Mr. Chairman and distinguished members of the Committee:
It is an honor to appear before you to discuss problems relating to Panama, the Canal, and U.S. interests in the isthmus. These hearings are particularly timely in light of the upcoming surrender of the Canal and adjoining facilities on the last day of 1999, as prescribed by the Carter-Torrijos treaties ratified by the U.S. Senate in 1978 and by the Panamanian people in a national plebiscite.
The first thing to say is perhaps the most obvious--whatever our opinion of the treaties themselves, either now or at the time of ratification--in a technical sense the transfer of facilities has gone forward without serious difficulty. The United States has rigorously adhered to the schedule established by the treaties, indeed, in some ways has moved ahead of it. Since 1990 the administrator of the Canal has been a Panamanian, and the overwhelming majority of employees of the Canal authority are now Panamanian. We have expeditiously relocated both the School of the Americas and the U.S. Southern Command to the continental United States, drastically reduced our troop presence, and turned over hundreds of military buildings and facilities in the old Zone to the Panamanian government.
The orderly fashion in which this has taken place is remarkable, particularly in view of the emotions in both countries, and the constant accusations by elements of the Panamanian media and political class--accusations which continue to the present day--that the United States was (or is) secretly conspiring to go back on its agreements. Our record stands in stark contrast to the Suez disaster suffered by Great Britain.
On the other hand, many issues which were either ignored, minimized, or swept under the rug at the time of ratification are poised to foist themselves upon us. My purpose today is to discuss some of these.
The Canal
One of the great engineering marvels of the world, the Canal is a tribute to the determination, engineering genius, and back-breaking work of a multinational labor force directed by our own U.S. Army Corps of Engineers. Nonetheless, it is an old facility, and as such in constant need of maintenance. It also requires a benevolent environmental situation, since every ship that transits the canal pushes 52 million gallons of fresh water from the Central Lake out into the sea. In addition, in order to remain competitive, the Canal must be modernized. At present neither oil supertankers nor aircraft carriers can pass through the Canal. This deficiency could be remedied by the construction of a third set of locks, and there are plans to do just that. However, that eventuality is long-term and depends upon the capacity of Panama to borrow enormous amounts of money. Whether that happens depends largely on the country’s capacity to demonstrate its stability in the absence of a large American civil and military presence.
Generations of Panamanian politicians have assured their people that the Canal is a kind of potential bonanza, that, like oil in Kuwait, once incorporated into the national patrimony, would assure effortless prosperity for all. This has always been a gross exaggeration. The Canal was constructed by the United States for strategic and commercial reasons, not as a profit-making enterprise. Indeed, under law it was supposed to merely break even, and often ran a deficit made up by the U.S. Congress. In some recent years it has made a modest profit, but certainly negligible in terms of Panama’s overall social and economic needs. The real economic benefit from Panama has always come from ancillary activities--repairing or provisioning ships--or from salaries dispensed to the Canal work force or money spent within the territory of the Republic by the military and their families--in some recent years amounting to as much $500 million.
In some ways the presence of the U.S. military also amounted to an invisible insurance policy for foreign investors and traders; as long as the Americans were there, nothing too strange would be allowed to happen in Panama. Although the current decline in confidence suffered by the Panamanian government in Western Europe and Asia may be unjustified, it is at least understandable, particularly given the country’s problematic political history. This is a point to which I shall return shortly.
The Panamanian dilemma is this--the country is condemned to make a success of the Canal or lose its viability as a nation-state. To do this means to pay serious attention to things like maintenance, management, and the environment. Under all three headings there are reasons for concern.
Maintenance. Just how well Panama has done along this line since 1978 is a matter of opinion. During the 1980s, when the country was under military or quasi-military rule, all public facilities were neglected, and many shippers complained bitterly about the deterioration of Canal facilities. Since the intervention of the United States in 1989-90, and particularly since 1994 when the present government took office, there has been a significant increase in the amount of resources earmarked for maintenance, and some of the facilities at the Pacific and Atlantic ports modernized with the latest computer technology.
On the other hand, members of the Committee should be aware of a 1997 report of the U.S. Army Corps of Engineers that identified 830 maintenance tasks requiring immediate attention. Of these, fully 389--that is to say, 47 percent--had not even been started. They include such arcane matters as replacing the existing locks machinery, reactivating emergency dams (the upkeep on which had been “abandoned since 1982”), repairing the concrete around the locks machinery tunnel (the work done to date was found “less than desirable”), widening the Atlantic entrance, refurbishing the tugboat fleet and the canal railroad (the “mules”).1 While President Ernesto Pérez responded peevishly to the report, he also implicitly endorsed its findings by putting into motion a $1 billion program to improve Canal maintenance. Whether it will be adequate, and carried out in a timely fashion, remains to be seen.
Management. Like most Latin American countries, Panama has at best a spotty record of managing public enterprises. These are usually run as employment agencies for deserving members of the victorious party, with virtually no attention paid to the bottom line. Ever since taking office President Pérez Balladares has complained that everyone in Panama excepts to be put on the government payroll; this, he has explained repeatedly, is an impossibility.
Nonetheless, the public sector in Panama has been large, and there are many institutional and political reasons why its downsizing or privatization is resisted by politicians and public alike. Moreover, the ruling Democratic Revolutionary Party has a long history of using public enterprises for political patronage.
The new Organic Law of the Canal is supposed to insulate the Canal from such pressures. Nonetheless, the board of the new Canal authority has been packed with friends and relatives of the current president, and its new head, Jorge Ritter, is a politician with an unsavory past and no experience whatever in maritime affairs. Moreover, the Organic Law mandates that the Canal show a profit. However, this objective is bound to be undercut by pressures for political patronage on one hand, and the need to keep tolls low enough to continue to attract shipping on the other.
This last requires additional comment. Changes in shipping technologies--for example, double-stacking of CONEX containers on railroad cars across the U.S. and Canada--now make the Canal less vital than in the past. Even for certain types of high-value, low-volume products air shipment is competitive. For products like oil, trade-offs between Pacific and Atlantic producers can dispense with inter-isthmian traffic altogether if necessary. In effect, the Canal is not the transoceanic monopoly it once was.
Environment. Panama’s stewardship of its environment is crucial to the continued competitiveness of the Canal. This is so because water shortages in the Central Lake will lead to delays, and for every day that ships are backed up in a line waiting to use the facility, the unit cost of shipping each item rises. Water shortages will also create serious problems for city-dwellers, who now constitute more than 50 percent of Panama’s population.
Unfortunately, the environment has been given short shrift in Panama. The entire ecosystem of the Chagrés river basin has been steadily deteriorating since 1978, when the area was turned over (along with the rest of the old Canal Zone) to Panama. An unrestrained invasion of peasants practicing slash-and-burn agriculture has drastically reduced the forested area, and by some estimates will denude it entirely by the end of the next century. Deforestation has a negative effect on rainfall, and even more important, fosters erosion and build-up of sediment in the lakes, which in turn creates problems for navigation.
The Panamanian government has recently undertaken to institutionalize its environmental concerns. On the other hand, like all other government agencies, the Panamanian environmental organization INRENARE, is a patronage machine, staffed with political appointees, many of whom are utterly unqualified for their work. Several qualified environmentalists have been discharged for political reasons.
There is no intrinsic reason that Panama cannot redress deficiencies in all three areas--maintenance, management and environment, but it must make up for an entire lost decade--the 1980s--and accelerate actions taken since the ouster of General Noriega. This in turn requires a change in the country’s political culture, and a new respect for professionalism, insulation from partisan pressures, and rigorous attention to the bottom line.
This may or may not occur. But the interest of the United States in the efficient operation of the Canal is much less crucial than in the past, both because of changes in global politics and the emergence of new shipping technologies. Of course, ideally a well-run Canal is in everyone’s interest--starting with Panama’s. But if Panama fails to meet the challenge, it will not be the end of the world for the international shipping community or the United States.
Panama's Political Development
At the time of the Carter-Torrijos treaties, Panama was ruled by a populist military dictatorship. Today it has an elected government and national assembly, an independent press, and a lively civic life. The Panamanian army has been abolished and replaced with a national police on the Costa Rican model. Unfortunately, it remains a deeply divided society--fractured along political, racial, class, linguistic and regional lines. Of course this is true for many countries, including the United States. But it is dangerously true for Panama, which has the most inegalitarian distribution of income of any Latin American country except Brazil.
As a result, no political party in Panama can expect to win anything like 50 percent of the vote. In the 1994 election President Pérez Balladares won 33.3 percent of the vote, which made him the victor in Panama’s first-past-the-post system. But his opponent, Mireya Moscoso of the Arnulfista party, garnered 29.1 percent--nearly as much. Salsa singer Ruben Blades of the new Papa Egoró party won 17 percent, and Rubén Darío Carlés of the MOLIRENA party won 16 percent, respectively.
Not all parties in Panama are alike. Pérez Balladares’ Democratic Revolutionary Party is the successor to the Torrijos-Noriega dictatorship, and although it has greatly improved its behavior since 1990, still polarizes Panamanian opinion. Other parties, particularly the Arnulfistas and MOLIRENA, feel (not wholly without reason) that the PRD still harbors many anti-democratic elements. Indeed, they are not slow to suggest that rather than a party in the ordinary sense, it is a collection of thugs who believe that they alone have the right to govern the country, by fair means or foul. For example, many members of these two opposition parties believe that the PRD rigged the 1978 plebiscite on the Canal, and they also believe that in the upcoming referendum on constitutional reform, electoral fraud is genuinely possible.
Recognizing these divisions, and also the limitations of his own electoral score, following his election President Pérez Balladares reached out to the opposition and tried to incorporate as many of its members as he could in his new administration. For reasons of their own, the Arnulfistas, Panama’s second largest party, chose not to accept his offer.
Meanwhile, as his term has worn on, Pérez Balladares has been increasingly deferred to the less respectable elements of his own party in order to consolidate support for a constitutional amendment which would allow him to run for another term. One example is the appointment of Jorge Ritter as minister of canal affairs; another is the curious composition of the Canal Authority. Even more troubling, in recent weeks there has been a coarsening of political discourse. When former Vice-President Ricardo Arías Calderón, a Christian Democrat and a political figure of unmatched integrity, recently suggested that it would not be a good idea to change the rules so as to allow consecutive presidential terms, PRD leader Mitchell Doens suggested that Dr. Arías Calderón needed “a political Viagra to bring him into line with the new times in which we are living.” A new decree of the Electoral Tribunal requires newspapers to allow it to vet opinion polls before they are published, a kind of prior censorship that most have said they will resist.
Panama’s democratic political culture is extremely fragile and needs nurturing. While a second presidential term in and of itself need not threaten democratic institutionality, given Panama’s troubled past, and the role which the PRD has played in propping up military dictatorships, continuismo of the type contemplated by President Pérez Balladares may not be the best solution. Panamanian political life has been plagued by sectarianism, intolerance, random violence, and intemperate discourse--it needs a healthy dose of what Latin Americans call alternancia to strengthen the forces of moderation, pragmatism, and good sense.
U.S. Interests in the Isthmus
Security of the Canal. At the time of the ratification of the Canal treaties, some legitimate U.S. security concerns were raised by members of the Senate and the general public. These were understandable in the context of the times. They have been largely addressed by the Neutrality Treaty, which assures that the facility will remain “secure and open to peaceful transit by vessels of all nations on terms of entire equality.” (Article II). The United States is also guaranteed “expeditious passage” of its ships through the Canal in time of war--that is, that its ships will be allowed to go to the head of the line. (Article VI).
The Neutrality Treaty has generally been construed, in the United States at least, as giving our country the right to forcibly intervene militarily to keep the Canal open if necessary. This was one of the pretexts used to justify our intervention in 1989. However, as many Panamanian politicians have pointed out, whether the United States does or does not have that right, if it wants to it will intervene anyway. Certainly we retain the capacity to do so, whether we or not we are physically present in the isthmus.
The United States has been extraordinarily lucky in the years since ratification. Our only serious global adversary, the Soviet Union, has disappeared, and the political environment in the circum-Caribbean is significantly more favorable to us now than twenty years ago. Among other things, Fidel Castro’s Cuba is in rapid decomposition, and all of the countries of the basin, including Panama, are anxious to become part of the NAFTA community of nations.
Further, no country in the world has a greater interest in keeping the Canal open than the Republic of Panama. This was as true twenty years ago as today. It is perhaps worth noting that the only time the facility has ever been shut down in its more than eighty year history was the day after the U.S. invasion in December 1989--and by action of the U.S. military.
Other security considerations. There are other security considerations in Panama, but they are marginal to the Canal itself. The biggest problem is the porous nature of the country’s southern border, where the province of Darien meets Colombia’s Chocó province. The latter is a wild, sparsely populated area, home to clandestine drug labs and airfields. According to Panamanian law-enforcement officials, since 1988 Colombian drug traffickers have been smuggling their product--as well as millions of dollars in cash--through Puerto Abadía in Darien for transshipment through Panama or laundering through Panamanian banks.
Further, clashes between Colombian paramilitary groups and rebels on Panamanian soil are taking place with increasing frequency, with local authorities powerless to do anything about it. Indeed, by the summer of last year the situation had become so serious that Panamanian authorities were granting permission for Colombian Army troops to camp in Darien province and conduct operations against rebels who had taken refuge there.
These developments are all the more troubling in light of the fact that Panama no longer has an army. The national police agencies are still struggling to find their professional feet. No matter what happens, however, the United States is not going to have the kind of military presence in Panama that would equip it to defend the country’s frontiers or engage in hot pursuit of drug dealers.
U.S. military presence in Panama. Under the Carter-Torrijos treaties the United States is obliged to liquidate the totality of its military presence in the country by the last day of 1999. We are actually slightly ahead in this process, from a high of 12,000 in 1990 to 4,000 today. We are moving very expeditiously as well to turn over some 7,000 buildings on what used to be U.S. military bases.
At the time the Carter-Torrijos treaties were negotiated, Panama would not hear of any residual U.S. military presence in the country. For many years thereafter, however, various public opinion polls showed that a decisive majority of Panamanians (usually around 70 percent) did not favor the departure of the U.S. military. Indeed, some polls even reflected a strong majority in favor of the U.S. remaining in Panama to run the Canal, jointly with the Panamanians or even on its own! In recent years--that is, since President Pérez Balladares took office in 1994--Panamanian enthusiasm for a residual U.S. military presence has been somewhat tempered by the realization that we were not prepared to pay for the privilege of remaining.
The bases issue dramatically illustrates the disconnect between Panamanian opinion and Panamanian politics. During all the years that ordinary Panamanians were telling pollsters that they wanted the U.S. military to stay, the politicians were each accusing the other of secretly conspiring--oh horrors--to respond to majority opinion. On the other hand, it must be admitted that the political class did an excellent job of convincing the public that the United States should have to pay for the privilege of remaining in the country--as if $250 to $500 million a year thrown into the local economy by American military personnel was just so much spare change.
The Panamanian political class greatly overestimated the country’s importance, particularly in the light of the end of the Cold War, and played its cards badly on this issue. The U.S. refused to be blackmailed, and any further discussion of a residual base presence came to an end.
The Multinational Counternarcotics Center. Once the Panamanians realized that the U.S. military was definitely leaving the country, panic set in, particularly in the circles of the wealthy elite and the political class. As one business delegation explained to me, in their visits to Western Europe they found that potential investors were interested only in one thing--would the United States continue to be present in Panama. With the closing of the bases, some sort of mousetrap had to be found.
Our concern with narcotics nicely meshed with the need of Panama’s elite to retain some sort of symbolic U.S. military presence. This convergence of needs explains the current plan to construct a Multinational Counternarcotics Center at Fort Howard, run by civilians and drawing on representatives of the United States and a number of Latin American countries. A framework agreement was announced on Christmas Day 1997, but American and Panamanian negotiators have had considerable difficulty thrashing out the final details.
The MCC poses a number of serious problems that this Committee should carefully consider.
1. The “multilaterality” will be largely fictitious. Although President Pérez Balladares likes to talk about complements from Argentina, Brazil, Peru, Colombia and Mexico, there is strong opposition to participation in many of these countries (it is overwhelming in Mexico), so that the overwhelming majority of military personnel would be from the United States.
2. Such a center would require a new treaty. No doubt the Clinton administration would prefer an executive agreement, but this would contravene Article V of the Neutrality Treaty, which states unambiguously that “after the termination of the Panama Canal Treaty, only the Republic of Panama shall…maintain military forces, defense sites, and military installations within its national territory.”
3. In my own view, the Senate should require the Clinton administration to subject any residual U.S. military presence in Panama--under whatever label--to this restriction, and then force the treaty to run the gauntlet of ratification.
4. Neither the United Nations nor the Organization of American States nor any other international actor has offered to loan the center its flag; the best that President Pérez Balladares can lamely offer is a committee of foreign ministers of participating countries, headed by his own, to supervise the activities of the Center. As far as the United States is concerned, this begs crucial questions of command, control, and safety of American personnel and their families.2
5. As envisaged by Panama, the Center will be a permanent object of controversy. Nobody will believe in its multilaterality--indeed, that is precisely what Panama hopes. (All foreign investors will read it as a largely American enterprise, which what it will be, but without the advantages of our outright basing agreements with Spain, Italy, Germany and Japan.) However, it will be an open sore in Panamanian politics, with agitators insisting that it is “really” an American base and demanding its removal. The fact that Panama wants to extend facilities in three year increments almost certainly builds in political problems, with anti-U.S. agitation returning promptly in the second year of each cycle.
I personally believe that U.S. interests are better served by a rigorous adherence to the Carter-Torrijos treaties, and a complete and total withdrawal of our military forces from the country. If we need to accomplish certain missions related to narcotics trafficking, these would be best carried out from our own territory.
But if we are to have a residual military presence in Panama--under whatever label--Panama must first ask for it by name, rank and serial number, and then submit the decision to a plebiscite. There must be no ambiguity, no pretense. No one in Panama must ever be able to say that American troops were introduced into the country through the back door or against the will of the people. And, as I have said above, a new treaty with appropriate status-of-forces agreements must be negotiated, signed, and sent to this distinguished body for ratification. Anything else is a disservice to the U.S. national interest.
Notes
[1] Panama Canal Commission, Master Plan to Implement the U.S. Army Corps of Engineers (USACE) Recommendations (Panama City, 1977), pp. 2-3, 5-6.
[2] The question of safety is not a frivolous one. Shortly before President George Bush's visit to Panama in 1991, two American soldiers were murdered in cold blood by Pedro Miguel Gonzalez, son of the president of the Democratic Revolutionary Party. Despite eyewitnesses, no Panamanian court felt capable of establishing his guilt. Miami Herald, October 23, 1997, At this writing Mr. Gonzalez is a candidate for congress on the PRD ticket.
Mark Falcoff is a resident scholar at AEI.
