Panama Meanwhile, Back in Panama

By RICARDO CHAVIRA PANAMA CITY

Even as the case against Manuel Noriega was degenerating into a legal three- ring circus, the country he once dominated was mired in a deep slump. Nearly a year after being installed by the U.S. invasion, the government of President Guillermo Endara is stumbling badly in the monumental chore of rebuilding a country devastated by corruption and the financial squeeze applied by the U.S. during the final two years of Noriega's reign. Though Bush Administration officials praise Endara for his good intentions, they fear that he and his government may not be up to the task of converting Panama into a stable democracy.

One example of Panama's woes is the Atlantic Coast city of Colon (pop. 100,000). Once a prosperous port of call for ocean liners, today the country's second largest city seems to harbor only misery. Rotting tenements line the streets, unemployment exceeds 25%, drug use and violent crime are rampant. Deane Hinton, the American ambassador to Panama, first visited Colon in 1938, when it was "a beautiful city." Now, he says, it is "a disaster area."

The city's tragic transformation began in the 1950s, when an economic boom in Panama City diverted investment and, later, government spending from Colon. But after Noriega was overthrown, there was hope that Colon might begin to recover. More than 80 residents, most of them unarmed civilians, were killed in the U.S. invasion, but even that toll seemed an acceptable price for Colon's rehabilitation. "We thought maybe this government would remember us," says Father Carlos Ariz, bishop of Colon. "Instead the government says it has no way to help."

So far this year, although the U.S. has given Panama $130 million to pay off arrears on its $5 billion foreign debt, Washington has laid out only $70 million in direct aid. "What we're giving them is not even equal to direct damages caused by the invasion," says former U.S. Ambassador Ambler Moss, who estimates the destruction's price tag to be $1 billion. Meanwhile, the surge in global oil prices has dealt the country an unexpected and potentially disastrous blow. Totally dependent on imported oil, Panama expects to see its petroleum costs double to $300 million next year. Says Comptroller General Ruben Carles: "The economy is strangled."

Drug trafficking and money laundering, which reached epidemic proportions under Noriega, continue to flourish. More than 13,000 lbs. of cocaine -- worth $153 million wholesale in the U.S. -- have been seized since January. "One can only surmise that if this much is being seized, a lot more is moving," says Hinton. At the same time, U.S. attempts to control money laundering have been stymied by Panama's banking laws, which remain unchanged since Noriega's days. Washington is eager to negotiate a treaty that would give American investigators access to secret accounts when they suspect criminal activity. But Endara's associates claim this would destroy the banking industry.

Endara's task is not made easier by the fact that he presides over a coalition government whose members seem to have spent more time sniping at one another than governing. Critics accuse the President and his ministers of handing out jobs to cronies and relatives. That is part of a larger problem: Endara and company are a throwback to the white-dominated governments that ruled Panama until 1968. Military dictator Omar Torrijos came to power that year and revolutionized the country by giving government posts to blacks and mixed-race Panamanians -- some 90% of the country's 2.4 million people. The trend continued with Noriega, and so while the abuses of 21 years of military rule were rampant, nonwhite, frequently poor Panamanians achieved unprecedented upward mobility. Under Endara the rabiblancos, or "white $ tails," as wealthy whites are known, are ascendant once more.

Endara officials protest that it's unfair to expect rapid solutions to Panama's problems. But it's equally unrealistic to expect eternal patience from Panamanians. Leftist parties and labor unions are the natural beneficiaries of popular unrest. In recent weeks, antigovernment protesters have clashed with riot police and blocked a major highway in the capital. "It's not yet a simmering discontent," says a top Bush aide. "But you can just start to see the steam rising."

While the U.S. appears intent on lowering its profile in Panama -- troop strength is below 10,000, less than half of what it was during the invasion -- some in the new government maintain that without extensive American involvement, the fledgling democracy might collapse. Meanwhile, the Endara government remains absorbed in its efforts to eliminate the vestiges of Noriega. The general's Panama Defense Forces have been replaced with a police force, and criminal charges are pending against nearly 50 ex-military men. Banishing Noriega's ghost is vital. Yet moving ahead is even more important. American officials say they want to hand over the canal as scheduled on Dec. 31, 1999. Whether the waterway ends up in the control of a stable democracy or a new dictatorship may depend on Endara's questionable ability to win the confidence of Panama's battered and alienated poor.