Wayzata World Factbook 1996/The World Factbook - 1996 Edition - Wayzata Technology (3079) (1996).iso/mac/TEXT/backgrd/PANAMA.BKG

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U.S. Department of State
Background Notes: Panama, January 1995
Bureau of Public Affairs


January 1995

Official Name: Republic of Panama


PROFILE

Geography

Area: 77,381 sq. km. (29,762 sq. mi.); slightly smaller than South
Carolina.  Panama occupies the southeastern end of the isthmus forming
the land bridge between North and South America.
Cities:  Capital--Panama City and San Miguelito, a large, poor section
of Panama City (827,828).  Other cities--Colon (140,908), David
(102,678).
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 (1994 est.):  2.54 million.
Annual growth rate:  2%.
Ethnic groups:  Mestizo (mixed Indian and European ancestry) 70%, West
Indian 14%, Caucasian 10%, Indian 6%.
Religions:  Roman Catholic 85%, Protestant (Evangelical) 15%.
Languages:  Spanish (official); 14% speak English as their native
tongue; various Indian languages.
Education:  Years compulsory--6.  Attendance--95% for primary school-age
children, 96% for secondary.  Literacy--87% overall:  urban 94%, rural
62%
Health:  Infant mortality rate--17/1,000.  Life expectancy--74 yrs.
Work force (921,000):  Government and community services--32%.
Agriculture--27%.  Commerce, restaurants, and hotels--16%.
Manufacturing and mining--9%.  Transportation and communication--6%.
Construction--3%.  Finance, insurance, and real estate--4%.

Government

Type:  Constitutional democracy.
Independence:  November 3, 1903.  Constitution:  October 11, 1972;
amended 1983.
Branches:  Executive--president (chief of state), two vice presidents.
Legislative--Legislative Assembly (unicameral, 72 members).  Judicial--
Supreme Court.
Subdivisions:  Nine provinces and one (Indian) territory.
Political parties:  President Perez Balladares belongs to the Democratic
Revolutionary Party (PRD), which is allied with the Labor Party (PALA)
and the Liberal Republic Party (PLR or LIBRE).  This alliance, known as
the Pueblo Unido ("United People") Party, holds a slim majority in the
new Legislative Assembly.  Other major political parties include the
Arnulfista Party (PA), to which former President Endara belongs; the
Christian Democratic Party (PDC); the Papa Egoro Party; and the National
Liberal Republic Movement (MOLIRENA).
Suffrage:  Universal and compulsory at 18.

Economy

Real GDP (1993):  $6.6 billion.
Annual growth rate (1993):  6%.
Per capita GDP (1993):  $2,500.
Natural resources:  Timber, seafood, copper, ore.
Services (72% of GDP):  Finance, insurance, canal-related services.
Agriculture (11% of GDP, 1993):  Product--bananas and other fruit, corn,
sugar, rice, coffee, shrimp, timber, vegetables, cattle.  Land--
agricultural 24%, exploitable forest 20%, other 56%.
Industry (19% of GDP):  Types--food and drink processing, metalworking,
petroleum products, chemicals, paper and paper products, printing,
mining, refined sugar, clothing, furniture, construction.
Trade (1993):  Exports--$508 million: bananas 43%, shrimp 11%; sugar 4%;
coffee 2%, clothing 5%.  Imports--$2.2 billion:  capital goods 21%,
crude oil 11%, foodstuffs 9%, other consumer and intermediate goods 57%.
Exchange rate:  Fixed at unity with the U.S. dollar.


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.  Spanish is the official and dominant language; English
is a common second language spoken by the West Indians and by many in
business and the professions.  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 Kuna 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.

The University of Panama and its extensions throughout the country have
a total enrollment of more than 51,000 students, the majority of whom
attend evening classes.  More than 11,000 students, primarily in
engineering and allied fields, attend the Technological University.
About 6,000 students are enrolled in the University of Santa Maria La
Antigua, a private Catholic institution.

The first six years of primary education are compulsory, and there are
357,402 students currently enrolled in grades one through six.  The
total enrollment in the six secondary grades is 206,509.  Nearly 90% of
Panamanians are literate.


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.

Building the Canal

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 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.)

Military Coups and Coalitions

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
government was established, 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 1981 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 force (PDF), as they were then known, 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.  In the summer of 1987, prompted by
government restrictions on media and civil liberties, more than 100
business, civic, and religious groups formed a loose coalition that
organized widespread anti-government demonstrations.

Panama's developing domestic crisis was paralleled by rising tensions
between the Panamanian Government and the United States.  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 U.S.
embassy.  The Government of Panama countered by ousting the U.S. Agency
for International Development in December 1987; before the end of the
year, the U.S. Congress cut off all assistance to Panama.  General
Noriega's February 1988 indictment in U.S. courts on drug-trafficking
charges sharpened tensions, as did a government takeover by the PDF and
domination of the Legislative Assembly by Noriega forces the following
month.  In April 1988, President Reagan invoked the International
Emergency Economic Powers Act, freezing Panamanian Government assets in
U.S. banks and prohibiting a variety of payments by American agencies,
firms, and individuals to the Noriega regime.

When national elections were held in May 1989, Panamanians voted for the
anti-Noriega candidates by a margin of over three-to-one.  Although the
size of the opposition victory and the presence of international
observers thwarted regime efforts to control the outcome of the vote,
the Noriega regime promptly annulled the election and embarked on a new
round of repression.

By the fall of 1989, the regime was barely clinging to power.  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.  In December 1989, the
regime declared war against the United States and initiated attacks on
members of the U.S. forces.

On December 20, President Bush ordered the U.S. military into Panama to
protect U.S. lives and property, to fulfill U.S. treaty responsibilities
to operate and defend the Canal, to assist the Panamanian people in
restoring democracy, and to bring Noriega to justice.  The U.S. troops
involved in Operation Just Cause achieved their primary objectives
quickly, and the withdrawal of troops began on December 27.  Noriega
eventually surrendered to U.S. authorities voluntarily.  He is now
serving a 40-year sentence in Florida for drug trafficking.

Rebuilding Democracy

Panamanians moved quickly to rebuild their civilian constitutional
government.  On December 27, 1989, Panama's Electoral Tribunal
invalidated the Noriega regime's annulment of the May 1989 election and
confirmed the victory of opposition candidates under the leadership of
President Guillermo Endara.

President Endara took office as the head of a four-party minority
government, pledging to foster Panama's economic recovery, transform the
Panamanian military into an apolitical force under civilian control, and
strengthen democratic institutions.  During its almost five years in
office, the Endara Government struggled to improve the lot of Panama's
poorer citizens, of whom an estimated 50% live in poverty.  Success was
limited; although real economic growth was impressive, benefits often
did not trickle down to the needy, and the unemployment rate, though
reduced, remained high.  Lacking resources, the government was unable to
carry out needed improvements in infrastructure such as medical
services, education, and the transportation system, and these continued
to deteriorate.  The new police force proved to be a major improvement
in outlook and behavior over its thuggish predecessor, but efficiency
was a problem, and polls showed rising concern over escalating crime
rates.

While charges of narco-trafficking hurt Panama's international image,
accusations of official corruption--nepotism, bribery, and favoritism--
plagued the Endara Government.  However, the Endara years produced
important advances in democratic institutions:  A free, noisy press
flourished; government prosecutors brought accused criminals and human
rights violators from the Noriega and Torrijos periods to trial; and the
Legislative Assembly made significant strides in changing its role from
a rubberstamp for dictatorial decrees to an independent, responsible
second branch of government.


GOVERNMENT AND POLITICAL CONDITIONS

Panama is a representative democracy with three branches of government:
executive and legislative branches elected by direct, secret vote for
five-year terms, and an independent appointed judiciary.  The executive
branch includes a president and two vice presidents.  The legislative
branch consists of a 72-member unicameral 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, the election process, and the
activities of political parties.  Everyone over the age of 18 is
required to vote, although those who fail to do so are not penalized.

Ernesto "Toro" Perez Balladares was sworn in as President on September
1, 1994, after an internationally monitored election campaign--Panama's
largest, with seven candidates for the presidency, over 2,500 for the
legislature, 2,000 for mayoral posts, and more than 10,000 at the local
level--that was notable for its non-violent, orderly, and efficient
pace.

Balladares ran as the candidate for a three-party coalition dominated by
the Democratic Revolutionary Party (PRD), the unpopular political arm of
the military dictatorship during the Torrijos and Noriega years.
Bruised by its forcible ejection from power by U.S. forces in Operation
Just Cause, the PRD had been regarded--and indeed considered itself--
highly unlikely to conclude the elections anywhere near the top of the
list.  A long-time member of the PRD, Balladares worked skillfully
during the campaign to rehabilitate the PRD in the eyes of the voters,
emphasizing the party's populist Torrijista roots rather than its
association with Noriega.  He won the election with only 33% of the vote
when the major non-PRD forces, unable to agree on a joint candidate,
splintered into three competing factions.  Although two-thirds of the
Panamanians voted against Perez Balladares, the dispersion of their
votes left the PRD candidate with the simple majority he needed to win.

President Balladares has broad powers under Panama's current
constitution, but must work with a legislative assembly in which his PRD
party and its political allies have only a bare majority.  Although the
assembly lacks strong budgetary authority, it does play a crucial role
in designing political, economic, and social initiatives; President
Balladares will need to woo shifting constellations of the 10 parties
represented in the assembly to build consensus for legislative projects.
Stressing "national reconciliation," Balladares has appointed a multi-
party cabinet that includes prominent experts in their fields as well as
several members who publicly opposed General Noriega.

National Security

The Panamanian Government has converted the former Panama defense forces
(PDF) into a civilian police organization called the public force, which
is subordinate to civilian officials and responsive to human rights.
Personnel strength has been cut from 16,000 to about 13,000.  Virtually
all former PDF senior officers were removed from the public force.  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, and the institutional
protective service (VIP security).  The public force is fully
accountable to civilian authority under the minister of government and
justice.

A constitutional amendment would abolish the military permanently,
subject to approval in a national plebiscite.  Investigative and other
units that have been separated from the public force, such as the
technical judicial police, are also directly subordinate to civilian
authorities.  The public force budget--in contrast to the former
PDF--is on public record and under control of the executive.  The
Panamanian Government has spent almost $500 million since 1990 on public
order and security expenses.  Public security will cost $87 million this
year and is expected to rise to $92 million for next year.

The United States, with congressional approval, is delivering
appropriate assistance to establish a truly professional law enforcement
institution, dedicated to providing adequate protection to the citizens
of Panama while fully respecting human rights, democracy, and the law.
By the end of 1994, the United States will have provided police skills
training and technical assistance in civilian law enforcement
development through a $25.2-million program managed by the International
Criminal Investigative and Training Assistance Program (ICITAP).  In
addition, $4.4 million will have been spent to help the Panamanian
Government improve its administration of justice.  Equipment that is
appropriate for police work is also being provided.

Principal Government Officials

President--Ernesto Perez Balladares
First Vice President--Tomas G. Altamirano Duque
Second Vice President--Felipe Virzi
Ministry of Foreign Affairs--Gabriel Lewis Galindo
Ambassador to the U.S.--Ricardo Alberto Arias
Ambassador to the UN--Jorge Illueca
Ambassador to the OAS--Lawrence Chewning

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


ECONOMY

Two great challenges face the Balladares Administration as it begins its
five-year term:  efficiently utilizing 70,000 acres of U.S. military
land and buildings which will revert to Panama by 1999 and laying a
solid groundwork for assuming full control of the Panama Canal in the
21st century.  As the U.S. military departs, Panama will have to replace
jobs and income earned from U.S. bases.  Long-term investor confidence
brought about by political stability and economic liberalization are the
keys to Panama's economic future.

Panama's economy is primarily based on a well-developed services sector
that accounts for 72% of GDP.  Services include the Panama Canal,
banking, insurance, government, the trans-isthmian oil pipeline, and the
Colon Free Zone--the world's second-largest free trade zone after Hong
Kong.  Mining, tourism, and maritime services are projected sources for
future growth.

Rapid economic growth characterized the early 1990s.  Current forecasts
call for continued but slower economic growth in 1994 and 1995.  Real
GDP growth of about 5% is projected for 1994 and 1995, down from 6%
growth in 1993, and 8.6% growth in 1992.  Nominal GDP rose to an
estimated $6.6 billion in 1993 a result of construction and Colon Free
Zone activity.  Capital has returned to the Panama banking system.
Total banking center deposits rose to $21 billion in December 1993, with
total assets valued at $26 billion.

Although the economic recovery of the early 1990s returned the country
to its 1987, pre-crisis levels, sustained growth depends on Panama's
ability to resolve long-standing problems of inequitable distribution of
wealth, high barriers to trade, external debt, and dependence on U.S.
Government and Canal revenues.  Under and unemployment, although sliced
by more than half in recent years, continues as an economic millstone.
Panama's working-age population is expected to grow 2.5% per year during
the 1990s; the economy must grow by at least 5% annually, according to
one estimate, to keep the unemployment rate stable as new entrants swell
the labor force.

Role of Business

The government and the U.S. business community actively promote Panama's
long-standing reputation as an international trading, banking, and
services center and as a site for foreign direct investment.  Panama's
economy is characterized by low inflation and zero foreign exchange
risk, despite the lack of major foreign investment in the last decade.
Panama, however, must change its international image (e.g., on money
laundering) and improve its infrastructure if it is to attract
investment.

Decisive policy reforms to change the economy and sustain long-term
growth--reducing the public sector payroll, liberalizing the trade
regime, privatizing state-owned enterprises, and fostering job creation
through labor code reforms--is the major task of the Balladares
Government.  Private construction and capital goods spending will be the
main sources of growth in the short term.

Many of the needed reforms are expected to be taken in the context of
Panama's accession to the General Agreement on Tariffs and Trade (GATT),
which began in earnest in April 1994.  Panama's new minister for
planning and economic policy has stated that trade liberalization,
including GATT accession, will be a priority of the Balladares
Administration.  He has also affirmed his interest in structural
economic reform that will ensure continued economic growth into the 21st
century.


FOREIGN RELATIONS

Panama is a member of the UN General Assembly and most major UN
agencies, and it has served three terms as a 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 Rio
Group.  Although it was suspended from the Latin American Economic
System (known informally both as the Group of Eight and the Rio Group)
in 1988, due to its internal political system under Noriega, Panama was
re-admitted in September 1994 as an acknowledgment of its present
democratic credentials.  Panama is also one of the founding members of
the Union of Banana Exporting Countries and belongs to the Inter-
American Tropical Tuna Commission.

It is an active participant in Central American regional meetings and
endorses Central American integration efforts.  Panama is a member of
the Central American Parliament (PARLACEN) as well as the Central
American Integration System (SICA).  The government is also taking steps
to join the Central American Development Bank.  Panama has requested
GATT accession and has already taken many of the key procedural steps
necessary for membership.

Panama strongly backed efforts by the United States to implement UN
Security Council Resolution 940, designed to facilitate the departure of
Haiti's de facto authorities from power.  Panama offered to contribute
personnel to the Multinational Force, which restored the democratically
elected government to Haiti in October 1994, and granted asylum to the
former Haitian military leaders.