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#CARD:Panama:Background Notes
US DEPARTMENT OF STATE BACKGROUND NOTES: PANAMA

MARCH 1992
Official Name:  Republic of Panama

PROFILE
Geography
Area: 77,381 sq. km. (29,762 sq. mi.); about the size of South Carolina.

Cities:  Capital--Panama City and San Miguelito (pop. 821,000
preliminary estimate).  Other cities--Colon (141,000), David (103,000).
Terrain:  Mountainous (highest elevation Cerro Volcan,
3,475 m.--11,468 ft.); coastline 2,857 km. (1,786 mi.). Climate:
Tropical, with average daily rainfall 28 mm. (1 in.) in winter.

People
Nationality: Noun and adjective--Panamanian(s).  Population (1991):
 2.4 million.  Annual growth rate (1991): 2.5%.  Ethnic groups: Mestizo
70%,  West Indian 14%, white 10%, Indian 6%.  Religions: Roman Catholic
93%, Protestant (Evangelical) 6%.
Languages:  Spanish (official); 14% speak English as their native
tongue; various Indian languages.
Education:  Years compulsory--6.  Attendance--95% primary school-age
children; 96% secondary.  Literacy--87% overall:  urban 94%, rural 62%.

Health (1989):  Infant mortality rate--22/1,000.  Life expectancy--72
yrs.  Work force (1990, 820,000): Government and community
services--27%. Agriculture--25%. Commerce, restaurants, and hotels--15%.
 Manufacturing and mining--10%.  Transportation and communication--6%.
Construction--4%.  Finance, insurance, and real estate--4%. Canal
area--2%.  Electricity, gas, and water--1%.  Other --5%.

Government
Type: Constitutional democracy. Independence:  November 3, 1903.
Constitution:  October 11, 1972; amended 1978 and 1983 (new amendments
pending).
Branches:  Executive--president (chief of state), two vice presidents.
Legislative--Legislative Assembly (unicameral, 67 members).
Judicial--Supreme Court.
Subdivisions:  Nine provinces and one (Indian) territory.
Political parties:  Government coalition includes the Arnulfista Party,
led by President Guillermo Endara, and the National Liberal Republican
Movement (MOLIRENA) of Second Vice President Billy Ford.  The Christian
Democratic Party (PDC), led by First Vice President Ricardo Arias
Calderon, was removed from the coalition in April 1991 and is the main
opposition party, holding a plurality of seats in the Legislative
Assembly.   The oppositionist Democratic Revolutionary Party (PRD) was
founded by Gen. Omar Torrijos and constituted the civilian arm of the
regime of Gen. Manuel Noriega. The Civic Crusade spearheaded the
struggle against Noriega and favors more far-reaching institutional
reforms than the governing coalition, although it is not a political
party.  Smaller parties along the political spectrum include: Agrarian
Labor Party (PALA), Liberal Party (PL), and the Doctrinaire Panamanista
Party.  Suffrage:  Universal at 18.
Flag:  Four rectangles--lower left, blue; upper right, red; upper left,
white with blue star in center; lower right, white with red star in
center.

Economy
GDP (1991): $5.2 billion.
Annual growth rate (1991): 9.3%.
Per capita GDP (1991): $2,150.
Avg. inflation rate (1991): 1%.
Unemployment (1991): 16% (down from 35% in December 1989).
Natural resources:  Timber, seafood, copper, ore.
Sectors: Service (79% of GDP, 1991): Finance, insurance, canal-related
services.  Agriculture (11% of GDP, 1991): Products--bananas and other
fruit, corn, sugar, rice, coffee, shrimp, timber, vegetables, cattle.
Land--agricultural 24%, exploitable forest 20%, other 56%.
Industry (10% of GDP): Types--food and drink processing, metalworking,
petroleum products, chemicals, paper and paper products, printing,
mining, refined sugar, clothing, furniture, construction.
Trade (excluding Colon Free Zone): Exports (1991 est.)--$385 million:
bananas 25%, shrimp 13% (other seafood 4%), sugar 8%, clothing 5%,
coffee 4%, other 41%.  Major markets--US, Europe.  Imports (1991
est.)--$1.5 billion: consumer and intermediate goods 65%, capital goods
18%, food 9%, crude oil 7%.  Major suppliers--US, Japan, Europe, Mexico.

Exchange Rate: The exchange rate is fixed at unity with the US$.
US economic assistance: FY 1990-91, $451 million; FY 1992, $10 million.
Fiscal year:  Same as calendar year.

PEOPLE
 The culture, customs, and language of the Panamanians are predominantly
Caribbean Spanish.  Ethnically, the majority of the population is
mestizo (mixed Spanish and Indian) or mixed Spanish, Indian, Chinese,
and West Indian.  Separate minority races, including West Indian and
indigenous Indian (Cuna, Guaymi, and Embera or Choco), complete a
colorful ethnic tapestry.  Spanish is the official and dominant
language; English is a common second language spoken by the West Indians
and by many Panamanian professionals and businessmen.  More than half
the population lives in the Panama City-Colon metropolitan corridor.
The rural areas are not heavily populated, and most of the rural
population lives west of the canal.
 Panama is rich in folklore and popular traditions.  Brightly colored
national dress is worn during local festivals and the pre-Lenten
carnival season, especially for traditional folk dances like the
tanborito. Lively salsa--a mixture of Latin American popular music,
rhythm and blues, jazz, and rock--is a Panamanian specialty.  Indian
influences dominate handicrafts such as the famous Cuna textile molas
which generally depict native wildlife and themes.  Artist Roberto
Lewis' Presidential Palace murals and his restoration work and ceiling
in the National Theater are well known and admired.

Education
 The University of Panama and its extensions throughout the country have
a total enrollment of about 40,000 students, the majority of whom attend
evening classes.  Some 9,500 students, primarily in engineering and
allied fields, attend the Technical University.  About 4,500 students
are enrolled in the University of Santa Maria la Antigua, a private
Roman Catholic institution.  A large number of the well-to-do study
abroad.
 Primary education is compulsory, and there are 350,000 students
currently enrolled in grades one through six.  Enrollment in secondary
grades is 200,000.  Literacy in Panama is measured at 87%.

Media
 Panama has six daily newspapers and tabloids:  La Prensa, Panama
America, El Siglo, Critica Libre, El Diario Independiente, and La
Estrella de Panama.
 Three commercial Spanish-language television stations broadcast daily,
and US television programs are available by satellite or subscription in
Panama City.  The Voice of America international news is carried daily
on most of the major radio stations.
 The US Southern Command, headquartered in Panama, operates an AM/FM
radio transmitter and a television station for the benefit of the US
military and their dependents.  These broadcasts also have significant
audiences among Panamanians in Panama City and Colon.

HISTORY
 Panama's history has been shaped by the evolution of the world economy
and the ambitions of great powers.  Rodrigo de Bastidas, sailing
westward from Venezuela in 1501 in search of gold, was the first
European to explore the isthmus of Panama.  A year later, Christopher
Columbus visited the isthmus and established a short-lived settlement in
the Darien.  Vasco Nunez de Balboa's tortuous trek from the Atlantic to
the Pacific in 1513 demonstrated that the isthmus was indeed the path
between the seas, and Panama quickly became the crossroads and
marketplace of Spain's empire in the New World.  Gold and silver were
brought by ship from South America, hauled across the isthmus, and
loaded aboard ships for Spain.  The route became known as the Camino
Real, or Royal Road.
 Panama was part of the Spanish empire for 300 years (1538-1821), and
the principal themes of Panamanian history are rooted in that
experience.  From the outset, Panamanian identity was based on a sense
of "geographic destiny," and Panamanian fortunes fluctuated with the
geopolitical importance of the isthmus.  The colonial experience also
marked Panamanian nationalism with its strongly anti-imperialist flavor.
 In addition, one of the principal legacies of Spanish colonialism was a
racially complex and highly stratified society, the source of internal
conflicts that ran counter to the unifying force of Panamanian
nationalism.
 A trans-isthmian canal had been a dream since the beginning of Spanish
colonization.  From 1880 to 1900, a French company under Ferdinand de
Lesseps attempted unsuccessfully to construct a sea-level canal on the
site of the present Panama Canal.  In November 1903, after Colombia
rejected a treaty permitting the United States to build a canal, Panama
proclaimed its independence from Colombia and concluded the
Hay/Bunau-Varilla Treaty with the United States.  The treaty authorized
the United States to build a canal through a zone 10 miles wide and to
administer, fortify, and defend it "in perpetuity."  In 1914, the United
States completed the existing 83-kilometer (52-mile) lock canal.  The
early 1960s saw the beginning of sustained pressure in Panama for the
renegotiation of this treaty.  (See discussion of United States-Panama
relations and the 1977 Panama Canal Treaties below.)
 From 1903 until 1968, Panama was a constitutional democracy dominated
by a commercially oriented oligarchy.  During the 1950s, the Panamanian
military began to challenge the oligarchy's political hegemony.  In
October 1968, Dr. Arnulfo Arias Madrid, twice elected President and
twice ousted by the Panamanian military, was again ousted as President
by the  National Guard after only 10 days in office.  A military junta
governed, and the Commander of the National Guard, Brig. Gen. Omar
Torrijos, emerged as the principal power in Panamanian political life.
Torrijos was a charismatic leader whose populist domestic programs and
nationalist foreign policy appealed to the rural and urban
constituencies largely ignored by the oligarchy.
 Torrijos' death in a 1981 plane crash altered the tone but not the
direction of Panama's political evolution.  Despite 1983 constitutional
amendments which appeared to proscribe a political role for the
military, the Panama Defense Forces (PDF), continued to dominate
Panamanian political life behind a facade of civilian government.  The
presidential election of 1984 resulted in the election of the
pro-military coalition candidate, amid widespread voting irregularities
and charges of fraud.  Pro-government parties also won a majority of
Legislative Assembly seats in races tainted by charges of corruption.
By this time, Gen. Manuel Noriega was firmly in control of both the PDF
and the civilian government.
 The rivalry between civilian elites and the Panamanian military, which
had been a recurring theme in Panamanian political life since the 1950s,
now developed into the gravest crisis in Panama's history.  Traditional
elites joined middle-class elements in organized opposition to the PDF's
economic and political power.  Prompted by government restrictions on
media and civil liberties and the 1985 murder of prominent opposition
leader Dr. Hugo Spadafora, more than 100 business, civic, and religious
groups formed a loose coalition that organized widespread
anti-government demonstrations in the summer of 1987.
 Panama's developing domestic crisis was paralleled by rising tensions
between the Panamanian Government and the United States, which were
caused in part by the regime's crackdown on civil liberties and its
harassment of US citizens.  The United States froze economic and
military assistance to Panama in the summer of 1987 in response to the
political crisis and an attack on the US Embassy.  The Government of
Panama countered by ousting the US Agency for International Development
in December 1987.  On December 23, the US Congress cut off all
assistance to Panama.  The indictment of General Noriega in US courts in
February 1988 on drug-trafficking charges sharpened the political crisis
in Panama and tensions between Panama and the United States.  In early
March, President Eric Arturo Delvalle's attempt to remove Noriega as PDF
commander led to a government takeover by the PDF and domination of the
Legislative Assembly by Noriega forces.
 In April 1988, President Reagan invoked the International Economic
Powers Act, freezing Panamanian Government assets in US banks and
prohibiting a variety of payments by American agencies, firms, and
individuals to the Noriega regime.  Efforts to negotiate a resolution of
the crisis failed in May 1988, when Noriega refused to abide by the
terms of an agreement negotiated with his representatives for him to
relinquish his authority.
 Despite the increasingly repressive character of the regime, the
anti-Noriega opposition prepared for presidential and legislative
elections in May 1989.  The May 1989 election was widely understood by
Panamanians to be a referendum on Noriega versus democracy.  Panamanian
voters turned out in overwhelming numbers and voted by a margin of more
than three-to-one for the anti-Noriega candidates.  The size of the
opposition victory and the presence of international observers thwarted
regime efforts to control the outcome of the vote.  The regime annulled
the election and embarked on a new round of repression.
 By the fall of 1989, the Noriega regime was clinging to power through
fear and force.  An unsuccessful PDF coup attempt in October produced
bloody reprisals.  Deserted by all but a small number of cronies,
distrustful of a shaken and demoralized PDF, Noriega began increasingly
to rely on irregular, paramilitary units called Dignity Battalions.  The
climax of the crisis came in December 1989, with a regime declaration of
war against the United States and attacks on US military personnel.  On
December 20, President Bush ordered the US military into Panama to
protect US lives and property, to fulfill US treaty responsibilities to
operate and defend the canal, to assist the Panamanian people in
restoring democracy, and to bring Noriega to justice.
 The US troops involved in Operation Just Cause achieved their primary
objectives quickly, and the withdrawal of troops sent into Panama on
December 20 began on December 27.  Noriega initially sought refuge in
the Papal Nunciature, but he eventually surrendered voluntarily to US
authorities.
 Panamanians moved quickly to begin rebuilding a civilian,
constitutional government.  On December 27, Panama's Electoral
Tribunal--whose members were appointed by Noriega--invalidated the
Noriega regime's annulment of the May 1989 election and confirmed the
victory of opposition candidates Guillermo Endara (President), Ricardo
Arias Calderon (First Vice President), and Guillermo Ford (Second Vice
President).  As its priority objectives, the Endara Government
identified economic recovery and the transformation of the Panamanian
military into an apolitical police force under civilian control.  The
Electoral Tribunal also certified winners in 58 of the 67 Legislative
Assembly races held in May 1989, and the Legislative Assembly convened
for its first session on March 1, 1990.  In January 1991, free and fair
elections were held for the nine legislative seats whose winners could
not be certified by the Electoral Tribunal.


GOVERNMENT AND POLITICAL CONDITIONS
 Panama's constitution separates the government into executive,
legislative, and judicial branches.  The president is elected to a
5-year, non-renewable term in a direct popular election.  The
legislative branch consists of a 67-member Legislative Assembly.  The
judicial branch is organized under a nine-member Supreme Court and
includes all tribunals and municipal courts.  An autonomous Electoral
Tribunal supervises voter registration and political party and election
law activities.  Everyone over the age of 18 is required to vote,
although those who fail to do so are not penalized.
 The Legislative Assembly is considering a number of proposed
constitutional amendments.  While most of the proposed amendments are of
a relatively minor nature, there are a number which would establish a
permanent legal basis for the demilitarization reforms carried out by
the Endara Government in 1990 and 1991.  They would prohibit the
existence of an army, divide the public security forces into separate
branches, and prohibit them from intervening in Panama's political life.
 Following approval by the Legislative Assembly, these constitutional
changes will be submitted to popular ratification in a plebiscite.
 Panama has a rather fragmented multi-party system;  16 parties took
part in the 1984 elections, and more than 12 participated in the 1989
elections.  Each political party must have at least 30,000 members in
order to acquire full legal status.  The current government was elected
under the aegis of the Civil Democratic Opposition Alliance (ADOC),
which was a coalition of the Authentic Liberal Party (PLA), the
Christian Democratic Party (PDC), and the National Liberal Republican
Movement (MOLIRENA).  President Endara ran as the candidate of the
Authentic Liberal Party because his own political party--the Authentic
Panamanista Party--had been taken away by the regime's Electoral
Tribunal and awarded to a Noriega supporter.  In 1990, Endara
reorganized his followers as the Arnulfista Party which is now part of
the governing coalition.
 In April 1991, after a series of disagreements over policy and
patronage issues, President Endara removed Arias Calderon from his
cabinet position as Minister of Government and Justice, prompting the
other members of the PDC to resign from government.  Arias Calderon
retains his elected position as First Vice President.  The PDC, which
holds a plurality in the legislature, has stated that it will act as a
responsible opposition party, working in cooperation with the Endara
Government on issues to benefit the country.
 The Democratic Revolutionary Party (PRD) leads the COLINA coalition of
labor, revolutionary, and communist parties, and is made up primarily of
former Noriega supporters; COLINA holds the "swing vote" in the national
legislature with 12 seats.  The Tendencia faction of the PRD is a
strong-arm battalion with ties to Cuba and Libya.  Tendencia's influence
is declining because of internal frictions and public opposition.

Principal Government Officials
President--Guillermo ENDARA
First Vice President--Ricardo ARIAS Calderon
Second Vice President and Minister of Planning and Finance--Guillermo
"Billy" FORD
Minister of Foreign Affairs--Julio LINARES
Ambassador to the US--Jaime "Jimmy" FORD
Ambassador to the UN--Dr. Carlos AROSEMENA
Ambassador to the Organization of American States--Lawrence CHEWNING
Fabrega

 Panama maintains an embassy in the United States at 2862 McGill Terrace
NW, Washington, DC 20008 (tel. [phone]).

ECONOMY
 Perhaps the greatest challenge for Panama is economic recovery and
expansion.  Panama's economy was in shambles at the outset of 1990,
after years of mismanagement, 2 years of US economic sanctions, and the
lingering effects of increased debt servicing requirements.  Total
external debt stood at more than $4 billion and total external arrears
reached $2.4 billion, including $540 million in arrears to international
financial institutions.  Panama also had high unemployment and a
deteriorating national infrastructure.
 With the return of democratically elected civilian government, the
United States lifted all sanctions and is providing more than $450
million in grant aid and more than $500 million in credits and
guarantees in FY 1990-91 to assist in Panama's economic recovery.  The
key element for Panama's economic recovery, however, is the return of
long-term investor confidence brought about by political stability and
economic liberalization.
 The traditional basis of Panama's economy has been services in
international shipping, commerce, and finance.  Reflecting the canal's
role as a global transit point, the canal corridor is significantly more
developed than the rest of the country, and modern service and
commercial centers have grown up around the terminus cities of Colon and
Panama City.
 Rapid economic growth in the 1960s and early 1970s was due largely to
an expansive fiscal policy fueled by extensive foreign borrowing.
Annual real growth of almost 5% continued until 1983.  This expansion
ended, however, with the onset of higher energy prices (Panama imports
virtually all of its oil), and the higher world interest rates which
these energy price increases caused.  Under pressure from its external
creditors, Panama attempted to encourage exports, reduce the public
sector's deficit and involvement in the economy, and reschedule official
and commercial debt.  These efforts were half-hearted and finally
stalled in the mid-1980s on politically painful issues such as social
security and labor code reforms.  Moderate growth resumed from 1985
until the 1987 mid-year political crisis, when the economy contracted
sharply.  From this point through 1989, real GDP declined by more than
17%.
 The 1987-89 recession had its origins in Panama's deepening political
crisis which led to reduced foreign lending and massive capital flight,
resulting in a liquidity squeeze.  Immediately prior to the 1987
political crisis, Panama again began to have problems with its
international debt and rescheduled certain payments.  Failure to service
external arrears resulted in a cutoff of new credit and further economic
contraction.  From mid-1987 to December 1989, total banking center
assets declined drastically, and many banks left Panama.  Bank runs
closed financial institutions on March 4 and 18, 1988, and the Banking
Commission responded by placing restrictions on depositors' access to
accounts (all restrictions were lifted in early 1990).
 Capital flight exacerbated other problems, such as unemployment.  Lack
of capital led to declining investment and a simultaneously decreasing
demand for workers.  The construction industry and the financial sector,
which had been Panama's third-largest employer after the Panamanian and
US Governments, were hit especially hard.
 The economic recovery of 1990-91 was broad-based.  Capital returned to
the banking system.  Exports and construction rose.  The government
deficit and unemployment declined.  GDP was estimated to have grown by
at least 3.4% in real terms in 1990 and by 9.3% in 1991, and inflation
remained very low.  Government policies aimed at encouraging foreign
private investment for export industries and at improving market
efficiencies through the reduction or elimination of tariffs, price
controls, and quotas were proposed.  Although the initial recovery has
been encouraging, sustained growth depends on Panama's ability to
resolve some of its long-standing problems, which include high barriers
to trade, external debt, persistently high unemployment, and dependence
on US Government and canal revenues.
 Structural economic reforms are the key to lasting Panamanian growth
and development.  In early 1992, the Endara Government concluded
negotiations with the international financial institutions to clear
Panama's arrears with these institutions and to restore access to new
financing.  These negotiations included Panamanian agreement to
implement various structural reforms, such as trade liberalization, tax
and social security reforms, privatization, poverty reduction, and
increased public investment.
 These reforms will also help to reduce unemployment.  By December 1989,
unemployment had reached over 35%.  US economic assistance during
1990-91 helped to create jobs by funding short-term employment projects
in the public sector and by encouraging private sector investment.  By
1992, the unemployment rate had fallen to about 16%, close to the
"normal" rate of the 1980s.  The further expansion of employment
opportunities will require new private investment, which will in turn
require public sector investment in infrastructure and human resources
and policies which promote trade liberalization, market efficiencies,
and private sector confidence.
 To an extent, Panama depends on US Government expenditures and
attendant economic activity.  The draw-down of US military and civilian
forces during the 1990s, the final decade of the canal treaty, will
produce increasing economic pressures in Panama unless the country is
able to create additional economic activity in the reverted properties.

 Although the canal produces millions of dollars annually for Panama, it
would be inappropriate to use canal revenues to sustain government
spending in other non-canal related areas at the end of the treaty
period.  Canal transits and revenues have increased since 1985, but
expanded use of alternatives to the canal, such as cargo transport
across North America and the trans-isthmian pipeline, requires that
Panama keep the canal economically competitive if revenue is to be
sustained or increased.  This can only occur with continued maintenance
and investment financed by canal revenues.  The Panama Canal Commission,
which operates the canal through 1999,  has approved a $200-million
project to widen the canal's Gaillard Cut over the next 20 years.
 Many other factors point toward economic expansion over the next few
years.  Panama has long been a major international financial center,
fully exploiting its central location and good communication and
transportation facilities.  A Spanish-speaking environment combined with
widespread English proficiency, a well-educated labor force, relative
labor stability, and a sophisticated banking system make Panama
attractive to outside investment.  Additionally, one of Panama's
greatest comparative advantages is that it is a dollar-based economy.
The exchange rate is fixed at unity with the dollar; the balboa is
issued only in coins, and the US dollar circulates freely as legal
tender.  Panama maintains no foreign exchange controls.
 The Colon Free Zone (CFZ) is the world's second-largest free trade zone
after Hong Kong.  In 1990, CFZ activity comprised over 5% of Panama's
GDP.  The free zone is set to help return Panama to the center of the
Latin American economy.
 The most important action which the Government of Panama has taken to
improve the economy, however, is to encourage political stability by
re-establishing and strengthening democratic Panamanian institutions.
Political stability is crucial in order to attract new private
investment and will, along with comprehensive, structural economic
reform, go farthest toward creating long-term economic growth for
Panama.

DEFENSE
 The Panamanian Government has converted the former Panama Defense
Forces into a civilian police organization called the Public Forces,
which is subordinate to civilian officials and is responsive to human
rights concerns.  Personnel strength has been cut from 16,000 to about
13,000.  Virtually all former PDF senior officers were removed from the
Public Forces, and personnel discovered to have been involved in
corruption or other criminal activity are being removed.  The old,
centralized command structure has been broken up into four independent
units:  the Panamanian National Police, the National Maritime Service
(coast guard), the National Air Service (official transportation), and
the Institutional Protective Service (VIP security).  The Public Forces
are fully accountable to civilian authority under the Minister of
Government and Justice.  Investigative and other units that have been
separated from the Public Forces, such as the Technical Judicial Police,
are also directly subordinate to civilian authorities.  The Public
Forces budget--in contrast to that of the former PDF--is on public
record and under control of the executive, decreasing from $97 million,
plus at least $45 million in off-budget spending, under Noriega in 1989
to $76 million in 1990.
 The United States, with congressional approval, is providing
appropriate assistance to establish a truly professional law enforcement
institution, dedicated to delivering adequate protection to the citizens
of Panama while fully respecting human rights, democracy, and the law.
The United States is providing police skills training and technical
assistance in civilian law enforcement development through a
$13.2-million program managed by the US Department of Justice's
International Criminal Investigative Training Assistance Program
(ICITAP).  In addition, $8 million is being spent to assist the
Panamanian Government to improve the administration of justice.

INTERNATIONAL RELATIONS
 The Government of Panama is nonaligned.  Panama is a member of the UN
General Assembly and most major UN agencies, and it has served three
terms as an elected member of the UN Security Council.  It maintains
membership in several international financial institutions, including
the World Bank, the Inter-American Development Bank, and the
International Monetary Fund.  Panama is a member of the Organization of
American States and was a founding member of the now-defunct Contadora
group, which during the mid-1980s sought peaceful settlement of Central
American disputes.  It is one of the founding members of the Union of
Banana Exporting Countries and also belongs to the Inter-American
Tropical Tuna Commission.
 Although not yet a member of the Central America Common Market, Panama
is affiliated with several other Central American regional
organi-zations and, under the Endara Government, has participated
actively in Central American regional meetings.  Panama has not
participated in the Latin American Economic System, known informally
both as the Group of Eight and the Rio Group, since it was suspended in
early 1988 due to its internal political situation under Noriega.
Panama is not a member of the General Agreement on Tariffs and Trade
(GATT) but has established a commission to negotiate accession to the
GATT.

US-PANAMANIAN RELATIONS
 The United States has traditionally maintained friendly relations with
the people of Panama and, with the exception of the later Noriega years,
has cooperated with the Panamanian Government in promoting economic,
political, and social development through US and international agencies.
 Cultural ties between the two countries are strong, and many

Panamanians come to the United States for higher education and advanced
training.
 The presence of US armed forces in Panama has generated some friction,
however, and Panama's relationship with the United States has been a
recurring political issue throughout Panamanian history.  Severe strains
were placed on the relationship by the Noriega regime during the late
1980s, but the renewal of democracy and stability in Panama has shown
that the bilateral relationship remains fundamentally strong.
 In addition, the Panama Canal Treaties have provided the foundation for
a new partnership.  The United States and Panama remain committed to the
smooth implementation of these treaties, including the departure of US
armed forces, the reversion of US military bases, and the turnover of
the canal to Panamanian control at noon on December 31, 1999.
 Panama is also committed to the fight against illegal narcotics.  The
country's proximity to major cocaine producing nations and its role as a
commercial and financial crossroads make it a country of special
importance in this regard.  Although Panamanian anti-narcotics
institutions lack trained personnel and blueprints for action, concerted
efforts against the drug problem are being made by the Endara
Administration in cooperation with the United States.  Several bilateral
anti-narcotics agreements have been signed, the United States is
providing needed resources and training, and Public Forces joint
operations with the Drug Enforcement Agency and other US agencies have
resulted in unprece-dented seizures of cocaine and other narcotics.  The
conversion of the PDF into the professional Public Forces has further
demonstrated the government's resolve to strengthen democracy and to
continue the fight against drug-trafficking and money-laundering in
Panama.

Principal US Officials
US Embassy Ambassador--Deane R. Hinton
Deputy Chief of Mission--David Beall
Counselor for Political Affairs--Steven  Wesche
Counselor for Economic Affairs--Maureen Quinn
Counselor for Public Affairs--Peter DeShazo
Counselor for Administrative Affairs--William Francisco
Consul General--Robert Raymer

Panama Canal Commission
Administrator--Gilberto Guardia
Deputy Administrator--Raymond Laverty

US Southern Command
Commander in Chief--Gen. George Joulwan

 The US Embassy in Panama is located at Avenida Balboa y Calle 38,
Panama City (tel. 27-1777).  Personal and official mail for the Embassy
and members of the mission may be sent to: US Embassy Panama, Box E, APO
Miami, 34002.

 The Panama Canal Treaties
 The 1977 Panama Canal Treaties entered into force on October 1, 1979.
They replaced the 1903 Hay/Bunau-Varilla Treaty between the United
States and Panama and all other United States-Panama agreements
concerning the Panama Canal which were in force on that date.  The
treaties comprise:
 --  A basic treaty governing the operation and defense of the canal
from October 1, 1979, to December 31, 1999 (Panama Canal Treaty); and
 --  A treaty guaranteeing the permanent neutrality of the canal (Treaty
on the Permanent Neutrality and Operation of the Panama Canal).
 The details of the arrangements for US operation and defense of the
canal under the Panama Canal Treaty are spelled out in separate
implementing agreements.

Purpose of the Treaties
 In negotiating the Panama Canal Treaties, the United States acted to
protect a fundamental national interest in long-term access to a secure
and efficient canal.  Panama's cooperation is fundamental to this
objective.  By meeting Panamanian aspirations for eventual control of
the canal, the United States sought a new relationship with Panama based
on friendship and mutual respect.  The treaties make Panama a partner in
the continued safe and efficient operation of the canal.  In serving the
best interests of both nations, the treaties serve the interests of all
users of the canal.

History of the Negotiations
 Our bilateral relationship with Panama has centered on the Panama Canal
since the beginning of the century.  Under the 1903 treaty, the United
States acquired unilateral control of the canal and the Panama Canal
Zone--a 553-square-mile area in which the United States exercised the
rights, power, and authority of a sovereign state.  Panamanians deeply
resented the 1903 treaty and the unequal relationship with the United
States which it embodied.  In January 1964, Panamanian dissatisfaction
with this relationship boiled over into riots which resulted in the
deaths of four US Marines and more than 20 Panamanians.  A 3-month
suspension of diplomatic relations followed.
 The growing bilateral tension in the 1960s gave weight to the views of
those who believed that a new canal treaty was needed to replace the
1903 treaty and to establish a new relationship with Panama.  In June
1967, United States and Panamanian negotiators completed draft treaties
dealing with the existing canal, a possible sea-level canal through
Panama, and defense matters.  Neither country ratified the treaties,
however, and they were publicly rejected by the Torrijos Government in
1970.
 Treaty negotiations resumed in June 1971.  On September 7, 1977,
President Carter and General Torrijos signed the Panama Canal Treaties
at the headquarters of the Organization of American States in
Washington, DC.  The Panamanian people approved the new treaties in a
plebiscite held on October 23, 1977.  The US Senate ratified the
neutrality treaty on March 16, 1978, and the Panama Canal Treaty on
April 18, 1978.  The treaties entered into force on October 1, 1979.
The protocol to the neutrality treaty is open to accession by all
nations, and more than 35 have so far subscribed.

Basic Provisions of the Treaties
 The United States has primary responsibility for the operation and
defense of the canal until December 31, 1999.  US rights to station
military forces and maintain military bases also terminate with the
canal treaty.  After that date, the United States and Panama will
maintain a regime of neutrality for the canal, including
nondiscriminatory access and tolls for merchant and naval vessels of all
nations.
 US warships will be entitled to expeditious passage of the canal at all
times, however, and the United States will continue to have the right to
ensure that the canal remains open and secure.
 The United States operates the canal through the Panama Canal
Commission (PCC), which is a US Government agency supervised by a board
of directors consisting of five American and four Panamanian members
appointed by the President; the Panamanian members are initially
nominated by their government.  Until 1990, the canal administrator was
an American and the deputy administrator was Panamanian; these
nationalities reversed for the final decade of the treaty on September
20, 1990, when Gilberto Guardia was installed as the first Panamanian
administrator.  Pursuant to treaty obligations, the PCC is training
Panamanians in all areas of canal operations prior to the transfer of
the canal in 1999.  Panamanian citizens currently comprise over 87% of
the PCC workforce.
 During the life of the treaty, Panama receives the following payments
from Canal revenues:
 --  A fixed annual payment of $10 million;
 --  An annual payment of $10 million, adjustable for inflation, for
public services provided to canal operating areas by the Panamanian
Government (the Canal Zone and its government ceased to exist when the
treaties entered into force, and Panama assumed jurisdiction over canal
zone territories and functions);
 --  An annual percentage of toll revenues assessed at $0.35 (since
October 1, 1990) per Panama Canal net ton transiting the canal, worth
$60.2 million in 1990;
 --  A payment of up to $10 million in the event that revenues exceed
PCC expenditures in a given year.
 Under US implementing legislation (the Panama Canal Act), the PCC must
be self-sustaining; its costs may not exceed its revenues, nor may US
taxpayer funds be used for canal operations or payments to Panama.
 In a note separate from the treaties, the United States agreed to
expedite economic and military assistance programs for Panama.  From the
time the treaties entered into force until the political crisis with the
Noriega regime, the United States provided $200 million in development
assistance, economic support funds, and food and military aid.
Assistance was suspended in 1987 in response to political developments
in Panama but was reinstated in 1990 with a 2-year package of more than
$450 million in direct economic assistance and more than $500 million in
credits and guarantees.
 Panama and the United States are committed by Article XII of the canal
treaty to study jointly the feasibility of a sea-level canal in Panama
and to negotiate terms for its construction if it is agreed that such a
canal is desirable.  In addition, the United States retains the right
throughout the term of the treaty to build a third lane of locks to
increase the capacity of the existing canal.  In 1985, a tripartite
international organization, the Canal Alternatives Study Commission, was
established by the United States, Panama, and Japan to examine the
feasibility of modifications and alternatives to the existing system.
Completion of this study in 1993 will meet our treaty obligation under
Article XII.

 Published by the United States Department of State -- Bureau of Public
Affairs -- Office of Public Communication -- Washington, DC, March 1992
-- Editor:  Anita Stockman.
 Department of State Publication 8022 Background Notes Series -- This
material is in the public domain and may be reprinted without
permission; citation of this source is appreciated.  For sale by the
Superintendent of Documents, US Government Printing Office, Washington,
DC 20402.(###)


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