COMBAT IN PANAMA : U.S. Acts to Bring Stability, Aid Leaders, Help Restore Economy : The future: Bush says nation is ‘helping Mr. Endara already.’ New president presides over Legislative Assembly, extends olive branch to Noriega forces.

With hostilities in Panama winding down, the Bush Administration began moving Thursday to help Panama’s fledgling leadership establish a government and map plans for rebuilding the country’s shattered economy.

President Bush said the United States wants to see a major restructuring of the Panama Defense Forces and will soon propose increased economic aid for the government of newly installed President Guillermo Endara.

Bush told reporters Thursday that the United States is “helping Mr. Endara already” by releasing about $375 million in withheld government and corporate payments. These funds had been accumulating since March, 1988, when the United States banned payments to Panama as part of a package of economic sanctions.

“Beyond that, though, . . . I think we will feel obligated to try to help in every way possible,” Bush added.

In Panama City, Endara and his two vice presidents, Ricardo Arias Calderon and Guillermo Ford, presided over their first meeting of members of the Legislative Assembly. U.S. troops provided heavy guard but, to avoid an appearance of Panamanian dependence on U.S. protection, the soldiers were asked not to wear their uniforms, several of them told reporters.

Endara offered an olive branch to former followers of fugitive strongman Manuel A. Noriega, saying he would welcome back members of Noriega’s defense forces “who can show they support our democracy.”

The new president, who had been in hiding until Thursday, also imposed a nationwide dusk-to-dawn curfew in an effort to help restore order to his beleaguered country.

U.S. officials said that restoring stability to Panama was vital to U.S. interests, both because of the strategic importance of the Panama Canal in case of war and because of the role that the Noriega regime had played in global drug trafficking.

Under Noriega, they said, Panama served as a massive money-laundering machine that enabled drug kingpins to convert their huge piles of cash into more usable bank deposits. Officials here also feared that continuation of the Noriega regime might have posed a major threat to the efforts of neighboring Colombia to continue its war against the international drug cartel.

Nevertheless, White House Press Secretary Marlin Fitzwater reiterated Thursday that officials here were under no illusions about how difficult the rebuilding job would be.

“The government of Panama has been severely corrupted and dismantled by the years of Noriega dominance,” Fitzwater said. “The new government will not have an easy task. We intend to work with them, but don’t look for results overnight.”

Senior Administration officials laid out a step-by-step agenda for the next phase of U.S. operations in Panama:

-- Convert the PDF from a mainstay of Noriega’s support to separate, effective police and military forces.

-- Oversee the elimination of U.S. economic sanctions and the rebuilding of Panama’s shattered economy. “What we want to do--and soon--is create an environment for business to come back,” a U.S. official said. He conceded it could be the most difficult of the tasks ahead.

-- Help Endara and his aides provide an early demonstration that they can put together and operate an effective government that is capable of winning the confidence and support of Panamanians and foreigners alike.

U.S. officials cautioned that restructuring the PDF to turn it into an effective--and corruption-free--police force would not be easy.

Although some of the Noriega loyalists in the PDF have been killed or taken into custody, they said, the officers who might have been willing to work with the new Endara government fled the country following a failed coup attempt on Oct. 3.

Defense Department officials said the Pentagon will probably send special operations soldiers trained in “psychological operations” and military experts trained in civilian affairs to help rebuild the PDF.

“We’d always feared that if we had to crush the PDF, we’d have a vacuum,” said one former defense official who was active in charting the Reagan Administration’s Third World policies. “That may now be a problem.”

The official said that former and retired PDF members with no ties to Noriega’s regime could form the skeleton of a new PDF.

Richard Millet, a Southern Illinois University professor who is an authority on the Panamanian military, said Panama must separate its police from its military and build up its police force before worrying about its military.

“It’s going to be a slow and painful process,” he said. “You’ve got to start virtually from scratch.”

One U.S. military official said a likely candidate to head the new, cleaned-up PDF is Col. Eduardo Herrera Hassan, a former Noriega colleague who turned against the dictator in 1988 and attempted, without much success, to foment a coup with CIA backing. Herrera reportedly has left his home in Miami for Panama.

The Panamanian economy is handicapped by its reliance on the drug trade. One major problem in rebuilding the economy may be how to replace the income that had been generated by the banking industry’s money-laundering operations.

U.S. Treasury Department officials speculated Thursday that the banking industry could be revived relatively quickly once the new government acted to restore confidence, because many large U.S. banks already owned office buildings there and were receptive to resuming operations.

But some U.S. officials cautioned that banking in Panama would not be nearly so lucrative without the money-laundering operations that had flourished under Noriega.

One fortunate aspect, one analyst said, is that most of the profits from drug trafficking went to a handful of wealthy families and not to average Panamanians. “The effect on the income of the typical Panamanian is likely to be small,” he said.

The Bush Administration established a high-priority inter-agency task force Thursday to plan and coordinate economic aid to Panama, officials said. Washington has no estimates yet of how much aid Panama will need. The group is expected to begin meeting early next week.

The new Endara government remained a long way from international recognition, meanwhile. The State Department ordered U.S. diplomats worldwide to ask other governments to recognize the new Panamanian government, but apparently without success.

“We’re confident that recognition will come as soon as people see Endara moving around and functioning,” one key U.S. official said.

Officials said reviving Panama’s political institutions should take relatively little time after the restoration of basic order.

“This is a country that has had political parties and elections for a long time,” a State Department official said. “You have some institutions in place. It’s not like starting from square one.”

The fact that Endara and his two vice presidents were widely recognized as the legitimate winners of last May’s presidential election--even though Noriega halted the counting of the ballots--should make the political transition smooth, he said.

Much of the Panamanian government’s bureaucracy should be able to continue business as usual in the new government, officials said. In fact, many government ministries were centers of tacit opposition to Noriega’s military rule.

However, officials said, some political institutions will need to be overhauled.

In ignoring the results of the June election, Noriega packed the country’s 67-member legislature with his own supporters. “Those are the guys who declared war on the United States,” a State Department official said.

The new government will have to decide whether to try to piece together the legislative results of the May election or, more likely, to call a new vote.

Staff writers Melissa Healy and Doug Frantz contributed to this story.

FROM LABOR LAWYER TO PRESIDENT

Guillermo Endara, 53, sworn in Wednesday as Panamanian president, won presidential election as opposition candidate in May, according to independent observers. But regime of Gen. Manuel A. Noriega nullified vote. Endara . . went on two-week hunger strike in September to assert right to presidency . . . went into hiding after military coup failed Oct. 3 . . . was injured when clubbed by Noriega’s Dignity Battalion militiamen during demonstrations alleging election fraud . . . was a little-known labor lawyer who served as aide to three-time President Arnulfo Arias Madrid . . . described as affable but bland . . . was

chosen as Democratic Opposition Alliance candidate for president after a bruising power battle among opposition parties . . . did postgraduate work at New York University and speaks fluent English . . . was painted by government as lackey of Washington in its long effort to oust Noriega . . . has criticized U.S. policy toward Panama, calling it inconsistent, but declined to criticize U.S. economic sanctions against his country . . . was married to Marcela Cambra de Endara, who died this year . . . has a married daughter.

Source: Reuters