Unrest Imperils Panama’s Role as Bank Center

Four weeks of violence and unrest have sent shivers through the international banking community in Panama, and, some bankers say, could threaten the nation’s status as a leading financial center.

About 125 banks, with assets estimated at more than $30 billion, are operating here, making Panama the most important offshore banking center in Latin America and the Caribbean. It ranks ahead of the Bahamas and the Cayman Islands.

“Panama has been a convenient place for international banks,” a financial expert said, “but it is by no means indispensable. If trouble continues here for much longer, bankers will think twice about staying on.”

Near-Ideal Conditions

No one is predicting that a mass exodus is imminent from a country with near-ideal conditions for a center of international finance: There are no taxes on bank deposits, no reserve requirements for foreign operations, no income tax on profits and no currency conversion problems because Panama’s unit of exchange is the U.S. dollar.

But when mobs chanting anti-American slogans hurled stones and bags of paint against the buildings of Chase Manhattan, Citibank, and the Bank of America, alarm bells went off in corporate headquarters from New York to Tokyo.

“There is a lot of nervousness in the banking community,” an international businessman said. “A lot of people are ‘reviewing operations.’ ”

Trouble flared after public accusations that Panama’s military strongman, Brig. Gen. Manuel A. Noriega, had been involved in crimes ranging from murder and drug trafficking to vote rigging.

Series of Clashes

The charges were made by Col. Roberto Diaz Herrera, formerly Noriega’s second-in-command of the Panama Defense Forces, the nation’s sole military and police institution. They touched off a series of violent clashes between anti-Noriega protesters and security forces.

The initial clashes followed a familiar pattern: police versus demonstrators. But since then, there have been a number of incidents which caused considerably more concern to many business executives.

Last week, a crowd of 500 government supporters yelling “Yankee go home!” stoned the U.S. Embassy and consulate to protest a resolution by the U.S. Senate urging a return to democracy in Panama.

The country has a civilian president who is little more than a figurehead. Noriega, who commands the 20,000-strong Defense Forces, is Panama’s de facto ruler.

After the embassy attack, blamed by Washington on Noriega, a third layer of violence was added to the already heated atmosphere: armed civilians who attacked commercial establishments and offices belonging to opposition leaders.

In the worst incident, a group armed with submachine guns stormed an exclusive clothing store and a Jaguar car dealership and set fire to the building and several cars. Police stationed nearby did nothing to stop the vandals.

With many banks already recording stagnating profits, some economic experts say continued insecurity could easily tip the balance toward a decision to scale down or pull out.