Panama Country Analysis Paper

Panama is considered to be one of the most recent nation states in Latin America. Most nations are formed due to national struggle that seeks independence from its former colonizers, but in the case of Panama, the formation of this nation state was due to American encouragement of revolutionary activities among the bourgeoisie which resulted in a separation from the motherland Colombia. American interest in Panama is mainly due to the strategic Panama Canal which connects the Pacific and the Atlantic oceans. Panama’s economy is entirely dependent on its canal, but so are other countries in the region, particularly the US, whose trade benefits largely by using the canal that saves both time and costs of freight from one side of the continent to the other. The US, through political and economic pressures, has forced previous Panamanian governments to sign treaties that provide the US control over the canal. This does not only breach the small country’s sovereignty, but it also makes it dependent on American military presence for national security purposes, particularly that Panama’s neighbors are both aggressive and strong. At the same time, Panama’s borders are a passage for Colombian drugs into the US and other countries of the world. Due to its geographic importance and historic development, the political structure of Panama cannot break free from American influence and intervention.

As early as the end of the nineteenth century, American politicians were aware of the necessity of imposing their influence and control over the Panama Canal. Consequently, the US tried to purchase local support to mobilize a local revolt against Colombia. Indeed, the revolt took place on November 3, 1903, and the US troops prevented the Colombian government from reaching Panama or repressing the Panamanian uprising. Thus, from the very beginning, the Panamanian state was formed under immediate American influence and intervention (Graham, 12-13).

After breaking up from Colombia, Panama began to receive economic aid from the US, in addition to a number of agreements which opened the way for American economic, military and political influence in the small country. For example, the US received a perpetual lease for a section of central Panama 16 km (10  mile) wide, stretching from ocean to ocean. In return for a fully free control over this land, the US had to guarantee Panamanian independence  to pay $10 million, in addition to $250,000 every year to Panama (Graham, 95-96).

However, the Panamanian independent public state was only independent apparently, because in effect, the US was in virtual control of the finance, military and administration. The country itself had to troops to protected, and it had very few resources, making it almost impossible to borrow foreign funds from banks or other sources. The Panama Canal was the only real source of revenue and income, but even this one was under the control of the United States and its interests (Gause, 109).

While the Panama Canal is seen as an advantage to the economy of the country, the very construction of this canal is also considered to be a disadvantage, particularly as it cut off an important part of the country which could have been used for irrigation. Moreover, since the Panama Canal did not only use up the territories that were directly included to form it, but also neighboring territories necessary for related industries or services, the Canal became a major burden on the Panamanian economy (Gause, 68). The burden of constructing the Panama Canal on the people increased as the international influence in the country grew, particularly on the part of the Americans, making its impossible for the Panamanians to enjoy the economic fruits of their canal (Graham, 115).

Panama was originally a part of Colombia, and there were no plans to separate it and announce it an independent state, until the Americans came out with the idea of digging the Canal, which they wanted to be out of Colombian territories. The American interests did not take into consideration that their interests would result in the formation of a small state that would in turn face a severe lack of resources, not only because of its lack of territory, but also because of the limited human resources and the possibilities of making use any other resources (Weil, 19).

In addition to this, the US forces remained in control of the Panama Canal, organizing, protecting, and administering it ever since the canal was founded. The US held its influence on and control of the Panama Canal by virtue of the 1903 Canal Treaty which also enabled the US to keep a strong garrison to protect its territory in the canal region. However, the Panamanians repeatedly considered this to be a challenge to their sovereignty and liberty, and violence against American and western intervention repeatedly broke out, until the 1950s, when serious threats began to get closer to the Panama Canal (Scranton, 6).

In 1969, President Torrijos aimed at negotiation with the US over the Canal, thus in 1977, signing a new treaty with President Jimmy Carter in 1977. According to the Treaty, the US was to return the Panama Canal to Panama by December 31, 1999, while at the same time, 60% of the canal zone would be turned over to Panamanian control in 1979. Although this treaty established the new bases of relationships between the two countries, it faced serious challenges both in the US and in Panama. The Panamanians still believed that this treaty gave the Americans more than what they should have taken, whereas as the same time, the Americans believed that they had given up an American territory (Scranton, 6).

Pleased with the limited success his government made for the first time since Independence, Torrijos immediately started to stabilize the economy and the state, especially after the growing unrest that was apparent during the growing leftist violence at that period. Torijjos then began to shift the country from military to civilian rule, but he was unwilling to give in power, even though he formed the Democratic Revolutionary Party (PRD) to back the civilian president he himself chose. The most powerful group after Torrijos’s death was the National Guard which was closely associated with Torrijjo during his life (Scranton, 23).

The lines of the National Guard provided an adventurer such as Manuel Noriega to reach power very quickly, for, Noriega who was the former head of the intelligence service and head of the National Guard was effectively in control of the government. Apart from being a ruthless leader who may further threaten any possibility of democratic stability or growth in Panama, Noriega was closely associated with the drug cartels of Colombia (Scranton, 23).

Noriega took two advantages of the situation. First of all, Panama  was in the mid way between Colombia and its wide markets of North America, particularly Mexico and the US. Therefore, drug smuggling was to pass directly through Panama. This trade passage would enrich Panamanian economy as well as individual government-related traffickers including Noriega himself (Scranton, 31).

Soon, Noriega was growing too big for the game he was playing in Panama. He continued to move politicians and presidents like pawns, until finally the violence led by his armed forces became so wide spread that the US began to question his credibility, especially as the drug related accusations continued to gather against him (Scranton, 91).

Between 1986 and 1988, the US added up pressures against Noriega in an attempt to convince him to give up power. However, the attempts were in vain, especially as Noriega saw in himself a national hero, at a time when the US was seeking indictments in drug trafficking cases that were easier to deal with than violations of human rights (Scranton, 117).

Indeed, in December 1988, the US troops invaded Panama, capturing Noriega and putting an end to bloodshed in the country. For a while, it seemed that the problems of this small state were over, but this was just another beginning. The US promised to help Panama was a number of political problems, including human rights, democracy and others, but it is the economy problems which remain a major problem for Panama, especially that most of the Panamanian governments have virtually done nothing for the country since the beginnings of the century (Scranton, 143).

The most important source of assets that the government is expecting by the year 1999 is the Panama Canal itself, especially that most of the real estate is intended to be transformed into facilities of export-processing zones, educational institutions, and eco-tourism centers (The Economist, 39).

However, while the Panamanians are happy that the American soldiers, or at least most of them will leave in 1999, economists are worried because these soldiers remain the major spending sector in the economy, especially with respect to foreign currency. The withdrawal of the soldiers might simply result in a serious economic problem for Panama (The Economist, 39).

Another disastrous problem for Panama is the loss of civil order as the rates of crime in the country have reached the highest levels in the world. Mostly due to drug trafficking and related trade, spread of violence remains a serious problem that does not only encounter foreigners in Panama, but also locals as well as government officials. Violence has also reached the Canal Free Zone, considered to be one of the largest tax free trade zones in the world, but also one of the most active passages for Colombian drugs and money laundry. The drug trade is enriching Panamanian trade, yet, this prosperity has only a very short term influence, because on the long term, this trade will only result in uncontrollable violence, loss of credibility of the Panamanian government, and losses in trade (The Economist, 39).

Country Analysis paper about Panama:

With Panama facing all these constraints, the US seems to be the most suitable supporter, especially that the US has more interests with Panama than any other country. To start with, the very existence of Panama was brought about under planning and recommendation of the US Administration. Secondly, the US has a very important stake in the Panama Canal which it currently administers and controls. More than 70% of US seaborne trade passes through the canal, and consequently, the American Administration is not willing to have the security of the canal and its interests sabotaged. As a result, the US is very concerned about the stability of Panama, especially that this stability reflects positively on American interests in the canal. And thirdly, the US is also concerned about the drug river running from Colombia to the US through Panama. The evidence that shows that the US is very concerned about this problem in Panama is that the US invasion of Panama in 1988 was due to Noriega’s drug trafficking activities into the US (The Economist, 39).

The US administration believes that the best way to secure American and Panamanian interests at the same time, is through maintaining democracy in the country. Immediately after the invasion, the US started to prepare for free elections. However, the polls proved most unattractive, and hardly 10% of the voters participated, surprisingly electing supporters of the fallen dictator, Noriega. Election of Noriega supporters did not come out of love for the dictator who ruled with blood, but out of spite for the Americans, whom the Panamanians consider responsible for the awes of the country (Ropp, 59).

First of all, the Americans are considered responsible for the drift of power into the hands of the white oligarchy, excluding the blacks and the Indians who constitute the majority of the population. Secondly, As the US reduced its military presence in the Canal Zone, the impact became severe on the Panamanian economy, creating a feeling that Panama was punished by the US. Thirdly, the Panamanians have hard feelings towards the US and bitterness towards the treaties their presidents had signed with the American administrations over the Panama Canal. They feel that their sovereignty and the integrity of their country are threatened by the US and American presence and interests. Furthermore, the Panamanians feel extremely bitter over American economic neglect. It was the American strike against Noriega that scared away international investors, leaving the country on the verge of bankruptcy. Yet, the US hardly tried to do anything to bring economic security back to its small neighbor, nor did it try to provide sufficient aid (Ropp, 59).

In conclusion, Panama, a small and unstable country in Latin America, continues to suffer as it drifts towards the twenty-first century, mainly under influence from its major neighbor, the US, but also from its own divisions, economic insufficiency, and political weakness. Ironically, all these problems were originally initiated by the US almost a century ago, when the American administration intervened in the region to create a new nation that lacks the capability of survival.










Works Cited

Gause, Frank. The Story of Panama. New York: Silver Burdett & Company, 1912.

Graham, Stephen. In Quest of El Dorado. New York: D. Appleton & Company   “Panama likes democracy but wants something else too.” The Economist, February 2,

1991, p.39.

Ropp, Steve. “Tailoring a new image.” Current History. February 1997, pp. 55-60.

Scranton, Margaret. The Noriega Years. London: Lynne Rienner Publishers, 1991.

Weil, Thomas. Area Handbook for Panama. New York: The American University,