PANAMA: POLITICAL PROSPECTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90R00961R000700100001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 23, 2016
• Document Release Date: February 25, 2013
• Sequence Number: 1
• Publication Date: July 1, 1986
• Content Type: SNIE

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Director of _eeri?t"
Central
Intelligence
FA$TER FILE COPY
_~ _n,~yr rQ.iuG m OUT
Panama: Political Prospects
Special National Intelligence Estimate
ret
SNIE 84-86
July 1986
494
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THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL
INTELLIGENCE.
THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS.
The following intelligence organizations participated in the preparation of the
Estimate:
The Central Intelligence Agency, the Defense Intelligence Agency, the National Security
Agency, and the intelligence organizations of the Department of State, and
the Treasury
Also Participating:
The Assistant Chief of Staff for Intelligence, Department of the Army
The Director of Naval Intelligence, Department of the Navy
The Assistant Chief of Staff, Intelligence, Department of the Air Force
The Director of Intelligence, Headquarters, Marine Corps
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SN I E 84-86
PANAMA: POLITICAL PROSPECTS
Information available as of 10 July 1986 was used in the
preparation of this Estimate, which was approved by the
National Foreign Intelligence Board on 10 July 1986.
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CONTENTS
Page
SCOPE NOTE ...................................................................................... 1
KEY JUDGMENTS .............................................................................. 3
DISCUSSION ........................................................................................ 7
The Delvalle Government ................................................................ 7
Military-Party System of Control ............................................... 10
The PDF as an Institution ............................................................ 11
Gen. Manuel Antonio NORIEGA Moreno ................................. 11
The Government Coalition ......................................................... 12
The Opposition ................................................................................. 12
Labor, Business, and the Church ................................................ 12
Students and the Left ................................................................... 14
Soviet-Cuban Links ........................................................................... 15
Outlook and Alternative Scenarios .................................................. 15
Key Variables .................................................................................... 16
Impact on US Interests ..................................................................... 16
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uranae -~----
t._,,? Pan; ma
CHIRIQUI '.? Penanami
l );PROVINCE
0 50 Kilometers
0 50 Miles
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SCOPE NOTE
The United States has an important interest in the stability of
Panama and the prospects for a successful and complete democratic
transition. President Eric Arturo Delvalle is scheduled to be replaced in
new elections in 1989. He serves primarily at the sufferance of powerful
Defense Forces Commander General Noriega, and the civilian political
process remains vulnerable to military pressure and manipulation. This
Estimate examines the political prospects for Panama over the next
three years, including civil-military relations and the main contenders
for future rule.
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KEY JUDGMENTS
The Panamanian military, in alliance with the ruling Democratic
Revolutionary Party, is almost certain to retain political control of
Panama through the scheduled 1989 elections. We believe US strategic
interests in Panama during the period-including access to the Canal,
use of defense facilities, and support for US activities in Central
America-would be little affected by such a scenario. US interests
would probably suffer, however, if the internal system of control were
to become increasingly repressive and authoritarian. This probably
would cause somewhat greater instability and provoke increased anti-
American sentiments.
We believe that Defense Forces Commander, Gen. Manuel Nor-
iega, will be able to hold on to his command until 1989, but, even
should he depart, there is not likely to be a substantial reduction in the
political influence of the military. A commander less capable than
Noriega might be forced to leave somewhat greater political space for
civilians, but the military will remain Panama's political arbiter:
- We believe the involvement of members of the military in
various corrupt activities, including assistance for illegal arms
shipments, protection of drug dealers, and association with
Cuban front companies circumventing the US embargo, is likely
to continue. General Noriega may be making some effort to halt
arms trafficking and narcotics dealings in response to outside
pressure, but it remains to be seen if these moves prove more
cosmetic than real over the longer term.
- The populist image of the military and the ruling party could
fade considerably if they are viewed as becoming too corrupt
and unresponsive to popular needs, setting off a spiral of
resistance and repression to maintain the system.
- Nevertheless, the general population is largely apathetic about
politics, and we believe that Noriega is sufficiently astute to
keep corruption within bounds and to coerce and co-opt any
significant opposition to his and the military's dominance
without provoking massive popular unrest.
There is a substantially less than even chance that the military's po-
litical role will diminish sharply, clearing the way for a full transition to
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democratic civilian rule in the 1989 elections. Such a scenario would be
most conducive to the protection and furtherance of US interests in
Panama, given the relatively moderate political orientation of any party
likely to win in 1989. Nevertheless, even a democratic, pro-US govern-
ment is unlikely to be able to eliminate the extensive system of
corruption in Panama
A military coup is even less likely between now and 1989. Such a
coup would seriously complicate US policy interests toward Panama by
undermining US efforts to encourage democracy in the region, and by
making US bilateral cooperation politically difficult.
A sharp turn to the left in Panama appears to be the most unlikely
scenario, because a leftist officer such as Chief of Staff Diaz Herrera has
little chance of becoming commander of the military. The military has
become more conservative in recent years, and it has co-opted most of
the radical left. The military also wants to ensure that it can peacefully
take over the Panama Canal by 2000. Although such a shift is unlikely,
it nevertheless would represent the greatest threat to key US interests in
Panama.
President Eric Arturo Delvalle serves at the sufferance of General
Noriega and the military, and they would like him to serve out his term,
which runs until 1989. His continuance in office helps preserve what re-
mains of the image of democratic, civilian rule, and Delvalle wants to
avoid a move by the military to replace him:
- The military does not trust Vice President Roderick Esquivel
and is opposed to allowing him to assume the presidency should
Delvalle have to step down for health or other reasons.
- If Delvalle had to resign, the military would probably block
Vice President Esquivel's succession and either call for new
elections or install a caretaker government until 1989.
The military would prefer not to have new elections, however, as
long as key opposition leader Arnulfo Arias is capable of running:
- The aging Arias was cheated out of an election victory in 1984
by Noriega and the ruling party, and he could probably win an
honest contest if one were held.
- In the absence of Arias, the opposition coalition might well
crumble and, in any event, probably would do poorly in a clean
election.
- It is difficult to predict who would be the government's
candidate. The military would have the final say, and Noriega
will probably keep his own options open.
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Delvalle has been successful in pushing through economic reforms
and securing new international funding, but he is unlikely to be able to
greatly stimulate the stagnant economy, and unemployment may
become a political problem. Panama also has a large foreign debt-
some $3.7 billion. Debt servicing, even under reschedules, remains a
problem, given the tight fiscal situation and conditions required to
obtain external financing. Thus, the benefits of the substantial US
presence and the need for continued US financial assistance provide a
strong incentive for continued cooperation and good relations on the
part of Panama at least through 1989.
If Noriega perceives US pressure to end corruption and move the
military out of politics as being excessive he could retaliate by
hampering US military activities in Panama and by
manipulating his relationship with the domestic left and the Soviet
Union and Cuba to his own advantage. The government would also be
likely to appeal to Panamanian nationalism, claiming that the United
States was attempting to renege on the Panama Canal Treaties.
The Soviet Union has a commercial presence in Panama but no
formal diplomatic relations, and so far has been denied Aeroflot landing
rights and port basing rights for its Pacific fishing fleet:
- Cuba has diplomatic relations with Panama and maintains a
large commercial presence through numerous front companies
designed to circumvent the US embargo. Havana is also behind
many illegal arms shipments through Panama destined for
regional insurgents, and the Panamanian Defense Forces (PDF)
reportedly cooperate in return for a price and assurances that
Cuba will not support internal subversives.
- Libya has diplomatic relations with Panama, but Noriega keeps
a close watch on Libyan activities in order to guard against
potential terrorist incidents.
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DISCUSSION
The Delvalle Government
1. Eric Arturo Delvalle became President of Pana-
ma following the forced resignation of President Nico-
las Ardito Barletta in late September 1985. A former
World Bank official, Barletta had been the candidate
of the ruling Democratic Revolutionary Party (PRD)
and the Panamanian Defense Forces (PDF) in the
election of May 1984. This election, the first in 16
years, was tainted by evidence of fraud to prevent
victory by principal opposition candidate Arnulfo
Arias, a longtime foe of the military. Despite Barletta's
selection by PDF Commander General Noriega as his
personal choice, his political ineptitude and economic
policies gradually alienated his military backers and
the six parties of his government coalition, as well as
the labor and business sectors. The catalyst for his
removal, however, was the murder, probably by mem-
bers of the PDF, of Dr. Hugo Spadafora, a professional
revolutionary and longtime critic of General Noriega.
The incident precipitated a brief, unsuccessful bar-
racks move against Noriega, as well as calls for an
independent inquiry into the crime. Barletta rejected
an independent commission, but may have angered
the PDF by insufficient zeal in stonewalling on the
investigation. In any case, the incident brought to a
head widespread dissatisfaction with Barletta among
the PRD and PDF, and on 28 September 1985 Barletta
resigned under intense pressure from party, Cabinet,
and military leaders led by Noriega. Vice President
Delvalle succeeded him.
2. Delvalle's primary task on taking office was to
restore Panama's economic health and enact contro-
versial structural economic reforms required by inter-
national lenders. Barletta, a well-known international
economist, had failed in this task when he was unable
to secure the cooperation of the government-con-
trolled legislature or the major labor unions for his
program. With the complete support of the govern-
ment coalition and the military, the Delvalle adminis-
tration was able to pass, in March 1986, a revised
economic reform program required by the World
Bank as a condition for agreement on a structural
adjustment loan. The government was able, with
military assistance, to end the resultant labor strife.
Employment by Sector-1985
Defense Forces
the Republic
Manufacturing 10 of Panama [PDF
30
Services 24 Agri-Mining 29
World Bank approval of these measures will entitle
Panama to new money, allow implementation of its
commercial bank debt rescheduling, and help reorient
its state-dominated economy (see inset)
3. Delvalle, a member of the small, conservative
Republican Party in the ruling coalition, has cooperat-
ed closely with the PDF, Panama's ultimate political
broker, and with the major government coalition
parties. Passage of the crucial economic reforms has
strengthened his political position. Moreover, Delval-
le's actions, unlike Barletta's, have not galvanized
widespread opposition to the government or alienated
supporters. PDF and PRD leaders have been pleased
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Panama's economy in recent years has been charac-
terized by slow growth and stagnant employment.
Annual growth over the past five years has averaged less
than 2 percent, and will probably be slow for the next
several years. New jobs have been created at an annual
rate of 4.5 percent, but the labor force is growing by 5.4
percent, or about 25,000 persons each year. Until very
recently the government has been the employer of last
resort, and now provides 30 percent of all employment.
Despite government efforts, unemployment-concen-
trated in urban areas around the Canal-may now be as
high as 20 percent.
Unemployment is endemic to Panama's high-wage,
service-oriented economy, but it has not yet become a
major political problem for the government. If the
government follows through on recent commitments
made to the World Bank to eliminate 3,000 government
jobs this year and to divest or close five state enterprises,
unemployment may become more of a political prob-
lem. Economic activity in the former Canal Zone and
the Colon Free Zone is not likely to pick up the slack,
and the reform measures are unlikely to stimulate
significant increases in private-sector growth or in the
export of goods over the short term. To avoid being
squeezed between loyalty to public-sector employees
and commitments to the World Bank, the government
may try to delay reducing its work force until private-
sector economic activity picks up~
The government's incipient compromise with the
World Bank has greatly enhanced its opportunities to
secure the foreign financing it needs. Panama's loans
are interlocking. The delay in negotiating a second
World Bank Structural Adjustment Loan (SAL) held up
disbursements from a $60 million commercial bank
loan and ensured that Panama would miss its IMF
program targets. If the SAL is completed and disburse-
ments resume from the commercial banks later this
year, Panama should be able to avoid the fiscal problem
it has experienced over the last few years. The prospect
of continued slow growth and the likely need for
additional credit over the next few years will be an
incentive for improved relations with the United States
and with international creditors.
Because Panama's financial system uses the dollar as
legal tender, the government cannot print money to
cover its budget deficits. If external financing is un-
available, the government must cut expeditures or raise
revenue. Limited financing thus restricts the govern-
ment's ability to be an employer of last resort and forces
it to trim government waste, to reduce corruption, and
to diminish its social welfare role. Panama's foreign
debt is high-$3.7 billion, 78 percent of GDP. Panama's
commercial bank rescheduling in October 1985 re-
duced projected debt service for 1986 to around $570
million, which would be only about 33 percent of
exports of goods and services. Nevertheless, without
rescheduling in 1987 and 1988, debt servicing will be
about $1 billion per year.
Panama's economic situation is aided by the decline
in both world oil prices and the strength of the dollar.
An average oil price of $15 per barrel for 1986 would
mean net current account savings of at least $115
million over earlier estimates, but could adversely affect
operations of the transisthmian oil pipeline. The pipe-
line is Panama's largest capital investment outside the
Canal. Continued low prices may cause the US oil
companies to request another cut in pipeline charges,
thus lowering the government's revenue, but low prices
do not threaten the viability of the pipeline. As the
dollar declines, Panama's efforts to develop nontradi-
tional exports will be helped, but Panama's high labor
costs-exacerbated by the wage structure of the former
Canal Zone-will continue to impede development of
labor-intensive exports.F___1
with his performance thus far, and now believe that
Delvalle will complete his term. Successes aside, how-
ever, Delvalle ultimately enjoys no more protection
than did Barletta from dismissal by the PDF. This
limits Delvalle's freedom of action and encourages a
degree of sensitivity to PDF preferences that under-
mines Panama's pretentions of democracy.
4. Delvalle is frustrated by Noriega's dominant
influence, but he and the military both benefit from
their partnership. From the PDF's perspective, Del-
valle preserves the appearance of democratic, civilian
rule while insulating the PDF from direct responsibil-
ity and public criticism for controversial government
measures. In addition, Delvalle, a conservative busi-
nessman, projects a positive image of Panama interna-
tionally. Finally, Delvalle's constitutional successor,
Vice President Roderick Esquivel, reportedly is so
unacceptable to the PDF that he would probably not
be allowed to serve. Noriega would be likely to opt for
an interim government, which would probably either
call for new elections or act as a caretaker government
until 1989. Thus the PDF and the PRD would like
Delvalle to serve the remainder of Barletta's five-year
term. For his part, Delvalle is trying to strengthen
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Panamanian Economic Trends'
Panama - Gross Domestic Product (GDP) Growth
Percentage Change
Consolidated Public- Sector Deficit
Percentage Share of GDP
1985 estimated.
1986 projected.
Consumer Price Inflation
Percentage Change
Foreign Debt Service Obligations
Percentage of Exports
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civilian government and avoid a move by the military
to replace him. At the same time, Delvalle is maneu-
vering to expand the political base of his party and to
improve the prospect for another Republican Party
president in 1989.
Panamanian Legislature by Party
Number of seats
National Republicans 3
Military-Party System of Control
5. The PDF is Panama's dominant political force.
Although constitutionally subordinate to the president,
General Noriega has been and remains Panama's chief
political arbiter. The PDF has little desire to assume
direct responsibility for governing Panama, but it
distrusts civilians and wants to retain a strong influ-
ence on decisionmaking to protect its institutional
interests. The military's predominant role in politics
was defined and institutionalized under former strong-
man and National Guard Commander Omar Torrijos.
The Torrijista military ruled Panama without elections
for 16 years, from 1968 until 1984, although Torrijos
himself died in 1981. Torrijos pushed the PDF's
predecessor, the National Guard, into a populist, mod-
erate-leftist embodiment of Panamanian nationalism
and a force for civic action and state-led economic
development. The military has become more conser-
vative in recent years, particularly under Noriega (see
annex A)
6. The military now prefers to govern indirectly in
close cooperation with its civilian allies. Officers as-
signed to provincial posts are encouraged to learn to
work with civilian officials, while general staff mem-
bers are strongly encouraged to be aware of national
political, social, and economic problems. Military zone
commanders, who are supposed to work closely with
local officials, usually have more authority and respon-
sibility than provincial governors. The military also
fills some of the government's advisory and ambassa-
dorial positions, and retains civilian advisers from
Panama's left-of-center political parties
7. Chief among the PDF's civilian allies is the PRD.
Created by Torrijos in 1978 on the model of Mexico's
ruling political party, the PRD is a populist party that
spans a broad political spectrum from conservative
businessmen to leftist students. United initially by
Torrijos's charisma and his populist-nationalist "revo-
lution," the PRD is increasingly held together by a
strong desire to remain in power. Its dominant ele-
ment is center left, but ideology counts for little and
economic constraints are moving it increasingly to-
ward the center. The party's main bases of support are
rural workers, urban labor, and middle-class govern-
ment employees. Its modus operandi is to co-opt those
sectors of society willing to accept party direction in
Republican
Liberal
Movement
(MOLIRENA)3
Christian
Democratic
Party (PDC) 5
Labor Party
(PALA) 7
Authentic Democratic
Panamenista Revolutionary
Party (PPA) 14 Party (PRD) 34
return for a share of the spoils. The PRD is the
dominant party in the six-party goverment coalition,
holding 34 of 67 seats in the legislative assembly and
six of the 11 Cabinet ministries (see chart)
8. The PRD coordinates closely with the PDF on all
policy matters, and accepts the military's predominant
role in key political issues. Party leaders are in regular
contact with Noriega and the PDF high command.
The party has some latitude in internal decisionmak-
ing, but the PDF high command has the final say on
all important issues such as choosing the party's nation-
al directorate or presidential candidate. The PDF also
mediates internal party disputes and balances the
competing demands of the party's disparate elements.
PDF control of the purse strings is an important means
of influence on the PRD. PRD moderates believe the
party can eventually decrease its dependence on the
PDF by developing independent fund-raising mecha-
nisms
9. The PRD-PDF's long-term goal is to retain con-
trol of the government when the Canal is turned over
to Panama in 1999. To achieve this, the PRD plans to
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institutionalize its dominant position, beginning pref-
erably with a victory over a disunited opposition in an
honest presidential election in 1989. The PRD-PDF's
perceived need to project a democratic image and its
sensitivity to US criticism over political corruption will
encourage the fielding of a respectable candidate such
as the PRD's Tomas Gabriel "Fito" Altamirano Duque
or Republican Party stalwart Dominador "Kaiser"
The PDF as an Institution
10. The PDF considers itself Panama's most effi-
cient, concerned, and nationalistic government institu-
tion. Its members are intensely loyal to the institution
and, to a lesser degree, its commander. In the middle
and upper levels of the officer corps, a "Mafia" style
of management prevails where loyalty is rewarded
and a code of silence honored. Because the PDF values
loyalty to the institution over personal integrity or
honesty, it protects and privately disciplines its own-
usually mildly. When threatened or during times of
crisis, the PDF closes ranks to protect the institution
and its members from civilian pressure, as occurred
after the murder of Spadafora. The PDF would be
highly unlikely, for example, to permit civilian prose-
cution of members accused of abuses committed over
the last 17 years of military rule. In this regard, it
watches with great interest the fate of the armed
forces in other Latin American countries that have
been returned to civilian rule.
11. Highly image conscious, the PDF wants to be
perceived at home as a force that maintains order
while promoting economic development and social
justice, and abroad as a professional institution capable
of both defending the Canal and fostering democrati-
zation. The PDF does not want to be isolated in a
hemisphere where the trend is from military to civil-
ian government. The PDF's attempts to hold on to
some of its populist image at home and its efforts to
gain credibility internationally have been badly dam-
aged by widespread allegations of corruption, involve-
ment in arms and drug trafficking, ties to regional
insurgents, and responsibility for the
very sensitive to the fact that these allegations have
invited intense and unwelcome US scrutiny that could
put in jeopardy US treaty commitments to modernize
its forces.
12. Beyond question, Panama has become a major
transshipment and money-laundering site for drug
dealers. Individual PDF officers have been involved,
although we do not have solid evidence that the PDF
as an institution engages in or protects the narcotics
traffic. There have been numerous reports of Norie-
ga's personal involvement in narcotics trafficking, but
the evidence is circumstantial. Noriega has ordered a
halt to arms trafficking and may be more cooperative
with the United States on narcotics and money-
laundering matters. Unless reinforced by continued
US and Colombian pressure, however, these changes in
behavior could prove more cosmetic than substantive.
Gen. Manuel Antonio NORIEGA Moreno
13. Commanding General Noriega currently enjoys
the dominant position historically assigned to the
commander of the Panamanian military. As PDF
Commander, Noriega automatically has the institu-
tional loyalty of most of the military and the majority
of the PRD, but he does not command the same wide
personal following that Torrijos had. Noriega recog-
nizes that he lacks Torrijos's charisma, but appreciates
the continued effectiveness of his predecessor's tactics
and rhetoric in balancing competing political interests
within both the military and the PRD. Noriega's brand
of "Torrijismo" has been cynically pragmatic, retain-
ing the populist leftist-nationalist rhetoric, while mov-
ing the PDF and the PRD increasingly toward the
center right, particularly in economic policy (see
annex A).
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14. Noriega's chief competitor within the PDF
remains Col. Roberto Diaz Herrera, currently Chief of
Staff. A protege and first cousin of Torrijos, Diaz has
his own personal and family network of support,
making him a powerful political figure in his own
right. Diaz is close to Havana, an admirer of Castro,
and more ideologically leftist than most PDF officers.
Nevertheless, Diaz has served past his mandatory
retirement date, and Noriega may force him to resign
within the next several months. He may then become
a high PRD official, despite the considerable influence
the Torrijos and Herrera families lost to Noriega 25X1
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15. Noriega's desire to exercise power may lead him
to run for office once his military career ends. We
believe he had previously planned to run for president
in 1989 after Barletta completed his term, and may
still entertain presidential ambitions. In the meantime,
with mandatory retirement facing him in January
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1987, Noriega is expected to remain as PDF com-
mander by engineering a waiver from the Legislative
Assembly. An alternative option would be for him to
create and head a, ministry of defense, which we
believe is less likely.
16. If he aspires to the presidency or ministry of
defense, Noriega needs to influence the PDF after he
retires. Unlike the charismatic Torrijos, Noriega's pow-
er derives chiefly from his position as PDF Command-
er, and traditionally PDF commanders have lost all
authority when they retire. This was the case, for
example, with former Commander General Paredes.
Noriega has probably not made up his mind about the
presidency, but will want to keep his options open.
17. Noriega's departure as PDF Commander would
not substantially reduce the military's continued politi-
cal influence. PDF officers adapt quickly to changes
of command, transferring their loyalties to the new
leadership. Although Noriega has not yet designated a
successor, the main contenders are Col. Alberto Pur-
cell, G-5, and Col. Elias Castillo, G-3. Castillo report-
edly is the most professional of the senior officers.
Purcell, a strong Noriega loyalist, distrusts the United
States and believes the military is the chief instrument
of national reform. Lt. Col. Eduardo Herrera Hassan,
currently Ambassador to Israel, is a wild card. He is
reputedly an independent and the most talented of the
PDF officers, and Noriega has kept him away from
the general staff, perhaps for just those reasons.
18. With or without a change of command, the
PDF will almost certainly remain Panama's primary
political decisionmaker for at least the next several
years. It does not trust the country's civilian politicians
to solve key national problems or to protect what the
PDF sees as its own institutional interests. A com-
mander less capable than Noriega might leave slightly
greater political space for civilians, but there is no
indication the PDF will withdraw voluntarily from its
political role or that a coalition of nonmilitary forces is
forming that is capable of removing the PDF from its
self-appointed role as political arbiter.
The Government Coalition
19. The National Democratic Union (UNADE), the
six-party governing coalition, is a fractious group of
disparate parties that cooperate with the PDF and the
PRD (see inset). Access to political spoils holds together
the coalition, with the minor parties competing for
those Cabinet posts with the greatest patronage, that is,
housing, social security, and public welfare. Rivalries
within UNADE have resulted in periodic Cabinet
reshufflings that redistribute access to political spoils
and realign party influence in the government. Con-
tinual readjustment of access to the spoils helps accom-
modate competing interests and thereby contributes to
the stability of the government.
The Opposition
20. The opposition is a fragmented collection of
political parties, splinter groups, civic organizations,
and unaffiliated individuals. The chief weakness of
Panama's political system is the immaturity of its
institutions and the general political apathy of much of
the population. Most parties, including those of
UNADE, do not have a clearly recognizable ideology
or program. They serve principally as vehicles for the
personal aspirations of their leaders or as economic
interest groups. With the exception of the Christian
Democrats, all the opposition parties fit into this
category. Generally, the opposition parties cooperate
in antigovernment efforts such as attacks on alleged
PDF corruption and human rights violations, but they
do not share strong ideological or programmatic posi-
tions.
21. The chief opposition parties-the Authentic
Panamenistas (PPA), the Christian Democrats (PDC),
and the Nationalist Republican Movement (MOLIR-
ENA)-united to form the Opposition Democratic
Alliance (ADO) for the elections in May 1984. The
ADO presidential candidate, rightwing populist Ar-
nulfo Arias, would have won a narrow victory had it
not been for fraud, and ADO's three member parties
won 22 of 67 seats in the Legislative Assembly. Since
the elections, the three ADO parties have not acted
jointly to challenge the government or to organize for
the next election. Nonetheless, Arias's popularity is
such that he would be able to mobilize a considerable
following if he became more politically active.
Labor, Business, and the Church
22. Panama's small, primarily urban, labor move-
ment is divided along ideological and personalistic
lines. Only 17 percent of the work force is unionized.
Labor's interests are ineffectively represented by the
National Council of Organized Workers (CONATO), a
loose confederation, to which 85 percent of private-
sector trade unions belong. CONATO's largest mem-
ber organization is the Confederation of the Workers
of the Republic (CTRP), a moderate democratic orga-
nization with links to the AFL-CIO, but CONATO
spans the political spectrum from democratic to Com-
munist. Typical of CONATO's ineffectiveness was a
10-day strike in March 1986 to protest a government-
proposed reform of Panama's liberal labor code. Union
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Major Political Parties
The PRD dominates UNADE, controlling 34 of 67
Legislative Assembly seats and six of 11 ministries. The
PRD's junior partner is the Labor Party (PALA), which
holds seven assembly seats and controls key patronage
Ministries such as Public Works and Labor. The PALA
received 7.1 percent of the 1984 vote in contrast to the
PRD's 27.4 percent. Unlike the PRD, which favors a
strong role for the state in the economy and social
welfare, PALA is primarily a conservative busi-
nessman's party. PRD moderates consider PALA their
conservative wing, and would consider bolting to PALA
if the PRD's left wing were to become too powerful or
too unwilling to compromise. The PALA is split be-
tween a pro-Noriega faction, led by Noriega's brother-
in-law, Ramon Sieiro, who is secretary general, and a
somewhat independent faction led by businessman
Carlos Eleta. Although Noriega reportedly has less
control over PALA than over the PRD, he could
conceivably use a restructured PALA as his political
vehicle if he were to run for president.
President Delvalle and Vice President Esquivel come
from two of the smallest, least influential parties in the
UNADE coalition, a fact that severely limits their
manuevering room. Delvalle's conservative, pro-US Re-
publican Party has only one Ministry-Commerce-
and received only 5.4 percent of the 1984 vote. Esqui-
vel's centrist Liberal Party has two Ministries-Justice
and Economic Planning-and garnered 4.4 percent of
the vote in 1984. To the extent Delvalle proves to the
PRD that the Republicans are a valuable asset, the
prospects that party colleagues, such as Kaiser Bazan,
Ambassador to the United States, will be chosen for the
government's next presidential ticket could be en-
Strongest among the opposition parties is the populist
Authentic Panamenistas (PPA), led by charismatic octo-
genarian and three-time president Arnulfo Arias. The
PPA occupies 14 of 67 seats in the Assembly and is
arguably the most popular party in Panama, having
received 35 percent of the disputed 1984 vote. Highly
personalistic, the PPA coalesces only when Arias chooses
to act or runs for office. Lacking a specific program or
ideology, it is united only by Arias's personal charisma
and his celebrated defiance of the military. When
Arias's unifying presence disappears because of death or
incapacitation, the PPA is likely to break up, with the
majority of his followers-primarily rural lower- and
middle-class workers-gravitating to the equally popu-
list PRD or PALA. Some may also move to the Christian
Democrats or abstain from political activity altogether.
Tightly organized and strongly ideological, the Chris-
tian Democratic Party (PDC), led by Ricardo Arias
Calderon, is a middle- and upper-middle-class reformist
party that sees itself as an alternative to the current
government. Anti-Communist and an advocate of ex-
panding the democratic process in Panama, the PDC
has been a relentless critic of the military and the
government, which it considers illegitimate. PDC criti-
cism has been intended to provoke a governmental
crisis in the hope that the PDC will be called by the
people to take power. For this reason, the PDF and the
PRD see the PDC as a major long-term threat and
worry about the PDC's attempts to develop ties to
junior officers.
The PDC's chief liability lies in its limited mass
appeal-only 7.3 percent of the vote in May 1984. This
is partly because of its image as a center-right, upper-
class, intellectual movement, as well as its ties to
regional and international Christian Democratic groups
considered "un-Panamanian." In addition, the PDC's
emphasis on organization has made the party somewhat
reluctant to develop a mass base. Aware of its weakness-
es, the PDC will probably make adjustments to expand
its appeal and its membership, because-as presently
organized-it is unlikely to win a free election in 1989
or sooner. PDC leaders readily admit that they are
presently incapable of winning the presidency on their
own and would have to form a coalition with Arias's
PPA to gain political power.
Another potential force is the National Liberal Re-
publican Alliance (MOLIRENA), which is an amalgam-
ation of some new political figures and smaller political
parties active before the 1968 Torrijos revolution. The
center-right party is business based and largely nonideo-
logical beyond a certain distaste for military interfer-
ence in politics. With 4.8 percent of the 1984 vote, it
has four seats in the Legislative Assembly ancould
contribute significantly to a coalition of parties. )
The Popular Action Party (PAPO) is a small, left-of-
center, adamantly antimilitary, nationalist party that
received only 2.2 percent of the valid vote in 1984 and
thereby lost its legal status. PAPO has strong ties to the
chief opposition paper, La Prensa. Despite its size,
PAPO's leadership was instrumental in spearheading
the anti-PDF National Coordinating Board for Civilian-
ization (COCINA). An umbrella group of professional
organizations, COCINA staged massive protests that
helped to undermine not only Barletta's October 1984
economic package but also his administration.
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indiscipline, strong PDF pressure on union leaders,
and PDF control of the transport workers prevented
the strike from gaining momentum. Although the PDF
does not completely control the labor movement, it
controls key unions and has plans to expand its labor
influence, especially in areas considered vital to public
order and national security, such as the petroleum
industry.
23. No single political party serves as the sole or
dominant vehicle for expressing the economic and
other interests of Panama's private business sector.
MOLIRENA, Labor Party (PALA), and the small
Republican and Liberal Parties are based largely in
the business community, and a "businessmen's front"
is influential in the PRD. Although generally apoliti-
cal-perhaps due to the broad consensus in Panama on
the role and importance of the private sector-busi-
ness groups lobby the government to protect their
specific interests. Common private-sector interests vis-
a-vis labor and government intervention in the econo-
my are formally represented by the National Free
Enterprise Council (CONEP)-a confederation of
smaller groups representing a variety of business inter-
ests including the Chamber of Commerce. In October
and November 1984, for example, CONEP joined the
antimilitary National Coordinating Board for Civilian-
ization (COCINA) to protest Barletta's proposed tax
increases.
24. The Catholic Church traditionally has not been
involved in politics, and under the leadership of
Archbishop Marcos Gregorio McGrath is unlikely to
change. The church is more conservative than in many
other Latin American countries, and lacks a strong
radical wing. It has not remained silent, however, on
issues of human rights and social justice. It criticized
the fraudulent May 1984 election, joined with the
Papal Nuncio to press for an effective inquiry into the
September 1985 Spadafora murder, and will probably
continue to speak out on human rights issues. Despite
PDF and PRD distrust of McGrath, the church's role
as a neutral political actor makes it a potential candi-
date to mediate between the government and opposi-
tion or between the military and civilians.
Students and the Left
25. Panamanian high school and university students
make up a volatile group that sees itself as a vanguard
representing middle- and lower-class interests against
the military and government. There are numerous
ultraleft, antigovernment, anti-US national student
organizations and splinter groups. Chief among them
are the Revolutionary Student Front November 29
(FER-29), the Panamanian Student Federation (FEP),
which has close ties to the PRD's far-left wing, and the
Guaykuchos. Much of the student movement was co-
opted by Torrijos, but military-student relations have
deteriorated since the late 1970s. Noriega's PDF is
now making a concerted effort to reassert control over
the student movement by placing its hand-picked
candidates in key posts in local student groups and by
expanding contacts with the national organizations.
26. The most influential leftwing group in Panama
is the far-left wing of the ruling PRD known as
Tendencia. Tendencia began as the youth wing of the
Moscow-line Communist Party in the early 1970s and
was co-opted by Torrijos in the mid-1970s.
Most
of its funds come from front companies and the PDF-
PRD, but there are reports of donations from Libya,
Cuba, and Nicaragua. There are also reports of a rift
between younger activists and their more conservative
elders who favor continued cooperation with the PDF
and PRD. Tendencia politicians run as PRD candi-
dates and generally avoid Marxist rhetoric in domestic
political debates. Tendencia inclines toward a Third
World, anti-US, nonaligned foreign policy, and is pro-
Cuban and pro-Sandinista
27. Noriega has carefully manipulated Tendencia
since Barletta's ouster in an effort to control its
activities. Tendencia strongly supported the PDF's
coverup of the Spadafora murder and the ouster of
Barletta, and later received two key positions in the
PRD directorate. Tendencia legislators were com-
pelled to support the government's March economic
reform package, which hurt them with their constitu-
ents. Noriega has allowed Tendencia a higher political
profile to undercut leftist opposition to the increasing-
ly centrist government. Should Tendencia attempt to
enhance its position in the PRD too aggressively, it
would risk a strong reaction by Noriega and the more
moderate PRD majority faction, leaving it politically
isolated.
28. The Moscow-line Communist People's Party
(PdP), with some 2,000 active members, has close ties
to the PDF. The party lost its legal status after the May
1984 election because it received less than the re-
quired 3 percent of votes cast, actually polling less
than 1 percent. It is now trying various strategies to
regain its legal status. The PdP maintains contact with
Bloc and other Communist countries, and with Salva-
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doran insurgents. Although the party calls itself a
Torrijista party and claims its objectives are similar to
Tendencia's, the PdP is unwilling to align itself closely
with the PRD. Other small parties on the left include
the Central American Workers Party and the Socialist
Workers Party, neither of which attracted enough
votes in 1984 to retain its legal registration as a
Soviet-Cuban Links
29. Panama maintains diplomatic relations with
Cuba and Nicaragua, although not with the Soviet
Union. There are no official Soviet, East European,
Chinese, or Cuban trade missions in Panama. But the
Soviets have several dozen nondiplomatic personnel in
Panama to handle a Soviet news agency, shipping, and
a commercial outlet primarily for the sale of Soviet-
built vehicles. The Soviets are pushing for Aeroflot
landing rights and port basing rights for part of their
33. Panama has served as a transshipment point for
arms, cadre, and funds for various regional insur-
gents-particularly Colombia's M-19. Cuba is often
behind the shipments, and PDF officers reportedly
cooperate for a price and assurances that Havana will
not support internal subversives. The Colombian mili-
tary has formally complained to the PDF about arms
trafficking to Colombian insurgent groups through
Panama. Anxious to improve the PDF's image and
fearful of being implicated in the M-19's takeover of
Colombia's Palace of Justice in November 1985, Nor-
iega signed a cooperation agreement with his Colombi-
an counterpart in early March 1986 to counter arms
and drug trafficking, but it remains to be seen whether
the PDF will follow through over the long term.
Pacific coast fishing fleet.
30. Cuba has some 60 to 70 personnel in Panama
who work for CIMEX, a large Cuban trading compa-
ny that acquires goods denied Cuba under the US
trade embargo. CIMEX works in conjunction with
some 35 to 55 other front companies controlled in
varying degrees by the Cuban Government in associa-
tion with Panamanian partners. CIMEX and other
front companies probably serve as cover for Cuban
clandestine operations in Central and South America.
There is strong evidence that members of the PDF
high command, including Noriega, are involved in
Cuban front companies and other companies that do
business with Cuba.
31. Cuba and the Soviet Union actively recruit
Panamanians for study in Communist countries. More
than 600 students study in Communist countries each
year, and an estimated 5,000 Panamanians graduated
from Communist universities during the period 1973-
82. Most study agriculture, engineering, and medicine
and return to find employment in the public sector.
32. Libya maintains a major People's Bureau in
Panama to facilitate contacts with Panamanian leftists,
Colombia's M-19, Ecuador's Alfaro Vive, and regional
Caribbean leftists. Some Tendencia members were
reportedly trained along with M-19 cadre in Libya
from 1982 to 1984, but returned to Panama disillu-
sioned by the experience. Tendencia's relations with
Libya have cooled considerably since 1985. Some
student and ultraleft groups publicly support Libya's
anti-US stance and have staged small protests at the US
Outlook and Alternative Scenarios
34. We believe that the most likely political out-
come in Panama over the next few years is the
continuation of the current system of PRD-PDF con-
trol up to and after the 1989 election, with Noriega in
command of the military at least up to the election. If
the PDF holds corruption to tolerable levels and makes
necessary political adjustments, it may be able to
maintain this system without generating too much
domestic opposition and instability.
35. There is a substantially less than even chance
that the PDF's political role will diminish sharply,
clearing the way for a full transition to civilian,
democratic rule that might culminate in the 1989
elections. For this to occur would require at the very
least the departure of both Noriega and Diaz Herrera
and the emergence of a less politically oriented PDF
leadership, a resulting realignment of civilian political
actors, and the arrangement of a deal that would
protect the vital interests of the PDF once the civilians
had assumed control. Favoring this kind of transition
are the corrupt activities of Noriega and the PDF that
might provoke a strong antimilitary response among
civilians and encourage PDF officers to prefer institu-
tional withdrawal from power over permanent dam-
age to the military institution and its interests.
36. A military coup resulting in direct PDF exercise
of power is even less likely between now and 1989.
Under normal circumstances, the PDF is able to
protect its interests and what it perceives to be Pana-
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ma's national interests under the present governing
formula. A military coup might be precipitated if
sustained popular reaction to revelations concerning
PDF corruption is effectively exploited by the opposi-
tion or if the reaction results in Delvalle's refusal to
take the PDF's side or to help work out an accommo-
dation. The military might also take power before the
1989 election if Arias appears to have a prohibitive
lead and the PDF feared it could not prevent his
election by fraud0
37. A sharp turn to the left appears to be the most
unlikely scenario. Such a scenario would probably
have to involve Noriega's replacement by his second in
command and chief rival, Col. Diaz Herrera. Diaz
Herrera is much more to the left ideologically than
Noriega, and there appears to be little chance that he
can put together the type of leftist political-military
alliance necessary to shift Panama's domestic and
foreign policy significantly to the left
Key Variables
38. The degree of corruption of General Noriega
and most of the senior officer corps is a key variable
affecting the various alternative political scenarios.
The populist image of the PDF and the PRD could
continue to fade if they are viewed as becoming too
corrupt and unresponsive to popular needs, setting off
a spiral of resistance to the system and government
repression to maintain it. Nevertheless, we believe that
Noriega is sufficiently astute to keep corruption within
bounds and to coerce and co-opt any significant
opposition to his and the military's dominance without
provoking massive popular unrest.
39. Another key variable in the political outlook is
the fate of Arnulfo Arias. Arias demonstrated impres-
sive vote-drawing powers in the 1984 election, and
would have won had there been a legitimate count.
His nationalistic antimilitary message is well received,
and it will probably enjoy new appeal if there is no
halt to the expanding list of rumors and revelations
about PDF misdeeds. Arias is 84, however, and may
not be physically able to run in the 1989 contest-or
may not survive until then:
- The absence of Arias would probably help the
governing coalition. With no opposition figure to
weld together an opposition coalition in the
manner of Arias, the ruling UNADE would
probably be able to co-opt enough erstwhile
Arias supporters to ensure a fraud-free victory, a
development that would allow the PRD-PDF to
begin legitimately institutionalizing their contin-
ued rule. The chances of a popular opposition
figure emerging or being thrust forward by
events will increase if the PRD-PDF formula
performs badly economically, grows increasingly
unresponsive to popular demands, and sinks
deeper into corruption.
- The likelihood of electoral fraud or a military
coup would increase if Arias were a candidate in
1989. There is little chance that Arias would be
allowed to win or that he would be permitted to
serve a full term if he were inaugurated.
40. Another key variable is President Delvalle. Del-
valle could be forced into retirement by health or
political problems, possibly prompting at least a tem-
porary disruption in the PRD-PDF plan for continued
political rule. Vice President Esquivel is strongly
opposed by both the PDF and PRD, who do not trust
him. Assuming he could be convinced to step aside by
measures short of a military coup, new elections would
be constitutionally required if such events were to
occur before September 1987. After that date, a
caretaker regime could be installed to oversee affairs
until inauguration of the 1989 winner.
41. External pressure-particularly from the Unit-
ed States-could also have a significant impact on the
question of PDF involvement in politics. If, for exam-
ple, Panama were to be denied economic and military
assistance and become more isolated politically as a
result of continuation of the corrupt practices associat-
ed with Noriega's supremacy, PRD-PDF critics would
have important new leverage to use against the current
system. The government, on the other hand, would be
likely to appeal to Panamanian nationalism, claiming
that the United States, abetted by the opposition, was
trumping up a pretext to renege on the Canal Treaties
and keep the Canal.
42. A final key variable is the domestic economy.
Only moderate growth over the next few years, tight
government austerity measures, and rising unemploy-
ment are likely to cause some domestic unrest. Should
the economy turn drastically downward, the govern-
ment would probably be faced with greater worker
unrest, which could strengthen both opposition and
leftist elements within the PRD. This, in turn, would
increase pressure for another change in government
and for more direct military involvement before the
1989 election
Impact on US Interests
43. US interests in Panama would be best served
by a stable, friendly government, preferably one that
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is democratic. Specific US interests in Panama
include:
- Unhindered access to the Panama Canal for
military and civilian purposes.
- Official cooperation in the fight against drug
trafficking.
- Denial of Panama as a base for the support of
regional terrorism and insurgency and as a site
for Cuban and Soviet Bloc activities, particularly
those designed to undermine the US embargo
against Cuba.
- Economic stability and continued access for US
trade and investment.
- Continued Panamanian support for US policies
and activities in Central America.
44. Among the alternative scenarios discussed
above, the first, and most likely, the continuation of
the present system, involves little change for US
interests in Panama. This scenario would provide
sufficient stability to ensure protection of US strategic
interests in terms of access to the Canal, maintenance
of access to defense facilities, and support for US
activities in Central America. Specific problem areas
would remain with respect to certain issues, however,
such as money laundering, arms, drug trafficking, and
PDF machinations with Cuba:
- US interests would probably suffer if the Noriega-
led system of PRD-PDF control became increas-
ingly repressive. Critics would probably attack the
United States for allegedly supporting, or not
forcing out, such a government. Not only would
the system become less stable as it became more
authoritarian, but anti-US sentiment-never diffi-
cult to arouse in Panama-would remain as a
latent threat to US interests, awaiting circum-
stances in which it could find expression.
45. The second scenario, a transition to increased
civilian rule, may provide the context most conducive
to the protection and furtherance of US interests and
open the way for the kind of economic and political
cooperation that could facilitate a turnover of control
of the Canal under the best possible circumstances for
both countries. Much would depend, however, on the
attitudes of the civilian officials toward the United
States and their ability to cooperate effectively on
common interests. Furthermore, even a democratic,
pro-US Government is unlikely to be able to eliminate
the extensive system of corruption in Panama.
46. A military coup would seriously complicate US
policy toward Panama, even if the resulting govern-
ment presented neither ideological problems nor
threats to US security interests. The disparity between
such a government and the US policy emphasis on
encouraging democratic government in Latin America
would make US cooperation extremely difficult. The
results would be particularly damaging for US inter-
ests in Central America if cooperation with Panama
would be restricted. The human rights abuses that a
military government would probably commit to attain
and consolidate power would also create bilateral
47. A sharp turn to the left would be likely to place
at risk US political, economic, and strategic
ontlict over these and other
foreign policy issues could poison cooperation even on
matters of common interest.
48. US ability to influence those potential outcomes
is constrained by the capacity of Noriega and the
PDF-PRD coalition to take retaliatory actions that
would harm US interests. For example, Noriega could
respond to US pressure to end corruption and move
the military out of politics by strictly enforcing Pana-
ma Canal Treaty provisions, restricting access to US
bases and facilities, and exploiting his relationship with
the Soviet Union, Cuba, and the domestic left.
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