Legacy of Dependence
U.S. administration and control of the
Canal Zone and the Canal since 1903 has
given the U.S. government almost total
domination over Panama.
“* The 1904 monetary agreement between the
United States and Panama precludes
Panama’s exercise of an independent
monetary policy. 4
“* Through the U.S. government’s power to
maintain Canal tolls at extremely low rates,
Panama has indirectly and unwillingly sub-
sidized the cost of production of all com-
modities traversing the Canal, to the benefit
of the international capitalist class. Due to
the enormous traffic of North American
commerce through the Canal, the economic
benefit to the U.S. bourgeoisie of maintain-
ing this policy far outweighs the benefit to
Panama. 5
“* The Panamanian government’s inability to
tax Canal Zone operations or wages prior to
1955 and the heavy concessions to the other
enclaves (primarily banana) have been im-
portant factors behind the historic scarcity
of public funds.
“* The establishment of 14 U.S. military bases
and other military installations in the Canal
Zone has been used innumerable times by
the United States to intervene in Panama’s
internal affairs as well as in the affairs of
neighboring republics. 6
“Panama has the geo-political fate of
being the ‘bridge of the world,’
uniting two oceans and hundreds of
countries without ever having
controlled itself.”
Herbert de Souza, Economist
United States. However, these treaty reforms
did extend some concessions to the local
bourgeoisie, initiating a late and mild import
substitution process in the 1940s which con-
tinued into the 1960s.
This process was begun with local capital,
but between 1946 and 1971 U.S. direct in-
vestments went from $38.8 million to $269.3
million, giving the U.S. firms control over the
production of consumer and intermediate in-
dustries.’
MODERNIZATION
WITHOUT TRANSFORMATION
The Panamanian economy grew at an
average annual rate of 8% between 1950 and
1973, in part due to the expansion of exports
to the Canal Zone as a result of the 1955 trea-
ty agreement. This “economic miracle” was
given another boost in the 1960s when
Panamanian workers in the Zone received
substantial pay increases which were spent in
Panama to buy food, clothing, houses, etc.
This diversification in the economy,
however, did not create a real structural
transformation of the economy, for, as com-
pared to commerce, the agricultural and in-
dustrial sectors remained weak. Nor did the
industrial sector, responding to and limited
by economic changes permitted through the
1955 treaty and by growth in the urban
population, create too many jobs. In the
period ending 1968, industrial firms con-
trolled by foreign capital provided no more
than 1600 jobs. 8
It is not surprising that this dependent
modernization would create new social pro-
blems without solving old ones such as
unemployment, land tenure systems in
agriculture, rural illiteracy, income distribu-
tion, etc.
WORKERS PUSH
FOR MINIMUM WAGE
The modernization of the Panamanian
economy in the late 1960s was accompanied
by a militant but not cohesive working class
movement. Workers, students and the urban
unemployed organized a number of hunger
marches; tenants, supported by workers and
students, organized rent strikes and promoted
a national movement to freeze rents in the
cities of Panama and Colon. And all these
groups, including sugar workers of Veraguas
In spite of the 1936 and 1955 reforms to the
1903 Treaty (See Article I), the Panamanian
economy remained subordinated to the
21NACLA Report
and banana workers of Chiriqui and Bocas
del Toro, supported the workers’ movement
to establish a national minimum wage law. 9
The minimum wage movement was vehe-
mently opposed by all fractions of capital in
Panama. The repression of the movement
undertaken by the regimes of President
Roberto Chiari and his successor (and
cousin), Marco “Rifle” Robles, was high-
lighted by the National Guard’s intervention
in the 1962 banana workers strike.*
Participation by the outlawed Partido del
Pueblo (Panama’s Communist Party) in these
popular and working class movements as well
as in the student-led Sovereignty Movement
was unquestionably important. The presence
of Party cadre among these movements im-
parted organization and political direction.
Although the popular and labor move-
ments continued to suffer reverses, they
achieved a 40C per hour minimum wage and
increased their union membership and
militancy, as was evident from their par-
ticipation in the national rejection of the 1967
treaty proposals.
CRACKS IN THE OLIGARCHY
In light of the Cuban Revolution, the in-
tensification of the nationalist struggle to
decolonize the Canal Zone, and the ascendan-
cy of the urban working class movement, the
United States poured millions of aid dollars
into Panama in the early 1960s under the
Alliance For Progress in order to promote
social reforms and prevent the radicalization
of the popular movement.'”
President Chiari’s 1962 agrarian reform
and agrarian code, conceived by the Alliance
For Progress, actually concentrated more
land in the hands of the cattle-breeding
latifundists. Chiari himself benefitted hand-
somely. The peasants in return were severely
repressed as they attempted to deal with the
land-grabbing landlords locally or even in-
dividually.
If the local oligarchical bourgeoisie were
unified over the labor and peasant questions
they were divided over fiscal reforms and
Panama’s incorporation into the Central
*Marco Robles was nicknamed “Rifle” for his role in the
military repression of the 1962 banana workers’ strike.
American Common Market.12 In 1964 Presi-
dent Robles attempted to implement some
fiscal reform measures but he was opposed by
wide sectors within the local bourgeoisie.
They were especially opposed to Rafael
Nunez, a young economist from Chicago
University. Nunez’ Office of Tax Collection
was implementing, probably for the first time
in the history of the Republic, the tax laws.'”
As a result of these and other measures the
Liberal Party split.’ 4
FROM CRACKS TO CRISIS
The local bourgeoisie, already showing
signs of division, had hoped that a new canal
treaty would bring a new era of prosperity
since the import substitution process was slow-
ing and there was no consensus among them
as to the future model to adopt. (The com-
mercial group wanted an open laissez-faire
type economy and no membership in the Cen-
tral American Common Market while the im-
port substitution sector wanted selective
tariffs and quotas and gradual membership
in CACM.)’
After three years of negotiations, U.S.
President Johnson and Robles in 1967 agreed
to a new canal treaty that would 1) abrogate
the 1903 Treaty, 2) legalize the 14 U.S. bases
in the Canal Zone, and 3) give the United
States the right to build a sea level canal in
Panama.
When the popular masses, led by the radi-
calized middle sectors, demonstrated against
the 1967 treaty and prevented its ratification
by the National Assembly, the local
bourgeoisie openly split. This division within
the oligarchy worsened as the country
prepared for the 1968 national elections. The
Liberal Party itself, in power from 1960
through 1967, split in two factions, and ex-
President Chiari, together with many in-
dustrialists from the Republican Party,
defected to the candidacy of populist leader
Dr. Arnulfo Arias Madrid.
When President Robles attempted, against
the constitution, to use state resources to sup-
port the Liberal Party’s candidate, David
Samudio, the Arnulfistas protested, provok-
ing a constitutional crisis. Robles was im-
peached by the National Assembly, which
called on the National Guard to uphold their
decision. But given bitterness over clashes be-
22SeptlOct 1979
Crowds of Panamanians gather outside National Assembly building during the tension-filled 1968 national elections.
tween Arias and the National Guard in 1941
and 1951, the Guard refused to re-
move Robles.’6
Dr. Arias nevertheless secured the financial
support of important family groups of the
bourgeoisie, such as the Eletas and the
Chiaris, and gained the support of the urban
masses and labor who had been so repressed
by the Robles and Chiari regimes.
The electoral victory by the enigmatic and
controversial Dr. Arias accentuated rather
than ameliorated the political crisis. The
bourgeoisie remembered his anti-U.S. policies
in 1941, the military never forgave his many
attempts at controlling their institution and
broad sectors of the masses never forgave his
racist policies.”
TAKEOVER BY THE MILITARY
Arias attempted to gain control of the
military and on October 11, 1968, eleven days
after occupying the presidency, was deposed
for his efforts. Almost immediately the Na-
tional Guard, led by Colonels Torrijos and
Boris Martinez, met with widespread opposi-
tion from all sectors of Panamanian society.
Dr. Arias fled to Washington, D.C., where
he begged the U.S. government to restore him
to power. Meanwhile, David Samudio, sup-
ported by fractions of the middle sectors, the
local bourgeoisie and the National Guard,
believed that the Guard would step aside and
ask him to form a new government.
The curtain came down on traditional oli-
garchical rule with Panama’s bourgeois sys-
tem in deep crisis. The modernization process
was rapidly slowing down, the causes of con-
flict still remained between the United States
and Panama, the oligarchy was badly split
and popular discontent was still quite visible.
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