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.
