After several months it was clear that the
National Guard would remain in power. By
that time the military had routed a pro-Arias
guerrilla effort in the province of Chiriqui,
abolished the National Assembly, outlawed
political parties and set up a provisional
Military Junta.
By February 1969 Omar Torrijos and Boris
Martinez emerged as contenders for the
leadership of the National Guard, represent-
ing two obviously different tendencies within
the military. Lt. Colonel Martinez, who had
initiated the coup, was known to favor the
Brazilian model of military rule. Colonel
Omar Torrijos, however, was in favor of a
military alliance with sectors of the popular
classes. Torrijos emerged victorious and Mar-
tinez was exiled to Miami.
Before consolidating his power within the
National Guard, Torrijos would have to face
another challenge-this time from the CIA
collaboration within the Guard. Two colonels
led a coup attempt against Torrijos in
December 1969 while the latter was visiting
Mexico. Torrijos returned immediately and
with the help of loyals crushed the coup and
consolidated his hold over the National
Guard.
DEALING THE OLIGARCHY OUT
AND THE COMMUNIST PARTY IN
Although the military outlawed political
parties, the regime sought an alliance with
the Partido del Pueblo, given the Party’s in-
volvement with the nationalist and populist
struggle of the 60s.
Ruben Dario Zanza, Secretary General of
the Partido del Pueblo, in a pamphlet
published in 1973, described why the Party
joined with the military regime: “The military
coup of 1968, by the nationalist officers of the
National Guard, created objective conditions
that favored the development of mass organi-
zations and actions.”‘” The tasks of these mass
organizations, he went on to say, were
“. the destruction of oligarchic power, the
expulsion of Yankee imperialism and the
transformation of the economic structures of
the country …. “9
By 1970, the Partido del Pueblo was play-
ing an important role in the formation of the
state-sponsored Asentamientos Campesinos
and bringing the regime closer to the power-
ful Confederacion Nacional de Trabajadores
(National Workers’ Confederation).
WINNING OVER
THE STUDENT MOVEMENT
One of the most important anti-imperialist
mass organizations is the Panamanian Stu-
dent Federation (FEP). Organized in 1943, it
has been in the vanguard of the nationalist
struggle to decolonize the Canal Zone. The
heroic posture of the FEP in the 1950s and
especially their participation in the 1964 stu-
dent struggle against U.S. colonialism is well
documented.0o
Their participation and collaboration with
the military-led populist alliance was impor-
tant to Torrijos: The FEP, identified in the
minds of Panamanians as anti-militarist and
anti-colonial, had to be won over by the Na-
tional Guard in order to legitimize both the
military and its anti-colonial policies. But this
was difficult because the student movement
and the Panamanian police-military force
had both emerged in the early 1940s and have
consistently clashed over the traditional pro-
oligarchical and pro-imperialist position of
the military. In return for its unconditional
and ardent support for the regime, the FEP
was awarded control of the university, which
carried with it government recognition and
funding. In addition, some of its most impor-
tant members were given important
ministerial and subministerial positions.
ROUNDING OUT THE ALLIANCE
In addition to the FEP and the Partido del
Pueblo, Torrijos made tactical alliances with
sectors of the middle class, peasantry and
labor. The economic basis for satisfying some
of the demands of these sectors was that the
military would allow foreign financial groups
to convert Panama into a platform for trans-
national services. To that end Torrijos, talk-
ing to a group of business executives in 1969,
affirmed that his policy would be one “of ex-
panding markets and ample maritime, aero-
nautical, banking, legal and labor facilities
and a cultural attitude favorable to interna-
24Sept/Oct 1979
The growing financial center is sandwiched between the Pacific Ocean and one of Panama City’s slum sections. This
neighborhood became part of an urban renewal project that relocated its former inhabitants to a more remote district.
tional business.” He added that he would
assure “an honest, modern and more respon-
sible public administration.””2
Torrijos continued to reassure the New
York business community when he empha-
sized that “we have a government team which
is young, professional and competent. .
There is stability and calm in our country to-
day, and we are functioning in an orderly
fashion.” 2 2 Following that speech Torrijos
passed the 1970 Banking Reform, which
allowed, among other things, the unrestricted
movement of money in and out of the coun-
try. 2 3
The transnational bankers were additional-
ly attracted to Panama because of the pre-
sence of the U.S. military, excellent com-
munications systems, geographical advan-
tages, a heavy concentration of clients, and
certainly not least because Panama’s mone-
tary unit is the U.S. dollar.
The bankers, in turn, funneled hundreds of
millions of dollars into Panama’s economy
through the public sector. The state increased
its ownership of production units and its con-
trol over resources only as a result of this
large-scale and expensive borrowing from the
international banking community. Its new
economic role enabled the regime to play
“broker” within the populist alliance.
JUNIOR PARTNERS
The Middle Sector: The intellectual petit
bourgeoisie, namely technicians and profes-
sionals, is represented in the alliance by those
“competent young men” Torrijos boasted of.*
Torrijos increased employment in the public
sector from 45,000 in 1968 to over 60,000 in
1975 as a result of the expanded role of the
state sector and massive public investments. 2 4
Two factors account for the participation
of middle class professionals and technicians
in the military regime. The military, largely
an anti-guerrilla and anti-riot combat force,
unlike its counterparts in Peru was unable
to adminsiter the state directly. Secondly, the
middle class’ professional aspirations were
always to replace U.S.-imposed bureaucrats
*Since the 1940s the officer corps of the National Guard
has been drawn from the middle class as well. Prior to
1968 the majority studied in Nicaragua, El Salvador and
Mexico, receiving their advanced training at the U.S.
School of the Americas in the Canal Zone. (Renato
Pereira, Panama: Fuerzas armadas y politicas, Panama,
Ediciones Nueva Universidad, 1979.
25N ACLA Report
or oligarchic groups in the administration of
the state. Torrijos offered them an opportunity to
share with the military in this undertaking.
The Rural Sector: To secure political sup-
port in the rural sector, Torrijos promised an
agrarian reform which would provide land,
tools, credit and distribution facilities to a
majority of the rural population. He began by
expropriating a few foreign holdings, such as
200,000 hectares of Boston Coconut Co. But
the main thrust of the “reform” was the crea-
tion of state-sponsored argarian production
collectives, mainly on public lands, called
Asentamientos Campesinos.
The Partido del Pueblo played an impor-
tant role in the formation of these asenta-
mientos and in the creation of the Confedera-
cion Nacional de Asentamientos Campesinos
(CONAC). On the basis of the government’s
initiative the CONAC proclaimed its uncon-
ditional support for the regime at its first na-
tional congress in 1970.
The regime launched 138 asentamientos in
the period 1969-72, primarily in rice produc-
tion for the domestic market. This aggressive
project reached 5,340 rural families. Between
1973 and 1977 only 92 asentamientos were in-
troduced, reaching another 4,065 families.
These projects gave a large share of the
domestic rice market to middle and lower
level producers.
The early emphasis on the asentamientos
was used by Torrijos to obtain political sup-
port from the rural sectors for his populist
alliance, although the reforms never included
more than 5% of cultivable land nor em-
ployed more than 5% of the agricultual
workforce. Landero Perez, head of the
Agrarian Reform Agency, made it clear in a
speech in May 1972 that, “the agrarian
reform will be carried out without confronta-
tions.” 2 5 The cooperation of the Partido del
Pueblo and the CONAC in this prevented the
radicalization of the process–they were not
even able to modify the 1962 Agrarian Code
approved by the oligarchical regime of
Roberto Chiari.
Between 1973 and 1977 the regime have
priority to building sugar refineries to tap the
export market. By 1974, sugar export became
the second most important foreign exchange
earner in agricultural exports.
Referring to the significance of the
agrarian reform, sociologist Marco
Gandesegui argues that it achieved three
things: 1) it stabilized the domestic grain
market; 2) it freed land for cane cultivation
geared to sugar production for the foreign
market; and 3) by integrating the agrarian
middle sectors into the populist alliance,
it serves “as a political instrument to displace
the landowning fraction from the bloc in
power.” 2 6 The support of these sectors was
essential at a moment when the entire
economy was undergoing a readjustment, a
modernization of its relationship to the inter-
national capitalist system.
Workers: The 1972 Labor Code approved
and put into effect by the Torrijos regime was
the main tool to incorporate workers into the
populist alliance. Before almost 200,000
Panamanians, Torrijos announced the Labor
Code on the third anniversary of the military
regime on October 11, 1971. He claimed that
“the new Code humanizes the conditions of
work and offers real and effective protection
to the man that works.” The Code provided
for obligatory collective agreements,
obligatory payroll deduction of union fees,
the establishment of a Superior Labor
Tribunal, and an immediate incorporation of
some 15,000 workers, including street vendors
and peddlers. Torrijos, unlike his oligarchical
predecessors, had offered some benefits to
labor, albeit mediated by the state.
THE CANAL ZONE
TO THE PANAMANIANS
Decolonization of the Canal Zone was Tor-
rijos’ highest political priority. Having forged
an alliance with the most popular and demo-
cratic forces of Panama, Torrijos hoped to
succeed in removing the “causes of conflict”
existing between Panama and the United
States. But he needed to legitimize and rein-
force both the internal and external support
structures necessary for an aggressive cam-
paign to force the United States to negotiate a
new treaty with Panama.
Not having full confidence that he could
shape a one-party system where civilians
would have ample power, and still maintain
control over the state, Torrijos in 1972 ordered
constitutional reforms which concentrated
political power in the executive branch (Tor-
rijos’ handpicked ministers) and gave vast
26Sept/Oct 1979
International support for Torrijos at March 1973 UN Security Council meeting includes Soviet Union’s Ambassador
Yakob Malik (left) and Chile’s Sub-Minister of Foreign Affairs Luis Orlandini (right).
powers to general Torrijos for a six-year
period.” The Constitution also provided
for a wide range of popular participation,
under the control of the state. The National
Assembly of Community Representatives,
consisting of 505 local representatives–of
which 480 represented agrarian in-
terests-served to legitimize the regime to the
Pan’amanian people.
GATHERING SUPPORT ABROAD
By the following year Torrijos had
garnered enough international support to em-
barrass the United States at the UN Security
Council meeting held in Panama. As part of
his anti-colonial policy, Torrijos also
established relations with several countries of
the socialist bloc and a number of African
and Arab nations, and opened an embassy in
Algeria. On August 20, 1974, Panama
established diplomatic relations with Cuba,
defying the U.S. blockade of that country. By
August 1975 Panama became a member of
the non-aligned movement. 2 8
Unable to ignore Torrijos’ nationalistic
thrust both at home and abroad, president
Nixon dispatched Secretary of State Henry
Kissinger to Panama in early February 1974
to sign the Tack-Kissinger Agreement on
Principles.
As of the signing of these accords, many
progressive and independent Left groups,
which had emerged when the student move-
ment split in 1972 over the question of sup-
port for the Torrijos regime, raised serious
questions about several of the eight points.
The Frente Revolucionario Estudiantil,
Guaykucho-NIR and the Independent
Lawyers Guild questioned the concepts of
joint military defense, legalization of U.S.
military bases and U.S. rights in the event of
a sea level canal.
“Panama is not seeking a change of
terminology, but a change of
structures.” Panamanian representative to
UN Security Council meeting, March 1973
The Torrijos regime, capitalizing on its im-
age abroad as anti-imperialist and “socialist”
– a confusion largely perpetrated by die-hard
conservatives in the U.S. Congress-began a
political campaign to isolate and neutralize
all independent progressive groups which op-
posed or questioned the Tack-Kissinger
Agreements. The criticisms raised by these
groups were curiously labeled “oligarchic”
and “imperialistic.”
But the real problem for an early Canal set-
tlement was not the independent Left, rather
it was the inability or unwillingness of Presi-
27NACLA Report
A shrimp boat crew unloads their catch at Panama fishing port. Shrimp is Panama’s third-largest export.
dent Ford, interim U.S. President, to con-
clude an early treaty with Panama.
ECONOMY FALTERS
Between the years 1960-72 the Panamanian
economy had experienced an 8% average an-
nual growth in its GNP. 2 9 However, in 1973
the growth rate slipped to 6.5%, and since
then has moved steadily downward to 2.6% in
1974, 0.6% in 1975 and 0.0% in 1976. In
contrast, closer inspection of the economy’s
performance reveals that the banking and
financial sectors showed positive rates of
growth of 21.3%, 9.5% and 7.9% between
these same years, while the agricultural, in-
dustrial and even commercial sectors
stagnated.s 3
The depth and scope of Panama’s eco-
nomic downturn, as part of the world capi-
talist crisis, was due to the unique distortion
of its dependent capitalist economy. Con-
trolled by foreign enclaves and highly depen-
dent on the external market, the economy
declined rapidly as traditional exports
(bananas, sugar, shrimp, meat) either ex-
perienced lower external demand or lower
prices.” 3 Together with this serious drop in ex-
ports, the rate of imports, especially for
equipment, machinery and food increased
rapidly. (Panama exports 32% of its products
and imports 37% of its consumption.)
In addition to the increasing gap in
Panama’s balance of trade, the government
argued that the recession-inflation cycle was
worsened because the local bourgeoisie, still
hostile to the regime’s populist policies, was
not investing. The reality, however, was that
the new economic program of accumulation
was based largely on a model favoring inter-
national finance with the state acting as a
junior partner. 3 2
Although Torrijos was able to receive mil-
lions from the international financial com-
munity to finance his development projects,
foreign bankers retained control over the ex-
pansion of the economy. As economist Juan
Jovane noted, “Since November 1974, 66.2%
of the loans provided through the Panama-
nian banking system were foreign loans, and
87.66% of the deposits in the system were also
foreign…. “33 The credit policies of these
bankers favored the already hypertrophied
28Sept/Oct 1979
service sector. In 1972, 62.3% of bank loans
went to the commercial sector while agri-
culture and cattle breeding obtained 7.2%
and industry a meager 8.5%. To further il-
lustrate, personal loans, geared toward pur-
chasing mainly sumptuous imported goods,
totaled $101.5 million, or 10% of total
domestic loans made by foreign-owned
banks. 3 4
On the other hand, state spending and in-
vestment, largely with loans from foreign
public and private lending institutions, were
used in transportation, electrification and to
increase the export capacity of state enter-
prises (e.g., sugar, cement and copper).
These investments were necessary to prepare
the country for a transition from an enclave
economy to one based on the platform for
transnational services.
Public spending and investment temporari-
ly softened the impact of the recession, at
least until 1976 when the country’s capacity to
borrow was seriously endangered by a foreign
debt which had reached the astronomical
figure of $2 billion. 3 5
By that year, with Panama’s gross national
product showing zero growth, government
credits and loans from international lending
institutions and foreign banks in Panama
spiraled in cost and contracted in amount. 3 6
Moreover, most of the public debt was owed
to private U.S. banks and financial institu-
tions, running interest rates as high as 12% .37
CLASS CONTRADICTIONS MOUNT
As a result of the halt in the economy, na-
tional income declined, unemployment and
inflation soared, and both the non-hegemonic
groups (commercial, agricultural and in-
dustrial) and the urban popular masses
pressed the regime for concessions, each in
their own interest.
As early as November 1974, Torrijos of-
fered the non-hegemonic bourgeoisie some
economic and fiscal incentives to promote
reinvestments of their profits: subsidized loans
of up to 4% to those investing in the export
sector; ten year exoneration on real estate
taxes for construction beginning January 1,
1976; a $30 million government-guaranteed
credit from private banks; and lastly, the
creation of a special office within the Ministry
of Commerce and Industry where local en-
trepreneurs with problems could seek aid.” 3
Nevertheless the old oligarchy continued to
conspire against Torrijos, provoking the ex-
pulsion of 14 of its leading members by the
military in 1976.39
POPULISM UNRAVELS
In September of the same year a spon-
taneous mass demonstration in Panama City
erupted against the high cost of living and
unemployment. The demonstration, the first
since 1968, was swiftly repressed.”4 The
authentic mass protest was characterized by
the government as an act of “destabilization
by the CIA in collaboration with the oligarchy
and the independent Left.'””` If the
oligarchy’s conspiracy threatened the regime
in January 1976, the demonstration dealt it a
hard blow, undermining the populist
alliance.
Thus by 1976 Torrijos had begun a real
reversal in his class alliances. The regime felt
that in view of the economic crisis, the
populist alliance was weakened and that the
oligarchy should be further conciliated.
In 1976 and 1977 the oligarchy demanded
the following concessions from Torrijos:
1) the return of rightwing exiles; 2) formation
of a tripartite commission, with a represen-
tative from labor, capital and government to
deal with labor questions; 3) direct political
participation for the Consejo Nacional de
Empresas Privadas (CONEP) which, in the
absence of political parties, represented the
interests of all fractions of the local
bourgeoisie.
GOODBYE POPULAR UNITY
HELLO NATIONAL UNITY!
Torrijos conceded the first two demands
and promised to fulfill the third in the near
future. And in return CONEP in August 1977
gave its explicit support for Torrijos’ Canal
policy. This new tactical alliance between
Torrijos’ popular base of support and the
CONEP, representing the oligarchy, was pro-
moted by the regime as “National Unity.”
Both the FEP and the Partido del Pueblo
characterized the National Unity as a “tac-
tical readjustment” on the road to national
liberation.42 But the popular masses, as seen
from the September demonstrations, had
begun to discover that their class interests had
been subordinated to this so-called national
interest.
29NACLA Report
The objective basis of Torrijos’ populism
was in crisis, and while a large sector of the
popular classe still believed in the “miracle”
of Canal negotiations, they were no longer so
willing to forego acting in their class interest.
Indeed, they had discovered just as the CON-
EP had earlier that, contrary to Torrijos’
desires, there was a class struggle going on in
Panama.
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