In Once-Hopeful Panama, There’s a Sense of Betrayal : Latin America: Optimism followed Noriega’s ouster. Now business-as-usual corruption is reported.

Wrapped in mystery, deceit and double-dealing, the scandal seemed to point to business as usual.

It began with the alleged secret purchase--in Panama’s name--of 25,000 submachine guns purportedly destined for Bosnia-Herzegovina in violation of an international arms embargo. Accusations reached as high as the office of the president of Panama. A Panamanian diplomat was implicated, documents were doctored and top politicians ran for cover. The nation’s foreign minister even proffered his resignation.

The Panamanian government eventually denied any involvement, and officials claimed that the weapons, including 7 million rounds of ammunition, were never actually shipped anywhere.

But the political damage was already done, reviving the longstanding belief here that arms smuggling--like money laundering, narcotics trafficking and influence peddling--still plagues Panama more than three years after Manuel Antonio Noriega was ousted in a U.S. invasion.

Noriega’s removal by U.S. troops was supposed to curb the illicit activities that made him a rich man and enhanced Panama’s reputation as a haven for international criminals and their ill-gotten gains.

But there is mounting evidence that some things have not changed. Persistent reports of government corruption have led to a general malaise among Panamanians who had high hopes for constructing a cleaner, working democracy when Noriega was deposed in December, 1989.

“There is great disappointment in what is seen as a lack of leadership and a lack of scruples,” said Eduardo Vallarino, who served as ambassador to Washington until resigning in a dispute with his government. “The problem is that we have a political class that sees the country as one big pork barrel.”

Even among the well-off business elite, which led the campaign against Noriega, there is disillusionment over the fact that, despite enhanced freedoms in post-Noriega Panama, many of the old problems have not been corrected. The political crisis is compounded by unabated poverty and unemployment, despite robust economic growth.

The government suffered an overwhelming defeat last fall in a referendum on constitutional reforms in voting seen largely as a repudiation of President Guillermo Endara, the man put in office by U.S. forces during the invasion. Perhaps more tellingly, only about half of the electorate even bothered to vote.

In a recent Gallup opinion poll, 79% of Panamanians interviewed said they believed that “a lot of corruption” exists in the government. Even before the weapons scandal, 32% of Panamanians polled listed corruption as one of the country’s major problems, second only to unemployment, with 33%.

The Endara administration maintains that it has made significant progress in stopping illegal activities and blames what it considers isolated acts of corruption on holdovers from the previous regime. The government points to an increase--with U.S. help--in cocaine seizures as evidence of its willingness to stop the traffic that flourished during Noriega’s rule.

But diplomats and politicians say Colombia’s major drug dealers continue to launder their sizable profits through Panama, taking advantage of a secretive banking system, lax finance regulations, a dollar-based economy and the climate of political corruption.

Deane R. Hinton, the U.S. ambassador to Panama, warned Panamanians months ago to fight drug trafficking and money laundering, “scourges burrowing deeply into the fabric of Panama’s society.”

“The ill-gotten gains of trafficking threaten to corrupt everything they touch,” he said.

The Legislative Assembly recently estimated that $500 million a month is laundered through banks and businesses in Panama. But government officials maintain that such reports are grossly exaggerated, adding that they have moved to better monitor bank deposits in excess of $10,000 to prevent abuse of the banking system.

“Panamanians expected that the new government would be able to dismantle (the vestiges) of the Noriega regime, and they are very disappointed,” said Roberto Brenes, head of the private Stock Exchange and a leader in the fight to oust Noriega. “The structures of weapon and drug trading are what the government has to systematically work at destroying. . . . Panama is hog heaven for that kind of thing.”

Indeed, there is a feeling among many citizens here that the corruption allows the rich to get richer while the poor can only watch at a distance.

A construction boom has put new, elegant skyscrapers in Panama City’s best neighborhoods, while two-fifths of the population lives in poverty. Worse, there have been increasing numbers of news reports suggesting that many of the new buildings were financed by dirty money.

The scandal that most recently enthralled Panamanians, filling newspapers and radio programs and preoccupying government officials, involved the arms-for-Bosnia deal.

An import license authorizing the acquisition of 25,000 Uzi-style submachine guns, 5,000 automatic pistols and ammunition was presented to Czech authorities months ago. Bearing the signature of a Panamanian diplomat based in Barcelona, Spain, the license indicated that the weapons were to be acquired from a Czech arms company and sent here for Panama’s police force.

But because Panama’s army was disbanded after the invasion, and the police force only numbers about 12,000, why would Panama need 25,000 submachine guns?

The suspicions of Czech authorities were aroused. The Czechs enlisted U.S. customs officials to help determine whether the import license was legitimate, diplomatic sources say. The U.S. officials turned to the Panamanian Ministry of Government and Justice, which denied any knowledge of the transaction. The gun shipment, the Czechs later said, was stopped.

That was in March. The Panamanian government took no public action until the story was leaked to a local newspaper in late July. At that point, officials fired Vice Consul Victoria Uribe, the diplomat in Barcelona whose signature appears on the import license, and launched an investigation.

But many Panamanians wondered how an official with the low rank of vice consul could be involved in a transaction of such apparent magnitude.

An employee of the Panamanian foreign service since before the Noriega regime, Uribe denied she had knowingly authorized a weapons purchase and instead blamed her immediate boss, Eliecer Elisha Quintero, the Panamanian consul in Barcelona.

Elisha Quintero, appointed to the Barcelona consulate by the Endara government in 1990, is a brother of Endara’s law partner, Hernan Delgado. Both Endara’s law firm and Delgado have previously been linked to cases involving the laundering of reputed drug money.

Endara, Elisha Quintero and Delgado denied they were behind the arms acquisition. Foreign Minister Julio Linares, ordered to appear before the Panamanian Legislative Assembly to explain the matter, blamed Uribe for “extreme naivete and negligence.”

Linares also told the lawmakers, according to members present, that Endara had notified him of the weapons matter in late March but had instructed him not to investigate, saying it would be handled by other authorities. On Tuesday, Endara refused to accept Linares’ resignation over the matter.

Uribe, meanwhile, offered this explanation: She said through an attorney that she had signed an import document for refrigeration units; the document was later altered to list weapons, she claimed. She provided The Times with copies of the document she said she signed, as well as the one eventually presented to Czech officials.

She claimed that the intermediary in the deal was a European named Serge Petrucci. A review of public records revealed that Petrucci’s legal representative in Panama is Endara’s law firm. Petrucci flew to Panama this week to deny any connection to the trafficking of weapons.

Endara said, “They are looking for the fifth leg on a cat (something that doesn’t exist) just to try to involve me in this mess.”

Whatever the truth about this episode, it has further eroded the already dwindling confidence Panamanians had in their U.S.-backed government.

“Old habits are creeping back,” said Carlos Mendoza, a prominent attorney and newspaper publisher who added that it was unrealistic to expect that the demise of Noriega would mean the end of corruption.

“That assumes human nature is going to change, and why should it? There was corruption before Noriega, (during) Noriega and what you see is a coming back of the corruption that always existed.”

Among the scandals to pop up during Endara’s tenure: Endara’s chief law enforcement official, Atty. Gen. Rogelio Cruz, after facing persistent criticism for his failure to prosecute Noriega cronies, was finally fired late last year when he ordered the release of $38 million in frozen bank accounts suspected of belonging to drug traffickers.

Cruz, who once served on the board of directors of a bank owned by Colombian traffickers, said he was merely following Panamanian law that requires definitive proof that money is of illicit origins before bank accounts can be frozen.

Endara, a number of his associates and other senior government officials have also served on boards of banks that U.S. officials suspected of laundering drug money.

Endara’s law partner, Delgado, is expected to be called as a witness later this year in the Miami trial of two convicted drug traffickers who stand accused of importing $2 billion worth of cocaine into the United States during the 1980s.

The defendants, Augusto Falcon and Salvador Magluta, used the Endara-Delgado law firm to set up shell companies in Panama to launder their profits, U.S. investigators assert. In public corporation registry records, Endara was listed as the treasurer of the companies; Delgado was named as the president.

Endara has told reporters that he was unaware of the true nature of his clients’ business, adding that it is not unusual for lawyers to serve in titular posts of companies they incorporate. Delgado, U.S. officials note, is “cooperating” in the investigation.

In the meantime, no one in Panama longs for the days of Noriega, who is serving a 40-year sentence in a federal U.S. prison after his conviction on drug charges.

The Noriega days were times when the military and its allies controlled government, silenced critics and fattened their pocketbooks. Today the press is open and vocal, public protest is allowed and free elections can be held.

But the euphoria many Panamanians felt at Noriega’s departure seemed to fade even before the invading U.S. troops had departed, and the disaffection set in quickly.

Many blame the government’s failures on Endara’s own lack of political skills and the incompetence of some of his aides, many deprived of any kind of political-administrative experience during 21 years of military rule. The government, dominated by fair-skinned aristocrats in a country with a darker-skinned working class, is often accused of elitism and of having little concern for the poor, which further alienates many Panamanians.

One in four Panamanians is out of work, according to church and private sector estimates. Crime has soared, and Panama now has the highest rate of drug abuse in Latin America, church studies report.

“You cannot compare this government to the military dictatorship,” said law and political science professor Miguel Antonio Bernal. “But if you compare it to the promises made, the hopes planted and the illusions awakened, this government is a failure. There is an ambience of serious deception, frustration and betrayal.”