Something about Panama

By Diane Alden
web posted July 19, 1999

A little country with a big strategic location in the Americas, Panama is beset with problems of transition and choosing a national course from a jumble of possibilities. Currently, it is a major economic destination of choice for American expatriates as well as Chinese and European economic interests. Historically it has been a link between oceans and of vital importance in the transport of goods around the world.

In 1513 Spanish explorer Vasco Balboa crossed the Isthmus of Panama to reach the Pacific coast of the Americas. Early on its importance was noted as the easiest route from the Atlantic to the Pacific. In the 1880s French engineers began then abandoned construction of a canal. Shortly thereafter, with U.S. help, Panama seceded from Columbia. When Theodore Roosevelt became president in 1901 the rush was on for an American made canal. Forty years, $10 billion and 30,000 lives later the canal was finished and soon became an American protectorate. Today it is changing hands, a process initiated in 1979 during the Carter Administration as a result of years of bickering between the United States and various Panamanian factions.

Officially the Canal Zone will be totally turned over to the Panamanians on December 31, 1999. At that time the United States Southern Military Command will formally move its headquarters to Miami. Apart from a pledge to keep the canal safe and open to ships, Panama may do what it wishes with $500 million a year generated by canal users. Decisions about the canal's future, including structural changes such as widening to keep it competitive with other sea routes, will be decided in Panama. The official word is that Panama can handle this vital area without U.S. help. Panamanians have been taking over key posts in administering the canal for over 20 years. However, a recent Gallup poll indicates that 54 percent of Panamanians do not believe Panama is prepared to run the canal. Seventy-four percent wanted it to remain under the protection of the United States.

The concern of Panamanians and Americans interested in the area are that politicians will get involved, and turn administration of the Canal Area into a political and economic football. President Ernesto Balladares has already filled some administrative posts with relatives and cronies. There are also fears that members of the Revolutionary Democratic Party, once allies of Manuel Noriega, will corrupt the whole process so that only a few will benefit from the economic opportunities inherent in operating the canal. U.S. political analyst, Mark Falcoff, said last year in his book Panama's Canal, Panamanians have regarded government agencies as facilitators of booty to be distributed among the followers of the ruling party." This eventuality is not supposed to happen because all appointments to the canal authority are to be ratified by the Panamanian congress.

Most of last year's collection of fees, $545 million U.S. dollars, were from grain shipments coming from the United States on their way to Asia. Containerized cargo and petroleum products were next in importance. The significance of the canal to international commerce is not in question, and Panama's economic potential is a fact. What is at stake may be the strategic fall out from the new players in Panama - the two Chinas.

Hand wringing and worry over transference of authority from the United States to Panama concerns many policy analysts. Both Taiwan and the People's Republic of China are involved in what is a strategically critical area for the United States. Recently, the two Chinas butted heads in America's neck of the woods. This does not bode well for cooperation between nations. A universal summit held in Panama City in September, 1997 was boycotted by most of those who were supposed to participate. This included the Clinton Administration, France, the United Nations, and mainland China. Of 20 countries invited only Honduras and Nicaragua attended and of course Taiwanese President Lee Teng-hui. The PRC was angry because Taiwan helped finance the four-day conference and this led to the international boycott.

However, the strange series of events began to unfold in January 1997 when a treaty between the shipping firm Hutchison-Wampoa of Hong Kong and the Panamanian government was signed. Considered to be a front for the PRC, Hutchison-Wampoa now runs the ports at each end of the canal. Many business and political interests in the United States found the bidding process to be mysterious and unfair. Taiwanese interests now operate a container terminal at Colon at the canal's Caribbean mouth, as well as maquiladora-style plants on a former U.S. military base. While the U.S. operates a container terminal at Colon. It is obvious, however, that the Asian giants consider the canal crucial to their economic and strategic interests.

Former General Manager for Communist China in Panama, Paul Rickmeyer, admitted that COSCO, (China Ocean Shipping Company) run by the Chinese military, and the CRE, (Chinese Resource Enterprises) considered a front for the Chinese CIA, are the entities behind Hutchison-Wampoa. Rickmeyers was removed as General Manager for making that statement. U.S. Ambassador William Hughes called the whole negotiation and resulting deal between China and Panama -- a set of "corrupt circumstances."

Some observers say that under the terms of the 50 year Communist China-Panama Canal Treaty, Communist China can legally prohibit US military vessels from the use of the Panama Canal and this prospect looms large to those who don't trust the PRC. Add the possibility of conflict between the two Chinas, as they bring their cat fight to American shores, and the strategic concern is glaring; especially now that China has benefitted from weapons technology derived from the United States -- by both legal and illegal means. Independent intelligence sources in the United States and elsewhere say a future conflict might include a scenario in which China holds the canal hostage to gain whatever advantage it may be seeking.

Secondary fallout from the transfer of power from the U.S. administration of the canal to Panama is the fact that what has been turned over so far is in disrepair. With the closing of the military bases, former employees are either making much less money than they did on base or they are with out jobs. Near Coco Solo, a former U.S. Navy base near the canal's Caribbean mouth, badly deteriorated apartments are filled with squatters. Garbage and putrid water are increasing symptoms of decay. People in the area have been offered housing elsewhere, but the costs are prohibitive as an influx of foreigners drive housing prices through the roof. The Panamanian government promises affordable housing - soon.

Lots of new American money is coming into Panama. The Canadian think tank the Frasier Institute, as well as the London Economist's "Big Mac" index, rank Panama in the top ten countries which offer economic viability and freedom. Panama has the lowest average tariff rates in Latin America, and after two years of near stagnation economic reforms are taking root. Gross National Product grew by nearly 5 percent last year indicating an economic upturn. The area is being touted as the destination of choice for Americans wanting to cash in on the good times. Evidence of that may be seen in the real estate market in the historic section of Panama City. Beautiful older homes are going at bargain prices and Americans are taking advantage.

Combine the inexperience of Panama's ruling class, the "what do we do now that the Americans are gone" syndrome, add the Chinese factor, stir in the American gold rush into the area and you have a recipe for interesting times. If the Chinese are smart they will separate buisness from politics as they have managed to do - so far - in Hong Kong. If Americans are smart they will support the Panamanians with sound advice and expertise -- and make hay at the expense of the Chinese. America doesn't have to run scared. But America does need to be prepared for any eventuallity. Like Teddy Roosevelt said almost a hundred years ago, "Speak softly and carry a big stick."

Diane Alden has previously been published at Right Magazine. This is her first piece in Enter Stage Right.

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