U.S. Squeeze on Noriega Triggers Bank Crisis

Efforts by the Reagan Administration to put an economic squeeze on the government of Panama’s military ruler, Gen. Manuel A. Noriega, triggered a banking crisis here Thursday.

The government’s central bank notified local bankers that it could not get money from at least one of its accounts in the United States and therefore will be unable to give them funds that it holds on their behalf or to clear checks that the banks might cash for clients.

As a result, local Panamanian-owned banks decided to delay their scheduled reopening today. The banks had been shut this week, both to show support for an anti-government general strike and to sit out potential financial chaos that might have resulted from it.

Bankers now fear that news of their lack of cash will cause depositors to make panic withdrawals and threaten the institutions’ already shaky financial situation. A run Thursday on foreign banks that do local business helped persuade the Panamanian banks to stay closed.

“We cannot deal with what would happen if we opened,” said a local banker.

The banking disruption was the first visible repercussion from a decision made by the Reagan Administration and opponents of Noriega in the United States to block the flow of money to Noriega’s government.

Washington continues to recognize deposed President Eric A. Delvalle as the legal president of Panama. Delvalle lost his job last week after unsuccessfully trying to fire Noriega, whom federal courts in the United States have indicted for drug-related corruption. Delvalle was replaced by Manuel Solis Palma, who was his minister of education.

Delvalle is in hiding, and his representatives in the United States are trying to gain control of Panamanian assets held there. A proclamation issued by Delvalle urged Washington to keep Panamanian funds away from Noriega. On Wednesday, the deposed president’s supporters won a U.S. court order blocking the transfer of Panamanian government money from Republic National Bank of New York to Panama.

The economic pressures are aimed at aggravating Panama’s severe budget problems, according to reports from Washington. Panama’s reserves of dollars are reported to be exceptionally low, and there have been persistent rumors that the government will soon be unable to pay its workers’ salaries. And Panama, which uses the dollar as its currency, keeps its reserves in the Federal Reserve System in the United States.

Just how soon, if ever, the government will run out of money is open to debate.

The effects of maneuvers in Washington were first reported here in government-owned newspapers Thursday morning.

In a published communique, the Panamanian government said it has been refused access to $10 million in funds in its account in Republic Bank. The money was meant to be disbursed to local banks and made available to individual clients in Panama.

“To our surprise, we were informed by telephone that the transfer (to Panama) was frozen by a legal action,” said a statement issued by the National Bank of Panama, the country’s central bank.

“We will re-establish the service of supplying cash (to banks) as soon as we resolve this absurd action,” the communique said.

The Panamanian government vowed to fight for access to its money in the United States through court action. It was not immediately clear how the problems might affect the more than 120 international banks that do offshore business here.

The bank closures and resulting uncertainty could harm the business community here immediately.

Eventual Recovery Worries

That possibility presents U.S. policy-makers with a dilemma: Financial pressures aimed at Noriega could ricochet onto the interests of business people who form the backbone of opposition to the general. U.S. officials in Panama have long expressed concern that escalating economic problems may seriously cripple the ability of Panama’s economy to recover in the future.

“Businesses will not be able to pay their employees or their bills,” said an officer of a local bank in Panama City. “They will not be able to run efficiently, if at all.”

At least three foreign banks that also take local deposits opened Thursday. At one, a businessman sat in a back office making out an application for transfer of $60,000 from a Panamanian branch of a U.S. bank to its American home office.

“These are not normal times,” the businessman said.

At another, Citibank, long lines of customers formed early in the morning. Most appeared to be making withdrawals. The bank closed a half-hour early, without explanation. Customers were upset.

“They do not want to pay me,” complained a 70-year-old retiree trying to cash a pension check.

Added a young office worker who gave his name as Gabriel, “All I wanted to do was make a transfer, and they would not let me.”

The run on banks overshadowed the fourth day of a general commercial strike called by opponents of Noriega. The strike appeared to wind down as some stores and gas stations opened for business.

Leaders of the Civic Crusade, a politically active organization of business and trade groups that organized the strike, called off the strike Thursday night. They said their decision was based on the banking crisis, which they termed “devastating.”

The strike had paralyzed most industries in Panama City as well as businesses located in middle-class and upper-class neighborhoods. On Thursday, supermarket chains and gasoline stations reopened.

There were no reports of violence Thursday, for the first time in two days. Only one public demonstration took place, that at noontime when residents of one middle-class neighborhood clanged pots and chanted anti-Noriega slogans.

Noriega has limited his public appearances to carefully staged rallies of political supporters.

In an interview to be published today in La Repubblica, Italy’s largest newspaper, he struck conciliatory tones.

Noriega offered to permit international observers to monitor presidential elections scheduled in Panama for next year. It was the first time he had made such an offer.

“All this pressure can be resolved politically, by an election that will take place next May.”