Bush to Propose $1.1 Billion in Aid to Panama

President Bush today will announce a $1.1-billion package of aid to Panama designed to help the country recover from the pre-Christmas U.S. invasion and to resuscitate its crippled economy after 21 months under American economic sanctions.

Officials cautioned that the proposal, developed in secret by the National Security Council, still has not won final approval from the President and could well be changed slightly at the last minute.

However, senior officials briefed key members of Congress on the plan late Wednesday and said they expect it to remain essentially intact.

A White House official said Wednesday that the Administration will seek congressional approval for $500 million in new cash aid in a supplemental budget request later this year, rather than including it in the fiscal 1991 budget that Bush will send to Congress next Monday.

The remaining $600 million would come in the form of trade benefits, loans and loan guarantees and incentives to increase private investment by U.S. firms, which have little impact on federal spending levels.

The program includes these elements:

--$45 million to $50 million in emergency humanitarian aid to help Panamanians recover from the looting that followed the invasion, rebuild shattered homes and businesses and provide welfare payments to the homeless.

--$500 million in direct cash assistance, first to inject new cash into Panama’s once-flourishing banking system, which was strangled by the U.S. economic sanctions, and second to finance major public works projects designed to restart the economy.

--$500 million worth of medium-term help designed to get Panama’s economy moving again. These range from credits for agricultural goods to loans and guarantees for trade and investment and restoration of trade benefits cut when the sanctions were imposed.

The latter include duty-free status for Panamanian exports, revival of Panama’s allocation under the U.S. sugar-import program and renewed participation in the Caribbean Basin Initiative, which grants tariff cuts for basic imports here.

In addition, the two countries will begin fast-track negotiations on an investment treaty that could prompt increased investment in Panama by American firms.

The public works projects would have two goals--to rebuild the country’s deteriorated infrastructure, including roads, bridges, highways and schools, and to create new jobs so as to relieve unemployment.

About $125 million of direct cash assistance would help bring Panama up to date in its payments to the World Bank and the Inter-American Development Bank--a prerequisite to obtaining further loans from those institutions.

Washington also will try to get other industrialized countries to contribute to the effort and may provide a temporary bridge loan to tide Panama over until International Monetary Fund and World Bank loans actually are disbursed.

Panama is $540 million in arrears on payments to the World Bank and Inter-American Development Bank. Its debts to commercial banks, not covered by the package that is to be announced today, would be negotiated separately.

The package outlined Wednesday is similar to the $1.5 billion in aid requested by the government of newly installed Panamanian President Guillermo Endara.

Administration officials said the approach taken in the package--that is, providing so much in trade preferences and other indirect assistance--was based on the belief that Panama already has a viable economic structure.

“They’re politically stable, so they’re going to be getting this stuff automatically,” one said. “Look at it as a jump start. That’s what they need. Then they’re off and running on their own. The very presence of the (Panama) Canal is a stabilizing factor.”

At the same time, however, officials conceded the job may be more difficult than some might have expected, partly because Panama’s banking sector--which provided a hefty portion of the country’s overall earnings--had made so much of its income from drug-related money laundering.

One official said that what has been missing most is the political stability and U.S. economic backing needed to restore confidence among international investors.

“We hope this will go a way toward reviving some of that,” one well-placed official said.

The official said the Administration had been prepared to present the program Wednesday but delayed for a day to review it with congressional leaders. He said the leaders appeared “pretty happy with it” and promised prompt action.

Bush was expected to issue proclamations today certifying that Panama is respecting human rights and is cooperating in the war against drugs, required under U.S. law before Washington can resume aid to Panama.

Congressional leaders declined to speculate late Wednesday how soon the aid package would be passed. But officials noted that the notion of aiding Panama is popular on Capitol Hill, particularly in the wake of the U.S. success in deposing strongman Manuel A. Noriega.

They said they expected that lawmakers would give their approval within a couple of weeks.

The Dec. 20 invasion more than doubled the 13,000 U.S. troops based in Panama and caused millions of dollars in damage to homes and other buildings.

Endara said last week in an interview with senior editors and correspondents of The Times that without sufficient economic aid for his government, the effort put into toppling Noriega will have been a waste.

“For us, the United States’ reaction is slow, very slow,” Endara said. His government was seeking $1.5 billion to help it recover not only from the invasion but also from the economic wreckage left by the two-year American effort to oust Noriega.