DCI'S BRIEFING BOOK FOR NSPG MEETING ON PANAMA 4 AUG. 1987

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B00224R000501730007-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 39
• Document Creation Date: December 22, 2016
• Document Release Date: November 28, 2011
• Sequence Number: 7
• Publication Date: August 4, 1987
• Content Type: REPORT

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DCI'S BRIEFING BOOK
FOR NSPG MEETING ON PANAMA
- 1987
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Talking Points
Map
US Interests in Panama
-- US Military Presence (map)
-- Commercial Importance of the Panama Canal (map)
Pressure Points on Panama and How Noriega Would React D
-- Threat to Economic Stability
-- Areas of US Leverage
-- How Noriega Would React to US Pressure
-- Noriega's Options
Noriega's Opponents and Supporters E
-- The Opposition
-- Noriega's Military Support
-- The Ruling Coalition
The Military's Role in Panama F
-- Role in Society
-- Role in Politics
-- Potential for Weakening Popular Support
Possible outcomes if Noriega Departs G
-- A New Military Strongman
-- Military-Condoned Civilian Rule
-- Military Assumes Direct Control
-- A Civilian-Military Transitional Junta
-- Opposition Comes to Power
Panama Chronology, 1976-1987 H
Key Judgments of Panama SNIE I
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The Background to the Crisis
-- The current crisis was sparked by the forced resignation of Chief of
Staff Diaz in early June. - -,"
-- Defense Chief Noriega had been wanting to get rid of Daiz for over a
year but had been unable. to do so because of Diaz's political
support from the Left.
-- Diaz subsequently accused Noriega of electoral fraud and the murder
of opposition figure Spadafora.
-- These accusations sparked demonstrations by students and opposition
groups.
-- The government then imposed a state of emergency in response to
escalating violence and the call for a general strike. In late June
the government lifted the emergency and a pro-government
demonstration at the US Embassy turned violent.
-- Unrest continued through July and on 27 July the military raided the
home of Diaz, arrested him, and shut down opposition newspapers. At
the same time the opposition began a D-day successful strike closing
down business in the capital.
II. The Opposition
-- The force behind the opposition is the Civil Crusade--a loose
network of a hundred business, professional;-and civil groups. Its
expressed goal is:
To force Noriega from power.
- Get a commitment by the military to withdraw from politics.
Guarantee free and fair elections in 1989.
-- The Civil Crusade was more successful than expected in its 2-day
strike last week but it has some serious weaknesses.
It lacks a dynamic leadership and does not have a leader of
national stature.
It may not be able to sustain its call for strikes.
It lacks a broad base of popular support.
-- The two major opposition parties have been loosely aligned with the
Crusade but they have a narrow base of support--limited to the
middle and upper classes.
-- Left wing university and high school students also have come into
the streets but are operating independent of the opposition and the
regime.
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[II. The Government
Noriega's support in the military and the ruling coalition seems to be
holding.
The military has support in local pop ce through political action
and aggressive civic action programs.
Opposition demands directly threaten the interests of the military
leadership and institution.
Noriega has placed supporters in key positions in the military and
the junior officer corps is loyal to the military if not to him
personally.
-- Nevertheless, the crisis has undercut Noriega's position; officers
are talking about alternatives.
-- Increased capital flight is putting Panamaian banks under severe
strain.
-- There are reports that several may be forced to close within the
next few weeks.
The pullout of the First National Bank of Chicago--the largest
commercial bank in Panama ($3.8 billion in assets) may accelerate
capital flight.
The government probably will be able to sustain its position by
keeping the pressure on until the opposition falters. In this
situation Noriega probably will remain until at least 1989, when he
claims he will step down.
if government measures to
suppress the opposition are not a ec e, the regime probably will
impose a state of emergency and arrest opposition leaders.
If there is a urther erosion in the military's popular support and
a significant dete-the situation, the general staff
could move against Noriega asking him to step down.
We are uncertain how the military would perform under a new leader. It
may be willing to let civilians take a stronger role. But an insecure
military pressed by an aggressive opposition may find the easiest course
is repression.
-- If Noriega were forced from power, the military probably would name
one of the two deputy chiefs to fill his shoes.
2
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Prospects for a successor coming from below the general sta
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Next 9 Page(s) In Document Denied
Iq
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Key US Military Facilities
and Political Protest Sites
in the Panama Canal Area
da,
Ga/eta Island
Collin
Fort Sherman
Training Center A Cristobal
Fort Gulick
Fort Davis
Gatun
Gatun-' NGetun
Dam Locks
Area of
Main Map
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Panama-m
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0 60 100 Mlles
Panama
Pedro o Miguel- Albrook
Locks Clayton Air Force
Mireflores-' /Station
Locks
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Reseration PANAMA
Rodman *Balboa
Naval
Station
US military
base
Government
opposition
protest site
Howard . & Fort
Air Force Kobbe
Base
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Commercial Importance of the Panama Canal
Although the Panama Canal carries only about 5 percent of
the world's seaborne commercial traffic, a recent study of price
sensitivities shows that prolonged disruptions to Canal
operations would cause serious economic dislocations and supply
bottlenecks in some countries. The effect would be the most
severe in Pacific Coast countries of South and Central America
that lack Atlantic ports. In particular, steep alternative
transportation costs would reduce export sales and raise import
bills in El Salvador, Nicaragua, Ecuador, Peru, and Chile.
US allies and trade competitors would be hurt if traffic in
the Canal were halted for any length of time.
-- Japan and other Asian countries would face higher costs
for shipping cars and other goods to the eastern United
States.
Canadian sales of grain, coal, and lumber to Europe and
the USSR likely would fall as transit costs favored other
suppliers. Approximately 10 percent of Ottawa's grain
sales to Moscow could shift to US suppliers.
The United States, although the largest individual user
of the Canal, generally could shift to transcontinental
rail shipments with little if any increase in costs.
While the Soviets would welcome the economic dislocations to
US allies, Moscow's allies and interests in the hemisphere also
would be adversely affected. All Nicaraguan oil deliveries--
which currently come almost totally from the USSR via the Canal--
would be affected. In addition, most of Nicaragua's Soviet-
supplied military equipment--except for major weapons systems--
transit the Canal. Cuban sugar sales to Asia rely on the Canal
and probably would be replaced by Philippine and Australian
supplies if it were closed. Finally, the USSR itself would no
longer be able to use Cuba as a convenient base of operations for
the Soviet fishing fleet in operation off the west coast of South
America.
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Panama Canal: Atlantic- and Pacific-Bound Cargoes, 19860
a Percentages for Atlantic- and Pacific-
bound cargoes are not all-inclusive.
Percentages are followed by parenthesized
cargo weights in million long tons.
Antigua
and Barbuda
P
? Dominica
u
.
? St Lucia
St. Vincent and .
the Grenadines, Barbados
Grenada
to
Asia
Galapagos islands 3
(Ecuador)
Primary Cargoes, FY 1986
(million long tons)
Atlantic
bound
Pacific
bound
2.5
Grain
20.4
2.7
Coal
7.5
2.4
Nitrates
7.5
18.9
Petroleum
11.9
5.4
Ores/metals
4.4
6.1
Lumber
0.8
4.2
Iron/steel
products
2.5
Major Routes, FY 1986
(million long tons)
Route
Cargo tonnage
Eastern U.S. to Asia
40.4
Asia to eastern U.S.
14.2
Western N. America to Europe
12.8
Europe to western N. America
3.8
Western S. America to eastern
U.S.
8.7
Eastern U.S. to western S.
America
3.6
Boundary representation is
not necessarily authoritative.
. n"rrinidad
_ and
alkland Islands
(Islas Malvinas)
(administered by U.K.,
claimed by Argentine)
South
Atlantic
Ocean
1000 Kilometers
1000 Miles
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Pressure Points on Panama and How Noriega Would React
Noriega's regime may be most vulnerable to domestic economic
difficulties, particularly declining confidence in Panama's
important international banking center. Despite the importance
of 30,000 Americans to the Panamanian economy, direct bilateral
aid, and Washington's influence with international lending
institutions, US economic leverage against Panama probably is
limited. Noriega probably would view any US pressure as a direct
challenge and would be tempted to retaliate against US interests.
His strongest action would be to restrict military and
intelligence activities in Panama.
Threat to Economic Stability
Businessmen are the cornerstone of the Civil Crusade, and
plunging business confidence has been a serious blow to the
regime. It also is undermining investment and dimming prospects
for growth. Businessmen have become increasingly critical of
rampant corruption and the regime's inefficient management of the
economy, according to US Embassy reporting.
Panama's international banking center, which ranks among the
top 20 in the world with more than 130 licensed banks and close
to $40 billion in total assets, is being especially hard hit by
the current crisis. While unrelated to the current unrest, the
decision by the First National Bank of Chicago--the largest
commercial bank with $3.8 billion in assets in Panama--to pull
out of Panama will accelerate capital flight, particularly among
Panamanian banks. Increasing capital flight already is putting
Panamanian-owned banks under severe financial strain, according
to the Embassy, and several may be forced to close in the next
few weeks. Moreover, the failure of major local banks could
leave the regime unable to meet its payroll.
The pullout of additional US banks would be a major
psychological blow to the regime and complicate its financial
difficulties, but would not cripple the economy. Major European
and Japanese banks in Panama are concerned about the impact of US
withdrawals and some probably are reconsidering their own
position in light of First Chicago's action. Nevertheless,
international banking represents only one component of Panama's
service economy, and the banking sector has been contracting
slowly since 1980. Further cutbacks would directly affect the
economy primarily by increasing unemployment; the sector provides
9,000 local jobs and accounts for 7 percent of GDP. While the
regime, in our judgment, could withstand a major drawdown in
banking operations, such an action would give the opposition
movement additional ammunition to undermine confidence in the
regime and probably reduce Panama's chances for attracting new
foreign loans and investment.
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Areas of US Leverage
US leverage over Panama has decreased over the past decade
largely because the Panama Canal treaties removed the largest
bargaining chip held by Washington. Official Panamanian concern
that the United States might renege on the treaties before they
are fully implemented may give the United States some residual
leverage. Nevertheless, any US move affecting treaty
implementation most likely would spark a nationalistic reaction
that would force the opposition to side with the government and
lead to protests throughout Latin America.
Panama derives economic benefits from the presence of over
30,000 Americans--including 10,000 military personnel--totaling
as much as $500 million per year. The regime probably calculates
the United States would not significantly reduce its personnel in
Panama because of the importance of US interests there. if
relations deteriorated seriously, Noriega probably would be
willing to absorb the costs of a phased US drawdown. Moreover,
the regime probably anticipates this as the eventual outcome of
implementing the Canal Treaties.
Direct economic and military assistance to Panama provides
the United States with little leverage because it amounts to less
than $40 million per year. Moreover, Panama has alternative
sources. Panama's use of the US dollar and access to
international financing diminish the importance of US economic
aid. Although Noriega recognizes the valuable role the United
States can play in modernizing the Panamanian Defense Forces, the
military has purchased equipment from other countries--Taiwan,
France, Israel, and Brazil--and probably would expand these links
if US assistance were cut off.
International lending institutions such as the World Bank
and the IMF pumped some $100 million into the Panamanian economy
last year. Although Washington would have some influence over
future disbursements, they already are reluctant to provide more
money until Panama implements fiscal reforms. In the absence of
new capital inflows, the government probably will be forced to
cut its spending, and the economy could fall into recession,
which would increase political pressure on the regime. Budget
decisions would become increasingly difficult as the regime was
forced to balance the need to conserve funds with the desire to
increase spending on programs to benefit its traditional lower-
income supporters.
How Noriega Would React to US Pressure
We believe Noriega will do whatever is necessary to stay in
power. Noriega is highly opportunistic and tends to look at
issues in terms of what is in it for him first and Panama second.
Moreover, we believe he will reverse a commitment if he later
concludes it is in his interest to do so. While Noriega likes to
be flattered, he is confident of his ability to read his
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opposition and prides himself on being able to manipulate others
without himself being manipulated. Noriega can be impulsive--
especially when drinking and/or angered--and may act
provocatively or violently at such times.
We believe Noriega will respond best to direct, honest,
private communications that suggest his taking a particular
course of action that is in his personal interest. Nevertheless,
we believe there is only a slight probability that bringing
pressure on Noriega will have any success given his psychological
need for power and his past resistance to perceived external
interference in his and Panama's business. A public challenge or
confrontation, in our view, will be seen by him as attempted
manipulation and would play to the more impulsive and
unpredictable side of his personality. While a public
confrontation might galvanize public opposition to Noriega, we do
not believe it would effect a positive change in his behavior.
Noriega's Options
Noriega has a range of options for retaliating if he
believes Washington is trying to force him out. At a minimum,
the regime probably would expel some US diplomats--including the
Ambassador and DCM--and might move to break relations, as Panama
did following the Canal riots in 1964. Panama already has gained
backing in the OAS against US intervention and would seek a
stronger diplomatic rebuke of the US.
In an escalating crisis in relations with the United States,
Noriega would be tempted to act directly against US interests in
also might move to improve relations with the USSR or a ance
Panamanian ties with other Communist countries. Such actions
could include granting landing rights to Aeroflot, allowing
Moscow to base its fishing fleet in Panama, or taking a pro-
Sandinista stance in reginal peace talks.
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bLUK&J.
Noriega's Opponents and Supporters
The opposition--composed of political parties, business
groups, and to some extent the Catholic Church--has gained
strength in the recent crisis, but lacks dynamic leadership, a
unified strategy, and a broad base of popular support.
Nonetheless, it has focused criticism on Noriega which could lead
to a more open political system.
Noriega's support in the military and the ruling coalition
is firm for now because opposition demands directly threaten
their interests--including sharing the spoils of power.
Sustained protests with escalating violence, an economic
downturn, and significant international pressure could cause the
General Staff to force Noriega's removal.
The Opposition
The two main opposition political parties, the Authentic
Panamanists and the Christian Democrats, have coordinated their
strategies and even worked out an agreement to share power in a
new government. The parties insist that both Noriega and
President Delvalle step down to pave the way for an opposition-
dominated junta and new elections, and they have refused the
regime's offer of dialogue. Their calls for democracy and an end
to corruption have broad appeal, but a key weakness is that they
have narrow support bases limited to the middle and upper classes
and the white minority.
The Civil Crusade--a loose network of over 100 business,
professional, civic, and a few labor groups--has played a
stronger role than the parties by calling for civil disobedience
and organizing three business strikes. The success of last
week's strike that shut down 90 percent of Panama City's stores,
transportation, and factories for two days has emboldened Civil
Crusade leaders to believe they can force Noriega to resign. The
Crusade's position has hardened; they now say President Delvalle
also must go. Crusade leaders, however, remain uncertain about
their next steps to achieve this goal, particularly since the
regime has restricted their access to the media. The Crusade may
soon formally align with the opposition parties as a means of
broadening its base of support. The coalition, however, is
fragmented, subject to the regime's economic harassment, and
unable to attract many labor unions, which are firmly in the
government's camp.
The opposition lacks leaders of national stature capable of
uniting and appealing to current supporters of the government.
The charismatic 86-year-old head of the Authentic Panamanistas,
Arnulfo Arias, was defrauded in the 1984 election and has caused
divisions in his party because of his failure to assert any
leadership role in the protests. Ricardo Arias Calderon, who
leads the Christian Democrats, has emerged-A'6'fhe most visible
opposition politician since the crisis began. His party is
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ideologically cohesive, but it is small and presently unable to
appeal to either Arnulfo's supporters or rural peasants. Aurelio
Barria, a leader of the Civil Crusade, is president of the
Chamber of Commerce and a well-known civic leader, but has no
popular following.
Leftwing university and high school students have clashed
violently with police, but they are operating independently of
both the opposition and the regime. The students' main concern
prior to recent events was opposition to the government's
proposed education reforms.
The Church, under Archbishop Marcos McGrath, contributed
significantly to the opposition's efforts by criticizing
corruption and human rights abuses and by calling for Noriega's
departure following the imposition of the state of emergency.
Despite its sympathy for the opposition, however, the Church--
generally conservative and lacking a strong populist element--is
unlikely to assume a leadership role. The Church's more moderate
rhetoric recently indicates it hones to act as mediator between
the government and opposition.
Escalating opposition protests and government miscalculation
could compel the General Staff to force Noriega's resignation, a
circumstance which might give the opposition more political space
to operate with greater unity in undertaking a dialogue with the
government. Despite the opposition's limitations, it appears
capable of sustaining the current protests in the hope that
internal and international developments eventually will tip the
balance in their favor.
Noriega's Military Support
Noriega has retained support of the military because his
allies occupy key positions, the officer-corps is loyal to its
commander, and the institution itself has been under attack. By
forcing Chief of Staff Diaz to retire, Noriega eliminated his
principal rival and has been able to consolidate his control of
the military. Noriega's support extends below the General Staff
to middle-level officers. some
of his most ardent foil
their personal loyalty.
that junior officers--captains and below--are less personally
committed to Noriega but are loyal to him because of his position
as Defense Forces Commander.
There is concern within the officer corps about damage to
the military's image resulting from the crisis, but we have. no
evidence to suggest that any segment of the military+is ready to
oppose Noriega. the
General Staff has considered asking Noriega to step down if
violence escalates and more deaths occur. In addition, we
believe there would have to be a serious erosion in the
military's popular support and significant international pressure
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brought to bear before the General Staff would move against
Noriega. Lt. Col. Herrera Haan,,,_the Panamanian Ambassador to
Israel and an officer who reportedly would like to see the
military withdraw from politics, would be among the most likely
officers to lead a move against Noriega. Like most officers,
however, he would feel constrained by the strong institutional
bias against an internal putsch; while displeased with being
placed in charge of putting down the opposition vrotest in mid-
July, he dutifully carried out his orders.
The Ruling Coalition
Despite some wavering of support for Noriega within the
ruling coalition, no party is likely to desert him unless the
situation deteriorates sharply or he loses his military backing.
Although all elements of the coalition probably would like to see
the military gradually withdraw from the political arena, most
are willing to remain allied with the Defense Forces. They
accept its dominance and want to share in the spoils of ruling.
In the unlikely development that the ruling coalition began to
disintegrate, the Liberal and Republican parties would have the
least to lose, and would be the first to go.
The leftist Tendencia faction of the ruling coalition is
using the current crisis to ingratiate itself further with
Noriega but could abandon him if its leaders felt he had lost
control of the situation and the military's support. Tendencia
initially wavered in its support due to party infighting during
the present crisis but apparently has salvaged its influence with
Noriega by mounting protests against the US Embassy and
opposition businesses, reportedly with the military's blessing.
Tendencia hopes to capitalize on the unrest as the regime relies
more heavily on its allegiance. The faction also recognizes that
a gross deterioration of the situation might present
opportunities to seize power directly.
President Delvalle appears unwilling to reduce his support
for Noriega unless the Defense Chief's military support erodes.
Delvalle undoubtedly hopes that the crisis will eventually remove
Noriega from the scene but allow him to remain as President.
Noriega, for his part, is committed for the time being to keeping
a compliant Delvalle in office and recently has allowed him
greater policy latitude. senior
officers of the General a ave expresse concern that
Delvalle is enhancing his own image at the expense of the
military. Nonetheless, they recognize that they need the
President's support, at least until October, after which they can
replace him without having to call early elections. Vice
President Esquivel, leader of the Liberal Party, has already
criticized his own government's handling of the crisis and is the
most likel senior politician to withdraw from the ruling
coalition.
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The Military's Role in Panama
The Panamanian military is unlike any other Latin American
military because it has carefully cultivated broad grassroots
support. It also created the present political system and has
coopted interest groups across the entire political spectrum.
The military's dominant hand in government has reinforced popular
perceptions that it is the only institution capable of running
Panama
Role in Society
The Panamanian Defense Forces draw on the populist legacy of
the late General Omar Torrijos, who emerged as the strongman soon
after the military forced newly elected Arnulfo Arias to step
down from the presidency in late 1968. Torrijos successfully
united key sectors of society behind military rule, largely by
increasing public services for the poor and enhancing the
regime's role in the economy. Military-run civic action
programs, such as road-building and public service projects, have
brought tangible benefits to the rural populace while enhancing
the military's power base. The funneling of limited government
resources for rural development through the military and the
public's traditional view of civilian government as ineffectual
have reinforced popular support for military rule.
In addition, the Panamanian military is less repressive than
those of other Latin American countries and has studiously
cultivated a positive public image. It has avoided an elitist
image because the officer corps reflects Panama's ethnic and
socio-economic makeup. Until recently, military personnel could
move unarmed and uniformed virtually anywhere in the country
without danger. The military has hired public relations firms to
improve Noriega's public stature, according to US Embassy
reporting.
Role in Politics
Exploiting the weakness of political institutions, the
military has dominated and manipulated a political system that
Torrijos created in 1977-78 in order to assure ratification by
the US Senate of the Panama Canal Treaties and to relieve
domestic pressure for change. Panama's dominant political party
--the Democratic Revolutionary Party--harnesses diverse groups
that the military has coopted. It heads a ruling coalition that
does not challenge the military's political initiatives and
usually seeks the Defense Forces' support before undertaking any
of its own programs. The military has not hesitated to ensure an
outcome favorable to its interests, such as in 1984 when it
altered votes to prevent the victory of regime opponent Arnulfo
Arias. In addition, three civilian presidents have been removed
by the military in the last five years. Current President
Delvalle is openly deferential to Defense Chief Noriega.
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The predominant power of the military in the political scene
for nearly two decades has indebted many to the current system
and has perpetuated weak civilian institutions. The military
retains links to key members of the executive, legislative, and
judicial branches and directly controls certain nonmilitary
agencies as well as most of the domestic media. Moreover, the
military virtually controls the government budget and has its own
moneymaking ventures.
Potential for Weakening Popular Support
The military's grassroots support shows signs of erosion
that could worsen if the current crisis does not end soon. A
sharp downturn in the economy that increased unemployment,
growing middle-class disaffection, and strong opposition from
organized labor could lead to greater urban unrest. More
evidence of widespread corruption coupled with a failure or
inability to continue providing adequate public services could
also trigger dissent, especially in key rural areas.
Nonetheless, the military's traditional role as the dominant
political institution in Panama gives it a solid foundation from
which to arrest any further erosion of its popular support.
Antiregime protests in rural areas have generally been more
muted, and the military has paid increased attention to
maintaining its urban support base. For example, the regime has
taken steps to address local grievances in the city of Colon, one
area of antiregime violence.
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Possible Outcomes if Noriega Departs
We see the potential for five possible outcomes if
Panamanian strongman General Noriega is forced from power because
of the current political unrest. We believe there is a better
than even chance that a new military strongman or a military-
condoned civilian government--would emerge after Noriega's fall.
It is less likely that a military dictatorship without civilian
participation in the government will be installed or that a
civilian-military transitional junta will emerge. The least
likely outcome, in our opinion, is an outright opposition
victory
A New Military Strongman
If the General Staff united to force Noriega from power, it
would name one of his deputies as the new Defense Forces
Commander. The military, which has become increasingly
conservative since Torrijos's death in 1981, probably would feel
compelled to follow the recognized chain of command in replacing
Noriega. Technically, Chief of Staff Colonel Marcos Justines is
next in line, but he is several years past the"?tr'aditional
retirement age and reportedly has stated he would retire if
Noriega goes. Of the two Deputy , C .j fs .Q f., Stiff, Colonel Alberto
Purcell, who is extremely cg,pt and a longtime Noriega ally, is
more senior than Colonel Elias Castillo, who is regarded a more
apolitical. Castro s rep ?aE-j:n'bias been rising, however, and
he commands the military's ground forces. Castillo would be more
likely to be named military chief if Justine retires because
Purcell is considered too closely tied to Noriega.
Prospects for a successor to Noriega emerging from below the
General Staff are remote. In fact, some of Noriega's most ardent
followers are among the majors and captains. They also are more
receptive to leftist influence and more anti-US.
Any new military strongman would be less powerful than
Noriega. With the regime on the defensive, the new military
commander would be less confident of his position than Noriega
and probably more willing to rely on repressive measures to
dampen the opposition. Indeed, several members of the General
Staff, including Castillo, reportedly have wanted to deal more
forcefully wit opposition demonstrators than Noriega.
The opposition, having successfully forced the departure of
one military strongman and seeing no change in the existing power
structure, is unlikely to accept another without further
protests. Leftist political groups, free of Noriega's strong
grip, would be emboldened to press the regime for increased
social programs. In such a continuing unstable political
climate, economic strains on the regime probably would increase.
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Such a scenario, however, could pose problems for the opposition
as well as the regime since social tensions are likely to be
exacerbated between the relatively well-to-do conservative
opposition and the lower-income and working classes that are the
backbone of the regime's support.
The Defense Forces without Noriega probably would leave
relations with the United States essentially unchanged, although
continued pressure for the military's withdrawal from politics
could prompt it to push for a more anti-US program. Colonel
Purcell would be more likely to pursue such a policy, while
Colonel Castillo would at least try to maintain working relations
with the US military.
Military-Condoned Civilian Rule
In the likely event Noriega's removal does not calm the
crisis, the military probably would try to defuse the opposition
by allowing its allies in the ruling coalition to exercise their
constitutional authority more fully. The military, however,
probably would insist on keeping involved in civic action
programs in order to maintain its base of support in rural areas.
Although the Defense Forces would play a less significant role in
the selection of civilian officials and public policymaking,
government authorities and ruling coalition party leaders
undoubtedly would ensure their decisions had the General Staff's
blessing. The Defense Forces probably would not tolerate the
eventual election of anyone viewed as inimical to its interests.
With Noriega gone the military's public profile visibly
reduced, short-term stability would be possible under this
scenario. The ruling coalition would be pleased with its
increased latitude in decisionmaking, and the military would
concentrate on developing its capability to assume primary
responsibility for defending the Canal in the year 2000.
Although the opposition has been demanding the removal of
President Delvalle and the installation of an opposition-based
government, military-condoned civilian rule probably would arrest
the opposition's momentum and cause some supporters to retreat to
the sidelines until the extent of the changes became clearer.
Unless Delvalle could demonstrate independence from the military
and genuinely free elections seemed likely in 1989, the
opposition probably would start agitating for the military to
withdraw completely to the barracks.
Military Assumes Direct Control
The military might decide to seize direct control of the
government if increasing numbers of its civilian allies joined
forces with the opposition and the ruling coalition sought to end
the crisis by replacing several senior military officials. A
military coup probably would lead to increasingly repressive
measures to maintain control--including martial law, the arrest
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or exile of opposition leaders, and possibly indiscriminate use
of force to put down demonstrations. It would al lace the
1989 elections in doubt.
A direct military takeover would entail serious political
costs for the regime. Many of the military's civilian allies,
probably including President Delvalle, would desert the regime
and join forces with the opposition. Such a weakening of the
military's political backing would make its leftist allies in the
dominant Democratic Revolutionary Party an increasingly important
source of support. The military, in recognition of their
support, probably would implement public policies amenable to the
left. More repressive regime measures probably would cow the
opposition and prevent major antigovernment demonstrations but
might not preclude some civil disobedience.
Resorting to martial law probably would have substantial
costs internationally. The unstable political situation would
further erode business confidence and make it more difficult for
Panama to secure more foreign aid and investment. Western
nations might introduce sanctions or curtail trade and investment
in Panama. Under pressure at home and abroad, a reversion to the
populist, anti-US program of the Torrijos era would become
increasingly attractive, and probably presage closer ties to
Cuba, Nicaragua, and possibly the Soviet Union.
A Civilian-Military Transitional Junta
If the crisis continues to escalate, the military might try
to appease the opposition by dismissing the present government
and establishing a transitional junta including representatives
of the government, military, and opposition. The General Staff
would hope that placing an apolitical military officer like
Castillo or Lieutenant Colonel Herrera Hassan on such a junta
would enable the military to influence the transition until
internationally supervised elections were held.
At least initially, the opposition probably would be
satisfied with Noriega's departure, its role in the transition
process, and the promise of an unfettered electoral process.
Stability could be threatened over time, however, over questions
of distribution of power or electoral procedures. In addition,
unrest would resurface if the junta came to be viewed or declared
itself unlikely to give way to a freely-elected government of any
political stripe.
Opposition Comes to Power
We believe the opposition movement would come to power only
if the current regime was totally repudiated publicly, economic
ruin was imminent, and the military successor or successors to
Noriega decided to give up the dominant role the military has
played in Panamanian politics for the past 40 years. The
opposition would have to unite behind a single and dynamic leader
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and become more broadly representative of the population to have
a chance at winning free and fair elections. Under no
circumstances would the current regime--even though weakened by
Noriega's departure--be willing to concede that electoral fraud
took place in 1984 and turn over power to arch-foe Arnulfo Arias.
Stability would be difficult to achieve under this scenario
without the total cooperation of the military. The political
left, unbridled by the military's weakened position, probably
would coalesce, receive increased support form Cuba and
Nicaragua, and pose a serious challenge to any conservative-based
pro-Western government. Even with the current regime in ruin,
the opposition probably would have to acknowledge that the
Defense Forces have an integral role to play in Panamanian
society, especially in national defense and probably police
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Date
Panama Chronology, 1976-1987
Event
7 Sep 77 Panama Canal treaties signed in Washington
by Carter and Torrijos.
Oct 77 Panama approves the Canal treaties by
plebiscite.
30 Jul 81 Torrijos killed in a plane crash.
Aug 83 Chief of Staff Noriega becomes head of the
military as National Guard Commander.
6 May 84 Panama holds first presidential election in
16 years; Nicolas Barletta is elected
President.
Nov 84 Noriega reportedly orchestrates Barletta's
establishment of a National Security and
Defense Council; body gives the military a
more formal role in the civilian government.
Sep 85 Regime opponent and Noriega critic Hugo
$padafora, apparently detained by military
personnel, is discovered murdered across the
border in Costa Rica. Spadafora reportedly
intended to go public with evidence of
Noriega's involvement in narcotics
trafficking and money-laundering activities
in Peru, Colombia, and Bolivia.
27 Sep 85 Noriega pressures Barletta to resign in
favor of First Vice President Delvalle after
Barletta indicate he would not protect the
military from an independent investigation
into the murder of Spaora.
Jan 86 Noriega reinforces his control over the
military through reassignments to the
General Staff and other key commands.
28 Feb 86 The military organizes a large rally to
denounce opposition and alleged US
interference following US Ambassador-
designate Davis' testimony before Congress.
10 Mar 86 10-day general strike begins despite threat
of retaliation against labor leaders by
Noriega.
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12 Aug 86
Huge progovernment rally of m
100,000 people celebrate the
anniversary of Noriega's rise
ore than
third
to power.
1 June 87
Chief of Staff Diaz Herrera f
resign, reportedly suffering
depression. Noriega had want
Diaz for more than a year but
do so because of Diaz's subst
orced to
from
ed to retire
was unable to
antial
political support from the le
ft.
8-10 June 87
Diaz accuses Noriega of elect
the Spadafora murder, sparkin
demonstrations by students an
groups
Militar
l
oral fraud and
g
d opposition
.
y c
oses rank
Noriega by pledging loyalty t
Forces and their Commander.
s behind
o the Defense
11 June 87
Government imposes state of e
suspending basic constitution
in response to escalating viol
call for a general strike.
mergency,
al guarantees,
ence and a
24 June 87
Nicaraguan President Ortega vi
discuss Central American peace
following invitation from Pres
Delvalle. Probably an effort
distract attention from the de
domestic political situation.
sits Panama to
negotiations
ident
by Panama to
teriorating
30 June 87
Government lifts state of emer
Progovernment demonstration in
Embassy turns violent.
gency.
front of US
8 Jul 87
After three days of peaceful b
opposition demonstrations, Pre
Delvalle announces a ban on pr
scheduled for 9 and 10 July.
ut growing
sident
otests
26 Jul 87
First confirmed death in the c
military shoots an anti-Norieg
in rural Panama.
risis when
a demonstrator
27 Jul 87
Defense Forces raid home of Di
az Herrera and
shut down opposition newspaper
opposition begins a two day gen
s, while the
eral strike.
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RET
MEMORANDUM TO HOLDERS
S N I E 8486
PANAMA:
POLITICAL PROSPECTS (s)
Information available as of 8 July 1987 was used in
the preparation of this Memorandum to Holders,
which was approved by the National Foreign
Intelligence Board on 9 July 1987.
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KEY JUDGMENTS
We believe that, despite the continuing popular unrest and
political instability in Panama, Gen. Manuel Noriega and the current
regime are likely to remain in power at least through the 1989 election:
- The military appears to remain solidly behind Noriega, and the
regime is determined to ride out the current crisis regardless of
the impact further unrest might have on relations with the
United States.
- The ruling Democratic Revolutionary Party (PRD) coalition also
remains firmly behind Noriega and the military, primarily
because of its desire to continue sharing in the spoils of power.
- While the opposition has been able to sustain protest activity, it
currently remains too weak and fragmented to pose a serious
threat to the regime, and it is vulnerable to further intimidation
and repression. Additional government miscalculations or reve-
lations by Col. Diaz Herrera, however, may reenergize opposi-
tion to the regime
Nonetheless, while the regime is unlikely to bow to international
pressure for an early election, prospects for Noriega's potential presi-
dential candidacy in 1989 appear to be increasingly doubtful:
- The military and the ruling coalition are now more likely than
ever to attempt to put forward a respected civilian candidate in
1989. They may calculate that they can still win an honest
election, although they would be prepared to resort to fraud, if
necessary.
- Furthermore, General Noriega probably will make some ges-
tures to reduce opposition and popular grievances with the
government over issues such as widespread corruption and
military control of the political system.
- Should sustained and violent opposition activities continue,
however, the possibility that President Delvalle will resign
voluntarily or be forced out as a scapegoat would increase
We believe there is a less-than-even chance that a serious escalation
of violence or a continuing confrontation with the United States might
cause the General Staff to remove Noriega:
- If Noriega resigns or is forced out by the General Staff, his
successor probably would be less powerful and might allow
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more political space for civilians, but not to the point of
weakening the military's institutional interests by significantly
reducing its role in politics.
- There is a small chance that Noriega's enforced departure may
have destabilizing consequences for Panama by setting off a
political free-for-all within the ruling system. The opposition
would also seek to take advantage of his departure to press for a
complete removal of the military from politics.
- Nevertheless, the prospects for a significant increase in radical
leftist influence in Panama are remote, except to the extent the
regime allows the left a greater voice to challenge US interests.
It has almost no chance of assuming power-even with substan-
tial help from Cuba and Nicaragua.
On balance, there currently appears to be little chance that the
military's political role will diminish sharply enough to permit a full
transition to civilian democratic rule as a result of the 1989 election:
- There is a greater chance that, if the crisis worsens significantly,
Noriega and the military will oust President Delvalle and Vice
President Esquivel and install another figurehead. They could
accomplish this constitutionally after September 1987. A direct
military takeover is unlikely, but it would put the 1989 election
in doubt.
- At present, the chances of an electoral victory by the moderate
opposition in 1989 are poor. The opposition would have to
coalesce around a charismatic leader by then in order to
effectively challenge the ruling party coalition. Nevertheless,
although its longtime leader Arnulfo Arias appears to have lost
considerable stature during the recent unrest, a new leader may
arise to fill the void. Furthermore, the opposition would benefit
from increased regime repression and a sharp economic down-
turn.
The traditional political opposition to Noriega and the ruling PRD
has attracted the support of a large segment of the business community
as well as many middle- and upper-class Panamanians, but it still lacks a
broad base of popular support:
- There have been some violent demonstrations in lower-class
neighborhoods in Panama City and Colon, but these primarily
represent popular grievances over lack of services, which the
government is already taking steps to satisfy.
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-Radical leftist students responsible for much of the recent
violence have little in common with the conservative political
opposition, and they are unlikely to join forces to coordinate
their efforts.
- The Catholic Church in Panama is generally cautious and
conservative, and is unlikely to assume a leadership role in the
effort to oust Noriega. Rather, the church has moderated its
rhetoric and is attempting to mediate between the regime and
the opposition.
- Finally, although Christian Democratic leader Ricardo Arias
Calderon has emerged as a major opposition figure, his party
lacks broad appeal to the working class and to the rural
peasants, who are the backbone of support to the regime. (s NF)
The regime's greatest vulnerability may lie in a possible economic
downturn, which most likely would be caused by a loss in investor
confidence and reduced access to funds from international lenders:
- A severe shortage of financial reserves appears almost certain by
early next year without relief from international lenders.
- The World Bank is withholding up a $50 million structural
adjustment loan until the government reforms Panama's nearly
bankrupt social security system, and other international and
commercial lenders are awaiting compliance with the World
Bank requirements before going forward with their own loans.
- Nevertheless, Noriega may prefer to delay action on lending
requirements by the World Bank and other foreign lenders
rather than risk unpopular fiscal measures such as social security
reform.
US leverage over Panama has decreased considerably since the
ratification of the Panama Canal Treaties in 1977, and Noriega has not
hesitated to rally Panamanian nationalism by claiming that the real
intent behind US pressures for reform is to retain control of the Canal:
- Direct US economic and military aid to Panama now amounts
to less than $40 million per year, and although Noriega
recognizes the importance of close military and economic ties to
the United States, he probably calculates that the strategic
importance of the Canal will dissuade Washington from exert-
ing excessive pressure on his regime and risking a destabilization
of the relationship.
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- Furthermore, the regime appears more than willing to accept a
drawdown of the US military presence resulting from imple-
mentation of the Canal Treaties
US interests in Panama are best served by a stable, friendly, and
more democratic government. Specific interests include:
- Unhindered access to the Canal for military and civilian
purposes.
- Unimpeded access to and use of military and intelligence
facilities.
- Cooperation against drug trafficking and money laundering.
- Economic stability and continued access for US trade and
investment.
- Denial of Panama as a base for the support of regional
subversion and as a site for Cuban and Soviet Bloc activities.
- Panamanian support for US policies and activities in Central
America
We believe that should the military and the PRD continue to
dominate Panama-with or without Noriega-there would still be
sufficient stability to protect US interests, assuming that they make
enough concessions on corruption and other issues to undercut regime
opponents:
- US interests would suffer, however, if Noriega became increas-
ingly repressive in dealing with the opposition. Not only would
the system become less stable, but also anti-American sentiment
would likely increase.
- US ability to pressure Noriega for meaningful reforms is
constrained by his ability to retaliate against the full range of US
interests in Panama, particularly by demanding an interpreta-
tion of the Canal Treaties that precludes activities in support of
our Central American policy and by improving relations with
the Soviet Bloc, Cuba, and Nicaragua.
- US policy would be further complicated should Noriega and
the military take over the government completely. In addition
to increased instability and repression, the contrast between
the regime and US policy emphasis on democratic government
in Latin America would make cooperation extremely difficult.
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In the unlikely event that the Panamanian military largely with-
drew from politics or that the moderate political opposition did achieve
power, the United States would probably still have to deal with a
nationalistic government that demanded full adherence to the Canal
Treaties as they interpreted them:
- A democratic civilian govenment would also remain susceptible
to popular pressures against economic austerity measures and
concessions to the United States on military basing rights and
intelligence access
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