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.
