Panama's Canal: The US Departure and Panama's New Era

By Chantziara, Thalia | Harvard International Review, Summer 1998 | Go to article overview

Panama's Canal: The US Departure and Panama's New Era


Chantziara, Thalia, Harvard International Review


On December 31, 1999, while the rest of the world will be celebrating the arrival of the new millennium, Panama's attention will be focused on noon and the return of the Panama Canal to its control.

But as American troops gradually evacuate the area in preparation for the final handover, both the United States and Panama seem to be reconsidering the issue. Despite expressed misgivings about the withdrawal, the handover that will mark the beginning of a new era for Panama is probably for the best.

According to the original treaties, US sovereignty over the Canal area was to be "in perpetuity." Indeed, the United States controlled the Canal since its completion in 1914 as a nonprofit, international utility until the 1960s, when anti-American riots in Panama forced Washington to start negotiating its withdrawal. In 1977, treaties between Panama General Omar Torrijos and United States President Jimmy Carter established a gradual transfer of sovereignty from the United States to Panama over the former Canal Zone and the operation of the Canal itself. This included the handover of all ten US military bases along the canal and the withdrawal of the 7,000 troops which were stationed there at the time. In 1979, the Canal Zone was considered Panamanian territory again; that same year, the administration of the Canal was assumed by a commission whose board consisted of four Panamanians and five Americans. Today, the administrator as well as the majority of the Board, the managers, and the commission's workforce are Panamanian. The US military presence is already decreasing. By the end of 1997, only 4,000 American soldiers remained there.

Panamanian ex-President Nicolas Ardito Barletta, head of the Inter-Oceanic Regional Authority (ARI), is responsible for the assimilation of the former Canal Zone into Panama. With the gradual withdrawal of US forces, Panama has taken control of the area of Balboa, adjacent to Panama City. This control has several advantages, such as a low density of construction, a beautiful setting, and space for middle-class housing. Also, Panama has registered many ships under its flag and has already established a duty-free zone at Colon, which is the Atlantic port.

Nevertheless, it seems that the handover may not be irreversible, as members of both parties have expressed their will for the Americans to prolong their stay. Recent polls indicate that about 70 percent of Panamanians, including Panama's current president, Ernesto Perez Balladares, would favor the extended deployment of US forces. In the United States, voices as diverse as Ronald Reagan and Bill Clinton have expressed an interest in negotiating a further stay of the troops, as have US Secretary of Defense William Cohen and GeneralWesley Clark, Commander of the US Southern Command. Reconsideration is grounded in the continuing importance of the Canal. As far as commerce is concerned, four percent of all world trade and 14 percent of US trade passes through it, while the waterway yields US$500 million in revenues per year. The canal may not be as strategically important as it once had been, but it remains the best route for moving warships between the Atlantic and the Pacific.

Both sides have valid reasons to want the troops to stay, but Panama's change of viewpoint since the 1960s can be attributed to economic reasons. The local spending by those who are associated with the US military troops in Panama is estimated to be around five percent of the country's GDP, which would be lost with the final withdrawal. In addition, approximately 16,000 jobs would be lost. Overall, the US contribution to the economy of Panama dropped from US$161 billion in 1995, to an estimated US$58 billion in 1998, and will drop to nothing in 2000. In addition, maintaining the military bases along the Canal is very costly, and it is not certain that Panama can carry this economic burden in the future.

The United States, in turn, has a variety of vested interests in the Canal Zone, both economic and political. …

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