University of Panama. Other state agencies and autonomous and semiautonomous agencies function in various capacities within the social and economic system of the nation.

Public employees, defined by the Constitution as "persons appointed temporarily or permanently to positions in the Executive, Legislative, or Judicial Organs, the municipalities, the autonomous and semiautonomous agencies; and in general those who collect remuneration from the State" are all to be Panamanian citizens and are governed by a merit system. The Constitution prohibits discrimination in public employment on the basis of race, sex, religion, or political affiliation. Tenure and promotion, according to Article 295, are to "depend on their competence, loyalty, and morality in service." Several career patterns relating to those in public service are outlined and standardized by law. The Constitution also identifies numerous individuals, including high political appointees, the directors and subdirectors of autonomous and semiautonomous agencies, secretarial personnel, and temporary employees, who are exempted from these regulations. In addition, the Constitution stipulates that a number of high government officials, including the president and vice president, Supreme Court justices and senior military officials, must make a sworn declaration of their assets on taking and leaving office. In practice, these provisions often are ignored or circumvented. Public employment is characterized by favoritism, nepotism, and a tendency to pad payrolls with political supporters who do little if any actual work.

Provincial and Municipal Government

The nine provincial governments are little more than administrative subdivisions of the central government. Article 249 of the Constitution states that "in each province there shall be a Governor freely appointed and removed by the Executive who shall be the agent and representative of the President within his jurisdiction." In addition, each province has a body known as the Provincial Council, composed of district (corregimiento) representatives. The governor, mayors, and additional individuals "as determined by the law" also take part in each council, but without voting rights. The powers of these councils are largely advisory, and they lack actual legislative responsibility. The Comarca de San Blas, inhabited largely by Cuna Indians, has a distinct form of local government headed by caciques, or tribal leaders.

In contrast, the nation's sixty-five municipal governments are "autonomous political organizations." Although closely tied to the national government, municipal officials, under Article 232 of the Constitution, may not be removed from office by the national administration. In each municipality, the mayor, the director of municipal administration, and their substitutes (suplentes) are directly elected for five-year terms. There is, however, an additional constitutional provision that the Legislative Assembly may pass laws requiring that officials in some or all municipalities are to be appointed by the president rather than elected. In 1984 municipal officials were elected in a separate election, held on short notice after the election of the president and the legislature. Opposition parties protested the timing and conditions of these elections, but participated. The great majority of offices, including those in the capital, were won by progovernment candidates, but opposition parties did gain control of a few municipalities, notably in David, capital of Chiriqu� Province.

Municipalities are divided further into districts, from each of which a representative is elected to the Municipal Council. Should a town have fewer than five districts, five council members are chosen in at-large elections. These districts, in turn, have their own form of local government, headed by a corregidor, and including a junta communal made up of the corregidor, the district's representative to the Municipal Council, and five other residents "selected in the form determined by law."

The major concern of municipal and district officials is the collection and expenditure of local revenues. These local politicians have some control over public works, business licenses, and other forms of local regulations and improvements, but many functions that fall within the jurisdiction of local governments in other nations, such as educational, judicial, and police administration, are left exclusively to the jurisdiction of the central government. Local administrations do contribute to the cost of schools, but the amount of their contribution is determined at the national level, based on their population and their state of economic and social development.




From 1968 until his death in an airplane crash in 1981, General Torrijos dominated the Panamanian political scene. His influence, greater than that of any individual in the nation's history, did not end with his death. Since 1981, both military and civilian leaders have sought to wrap themselves in the mantle of Torrijismo, claiming to be the true heirs of the general's political and social heritage. As of the late 1980s, none had been particularly successful in this effort.

Before 1968, Panama's politics had been characterized by personalism (personalismo), the tendency to give one's political loyalties to an individual, rather than to a party or particular ideological platform. The dominant force had been the traditional elite families, known as the rabiblancos (white tails), concentrated in Panama City. They manipulated nationalist sentiment, largely directed against United States control over the Canal Zone, the National Guard, and various political parties in order to maintain their control. The most dominant individual in the pre-1968 period was Arnulfo Arias, a charismatic, right-wing nationalist who was both feared and hated by the National Guard's officers. His overthrow in 1968 marked the third time that he had been ousted from the presidency, never having been allowed to finish even half of the term for which he had been elected.

It soon became apparent that the 1968 coup differed fundamentally from those that preceded it. Torrijos actively sought to add lower- and middle-class support to the power base provided by his control over the military, using a mixture of nationalism and populism to achieve this goal. He cultivated laborers, small farmers, students, and even the communists, organized in Panama as the People's Party (Partido del Pueblo--PdP). He excluded the traditional elites from political power, although he left their economic power base largely untouched. Political parties were banned, and the legislature was dissolved (until replaced in 1972 by the National Assembly of Municipal Representatives, 505 largely government-selected representatives of administrative subdistricts supposedly elected on a nonpartisan basis). Torrijos justified his policies as being required by the pressing social needs of the population and by the overriding need to maintain national unity in order to negotiate a treaty with the United States that would cede sovereignty over the Canal Zone and ultimately give control of the Panama Canal to Panama.

In the early 1970s, the strength of the populist alliance forged by Torrijos was impressive. He had reduced the traditional antagonism between the National Guard and the students, purging disloyal elements within both in the process. The loyalty of the middle classes was procured through increased public-sector employment. Major public housing projects, along with expanded health, education, and other social service programs, helped maintain support in urban areas. Labor leaders were cultivated through the adoption of a much more favorable labor code, and a constant emphasis on the necessity of gaining control over the canal undercut the nationalist appeal of Arnulfo Arias. By 1976, however, rising inflation, increased unemployment, and the continued failure to negotiate a canal treaty had begun to undermine the general's popularity.

The 1977 signing of the Panama Canal treaties, giving Panama full control over the canal in the year 2000, actually added to the problems confronting Torrijos. There was considerable opposition in Panama to some provisions of the treaties, and it took all of the general's prestige to secure the needed two-thirds majority for ratification in an October 1977 national plebiscite. Resentment further increased when the government acceded to several amendments passed by the United States Senate after the plebiscite. At the same time, in order to facilitate United States ratification of the treaties, Torrijos found it necessary to promise to restore civilian rule and return the military to the barracks.

The 1978 amendments to the Constitution were the first step in the process of restoring civilian rule. That same year, the government allowed exiled political opponents to return, permitted the re-emergence of political parties, and promised to hold legislative elections in 1980 and presidential elections in 1984. Only parties that could register 30,000 members, however, would gain official recognition. Torrijos and his supporters used the new system to create their own political party, the PRD, which tried to combine the old elements of the Torrijos coalition into a single political structure. Torrijos also appointed a new civilian president, Aristides Royo, and announced that he was relinquishing the special powers he had exercised since 1972.

Opponents argued that the pace of democratization was too slow and called for immediate, direct election of both the president and a representative legislature. Ultimately, however, most sought to achieve legal status for their parties. A major exception was Arnulfo Arias's Paname�istas, who initially boycotted the entire process. In the 1980 elections for nineteen of the fifty-seven seats in the legislature, the principal parties to emerge were the PRD, with twelve seats, and the opposition National Liberal Party (Partido Liberal Nacional--PLN), with five seats, and Christian Democratic Party (Partido Dem�crato Cristiano--PDC), with one seat.




The death of General Torrijos in a July 1981 airplane crash represented a major break in the pattern of Panamanian politics. The next several years saw considerable turmoil both in the National Guard and among the political leadership, as various individuals jockeyed to fill the void created by Torrijos's untimely death. Command of the National Guard was initially assumed by Colonel Florencio Florez Aguilar, but in March 1982, a struggle for power among the officers resulted in his replacement by Colonel Rub�n Dar�o Paredes, who promptly promoted himself to general and, four months later, forced President Royo to resign. In December, further changes in the National Guard's command structure saw the emergence of Colonel Noriega as chief of staff and the likely successor to Paredes.

On April 24, 1983, nearly 88 percent of the voters in a national referendum approved further amendments to the Constitution designed to set the stage for the 1984 presidential and legislative elections. Much of the rest of the year was devoted to maneuverings by Paredes and other potential presidential candidates, seeking to gain support for their ambitions and to form coalitions with other political groups and parties, in order to further enhance their prospects. By September, 13 parties had gained the 30,000 signatures necessary for official registration. These included the Paname�istas, as Arnulfo Arias reversed his longstanding boycott of the political process. Nominated by the PRD and several other parties, Paredes resigned from his post as the Guard's commander to pursue his presidential ambitions. Nevertheless, after Noriega was promoted to general and took over command of the National Guard, he quickly moved to undercut Paredes, leading to a sudden announcement of Paredes's withdrawal as a presidential candidate in September.

Paredes's withdrawal led to considerable confusion in the political process. Ultimately, two major coalitions emerged and presented candidates for president. (Although the parties united behind their presidential candidates, they nevertheless ran separate slates for seats in the legislature.)

The National Democratic Union (Uni�n Nacional Democr�tica-- UNADE) was formed by six parties: the PRD; the Labor and Agrarian Party (Partido Laborista Agrario--PALA), frequently referred to simply as the Labor Party; the PLN; the Republican Party; the Paname�ista Party (Partido Paname�ista--PP), a small faction that broke away from the majority of Paname�istas, who continued to follow Arnulfo Arias; and the Broad Popular Front (Frente Amplio Popular--FRAMPO). UNADE's presidential candidate was Nicol�s Ardito Barletta, an international banker with little political experience. Republican Party leader Eric Arturo Delvalle and PLN veteran Roderick Esquivel received the vice presidential nominations. UNADE's principal competition was the Democratic Opposition Alliance (Alianza Democr�tica de Oposici�n--ADO), which encompassed three major parties: the majority of Paname�istas organized in the Authentic Paname�ista Party (Partido Paname�ista Aut�ntico--PPA), the PDC, and the National Liberal Republican Movement (Movimiento Liberal Republicano Nacional--MOLIRENA). A number of smaller parties also joined the coalition. ADO's presidential candidate was eighty-three-year-old Arnulfo Arias. Carlos Francisco Rodriguez and Christian Democratic leader Ricardo Arias Calder�n were its vice presidential candidates.

Five minor candidates also entered the race. They included General Paredes, who reentered the field as the candidate of the Popular Nationalist Party (Partido Nacionalista Popular--PNP); Carlos Iv�n Z��iga of the Popular Action Party (Partido de Acci�n Popular--PAPO); and the candidates of three small, far-left parties.

The campaign and election were marred by violence and repeated charges by Arnulfo Arias and other opposition candidates that the Guard was using force, fraud, and intimidation to promote Ardito Barletta's candidacy. Official counting of the vote was delayed for several days and the Electoral Tribunal appeared divided, but ultimately the government certified Ardito Barletta as president, declaring that he had won with 300,748 votes to 299,035 for Arias. None of the minor candidates won more than 16,000 votes. All parties outside the major alliances plus the smallest members of the UNADE coalition (FRAMPO and the PP) lost their legal status by failing to receive 3 percent of the total vote. Supporters of Arnulfo Arias charged that Ardito Barletta's victory was the result of massive government fraud and organized several protest demonstrations, but to no avail. Charges of fraud also were launched against the winners of several legislative seats. In these races, official returns gave a large majority to members of the government coalition; the PRD won thirty-four seats, the PPA fourteen, PALA seven, the PDC five, the Republican Party and MOLIRENA three each, and the PLN one.

Disturbances continued for weeks after the announcement of Ardito Barletta's victory, contributing to a decision to postpone scheduled municipal elections. The disturbances also aggravated an already deteriorating economic situation, fueled by a massive debt and a rising budget deficit. In November 1984, shortly after his inauguration, Ardito Barletta attempted to implement an austerity program and to reduce the budget deficit through increased taxes. These measures led to a wave of strikes and public demonstrations, and the president was forced to back off on some of his proposals.

Conditions continued to deteriorate in 1985. Elements of the government coalition joined in protests against Ardito Barletta's economic policies, and pressures from the Guard and the PRD forced the president to agree to changes in several key cabinet posts. Both business and labor confederations withdrew from government- sponsored meetings to discuss the situation, and labor disturbances increased. In August, Noriega publicly criticized the government.

Rumors of a coup were spreading when, on September 14, 1985, the headless body of a prominent critic of Noriega, Dr. Hugo Spadafora, was found in Costa Rica. This discovery unleashed another round of protest demonstrations. Noriega and the National Guard denied any involvement in the murder, but they refused to allow an independent investigation. When Ardito Barletta seemed to indicate some willingness to do so, he was hurriedly recalled from a visit to the United Nations (UN) and, on September 28, forced to resign. Vice President Delvalle became the fifth president in less than four years.

The ousting of Ardito Barletta failed to calm the situation. Protests over Spadafora's murder and over the economic situation continued. In October the government was forced to close all schools for several days. Rising tensions also began to affect relations with the United States, which had opposed the ousting of Ardito Barletta, and even created problems within the major pro- government party, the PRD, which underwent a shake-up in its leadership.

The new administration initially attempted to reverse the rising tide of discontent by returning to the populist policies of the Torrijos era. Prices of milk, rice, and petroleum were lowered, and President Delvalle announced that any agreement with the International Monetary Fund (IMF) would be based on negotiations with labor and with the private sector. Economic realities, however, soon forced the government to impose an austerity program remarkably similar to that advocated by Ardito Barletta and to introduce, over strong objections from the unions, sweeping reforms in the labor code, designed to make Panama more attractive for foreign and domestic investment. A national strike protesting the new policies failed when Noriega and the FDP supported Delvalle. The new policies produced some economic improvement but did nothing to resolve mounting political problems.

Panama's domestic problems were paralleled by growing criticism abroad, notably in the United States. In March 1986, the Subcommittee on Western Hemisphere Affairs of the United States Senate Committee on Foreign Relations began holding hearings on the situation in Panama, and the following month hearings also began in the House of Representatives. In June a series of articles by Seymour Hersh alleging involvement by Panamanian officials in narcotics trafficking, the murder of Spadafora, and the passing of sensitive intelligence to Cuba were published in the New York Times. Both within and outside Panama, the increased criticism focused attention on the military and on General Noriega. Delvalle's civilian government found it increasingly difficult to contend with the perception that it was little more than a pliant tool of the military. These perceptions were further strengthened in October 1986, when the president, despite open protests, was forced to dismiss four cabinet ministers and appoint their replacements from a list prepared by the PRD.

Tensions also increased between the government and opposition media within Panama in 1986. Roberto Eisenman, Jr., editor of La Prensa, took refuge in the United States, alleging that there was a government plot to kill him. Radio Mundial, owned by opposition political leader Carlos Iv�n Z��iga, was ordered closed. But despite increased protests and international pressures, the government's hold on power seemed unshaken.

The situation changed abruptly in June 1987. A long-time power struggle within the FDP between Noriega and his chief of staff, Colonel Roberto D�az Herrera, led to the forced retirement of D�az Herrera on June 1. Six days later, the colonel responded by a series of public denunciations, accusing Noriega of involvement in the deaths of Torrijos and Spadafora and of using massive fraud to ensure the victory of Ardito Barletta in the 1984 elections. The result was widespread rioting. The opposition demanded that both Noriega and Delvalle resign, and numerous civic and business groups formed the National Civic Crusade (Crusada Civilista Nacional--CCN) to press for changes in the government. As demonstrations spread, the government declared a state of emergency, suspending constitutional rights and instituting censorship. The CCN responded by calling a national strike that paralyzed the economy for several days. Violent actions by government forces and antigovernment demonstrators further polarized public opinion. The leadership of Panama's Roman Catholic Church joined in criticism of the government but urged a peaceful solution to the national crisis. Such calls were ignored by the government, which, instead, threatened to arrest those involved in the protests and seize the property of businesses that joined in the strike, closed the schools, and unleashed a virulent propaganda campaign accusing its opponents of being linked with United States interests that wanted to abort the Panama Canal treaties.

The general strike collapsed after a few days, but protests did not end. Periodic protests, strikes, and demonstrations continued throughout the summer and fall of 1987. Relations with the United States deteriorated rapidly as the government charged the United States embassy with supporting the opposition and bitterly protested a United States Senate resolution calling for an investigation of the charges made by D�az Herrera. An attack on the embassy by a mob and the arrest of United States diplomatic and military personnel by the FDP led to a suspension of military assistance by the United States. At the end of 1987, relations were more strained than at any time since the 1964 riots.

The continued civil strife also badly damaged Panama's economy. The future of the banking sector seemed especially imperiled if the deadlock between the government and its opponents should be prolonged.

In late 1987, it seemed clear that the CCN and the opposition political parties could not, by themselves, force a change in either the military or civilian leadership. Indeed, their efforts may have solidified military support behind Noriega and Delvalle. But it was equally clear that the incumbent leadership could neither restore business confidence nor stop the steady flight of capital from the country. Efforts to portray the conflict as a class struggle, or as part of a United States plot to retain control of the canal only exacerbated the situation. Restoring order, rebuilding the economy, and creating faith in the political system were formidable tasks that became more difficult with each passing month. Panama, in late 1987, was a society in crisis, with a political system that could not function effectively, but the government appeared determined to resist any effort to produce fundamental changes.




During the first decades of independence, Panamanian politics were largely dominated by traditional, upper class families in Panama City. By the 1940s, however, the populist nationalism of Arnulfo Arias and the growing strength of the National Police (later the National Guard and then the FDP) had begun a steady process of reducing the oligarchy's ability to control events. Following World War II, students and, to a lesser extent, labor groups became more active in national politics. The 1968 military coup, which brought Torrijos to power, represented both the ascendancy of the military as the preeminent political force in Panama and a further diminution in the influence of traditional political parties and elite families. At the same time, the growth of the Panamanian economy gave business and professional organizations greater importance and potential influence.

From the 1964 riots until the 1978 ratification of the Panama Canal Treaties, the issue of United States control over the Panama Canal dominated the national political scene. When treaty ratification largely removed that issue, the focus shifted back to internal political conditions, and pressures, both domestic and international, for a return to civilian rule mounted steadily. Internal political dynamics had changed fundamentally, however, during the Torrijos era. His death in 1981 unleashed a struggle for power within the military, between the military and civilians, and among civilians, which has continued and intensified in subsequent years.

<> Political Parties
<> The Panama Defense Forces
<> Business, Professional, and Labor Organizations
<> Students
<> The Roman Catholic Church


Panama - Political Parties


Panama inherited the traditional political parties of Colombia- -the Liberal Party and the Conservative Party--which vied against one another from 1903 until the 1920s. This proved to be an unnatural party alignment: the Conservatives had never identified strongly with the independence movement and were not able to develop a mass following. The dominant political focus was rather on divisions within the Liberal Party. In time, the Liberals split into factions clustered around specific personal leaders who represented competing elite interests. The emergence of Arnulfo Arias and the Paname�istas provided a major challenge to the factionalized Liberals. The creation of a military-linked party in the 1950s, the National Patriotic Coalition (Coalici�n Patri�tico Nacional--CPN), further reduced the Liberals' strength. Liberals (the PLN) did win the 1960 and 1964 presidential elections, but lost in 1968 to Arnulfo Arias, who was ousted promptly by the military. In the aftermath of that coup, the military declared political parties illegal. Despite this edict, the PLN and the PPA survived the period of direct military rule and other parties, such as the PDC, actually gained strength during this period.

The first party to register after political parties were legalized in late 1978 was the PRD. Designed to unify the political groups and forces that had supported Torrijos, the PRD, from its inception, was linked closely with and supported by the military. Proclaiming itself the official supporter and upholder of Torrijismo, the vaguely populist political ideology of Torrijos, the PRD included a broad spectrum of ideologies ranging from extreme left to right of center. The prevailing orientation was left of center. Like the ruling Institutional Revolutionary Party (Partido Revolucionario Institucional--PRI) in Mexico, the PRD has managed to co-opt much of the Panamanian left, thereby limiting and undermining the strength of avowedly Marxist political parties. Unlike the PRI, however, the PRD has never been able to separate itself from the military or to gain majority popular support. At times, the PRD also has claimed a social-democratic orientation, and in 1986 it acquired the status of a "consulting member" in the Socialist International.

According to its declaration of principles, in the late 1980s the PRD was a multi-class, revolutionary, nationalistic, and independent party. Its structure included organizations for workers, peasants, women, youth, government employees, and professionals. It consistently had sought, with some success, to cultivate close ties with organized labor. The PRD had 205,000 registered members in 1986. It won approximately 40 percent of the votes in the 1980 elections, but gained only 27.4 percent of the vote in 1984, losing its place as the nation's largest party to the PPA. The PRD did, however, win thirty-four of the sixty-seven seats in the legislature.

Because of its inability to muster majority support, the PRD has sought electoral alliances with other parties. At first it was allied with FRAMPO and the PdP, the orthodox, pro-Moscow communist party that had earlier supported Torrijos. The PRD later cut its ties with the PdP and, together with FRAMPO, joined the PLN, PALA, PP, and Republican Party to form the UNADE coalition, which supported the 1984 presidential candidacy of Ardito Barletta. FRAMPO won only 0.8 percent of the vote in 1984 and lost its legal status, as did the PP, but the coalition of the other 4 parties-- PRD, PLN, PALA, and Republican Party--remained officially in place in the late 1980s.

In the late 1980s, the PLN was only a shadow of its former self. It had split repeatedly, including a rift in late 1987 when Vice President Esquivel began criticizing the policies of President Delvalle and was, in turn, ousted from control of the party by a faction headed by Rodolfo Chiari. Affiliated with the Liberal International, the party won 4.4 percent of the vote in 1984 and gained 1 seat in the legislature. Its ideology was generally right of center.

The PALA was the second largest party in UNADE. PALA won 7.1 percent of the vote and 7 seats in the legislature in 1984. The party's secretary general, Ram�n Sieiro, is Noriega's brother-in- law. Despite its title, the party generally has adopted a right-of- center, pro-business position. The party experienced considerable turmoil in 1987, with founder Carlos Eleta being ousted as party president. In addition, one of its seven legislators, Mayin Correa, denounced the government's actions during the June disturbances, leading, in turn, to efforts to expel her from PALA.

The Republican Party was a right-of-center party dominated by the aristocratic Delvalle and Bazan families. In return for joining UNADE, Delvalle was given one of the vice presidential nominations and became president following the forced resignation of Ardito Barletta. The party won 5.3 percent of the popular vote and gained 3 seats in the legislature in the 1984 elections.

The principal opposition party was the PPA, which won 34.5 percent of the votes in the 1984 elections, the largest percentage gained by any party. Since its founding in the 1940s, the Paname�ista Party had served as the vehicle for the ambitions and populist ideas of Arnulfo Arias. After a party split in 1981, the great majority of Paname�istas stayed with Arias and designated themselves as Arnulfistas, and their party became known as the PPA. The smaller faction adopted Partido Paname�ista (PP) as its name. Strongly nationalist, the PPA was anticommunist and antimilitary, and advocated a populist nationalism that would restrict the rights of West Indian blacks and other immigrant groups.

Arias turned eighty-six in 1987 and could no longer exercise the leadership or muster the popular support he enjoyed in the past. He remained politically active, however, and his party was officially committed to installing him as president. With fourteen seats, it controlled the largest opposition bloc in the legislature, but its future, given the age and growing infirmity of its leader, was highly uncertain.

In 1984 the PPA had joined with several other parties in the ADO, which supported the presidential candidacy of Arnulfo Arias. The most important of these parties was the Christian democratic PDC, which won 7.3 percent of the 1984 vote but secured only 5 seats in the legislature. Its leader, Ricardo Arias Calder�n, was a vice presidential candidate on the Arnulfo Arias ticket and emerged in 1987 as the most visible spokesman of the political opposition. The party was an active member of both the Latin American and world organizations of Christian democratic parties. The party was anticommunist and was generally located in the center of the political spectrum, advocating social reforms and civilian control over the military.

MOLIRENA also joined ADO and won 4.8 percent of the vote and 3 seats in the legislature in 1984. It was a pro-business coalition of several center-to-right political movements including dissident factions of the PLN. Its supporters worked closely with the PDC.

In addition to the 7 principal parties that won more than 3 percent of the 1984 vote, thereby gaining representation in the legislature and maintaining their legal status as registered parties, there were numerous other, smaller political parties and organizations that lacked this legal status. They included the Authentic Liberal Party, a dissident Liberal faction that supported ADO in 1984, and the PP, a small group that broke with Arnulfo Arias and supported UNADE in 1984. There were also several groups on the far left, including the Moscow-oriented PdP, the Socialist Workers Party, and the Revolutionary Workers Party. All were Marxist, all ran presidential candidates in 1984, and each won less than 1 percent of the vote.

The PAPO was an independent group with a social democratic orientation. It had ties to the leading opposition newspaper, La Prensa, and was a constant critic of the government and of the FDP. It ran Carlos Iv�n Z��iga for president in 1984 but gained only 2.2 percent of the vote, thus forfeiting its legal status.


Panama - The Panama Defense Forces


Although Panama's Constitution expressly prohibits military intervention in party politics, there was general agreement in the late 1980s that the FDP and its commander, General Noriega, controlled the internal political process. The PRD and, to a lesser extent, PALA, were seen as vehicles for military influence in politics. Presidents served at the pleasure of the military, and elections were widely viewed as subject to direct manipulation by the FDP. The officer corps had virtually total internal autonomy, including control over promotions and assignments and immunity from civil court proceedings. The military was supposed to have begun a turnover of power to civilians in 1978, but, in 1986 Professor Steve Ropp noted that "the system of government, established by General Torrijos, which allows the Defense Forces high command to rule through the instrument of the Democratic Revolutionary Party, remains largely intact."

If anything, the influence and power of the FDP increased after 1978. The force expanded from a total of 8,700 in 1978 to nearly 15,000 by the end of 1987. The military retained direct control of all police forces and expanded its influence in such areas as immigration, railroads, ports, and civil aviation. Three presidents were forced to resign, and the military itself changed commanders several times without consulting the president or the legislature.

The small size and pyramidical rank structure of the FDP's officer corps has helped maintain unity and concentrated effective power in the hands of the commander. This situation facilitated communications and consultations among senior officers, inhibited dissent, and made any effort to defy the wishes of the commander both difficult and dangerous. The total failure of the efforts of former Colonel D�az Herrera to gain support from within the officer corps, following his forced retirement in June 1987, illustrated both the cohesion of this body and the ability of its commander to dominate subordinate officers. Internal discipline within the officer corps was very strong, pressures to support existing policies were constant, and any deviation from these norms was likely to be fatal to an officer's hopes for future advancement.

The gap between the FDP and the civilian population was great and probably widening in the late 1980s. Part of this distance was the result of a deliberate policy by the high command, which actively promoted institutional identity defined in terms of resisting any external efforts to reduce the military's power or privileges or to gain any degree of control over its internal affairs. In this context, any criticisms of the FDP's commander, of the FDP's role in politics or the economy, and any charges of corruption have been viewed as attacks on the institution, and mass meetings of junior officers have been held to express total support for the high command.

Although there was no ideological unity within the officer corps, there was a consensus in favor of nationalism (often defined as suspicion of, if not opposition to, United States influence), developmentalism, and a distrust of traditional civilian political elites. There was also an overwhelming consensus against allowing Arnulfo Arias to return to power. The FDP was very proud of its extensive civic-action program, which it has used to gain political support in rural areas. It also saw itself as the promoter and guarantor of the populist political heritage of Torrijos.


Panama - Business, Professional, and Labor Organizations


Traditionally, sectoral interest groups have played a minor role in Panamanian politics. Commercial and industrial interests were expressed largely within the extended family systems that constituted the oligarchy. A heavy reliance on government jobs inhibited the development of professional organizations that could reflect middle-class interests. The slow rate of industrial development, the major role of the United States as an employer of Panamanians in the Canal Zone, and fragmentation and infighting within the labor movement all contributed to keeping that sector chronically weak. Nevertheless, the absence of political parties during most of the 1970s, accompanied by economic expansion, led to a growing importance for sectoral groups as vehicles for the expression of political interests. Frustrations over the failures of the political process and the evident inability of political parties to control the military gave this trend further impetus during the 1980s. As a result, sectoral groups emerged during the 1987 upheavals as major political actors, mounting a significant challenge to military domination of the political process.

In the late 1980s, Panamanian businesses and professions were organized into numerous specialized groups, such as the Bar Association, the National Union of Small and Medium Enterprises, the Panamanian Banking Association, and the National Agricultural and Livestock Producers. Two of the most important organizations were the Chamber of Commerce, Industries, and Agriculture of Panama and the Panamanian Business Executives Association. These and numerous other organizations were included in the National Free Enterprise Council (Consejo Nacional de la Empresa Privada--CONEP). The various groups within CONEP have often disagreed on issues, making it difficult to present a position of common interest. On two issues, however, protection from government encroachments on the private sector and the maintenance of their position vis-�-vis labor, members of CONEP consistently have found a unified position. Moreover, sentiment has grown increasingly within CONEP and many of its affiliated organizations that the problems facing the private sector extend beyond specific issues to growing problems within the political system as a whole. Resentment over continued military domination of the political system, a perception of increased corruption and inefficiency within the government, and a feeling that political conditions were increasingly unfavorable for business all combined to make many business leaders willing to join, and even lead, open opposition to the government when the June 1987 crisis erupted.

During the June 1987 crisis, business groups played a key role in the organization and direction of the CCN, which spearheaded protests against the regime. Many of the major bodies within CONEP, such as the Chamber of Commerce and Panamanian Business Executives Association, became formal members of the CCN. A total of more than 130 business, professional, civic, and labor groups joined the crusade, which undertook the task of organizing, directing, and coordinating the campaign to force Noriega out of power and to reduce the role of the military in government. The crusade deliberately excluded political parties from its membership and active politicians from its leadership. The presidents of CONEP and of the Chamber of Commerce took major leadership roles within the crusade, which emphasized peaceful demonstrations, economic pressures, and boycotts of government enterprises as means of forcing change on the government. The FDP responded with a campaign of measured violence and intimidation against the crusade's leaders and supporters. By the fall of 1987, most of the original leadership had been driven into exile and the effort appeared to have lost much of its impetus. The economic pressures continued, however; exiled leaders undertook a major international propaganda campaign against the government, and business groups within Panama kept up economic pressures, which began to have a serious impact on the economy and on government revenues. In December 1987, Delvalle offered an amnesty to most of the exiled crusade leaders, but this action neither appeased the opposition among the business and professional classes nor in any way responded to the causes that had created the crusade.

Although at the end of 1987 the crusade had not been able to force basic change on the government and the military, neither had the government and the FDP been able to end the campaign of civic opposition. How long the CCN would endure and what ultimate success it might enjoy remained unanswered questions, but the role and power of business and professional organizations within the Panamanian political structure had undergone fundamental change.

The Panamanian labor movement traditionally had been fragmented and politically weak. The political weakness of labor was exacerbated further by the fact that Panamanians working in the Canal Zone belonged to United States rather than Panamanian labor unions. The 1977 Panama Canal treaties made provisions for the collective bargaining and job security of these workers, and it was likely that Panamanian unions would replace United States unions when Panama assumed full control over the canal, but in the late 1980s, most canal workers remained with the original unions.

Labor organizations grew significantly in size and importance under Torrijos, who actively supported this trend. Major labor federations included the relatively moderate Confederation of Workers of the Republic of Panama, which had approximately 35,000 members, and the somewhat smaller, leftist, antibusiness National Workers' Central, which had ties with the Moscow-oriented PdP. There was also the Isthmian Workers' Central, a small confederation linked to the PDC. In 1972 these three bodies created the National Council of Organized Workers (Consejo Nacional de Trabajadores Organisados--CONATO) to give them a more unified voice and greater influence on issues of interest to organized labor. Other unions, including the important National Union of Construction and Related Workers, have since joined CONATO, increasing its affiliates to 12 with a claimed combined membership of 150,000. The diverse labor alliance in CONATO was an uneasy one, but the council succeeded in generating greater unity and militancy than had its component unions individually. A 1985 general strike called by CONATO forced the government to suspend plans to amend the labor code. Ultimately, however, the code was amended, reducing workers' job security. A March 1986 strike protesting these changes failed. CONATO reacted by urging its members to resign from parties that supported the government.

Despite the 1985-86 problems, labor generally was more supportive of the government than of the political opposition. This situation, however, was strained by the disturbances that began in June 1987. A few smaller labor groups joined the civic crusade, but CONATO did not. The government's problems, however, were compounded by a series of strikes by the public employees' union, the National Federation of Associations and Organizations of Public Employees (Federaci�n Nacional de Asociaciones y Sindicatos de Empleados P�blicos--FENASEP). The leadership of FENASEP even went so far as to threaten to respond to any government effort to dismiss government workers by publishing lists of all those on the government payroll "who do not go to work." CONATO was also critical of many government actions, demanding that closed newspapers and radio stations be reopened and that the government open a dialogue to end the continuing crisis. Whereas labor's influence in Panamanian politics remained limited, it was increasing steadily and was something that neither the government nor its political opposition could control or take for granted.


Panama - Students


University and secondary school students have long played a leading role in Panama's political life, often acting as advocates of the interests of the lower and middle classes against the oligarchy and the military. Students also played a leading role in demonstrations against United States control over the Canal Zone. Using a combination of force and rewards, the Torrijos government largely co-opted the students at the University of Panama, gaining considerable influence over the Federation of Panamanian Students (Federaci�n de Estudiantes Paname�os--FEP), the largest of several student federations. But relations between the government and student groups began to deteriorate in 1976, and a variety of competing student federations developed, notably the Federation of Revolutionary Students (Federaci�n de Estudiantes Revolucionarios-- FER), a group on the far left. Student groups were leaders in the opposition to ratification of the Panama Canal treaties, objecting largely to the continued presence of United States military bases in Panama.

Students and some teachers' groups played a major role in the 1987 protests. At least one university student was killed by the FDP, and the government closed the University of Panama twice and closed all secondary schools during the June protests. Periodic student protests took place throughout the year, frequently producing violent confrontations with the security forces. Although most student organizations were not part of the CCN, their growing opposition to the political role of the FDP and the policies of the government made the task of restoring order and stability even more difficult.


Panama - The Roman Catholic Church


Although Panama was nearly 90 percent Roman Catholic in the late 1980s, the church had a long tradition of noninvolvement in national politics. Weak organization and a heavy dependence on foreign clergy (only 40 percent of the nation's priests were native-born Panamanians) inhibited the development of strong hierarchical positions on political issues. As a result, Panamanian politics largely avoided the anticlericalism that was so prevalent in much of Latin America. Church concern over social issues increased notably in the 1960s and 1970s, and there were conflicts between the hierarchy and the Torrijos government, especially following the disappearance in 1971 of a prominent reform priest, Father H�ctor Gallegos.

In the late 1980s, the church hierarchy was headed by Archbishop Marcos Gregorio McGrath, a naturalized Panamanian citizen and a leader among the Latin American bishops. McGrath and the other bishops strongly supported Panama's claims to sovereignty over the Canal Zone and urged ratification of the Panama Canal treaties. Nevertheless, the church leadership also criticized the lack of democracy in Panama and urged a return to elected civilian rule. In 1985, as political tensions began to mount, the archbishop called for an investigation into the murder of Dr. Hugo Spadafora and urged both the government and the opposition to enter into a national dialogue. When the 1987 disturbances began, the church stepped up its criticism of the government, accusing the military of having "beaten civilians without provocation" and of using "tactics to humiliate arrested individuals." Priests were frequently present at CCN rallies and demonstrations, and masses downtown became a focal point for some CCN activities. Priests also stayed with D�az Herrera in his house after he issued his June 1987 charges against Noriega and the government, and when the house was stormed by the FDP and D�az Herrera arrested, the bishops demanded his release and denounced government restrictions on the press. But the church stopped short of endorsing the CCN or calling for specific changes in the government and the FDP. Instead, it stressed the need for dialogue and reconciliation. The archbishop's insistence on pursuing a moderate, neutral course in the conflict did not satisfy all of the church leadership. In November, two assistant bishops and a large number of clergy issued their own letter, denouncing government actions and urging changes in the conduct of the military. In late 1987, the church was becoming more active but was finding it difficult to agree on the manner and nature of that activity.


Panama - The Media


The press, radio, and, more recently, the television of Panama have a history of strong political partisanship and rather low standards of journalistic responsibility. The government has subsidized some news outlets and periodically censored others. During most of the Torrijos era, the press and radio were tightly controlled but, following the ratification of the Panama Canal treaties, a significant degree of press freedom was restored. It was at this time that the most significant opposition paper, La Prensa, was founded.

Throughout the 1980s, conflicts between the government and the opposition media, notably La Prensa, escalated. The government and the FDP blamed La Prensa and its publisher, Roberto Eisenmann Jr., for much of the negative publicity they received in the United States. The paper was attacked, its writers were harassed and, in 1986, Eisenmann fled to the United States, charging that his life had been threatened.

Events in 1987 increased the level of conflict between the government and the media. Strict censorship was instituted over all newspapers and radio and television news broadcasts. In response, three opposition papers suspended publication. Publication was resumed in late June, but in July the government closed La Prensa and the two other papers, as well as two radio stations. The English-language Panama Star and Herald, the nation's oldest newspaper, was forced out of business. The government pressured remaining stations and newspapers to engage in selfcensorship and attempted to crack down on foreign press coverage, expelling several correspondents. In October, President Delvalle sent to the legislature a proposed press law that would have made the publishing of "false, distorted, or inexact news" a crime for which individual journalists would be held responsible. Even the pro-government media attacked this proposal, which the legislature rejected. Although there were indications that the opposition media would be allowed to re-open in 1988, it seemed unlikely that government efforts to control news coverage would cease.




Panama's strategic location, the traditional domination of both the economy and the political agenda by the canal, and the strong influence exerted by the United States throughout most of Panama's independent history have combined to magnify the importance of foreign policy in the nation's political life. From the signing of the Hay-Bunau-Varilla Treaty in 1903 until the ratification of the Panama Canal treaties in 1978, Panama's overriding concern, both domestically and internationally, was to gain sovereignty over the Canal Zone and the control over the canal, itself. Determined to obtain sovereignty over its entire national territory, but aware of the limitations posed by its weakness in comparison with the United States, Panama sought the support of other nations, particularly in multilateral forums, in its efforts to renegotiate the canal treaties. In pursuing this end, Panama gained an international visibility much greater than that of most nations of similar size.

Traditionally, all other foreign policy matters were subordinated to Panama's concern with the canal issue. Secondary emphasis was given to commercial interests in dealings with other nations. Vehicles of international trade, such as the Col�n Free Zone, international banking, and shipping were central factors in Panama's foreign economic relations. In the 1980s, the issue of the mounting foreign debt also had become the focus of increasing attention and concern.

The experience and visibility gained in the long effort to obtain international support for Panama's stance in the canal negotiations were carried over into the years following the signing of the new treaties, as exemplified by Panama's role in the 1978-79 Nicaraguan civil conflict, and its participation in the Contadora peace process. Panama also has tried, with limited success, to appeal to the same Latin American and Third World sentiments that won it support for its efforts to renegotiate the Panama Canal treaties to gain support in subsequent disputes with the United States. Although foreign policy concerns were not as dominant in the 1980s as in previous decades, they occupied a high priority for Panama's government and still centered on relations with the United States. This pattern was likely to persist until at least the year 2000.

<> Relations with the United States
<> Relations with Central America


Panama - Relations with the United States


The Panama Canal

United States and Panamanian relations on issues connected to the control, operation, and future of the canal were conducted within the framework of the 1977 Panama Canal treaties. The negotiation of these treaties took several years and aroused domestic political controversies within both nations. Negotiations were finally concluded in August 1977 and, the following month, the treaties were signed in Washington.

The treaties were ratified in Panama by slightly more than twothirds of the voters in a national plebiscite. Ratification by the United States Senate was much more difficult and controversial and was not completed until April 1978. During the ratification process, the Senate added several amendments and conditions, notably the DeConcini Condition, which declared that if the canal were closed or its operations impaired, both the United States and Panama would "have the right to take such steps as each deems necessary . . . including the use of military force in the Republic of Panama, to reopen the canal or restore the operations of the canal." Despite an additional amendment, which specifically rejected any United States "right of intervention in the internal affairs of the Republic of Panama or interference with its political independence or sovereign integrity," the Senate's changes were met with strong protests from Panama, which never ratified the new amendments. Formal ratifications, however, were exchanged in June, and the treaties came into force on October 1, 1979.

To implement the provisions of the treaties establishing the new Panama Canal Commission, to regulate the conditions for canal employees, and to provide for the handling and disbursement of canal revenues, the United States Congress enacted Public Law (PL) 96-70, the Panama Canal Act of 1979. Several provisions of this act immediately became a focus for ongoing controversy between the two nations. Panamanians objected to provisions for the use of canal revenues to pay for early retirements for United States employees, to finance travel for education by the dependents of United States employees, and to provide subsidies to make up for any loss of earning power when, as required under the treaties, United States employees lost access to United States military commissaries. By 1986 Panamanian authorities were claiming that such provisions had cost their nation up to US$50 million. The claim was largely based on the fact that Panama had not been receiving the up to US$10 million annual contingency payment from Panama Canal Commission profits provided for by the treaties. The commission explained that this was because the surplus simply did not exist, a fact that Panama, in turn, attributed to provisions of PL 96-70.

The level of Panamanian complaints about PL 96-70 and the intensity of government charges of noncompliance by the United States in other areas were often influenced by the overall state of relations between the two nations. As tensions increased during 1986 and 1987, Panamanian complaints became more frequent and passionate. United States executive and congressional pressures and the suspension of aid that followed the June 1987 disturbances were portrayed by the government and its supporters as part of a United States plot to block implementation of the 1977 treaties and/or to maintain the United States military bases in Panama beyond the year 2000. In the months that followed, the government stepped up this campaign, attempting to link the opposition with elements in the United States Congress who allegedly were trying to overturn the treaties. Such charges, however, seemed more an effort to influence domestic opinion than a reflection of actual concerns over the future of the treaties.

Article XII of the Panama Canal Treaty provides for a joint study of "the feasibility of a sea-level canal in the Republic of Panama." In 1981 Panama formally suggested beginning such a study. After some discussion, a Preparative Committee on the Panama Canal Alternatives Study was established in 1982, and Japan was invited to join the United States and Panama on this committee. The committee's final report called for the creation of a formal Commission for the Study of Alternatives to the Panama Canal, which was set up in 1986. Although there was a general perception that the costs of such a canal would outweigh benefits, the commission was still studying the problem in late 1987, and further action in this area would await the conclusion of its labors.

One continuing bone of contention related to the treaties was the presence and function of United States military bases in Panama. United States military forces in Panama numbered slightly under 10,000. The United States military also employed 8,100 civilians, 70 percent of whom were Panamanian nationals. In addition to the units directly involved in the defense of the canal, the United States military presence included the headquarters of the United States Southern Command, responsible for all United States military activities in Central and South America, the Jungle Operations Training Center, the Inter-American Air Forces Academy, which provided training for Latin American air forces, and the Special Operations CommandSouth . Until 1984 Panama also was home to the United States Army School of the Americas, which trained Latin American army officers and enlisted personnel, but the facility housing that institution reverted to Panama in 1984 and, when negotiations with Panama over the future of the school broke down, the United States Army transferred the operation to Fort Benning, Georgia.

Issues involving the United States military presence included the possible retention of some bases beyond the year 2000, the use of the bases for activities not directly related to the defense of the canal, most notably allegations of their use in support of operations directed against Nicaragua's government and, since June 1987, charges by the United States of harassment and mistreatment of United States military personnel by Panamanian authorities. There were also problems relating to joint manuevers between United States and Panamanian forces, exercises designed to prepare Panama to assume responsibility for the defense of the canal. These manuevers were suspended in 1987, in part because of a United States congressional prohibition on the use of government funds for "military exercises in Panama" during 1988.

Despite such problems, the implementation of the 1977 treaties has continued on schedule and the United States has stated repeatedly its determination to adhere to the provisions and transfer full control of the canal to Panama in the year 2000. An October 1987 effort to amend the fiscal year (FY) 1988 foreign relations authorization act to include a sense of the Senate resolution that the United States should not have ratified the treaties and that they should be voided if Panama refused to accept the DeConcini Condition within six months was defeated by a vote of fifty-nine to thirty-nine. Barring a much higher level of turmoil in Panama that would directly threaten canal operations, it appeared highly likely that the canal would become fully Panamanian in the year 2000.

Other Aspects of Panamanian-United States Relations

Panamanian relations with the United States, in areas other than those related to the canal, have undergone increasing strains since the 1985 ouster of President Ardito Barletta. The United States protested this action by reducing economic assistance to Panama and began pressuring Panama to reform its banking secrecy laws, crack down on narcotics trafficking, investigate the murder of Spadafora, and reduce the FDP's role in the government. When these points were raised by United States ambassador-designate to Panama, Arthur Davis, in his confirmation hearings, Panamanian officials issued an official complaint, claiming that they were the victim of a "seditious plot" involving the United States Department of State, Senator Jesse Helms, and opposition politicians in Panama.

Additional problems continued to arise throughout 1986 and early 1987. In April 1987 the United States Senate approved a nonbinding resolution calling for a 50-percent reduction in assistance to Panama because of alleged involvement by that nation's officials in narcotics trafficking. The Panamanian legislature responded with a resolution of its own, calling for the withdrawal of Panama's ambassador in Washington. Hearings on Panama held by Senator Helms produced further controversy, especially when a Senate resolution called on the United States Central Intelligence Agency to investigate narcotics trafficking in Panama. Again Panama protested. The FDP issued a resolution accusing Helms of a "malevolent insistence on sowing discord," and the Panamanian representative to the Nonaligned Movement's meeting in Zimbabwe charged that the United States was not fulfilling the Panama Canal treaties.

Continued United States pressure in such areas as human rights, political reform, narcotics trafficking, and money laundering, as well as conflicts over economic matters, including a reduction in Panama's textile quota, kept relations tense during the first months of 1987. In March Panama issued an official protest, charging the United States with exerting "political pressures damaging to Panama's sovereignty, dignity, and independence." This, however, did not deter Senate passage, a few days later, of a nonbinding resolution rejecting presidential certification of Panamanian cooperation in the struggle against the drug trade. President Ronald Reagan's certification that Panama was cooperating in the struggle against drug trafficking was based on some Panamanian concessions on bank secrecy laws and a highly publicized narcotics and money-laundering sting operation.

The deterioration in relations accelerated following the outbreak of disturbances in June 1987. United States calls for a full investigation of the allegations made by D�az Herrera and for movement toward "free and untarnished elections" led to Panamanian charges of United States interference in its internal affairs.

The Legislative Assembly adopted a resolution demanding the expulsion of the United States ambassador, and the head of the PRD charged that United States pressures were part of a plot "not to fulfill the obligations of the Carter-Torrijos Treaties," and were also designed to "to get Panama to withdraw from the Contadora Group." Panama took its protest over United States policy and the Senate resolution to the Organization of American States (OAS), which on July 1 adopted, by a vote of seventeen to one with eight abstentions, a resolution criticizing the Senate resolution and calling for an end to United States interference in Panama's internal affairs. On June 30, a government-organized mob attacked the United States embassy, inflicting over US$100,000 in damages. The United States responded by suspending economic and military assistance until the damage was paid for. Panama apologized for the attack and, at the end of July, paid for the damage, but the freeze on United States assistance remained in effect as a demonstration of United States displeasure with the internal political situation.

Relations between the two nations failed to improve during the balance of 1987. Attacks on United States policies by progovernment politicians and press in Panama were almost constant. The actions of the United States ambassador were an especially frequent target, and there were suggestions that he might be declared persona non grata. There was also a growing campaign of harassment against individual Americans. In September the economic officer of the United States embassy was arrested while observing an antigovernment demonstration. The following month, nine American servicemen were seized and abused under the pretext that they had been participating in such demonstrations. United States citizens driving in Panama were repeatedly harassed by the Panamanian police. Restrictions also were increased on United States reporters in Panama.

For its part, the United States kept up pressure on Panama. In August the secretary of state announced that the freeze on United States aid would remain in effect, despite Panama's having paid for the damage done to the embassy. In November the United States cancelled scheduled joint military exercises with Panama. In December Congress adopted a prohibition on economic and military assistance to Panama, unless the United States president certified that there had been "substantial progress in assuring civilian control of the armed forces," "an impartial investigation into allegations of illegal actions by members of the Panama Defense Forces," agreement between the government and the opposition on "conditions for free and fair elections," and "freedom of the press." The same bill suspended Panama's sugar quota until these conditions were met. Panama responded by ordering all personnel connected with the United States Agency for International Development mission out of the country.

At the end of 1987, United States-Panamanian relations had reached their worst level since at least 1964. On the United States side, there was a high degree of agreement between the executive branch and the Congress that fundamental changes in both the domestic and international behavior of Panama's government were needed. There was little sign of movement toward resolving any of the basic issues that divided the two nations, and it appeared that this deadlock would continue until there was a change in the Panamanian leadership's position or composition.


Panama - Relations with Central America


Although it is part of the same geographic region as the countries of Central America, Panama historically has lacked strong political and economic ties with the five nations immediately to its north. Panama was not a member of either the Central American Common Market or the Central American Defense Council, although it did have observer status with the latter body. Under the rule of Torrijos, however, Panama actively sought to expand its contacts with Central America. At first, much of this was related to the effort to gain support in negotiations with the United States over a new canal treaty. During the Nicaraguan civil conflict of 1978-79, Torrijos gave political and military support to the Sandinista guerrillas seeking to overthrow the dictatorship of Anastasio Somoza. At the June 1979 OAS foreign ministers meeting on Nicaragua, Panama allowed the foreign minister-designate of the Sandinista-organized provisional government to sit with the Panamanian delegation. After the Sandinistas took power, Torrijos offered to train their military and police forces. But the Panamanian mission soon found itself reduced to training traffic police, and Torrijos, frustrated by growing Cuban influence in Nicaragua, withdrew his advisers. Since then, Panamanian relations with Nicaragua have been of lessened importance. Panamanian leaders have criticized United States efforts directed against the Sandinistas, but they also have criticized Sandinista policies. Nevertheless, during the June 1987 crisis in Panama, Nicaraguan President Daniel Ortega visited Panama, and the Nicaraguan government expressed strong support for Delvalle and Noriega.

Torrijos also had attempted to influence internal events in El Salvador, where he supported the reform efforts of Colonel Adolfo Majano, a military academy classmate of his, who had been named to the ruling junta in 1979. But Majano was removed from power in 1980 while visiting Panama, largely ending Panamanian influence in that nation.

Relations with Costa Rica were cool for several decades, following a 1921 settlement of the border dispute between the two nations, a settlement that Panama viewed as largely unfavorable to its interests. The opening of the Pan-American Highway between the two nations led to an increase in commercial ties and contributed to a steady strengthening of bilateral relations in the 1960s and 1970s. During the 1978-79 Nicaraguan civil conflict, Panama offered to help defend Costa Rica's northern border from incursions by Nicaraguan forces and, during the war's last months, then Costa Rican President Rodrigo Carazo and Torrijos worked closely together to facilitate the flow of supplies to the Sandinista insurgents. Cordial relations were maintained with Carazo's successor, Luis Alberto Monge, but numerous problems have emerged since Oscar Arias became president of Costa Rica in 1986. These began with the discovery, in Costa Rican territory, of the mutilated body of leading Panamanian critic Spadafora. Commercial disputes also began to disrupt trade. Early in 1987, the two nations signed an agreement to regulate commerce in the border region, but a few days later, Panama closed the border, claiming that Costa Rica was violating the agreement. The border was reopened after a few days, and in March presidents Delvalle and Arias signed an agreement designed to deal with commercial problems and to promote cooperation in areas such as health and education. Costa Rican press criticism of Panamanian government policy following the June disturbances, however, led to a cooling in relations. In December the Panamanian ambassador to Costa Rica charged that United States and Costa Rican officials were plotting to organize an invasion of Panama and to assassinate Noriega. Costa Rica rejected the charges, for which no supporting evidence was produced. Although this issue soon faded, relations between the two nations at the end of 1987 were less cordial than they had been in preceding years.

Reflecting both the growth of Panamanian involvement in Central American affairs and the expanded international role that the nation has sought was Panama's participation in the Contadora peace process. In January 1983, Panama invited the foreign ministers of Mexico, Venezuela, and Colombia to meet at the island resort of Contadora to discuss ways of mediating the conflicts in Central America. The result was the formation of the Contadora Group, a four-nation effort to promote a peaceful resolution of Central American conflicts. Although Panama's role in the mediating process was not so prominent as that of some of the other nations, it did give Panama increased visibility and prestige in international relations. Panama was also the site for many of the group's meetings with Central American representatives. Although the Contadora peace process failed to produce the hoped-for peace treaty, and, since 1987, has taken a backseat to the peace proposals of Costa Rica's President Arias, the Contradora group still exists and, under the Arias Plan, could play a significant role in dealing with security issues involving Central American states.


Panama - Bibliography

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John and Mavis Biesanz. The People of Panama. New York:
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Richard V. Burkhauser. "Social Security in Panama: A Multiperiod
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Marco A. Gand�sequi, hijo. "Las Migraciones Internas in Panam�."
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Chris N. Gjording. "The Cerro Colorado Copper Project and the
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B. Gonzalez. "New Trends in Rural Panama." World Marxist Review 18,
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Burton L. Gordon. A Panama Forest and Shore: Natural History and
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Stephen Gudeman. The demise of a rural economy From sibsistence
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David Howardth. Panama: Four Hundred Years of Dreams and Cruelty.
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James Howe. The Kuna Gathering: Contemporary Village Politics in
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Clyde E. Keeler. Cuna Indian Art: The Culture and Craft of Panama's
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Gerard M. La Forgia. "Fifteen Years of Community Health
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William L. Partridge. "The Humid Tropics Cattle Ranching Complex:
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Alejandro Portes and John Walton. Urban Latin America: The
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George A. Priestley. Military Government and Popular Participation
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Steve C Ropp. Panamanian Politics: From Guarded Nation to National
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Gian S. Sahota. "The Distribution of the Benefits of Public
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David Horton Smith. Latin American Student Activism:
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Frances Stier. "Modeling Migration: Analyzing Migration Histories
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Lee Swepston. "The Indian in Latin America: Approaches to
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CITATION: Federal Research Division of the Library of Congress. The Country Studies Series. Published 1988-1999.

Please note: This text comes from the Country Studies Program, formerly the Army Area Handbook Program. The Country Studies Series presents a description and analysis of the historical setting and the social, economic, political, and national security systems and institutions of countries throughout the world.

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