Panama’s Business-Led Opposition Watches the Bottom Line

When an opposition political movement is run by the Chamber of Commerce, it makes sense to frame questions about its future in business terms: How much are Panama’s businessmen willing to invest in their campaign to oust the country’s strongman, Gen. Manuel A. Noriega?

Under the banner of the National Civic Crusade, businessmen have organized car caravans through the city’s financial district, sponsored demonstrations and closed their doors--tactics that have cost them money.

Noriega has countered by shutting down opposition news outlets, by raiding the Chamber of Commerce building, where the Civic Crusade makes its headquarters, and by ordering the arrest of six opposition leaders, including the president of the Chamber of Commerce.

Months of Unrest

After more than two months of such political unrest, Noriega remains firmly in control of the Panamanian Defense Forces and, political analysts say, the country as well.

Panama’s dollar-based economy, meanwhile, has fallen into disarray. Political events have triggered a crisis of confidence in the country’s important banking sector. And the six opposition leaders have gone into hiding.

In the end, whoever wins will win nothing but “the garbage that is left,” said Minister of Planning Ricaude Vasquez.

Vasquez said that $150 million to $200 million has been withdrawn from Panamanian banks in the last two months. Private bankers say the figure could be as high as $400 million, or 13% of local bank deposits.

$4 Billion in Withdrawals

Total withdrawals from all banks, including international banks, have reached nearly $4 billion since June, according to banking sources. But most of the deposits in foreign banks are not kept in Panama and their withdrawal does not affect the economy as severely as those from local banks.

Panama uses the U.S. dollar as its currency, and so is limited in the measures it can take to restrict the outflow of money, such as exchange controls.

At a meeting of the American Chamber of Commerce last week, officials of three of the largest American banks here told U.S. Ambassador Arthur Davis that time deposits are leaving the country as fast as they mature and that the money is being sent abroad.

The banks have stopped issuing new loans, and bankers say they fear a continued run on deposits could sink one of the local banks in a matter of weeks. The credit crunch already has had an impact on the construction industry, stalling at least one major housing development that was in progress.

And the head of the National Bank of Panama, which acts as Panama’s central bank, resigned last month because of efforts by the military to use the bank to bestow political favors, say banking sources.

More than half of Panama’s economy depends on banking and other services--the Panama Canal, the duty free zone, insurance and the like. Attracted by a stable political situation, bank secrecy and tax advantages, many foreign companies and individuals set up offshore holding companies here. Now, sources in the business community say, the establishment of new companies has almost stopped.

The government, meanwhile, has stopped making investments and has suspended payments to suppliers. It continues to pay interest to commercial banks on most of its $4 billion in foreign debt, but it has suspended payments to foreign governments.

Officials have been meeting with a committee of commercial bankers this week to discuss the debt, which in per capita terms is one of the highest in Latin America. According to banking sources, the debt will probably be rolled over for three to six months while international bankers watch the political situation. But they think the government is unlikely to win any new loans this year.

President Eric A. Delvalle said in a recent interview, “If this (unrest) doesn’t end this month, we are going to have very serious economic problems.” Delvalle is the official head of state, but Noriega is the de facto ruler.

The opposition has gathered momentum since June 8, when Col. Roberto Diaz Herrera set the Civic Crusade in motion by publicly charging Noriega with corruption, with fraud in connection with the 1984 presidential elections and with killing one of his harshest critics in 1985.

Last week, the Civic Crusade turned out more than 20,000 handkerchief-waving anti-Noriega demonstrators. It was the largest such rally yet, but not enough to oust the general.

The Reagan Administration has frozen aid to Panama, and last week Secretary of State George P. Shultz endorsed the opposition movement. But even while the State Department presses for Noriega’s ouster, the Defense Department and the CIA defend him for maintaining stability around the Panama Canal.

Latin American governments have been careful not to openly side with what Noriega calls “Yankee intervention” in Panama. And, so far, there have been no signs of disunity among the 20,000 members of the military.

The wild card in Panama’s future seems to be the economy.

Economy Stumbles

Panama is more developed and has a much larger middle class than most of its neighbors in Central America. Before the unrest, the economy was growing by about 4% a year and the rate of inflation was less than 1%. Unemployment was estimated at 11% to 16%, as compared to 25% to 40% in other countries in the region.

But now, businessmen are predicting that the economy will stagnate for the rest of the year, and that thousands of workers will be laid off as a result of the unrest. For example, advertising executive Alberto Garcia, of McCann Erickson Panama, said he has furloughed three employees since the first of the month and lost $100,000 in billings, or 25% of his business.

Businessmen say the government is pressuring members of the Civic Crusade with such measures as sudden health inspections and threats to suspend their licenses. Some political observers wonder how long the businessmen will be willing to accept such losses for the cause.

“I think they are willing to take a calculated risk,” said Raul Leis, a sociologist at the leftist Panamanian Center for Studies and Social Action. “I don’t think they will put themselves in real jeopardy.”

Vasquez, the planning minister, said that long-term damage to the country’s image and economy already has been done. He and some worried bankers want the opposition to negotiate with Noriega.

But the members of the opposition say there is nothing to discuss. They say Noriega, rather than their Civic Crusade, is ruining the economy and that the general must step down and submit to an independent investigation of the corruption charges against him.

They have called for new presidential elections, but insist that there can be no fair elections as long as the military is in power. There have been four presidents since Noriega took over the armed forces in 1983.

“The losses will continue as long as we have this government, because there is no confidence in the government,” said Tomas Herrera, an attorney for the Civic Crusade. “This is a country without laws.”

The businessmen have called another strike for Monday. A strike last month was about 90% effective, and political analysts say, this one will serve as a barometer of whether the opposition is maintaining its momentum.