U.S. Army and Local Civilians Try to Revive a Pillaged Seaport : Panama: Improvised authority rules where looters once ran amok. ‘I don’t know if any of this is legal,’ says one executive.

For three days, U.S. military forces sealed off Panama’s second city and stood on the periphery as Gen. Manuel A. Noriega’s dictatorship collapsed amid an orgy of armed looting.

Finally, as Colon was self-destructing, a committee of businessmen waving white flags ventured into the lawless streets to track down Col. John Brooks, commander of 300 American troops surrounding this ramshackle island seaport.

Desperate for help to save the city and its thriving Free Zone, an area free of customs duties that is a vital prop of Panama’s economy, they introduced themselves as the new civil authorities here, hastily appointed in a phone call from President Guillermo Endara’s U.S-installed government in Panama City.

“Then I guess I’m out of a job,” came the American colonel’s joking reply.

“No,” one businessman recalls telling him in frustration. “You should see the anarchy in Colon. Your work has not even begun.”

In the week since that encounter, the U.S. military mission in Colon has expanded from that of a security ring to prevent Noriega’s possible escape to an occupying force with a hand in running every facet of public life here. The changes largely respond to demands by Panamanians reeling from their city’s worse disaster since its sacking by English pirates four centuries ago.

After entering the city late on Dec. 22, the Americans quickly controlled the looting, then began rebuilding a police force and collecting weapons from anyone who had them.

But their role today goes far beyond security. They manage food distribution and garbage collection, dispense medical care and help keep the lights on and the water running for 70,000 residents. They also work as disc jockeys on a new local radio station set up to broadcast the American-supervised order.

Every evening, GIs with green-and-black camouflage greasepaint on their faces and M-16 rifles in hand patrol the streets to enforce an overnight curfew. Each morning, U.S. officers in full combat gear sit in the city council chamber with the new Panamanian civilian authorities to plan the day’s emergency chores.

On his second day in office last week, Gov. Leopoldo Benedetti ordered the seizure of Colon’s wealthiest private company, Transit S.A., which had levied an unusual tax on Free Zone shippers and funneled millions of dollars in annual revenue to the Panama Defense Forces and to Noriega’s family.

But, while Transit is now nominally in the new government’s hands, Col. Brooks holds the keys to its sealed warehouses, and American investigators are taking the first look at its records.

“We’re running the whole city,” said Maj. James Coggin, who is Brooks’ second in command and organizer of Project Cooperation, a joint venture in local government. The mission is “the rebirth of Colon.”

“I don’t know if any of this is legal,” said Rafael Arosemena, a Panamanian ship repair executive involved in the project. “But the Americans have a moral obligation to help us get back to normal before they go home.”

Few in Colon are willing to predict that will happen soon, despite talk of withdrawing troops from the rest of Panama within a month.

In most of the country, the American occupation of territory outside U.S. bases along the Panama Canal has been less intrusive than in Colon or Panama City and thus is likely to be shorter.

For example, in David, Santiago and Penonome, three provincial capitals west of Panama City along the Pan American Highway, U.S. troops arrived days after the Dec. 20 invasion and did not conduct regular house-to-house searches for weapons or manage public services.

Instead, the Americans went to those small cities to collect weapons already picked up by former Noriega loyalists now assembling the new Public Security Force and accompany them in symbolic joint patrols. Because of an absence of major disorders in those cities, the transition from one regime to the next has been relatively smooth.

As in Panama City, crowds have gathered outside military garrisons seized by the Americans in the western provinces to applaud the intervention and to denounce collaborators of Noriega.

But in Colon, where people shout “Viva Bush!” at Americans in the street, popular support for the intervention runs even higher. It has been underscored by feelings of helplessness in the face of looting but also mixed with resentment that the Americans did not act promptly to stop it.

While the invasion also touched off a collapse of public order and looting in Panama City, the same chain of events brought more sweeping devastation to Colon, a crowded island of about 100 square blocks on the Atlantic side of the Panama Canal. It is an unruly place even in normal times.

“They were begging for the gringos to come in,” said a South American diplomat in Colon whose own government formally condemned the intervention. “Panama is a country without a national identity. The people here don’t think about Panama but about saving their businesses and livelihoods.”

Sacked by the pirate William Parker in 1572 and 1601, Colon recovered and grew to be a city through foreign interference. In 1855, a Cuban sold the island of Margarita, which the city was developing, for $1,000 to a U.S. company to build a trans-isthmus railway. The company brought thousands of workers from China and the Caribbean to work on the railroad and then the Panama Canal between 1903 and 1914.

In 1948, the same company set up the Colon Free Zone, and it became Panama’s glittering commercial showcase. Fenced off from the city’s seaside slums, the Free Zone’s 1,600 companies import, repackage and export everything from high-fashion clothing to high-tech computers without paying duties or export taxes. The companies employ 12,000 workers and move about $4 billion in merchandise a year.

Business leaders charge that Noriega’s graft undermined the Free Zone’s already declining competitive position in world trade. But the political tension built up here during his rule came more from the poverty in Colon’s grimy slums, exacerbated since last year by U.S. economic sanctions against the former strongman’s regime.

There, amid youths who were largely black and unemployed, thugs and low-paid dock workers were recruited into Noriega’s armed Dignity Battalions to help defend the regime, on the promise of better jobs.

It was that volatile mix of wealth, poverty, politics and firearms that exploded here with the spark of the American invasion Dec. 20.

Before abandoning their posts and shedding their uniforms, Noriega’s defense forces freed 360 jailed criminals who quickly joined the Dignity Battalions in opening stockpiles of AK-47 rifles and hot-wiring forklifts at the docks. The versatile yellow machines were used to smash open port containers, cart off Mercedes-Benz automobiles and living room furniture, and pry open metal gates protecting shops throughout the city. One woman ended up with seven refrigerators in her house.

“Picture a K-Mart opening their stores and announcing everything is free if you just come and take it,” said an American soldier who arrived with the looting in progress.

Soldiers described surreal images of looters sauntering through the steamy tropical night wearing one or more fleece-lined jackets and huge white Reebok sneakers, discarding old shoes everywhere. “This is now the best-dressed city in the world,” Gov. Benedetti remarked.

An estimated 80% to 90% of all shops outside the Free Zone were hit. Total damage has not been tallied, but the 80-member Spanish business community reported $8 million in losses. One single shipper lost 38 cars bound for South America. More remarkable than the extent of the looting was the full range of social classes involved in it. A diplomat said that he saw a Panamanian physician’s BMW full of electronic equipment.

“Engineers and professors were doing it because everyone else was doing it,” the governor said. “Noriega broke the morals of this country. He broke the values, and we saw it in the streets. For three days, the whole town was stealing.”

Looters overwhelmed a handful of guards and broke into at least 15 warehouses in one of the Free Zone’s two compounds, carting color TV sets into the nearby jungle. Losses were estimated at $4 million.

But they were beaten back from the more valuable Free Zone compound downtown by 150 armed businessmen of Arab descent who blocked all three entrances, killed three looters, arrested 22 and seized two truckloads of guns from the Dignity Battalions.

Until Dec. 22, Col. Brooks had decided not to risk American lives to stop the looting. But under pressure from the businessmen’s group, he agreed to slip his men inside Colon through a seaside entrance of the self-defended Free Zone compound, thus minimizing face-to-face combat with the Dignity Battalions.

From there, Brooks’ men, the 7th Light Infantry Battalion from Ft. Ord, Calif., secured the town within hours. One American soldier was killed and 51 other people, including Panamanian soldiers, Dignity Battalion members and civilians, were found dead when the fighting ended.

At that point, prominent Panamanians began maneuvering to assert their authority within the new order and shift their loyalties to the conquerors.

Benedetti, a respected former mayor who owns ice cream franchises and three gasoline stations here, met with two of Noriega’s Panama Defense Forces officers and devised a plan to disarm other soldiers. Brooks agreed to give them two hours before his troops assumed the task themselves.

After a series of radio appeals, virtually the entire 400-man Defense Forces contingent surrendered, and Benedetti collected another 403 weapons from civilians. Later, he was named governor, and one of the officers who aided in the disarmament became the local chief of staff of the new police contingent.

“I was between the knife and the wall,” said Maj. Ricardo Guardia, who surrendered his military police company and is now the new police commander in Colon.

“In front of me was an American battalion, and behind me were the people of Colon. If I had resisted, their bullets would not have stopped at us. There would have been a lot of innocent victims.”

Among those stepping forward to praise the American invasion and meet with the new governor was Ringo Mayani, an Indian-born merchant accused of receiving several businesses illegally seized by the Noriega regime from political opponents.

On Thursday, the assistant manager of Transit S.A., Rafael Ceballos, came out of hiding to submit to questioning by the governor and U.S. authorities about the company’s purchases for Noriega.

The previous day, American military officers raided Transit’s warehouse in the Free Zone with a cocaine-sniffing dog and seized records.

“The dope dog went crazy,” Brooks said. “He kept going around in circles,” apparently confused by the odor of cocaine recently removed from the premises.

Transit was described by one diplomat here as “the only private company in the world that collects taxes.” By government decree, other firms were required to pay it a percentage of business moving through the Free Zone, with the money going through a Noriega-controlled slush fund.

In an interview, Ceballos denied that the company trafficked in drugs but admitted to taking part in a scam to smuggle millions of dollars of export-bound duty-free goods into Panama for sale.

However, his estimate of Transit’s annual take of $4 million was well below the estimate of knowledgeable Panamanians--nearly $300 million.

In any case, Ceballos said he is ready to cooperate with investigators and help locate Carlos Duque, the Noriega crony and one-time presidential candidate who managed the company and is in hiding.

“I kept good records,” he said. “I accounted for every check and what it went for. I am no fool. I saw this coming.”

Many businessmen fear that the recovery of the Free Zone, which formally reopened Thursday, will depend more on public security in the post-occupation period than the elimination of Noriega’s graft.

“I assume there will be a negative reaction (to the looting),” Jimmy Ford, the Free Zone’s new manager, said in an interview. “But I am very optimistic about the future. The merchants who live here showed that they can take care of the Free Zone.”

Under the agreement with the Americans, Free Zone merchants are being allowed to keep their sidearms and share their responsibility for security with U.S. troops until the Panamanian policemen are trained, armed and left on their own.

In the meantime, the 324 Panamanians signed up for the new force are reduced to an unarmed role in joint patrols with American soldiers, who want to find more hidden weapons before arming their Panamanian counterparts.

Except in places where arms are seized, the patrols are not seeking looted merchandise, leaving Panamanians to barter or sell it among themselves.

“It’s the Christmas solution,” the governor said. “If we try to recover it we will just starting fighting among ourselves again. More important is collecting piles of rotting garbage, fumigating the streets and getting medicine to the city’s looted hospitals and food to the soup kitchens before the looted markets can return to normal.”

With their government paying the bill, American soldiers have assumed a direct role in each of these tasks. They are also mediating disputes between pro-Noriega managers of the water and power companies and hostile workers. Last week, an American squad blew open the vault in a looted bank branch and transferred the cash to the bank’s guarded central office.

“When we came to town we didn’t know we would still be here today,” Col. Brooks said. “There turned out to be lots of hungry people here. We have linked up with the local civilian authorities, trying to make things happen, and the demands on us have just grown.”

Brooks, an amiable and thoughtful officer, and Gov. Benedetti, a gregarious and popular businessman, enjoy what appears to be a smooth working relationship. But there are points of friction.

Benedetti complains that people are “imprisoned” by excessive Army roadblocks on the highway to Panama City. And for a brief time, the Americans resisted his bid to shorten the hours of the curfew. He believes the Panamanian police officers are reliable and should be armed to defend themselves before any of them are killed.

The Panamanian authority’s biggest worry is that euphoria over the ouster of Noriega and the windfall of the looting will wear off before Colon’s economy can recover enough to sustain social peace.

A breakdown might already be happening. The market for looted videocassette recorders, for example is so glutted that some are selling for $15 on the street. Apparently desperate for cash to buy food, gangs of thieves have resurfaced around town.

As a foreign reporter surveyed the dwindling stocks of looted clothing, toys and hand tools for sale on the downtown sidewalk Thursday, he was surrounded by four thieves, one of whom flashed a knife while another ripped open his front pants pocket and seized his wallet.

The gang vanished into the languid noontime crowd as fast as lightning, leaving their victim more stunned by the swiftness of the attack than frightened.

An American Army patrol arrived a couple of minutes too late. “Looks like Colon is getting back to normal,” one soldier remarked.