History of Panama

THE NEGOTIATION OF NEW TREATIES

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.

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 Chiriquí, 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'état 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 Demócrato Cristiano---PDC). The only party with a mass base was the Panameñista Party (Partido Panameñista---PP), the electoral vehicle of the erratic former president, Arnulfo Arias. The Panameñista 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 Oposición) 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 Panameñista 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 González 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 González 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 González Revilla. The Electoral Tribunal, senior to the Board and still loyal to Robles, protested, but the commander of the National Guard, Brigadier General Bolívar 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 José María Pinilla, and appoint Colonel Bolívar 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.

The Government of Torrijos and the National Guard

The overthrow of Arias provoked student demonstrations and rioting in some of the slum areas of Panama City. The peasants in Chiriquí 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 Martínez, 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 Democrático--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 Chiriquí 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, 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.

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 Nicolás González Revilla. Rómulo 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.

The 1977 Treaties and Associated Agreements

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.

Torrijos Government Undertakes "Democratization"

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'état, 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 Oposición--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 Panameñista Party (Partido Panameñista Auténtico--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 Democrático--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 Panameño 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 History Contents

SOURCE: Area Handbook of the US Library of Congress