Wayzata World Factbook 1995/World Factbook - 1995 Edition - Wayzata Technology (1995).iso/mac/text/Build/orig BACKGR/BNOT0084.TXT

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National Trade Data Bank
ITEM ID     : ST BNOTES PANAMA
DATE        : Oct 28, 1994

AGENCY      : U.S. DEPARTMENT OF STATE
PROGRAM     : BACKGROUND NOTES
TITLE       : Background Notes - PANAMA

Source key      : ST
Program key     : ST BNOTES
Update sched.   : Occasionally
Data type       : TEXT
End year        : 1992
Date of record  : 19941018
Keywords 3      :
Keywords 3      : | PANAMA

US DEPARTMENT OF STATE
BACKGROUND NOTES SERIES, PANAMA, MARCH  1992
PUBLISHED BY THE BUREAU OF PUBLIC AFFAIRS

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.