Dr. Henry Kissinger Remarks
Panama Week - 10/15/99

I must say that I am always reluctant to speak when there are so many Hispanic and Latin American speakers preceding me, because I realize that, in the art of oratory, the United States is still an underdeveloped country. When I hear that our two generals have acquired these Latin American skills of oratory, I begin to think that imperialism must have gone the other way.

I am of course delighted to be honored by my friends from Panama. But, really, you have to remember what they “suffered” when I was Secretary of State, and still they have had the generosity of spirit, which is great, to give me this award, and I very much appreciate it.

Seriously, though, when I started in government, Latin America was not a subject about which I knew a great deal (and you should all mark this in your calendars because not many audiences will hear me say that there was something I did not know everything about). So I needed education and, whatever was achieved in the Western Hemisphere during the administration in which I served and - of which I am very proud - could not have been achieved without the tremendous leadership of the Foreign Service of the United States and of Ambassadors like Bill Jordan, who, although not Foreign Service, served with so much distinction.

[Y]

Page 2

Of course Bill Rogers, whom you honored, was the Assistant Secretary of State for Latin America before he became Undersecretary of State. He was on my staff even though he had been a Democrat. More than that, he supported the presidential candidate of the opposing party in the presidential elections preceding the one in which he served. I must tell you that his first advice to me when I became Secretary of State was to go to Latin America, to Panama. "We have these principles of the Panama reversion treaty, eight principles, that you ought to sign down there. It will go very well and it will be a great symbolic step."

Very good advice, though after I had taken it, I began to suspect it was a Democratic plan designed to ruin me. Because I went down there to a really tremendous reception, big crowds in the streets, marvelous speeches, all inspiring speeches. When I came back, there were more inspiring speeches. You can measure my ignorance by the fact that I had no idea what I was doing. I agreed with the objectives and I am proud of having been associated not only with the principles but with the near completion of the treaty, later brought to final conclusion by my great friend, the great American, Sol Linowitz, in a different administration. It is a demonstration of the importance that, on fundamentals, our policy always be bipartisan and national, and not the expression of a single segment, party.

Anyway, I did not realize the passions I was arousing. But I contributed to the unity of the Americas because the left and the right came after me simultaneously - though for different reasons - on that agenda. Still, I am here because of the achievements of the administration in which I served, and there is none of which I am more proud than the Panama treaties.

Page 3

As was said here this morning, except for NAFTA, there is no treaty more visible in the Western Hemisphere or more central to our relations in the Western Hemisphere, than are the treaties about the Canal. And while I did not correctly judge the passions surrounding that debate, I believe I did correctly judge the importance of the subject.

In the last decade, no area of the world has seen more dramatic changes than those of Latin America - though we have seen the collapse of the Berlin Wall and the disintegration of the Soviet Empire in Europe.

In Latin America, we have seen the transition from a region where authoritarian leaders governed countries, to nations firmly committed to democracy - with one notable exception; from a collection of weak economies dependent on the price fluctuations of a limited range of raw materials, to nations firmly on their own, and to market economics.

In such a world, it would have been unnatural for a sovereign country to be bisected by an occupied strait of territory under the control of another nation.

It was important to make a decision between resting our interest in the Panama Canal on our undoubted ability to retain our rights, or assume our rights by force; or whether we would rely on cooperation with the nation of Panama and a consensus with the Western Hemisphere that what we were doing reflected our common destiny and our commitment to a common destiny.

Every great nation has to strike a balance between its power and its moral reach. And one can renounce the use of power when fundamental national interests are

[Y]

Page 4

involved. But in the case of the Western Hemisphere, we had an opportunity, and we continue to
have an opportunity, to build our relationship on consensus and cooperation.

I have not always agreed with those who believe that America's exclusive duty is to spread its
institutions into every corner of the world. As desirable as these objectives might be, they may be
beyond our capacities and may be misunderstood in other regions.

But in the Western Hemisphere, we are not talking of U.S. institutions. We are talking of a
common commitment to human dignity, of democratic institutions, and of cooperative relations.
And if we are serious about proceeding on the basis of these principles, the Panama Canal treaties
were absolutely essential.

When I came into office, a negotiation in the previous administration had just achieved the
extraordinary result of having the agreement that had been reached rejected by both parliaments,
of both sides, leading to such extraordinary dissatisfaction on both sides that the negotiation, in
the Johnson administration, blew up. And that meant that we in the Nixon administration, who had
plenty of problems, had plenty of people who did not hesitate to tell us that we had plenty of
problems.

We nevertheless decided that we would pick up these negotiations and try to bring them
to a conclusion. I think President Nixon deserves enormous credit for that decision. I must say the
Panamanian authorities of the time also deserve enormous credit because they showed
extraordinary patience in the face of the complicated maneuvers we had to engage in, in order to
build consensus step by step, and so that we would be able to present treaties that would not look
too generous here.

[Y]

Page 5

Speaking with warmth and obvious feelings of comradeship for Panama, I can not help but remember that the most difficult negotiation we had in the early 1970's was with the Pentagon: how to convince our colleges there that we were not hazarding space American security but that we were in fact strengthening American security.

It is also important that, in our domestic debate, we do not invent imaginary dangers of foreign influences threatening the security of the canal when in our heart of hearts we know that Panama has an interest as great as anybody's in operating the canal on a neutral, fair basis, and would not give any foreign government, in the guise of a foreign corporation, any access to the operation of the canal.

And in that spirit we will be able to work together to implement the Treaty of Neutrality, because the unimpaired operation of the canal is good for the interests of Panama, of course for the interest of the United States, and for the whole of the Western Hemisphere.

In short, these treaties have opened up a new era of relations.

I had an opportunity to read a speech given this morning and would like to close by quoting the end of that speech:

"Our legacy in Panama is proud and honorable. History must report that we left Panama a better and healthier country than we found one hundred years ago. Our desire to recognize the rightful claim of a sovereign republic was appropriate. Dignity, character, moral value, count.

That is the spirit in which we should leave Panama."

I should add: That is the spirit in which we are leaving Panama.

DEC-08-1999 11:09

GOLDHAMMER

212 4213934

P. 02/08

After so eloquent an introduction I am reminded of an occasion when at a reception a lady came up to me and said, "I understand that you are a fascinating man," she said; "Fascinate me." It turned into one of the less satisfactory conversations that I have had. I must say I am always reluctant to speak when there are so many Hispanic/Latin American speakers preceding me because I realize that in the art of oratory the United States is still an underdeveloped country. I must say when I hear our two generals have acquired these Latin American skills of oratory, I think imperialism must have gone the other way.

I am of course delighted to be honored by my friends from Panama. But really, when I agreed to participate and receive an award, you have to remember what they "suffered" when I was Secretary of State, and still they have had the generosity of spirit, which is great, and I greatly appreciate it.

DEC-08-1999 11:09

GOLDHAMMER

212 4213934

P.03/08

Seriously though, when I started in government, Latin America was not a subject about which I knew a great deal (and you should all mark this in your calendar) because not many audiences will hear me say that there was something I did not know everything about. But I needed education and whatever was achieved in the Western Hemisphere during the administration in which I served and for which I am very proud, would not have been achieved done without the tremendous leadership of the Foreign Service of the United States and of Ambassadors like Bill Jordan, who although not Foreign Service, served with so much distinction.

Page 2

Of course Bill Rogers whom you honored was the Assistant Secretary of State for Latin America before he became Undersecretary of State. He was on my staff even though he had been a Democrat. More than that, supported the presidential candidate of the opposing party in the presidential elections that preceded the one in which he served, and I must tell you his first advice to me when I became Secretary of State was to go to Latin America, go to Panama. We have these principles of the Panama reversion treaty,

DEC-08-1999 11:09

GOLDHAMMER

212 4213934

eight principles that you ought to sign down there. It will go very well and it will be a great symbolic step.

Very good advice though after I had done it, I suspected it was a democratic plan taken to be really designed to ruin me. Because I went down there and tremendous reception, big crowds in the streets, marvelous speeches, all inspiring speeches. When I came back there were also all inspiring speeches. I must tell you, you can measure my ignorance by the fact that I had no idea what I was doing. I agreed with the objectives and I am proud of the fact of having been associated not only with the principles but with the near completion of the

treaty which was then brought to final conclusion by my great friend, great American Sol Linowitz in a different administration. And it is a demonstration that on fundamentals our policy has to be bipartisan, and nationally, and not the expression of a single part.

Anyway, I did not know the passions that I was arousing. And I contributed to the unity of the Americas because the left and the right came after me simultaneously though for different reasons on that agenda. Still, I am here because of the achievements of the administration in which I served, there is none of which I am more proud than the Panama treaties.

DEC-08-1999 11:10

GOLDHAMMER

212 4213934

P.05/08

Page 3

As was said here this morning, except for Nafta, there is no treaty more visible in the Western Hemisphere and more central to our relations in the Western Hemisphere, are than the treaties about the canal. And while I did not correctly judge the passions that surrounding the debate, I believe I did correctly judge the importance of the subject.

In the last decade no area of the world has seen more dramatic changes than those of Latin America. Though We have seen the collapse of the Berlin Wall and the disintegration of the Soviet Empire in Europe.

But In Latin America we have seen a transition from a region where authoritarian leaders governed countries, to nations firmly committed to democracy, with one notable exception. From a collection of weak economies dependent on price fluctuations of a limited range of raw materials, to nations firmly on their own, to market economics.

In such a world it would have been unnatural for a sovereign country to be bisected by an occupied strait of territory under the control of another nation.

It was important to make a decision between resting our interest in the Panama Canal on our undoubted ability to retain our rights, or assume rights by force, or whether we would

DEC-08-1999 11:10

GOLDHAMMER

212 4213934

P.06/08

rely on cooperation with the nation of Panama and of our consensus with the Western Hemisphere that what we were doing reflected our common destiny and our commitment to a common destiny.

Page 4

involved. But in the case of the Western Hemisphere we had an opportunity, and we
continue to have an opportunity, to build our relationship on consensus and cooperation.

I have not always agreed with those who believe that America's exclusive duty is to
spread its institutions into every corner of the world because I believe that desirable as
these objectives might be, they may be beyond our capacities and may be
misunderstood in other regions.

But in the Western Hemisphere we are not talking of U.S. institutions. We are talking
of a common commitment to human dignity, democratic institutions, and cooperative
relations. And if we are serious about proceeding on these principles, the Panama Canal
treaties were absolutely essential.

DEC-08-1999 11:10

GOLDHAMMER

212 4213934

P.07/08

[Y]

When I came into office a negotiation in the previous administration had just been going on. The extraordinary results that had been achieved by both parliaments, of both sides, that led to extraordinary dissatisfaction on the part of the administration, blew up the negotiations.

We nevertheless decided that we would pick up these negotiations and try to bring them to conclusion. I think President Nixon deserves enormous credit for that decision. I must say the Panamanian authorities of the time also deserve enormous credit because they showed extraordinary patience in the face of the complicated maneuvers we had to engage in, in order to build consensus step by step, so we would be able to present treaties that did not look too generous here.

Page 5

Speaking with the warmth and obvious feelings of comradeship about Panama, I can not help but remember that the most difficult negotiation that we had in the early 1970's was with the Pentagon to convince our colleges there that we were not hastening the process of Vietnamization.

DEC-08-1999 11:10

GOLDHAMMER

212 4213934

P.08/08

American security, but in fact we were strengthening American security.

It is also important that in our domestic debate we do not invent imaginary dangers of foreign influence, threatening the security of the canal. When in our heart of hearts we know that Panama has an interest, as great as anybody, in operating the canal in a neutral, fair basis and would not give any foreign government, in the guise of a foreign corporation, any access to the operation of the canal.

And in that spirit we will be able to work together to implement the Treaty of Neutrality, because the unimpaired operation of the canal is good for the interests of Panama, of course the interest of the United States, and for the whole of the Western Hemisphere.

In short, these treaties have opened a new era of relations.

TOTAL P.08

Speaking with warmth and obvious feelings of comradeship for Panama, I cannot help but
remember that the most difficult negotiation we had in the early 1970's was with the Pentagon:
how to convince our colleagues there that we were not hazarding American security but that we
were in fact strengthening American security. It is also important that, in our domestic debate, we
do not invent imaginary dangers of foreign influences threatening the security of the Canal, when
in our heart of hearts we know that Panama has an interest as great as anybody's in operating the
canal on a neutral, fair basis, and would not give any foreign government, in the guise of a foreign
corporation, any access to the operation of the Canal.

And in that spirit we will be able to work together to implement the Treaty of Neutrality,
because the unimpaired operation of the Canal is good for the interests of Panama, for the
interests of the United States, and for the whole of the Western Hemisphere.

Excerpt from speech given by Dr. Henry A. Kissinger on October 15, 1999

US Panama Business Council Ambassadorial Awards Luncheon

Ronald Reagan Building, Washington, DC

This version following edits by Gina +Suzanne
This version sent electronically to Amy
Also sent electronically to Bill Connolly
(Secretary, Panama Canal Commission)
WConnolly@panama.com

This version on Rebecca's computer - speech - panama
for purposes of Secretary General Caldera to read as
he prepares his remarks for turnover ceremony

D]

Page 2

Very good advice, though after I had taken it, I began to suspect it was a Democratic plan designed to ruin me. Because I went down there to a really tremendous reception, big crowds in the streets, marvelous speeches, all inspiring speeches. When I came back, there were more inspiring speeches. You can measure my ignorance by the fact that I had no idea what I was doing. I agreed with the objectives and I am proud of having been associated not only with the principles but with the near completion of the treaty, later brought to final conclusion by my great friend, and great American, Sol Linowitz, in a different administration. It is a demonstration of the importance that, on fundamentals, our policy always be bipartisan and national, and not the expression of a single party.

[Y]

Page 3

[Y]

Page 4

Every great nation has to strike a balance between its power and its moral reach. And one can renounce the use of power when fundamental national interests are involved. But, in the case of the Western Hemisphere, we had an opportunity, and we continue to have an opportunity, to build our relationship on consensus and cooperation. I have not always agreed with those who believe that America's exclusive duty is to spread its institutions into every corner of the world.
As desirable as these objectives might be, they may be beyond our capacities and may be misunderstood in other regions.

[x]

Page 5

And in that spirit we will be able to work together to implement the Treaty of Neutrality, because the unimpaired operation of the Canal is good for the interests of Panama, for the interests of the United States, and for the whole of the Western Hemisphere. In short, these treaties have opened up a new era of relations.

[Y]

Page 6

DEC-03-1999 12:05

KAI DC

212 753 7248

P.02

After so eloquent an introduction I am reminded of an occasion when at a reception a lady came up to me and said, "I understand that you are a fascinating man," she said; "Fascinate me." It turned into one of the less satisfactory conversations that I have had. I must say I am always reluctant to speak when there are so many Hispanic/Latin American speakers preceding me because I realize that in the art of oratory the United States is still an underdeveloped country. I must say When I hear our two generals have acquired these Latin American skills of oratory, I think imperialism must have gone the other way.

DEC-03-1999 12:05

KAI DC

212 753 7248

Seriously though, when I started in government, Latin America was not a subject
about which I knew a great deal (and you should all mark this in your calendar because
not many audiences will hear me say that there was something I did not know everything
about) So I needed education and whatever was achieved in the Western Hemisphere in
during
the administration in which I served and for which I am very proud, I would not have been
achieved
done without the tremendous leadership of the Foreign Service of the United States and
of Ambassadors like Bill Jordan that although not Foreign Service, served with so much
distinction.

Page 2

Of course Bill Rogers whom you honored was the Assistant Secretary of State for
Latin America before he became Undersecretary of State. He was on my staff even
though he had been a Democrat. More than that, he supported the presidential candidate of
the opposing party in the presidential elections that preceded the one in which he served.
and I must tell you his first advise to me when I became Secretary of State was go to
Latin America, Go to Panama. We have these principles of the Panama reversion treaty,

DEC-03-1999 12:06

KAI DC

212 753 7248

M]

P.04

Very good advice though after I had done it, I suspected it was a democratic plan designed to ruin me. Because I went down there and tremendous reception, big crowds in the streets, marvelous speeches, all inspiring speeches. When I came back there were also all inspiring speeches. I must tell you, you can measure my ignorance by the fact that I had no idea what I was doing. I agreed with the objectives and I am proud of the fact of having been associated not only with the principles but with the near completion of the treaty which was then brought to final conclusion by my great friend, great American Sol Linowitz in a different administration. And it is a demonstration that on fundamentals our policy has to be bipartisan, and nationally, and not the expression of a single part.

Anyway, I did not know the passions that I was arousing. And I contributed to the unity of the Americas because the left and the right came after me simultaneously though for different reasons on that agenda. Still, I am here because of all the achievements of the administration in which I served, there is none of which I am more proud than the

Panama treaties.

DEC-03-1999 12:06

KAI DC

212 753 7248

P.05

Page 3

In the last decade no area of the world has seen more dramatic changes than those of Latin America. We have seen the collapse of the Berlin Wall and the disintegration of the Soviet Empire in Europe.

But in Latin America we have seen a transition from a region where authoritarian leaders governed countries, to nations firmly committed to democracy, with one notable exception: From a collection of weak economies dependent on price fluctuations of a limited range of raw materials, to nations firmly on their own, to market economics.

DEC-03-1999 12:06

KAI DC

212 753 7248

P.06

[Y]

rely on cooperation with the nation of Panama and have a consensus with the Western

Page 4

involved. But in the case of the Western Hemisphere we had an opportunity, and we

spread its into every corner of the world because I believe that desirable as

these objectives might be, they may be beyond our capacities and may need to be

DEC-03-1999 12:06

KAI DC

212 753 7248 P.07

[Y]

When I came into office a negotiation in the previous administration had just
achieved the extraordinary results that the agreement that had been reached was rejected
by both parliaments, of both sides, that led to extraordinary dissatisfaction on
that the negotiation, in the Johnson administration, blew up.

So we in the Nixon administration, who had plenty of problems, had plenty of people
who did not hesitate to tell us that we had plenty of problems.

We nevertheless decided that we would pick up these negotiations and try to
bring them to conclusion. I think President Nixon deserves enormous credit for that
decision. I must say the Panamanian authorities of the time also deserve enormous credit
because they showed extraordinary patience in the face of the complicated maneuvers we
had to engage in, in order to build consensus step by step, so we would be able to present
treaties that would not look too generous here.

Page 5

DEC-03-1999 12:07

KAI DC

212 753 7248 P.09

American security, that in fact we were strengthening American security.

It is also important that in our domestic debate we do not invent imaginary dangers of foreign influence, threatening the security of the canal; when in our heart of hearts we know that Panama has an interest, as great as anybody, in operating the canal in a neutral, fair basis and would not give any foreign government, in the guise of a foreign corporation, any access to the operation of the canal.

US-Panama Business Council
"Ambassadorial Awards" luncheon -
HAK honored with "1999 Friendship Award"
Ronald Reagan Building, DC

Dr. Henry Kissinger Remarks

Panama Week - 10/15/99

After so eloquent an introduction I am reminded of an occasion when at a
reception a lady came up to me and said, "I understand that you are a fascinating man,"
she said; "Fascinate me." It turned into one of the less satisfactory conversations that I
have had. I must say I am always reluctant to speak when there are so many
Hispanics/Latin Americans speakers preceding me because I realize that in the art of
oratory the United States is still an underdeveloped country. I must say when I hear our
two generals have acquired these Latin American skills of oratory, I think imperialism
must have gone the other way.

Seriously though, when I started in government, Latin America was not a subject
about which I knew a great deal and you should all mark this in your calendar because
not many audiences will hear me say that there was something I did not know everything
about. But I needed education and whatever was achieved in the Western Hemisphere in
the administration in which I served and for which I am very proud, would not have been
done without the tremendous leadership of the Foreign Service of the United States and
of Ambassadors like Bill Jorden that although not Foreign Service, served with so much
distinction.

Page 2

Of course Bill Rogers whom you honored was the Assistant Secretary of State for
Latin America before he became Undersecretary of State. He was on my staff even
though he had been a democrat. More than that, supported the presidential candidate of
the opposing party in the presidential elections that preceded the one in which he served,
and I must tell you his first advise to me when I became Secretary of State was go to
Latin America, Go to Panama. We have these principles of the Panama reversion treaty,
eight principles that you ought to sign down there. It will go very well and it will be a
great symbolic step.

Very good advise though after I had done it, I suspected it was a democratic plan
designed to ruin me. Because I went down there and tremendous reception, big crowds in
the streets, marvelous speeches, all inspiring speeches. When I came back there were also
all inspiring speeches. I must tell you, you can measure my ignorance by the fact that I
had no idea what I was doing. I agreed with the objectives and I am proud of the fact of
having been associated not only with the principles but with the near completion of the
treaty which was then brought to final conclusion by my great friend, great American Sol
Linowitz in a different administration. And it is a demonstration that on fundamentals our
policy has to be bipartisan, and nationally, and not the expression of a single part.

Anyway, I did not know the passions that I was arousing. And I contributed to the
unity of the Americas because the left and the right came after me simultaneously though
for different reasons, on that agenda. Still, I am here because of all of the achievements of
the administration in which I served, there is none of which I am more proud than the
Panama treaties.

Page 3

As was said here this morning, except for Nafta, there is no treaty more visible in
the Western Hemisphere and more central to our relations in the Western Hemisphere,
than the treaties about the canal. And while I did not correctly judge the passion
surrounding the debate, I believe I did correctly judge the importance of the subject.
In the last decade no area of the world has seen more dramatic changes than those of
Latin America. We have seen the collapse of the Berlin Wall and the disintegration of the
Soviet Empire in Europe.

But in Latin America we have seen a transition from a region where authoritarian leaders governed countries, to nations firmly committed to democracy, with one notable exception. From a collection of weak economies dependent on price fluctuations of a limited range of raw materials, to nations firmly on their own, to market economics.

In such a world it would have been unnatural for a sovereign country to be
bisected by an occupied strait of territory under the control of another nation.
It was important to make a decision between resting our interest in the Panama Canal on
our undoubted ability to retain our rights, or assume rights by force, or whether we would
rely on cooperation with the nation of Panama and on a consensus with the Western
Hemisphere, that what we were doing reflected our common destiny and our commitment
to a common destiny.

Every great nation has to strike a balance between its power and its moral reach.
And one can renounce to the use of power when fundamental national interests are

Page 4

involved. But in the case of the Western Hemisphere we had an opportunity, and we
continue to have an opportunity, to build our relationship on consensus and cooperation.
I have not always agreed with those that believe that America's exclusively duty is to
spread out institutions to every corner of the world because I believe that desirable as
these objectives might be, they may be beyond our capacities and maybe be
misunderstood in other regions.

But in the Western Hemisphere we not talking of U.S. institutions. We are talking
of a common commitment to human dignity, democratic institutions, and cooperative
relations. And if we are serious about proceeding on these principles, the Panama Canal
treaties were absolutely essential.

When I came into office a negotiation in the previous administration had just
achieved the extraordinary results that the agreement that had been reached was rejected
by both parliaments, of both sides, that led to extraordinary dissatisfaction to both sides
so that the negotiation, in the Johnson administration, blew up.

We nevertheless decided that we would pick-up these negotiations and try to
bring them to conclusion. I think President Nixon deserves enormous credit for that
decision. I must say the Panamanian authorities of the time also deserve enormous credit
because they showed extraordinary patience in the face of the complicated maneuvers we
had to engage in, in order to build consensus step by step, so we would be able to present
treaties that did not look too generous here.

Page 5

Speaking with the warmth and obvious feelings of comradeship about Panama, I can not help to remember that the most difficult negotiation that we had in the early 1970's was with the Pentagon, to convince our colleges there, that we were not hastening American security, that in fact we were strengthening American security.

It is also important that in our domestic debate we do not invent imaginary dangers of foreign influence threatening the security of the canal, when in our heart of hearts we know that Panama has an interest, as great as anybody, in operating the canal in a neutral, fair basis and would not give any foreign government, in the guise of a foreign corporation, any access to the operation of the canal.

In short, these treaties have open up a new era of relations.

> "Our legacy in Panama is proud and honorable. History must report that we left Panama a better and healthier country than we found one hundred years ago. Our desire to recognize the rightful claim of a sovereign republic was appropriate. Dignity, character, moral value, count. That is the spirit in which we should leave Panama."

[c]

FOREWORD

On the map, Panama appears as a small country on the border of Central and South America, but Panama and the United States share a century of often stormy and closely intertwined history. When the United States transfers its remaining facilities and the canal to Panama at the end of this year, the temptation may be great to place Panama on the outer margins of U.S. foreign policy. However, both Panama and the United States have an important stake in a positive and conspicuous bilateral relationship beyond 1999. Most of the commerce passing through the canal is destined for or departing U.S. ports. Furthermore, as trade expands, the canal is increasingly important to link core U.S. markets in Asia, Europe and the Americas.

The authors of this report, specialists in foreign policy and inter-American relations, help to guide us through the remaining steps of the transition and offer a useful progress report of what has taken place to date. They also take a hard look at what might go wrong if inadequate consensus exists in both countries to resolve the issues that remain. Most importantly, they offer suggestions for ensuring that things do not go wrong.

The authors consulted with prominent government officials and private sector representatives in both countries. This report is based mainly on facts emerging from these discussions, though the policy content is the responsibility of the authors.

The Council is grateful for the financial support of IB/MC of Panama Inc., Itochu Oil Exploration Co. Ltd., Penta-Ocean Construction Co. Ltd., the Tinker Foundation and Tomen America Inc. Without their support this work would not have been possible. However, the opinions presented in this paper do not necessarily represent those of the sponsors nor of the Atlantic Council; rather, they reflect the consensus of the authors.

DAVID C. ACHESON
President
The Atlantic Council of the United States

LC

# Panama Canal Transition: The Final Implementation

## CONCLUSIONS AND RECOMMENDATIONS

The implications of the transfer of the Panama Canal go well beyond U.S. relations with Panama. This complex transition provides an important lesson for Latin America and the rest of the world on how countries of vastly different size and outlook can work together. The success of this 20 year process lies mainly in first identifying the primary common interest of the United States, Panama and the major canal users: access to an open, safe and efficient canal. Important but secondary concerns, including U.S. military access to facilities in Panama, were addressed during the process but never were allowed to displace the primary interest. By focusing on this clear, compelling key objective, both Panama and the United States were able to accommodate fundamental changes in the political, economic and security context, including several changes in administrations, tough negotiations and even a military confrontation.

Today, the implementation of the treaty is a good news story that largely has been untold in the United States and is not fully appreciated in Panama. Overall, the transition is going better than expected, according to most informed U.S. and Panamanian observers. The 1977 treaty will be fully implemented on schedule, on 31 December 1999. This will result in the transfer of the Panama Canal, the withdrawal of U.S. military forces and the transfer of the buildings and property that constituted the old canal zone. Well-coordinated preparations for the canal transition should result in a seamless transfer that will benefit both the United States and Panama.

For the United States, divestiture of the canal will reduce chances that the canal might become the target of terrorists while at the same time, U.S. goods and ships will continue to have access to an open, safe and efficient waterway.

For Panama, national sovereignty will be consolidated over the entire territory of the country. Revenues from the canal, related businesses and reverted properties are

2 PANAMA CANAL TRANSITION

[L]

expected to offset much of the economic loss associated with the withdrawal of U.S. troops.

Nevertheless, the final months of the 20-year treaty implementation period are by far the most challenging. More than half the total acreage and buildings must be transferred in 1999. Panama must absorb and maintain several billion dollars worth of assets and convert them to other uses in a timely and efficient manner to maximize their value for the benefit of the people of Panama.

How well the United States and Panama manage these final months will set the stage for future relations. To be avoided are developments that could make the transition more of a "messy divorce" than a celebration of a relationship that has finally come of age. For example, the failure in 1998 of bilateral negotiations to establish a Multinational Counternarcotics Center (MCC/CMA) contributed to a lack of confidence that the governments can work together on difficult issues.

Such negative images of the transition probably will be compounded by the controversy over cleaning up the military firing ranges. A relatively small amount of land in remote areas cannot be rid of unexploded ordnance. Panama should resist any temptation to turn the issue into a long-term cash cow by demanding compensation, because it probably will backfire and could hamper future relations. Likewise, the United States should acknowledge a willingness to help Panama manage the problem. Both governments need to establish a mechanism to deal with range-related safety and health concerns over the long term, that is, beyond the property transfers in 1999.

Much of what constitutes the U.S.-Panama "special relationship" no longer will exist after 1999. Most notably, the U.S. military will be absent for the first time in 158 years (since the construction of the cross-isthmus railroad), and the old Panama Canal Commission no longer will exist. The transition also provides a relatively clean break with the past as new political leadership takes office in Panama and a new U.S. ambassador assumes his responsibilities. Nevertheless, both countries will remain important to each other, and each will need to reconsider how to manage bilateral relations.

For the United States, the nature of the relationship will shift from concerns about canal operations to mainly economic and law enforcement interests. Bilateral security concerns will be limited largely to illegal drugs and related transnational crime. The major change in the way U.S. leaders think about Panama is that they no longer will need to feel responsible for what happens in Panama. In the past, senior officials were generally of the view that they could not afford to let Panama fail. This is no longer the case. Also, U.S. military forces no longer will be tethered to bases in Panama, but will be operating from a variety of locations throughout the region. U.S. counter drug operations are shifting to Florida, Puerto Rico, Ecuador, Curaçao, Aruba and other locations.

THE FINAL IMPLEMENTATION 3

Without the infrastructure that underpinned the "special relationship" with the United States, Panama's leaders will have to work much harder to gain the access, attention and resources they have come to expect from the United States. Also, a smooth political transition is important as a new president, Mireya Moscoso, takes office in September, just a few months before the canal turnover. The new government may be inclined to reverse some of the market-oriented reforms instituted over the last few years because the economic benefits have not yet been realized by most of the people. But these reforms are crucial to Panama's ability to compete in international markets and attract foreign investment. At the same time, the new government will face substantial challenges in dealing with poverty, drugs and corruption, areas which merit high priority attention. International investors and shippers will watch closely how the new government manages its "new" assets. Especially, they will monitor how it honors contracts and commitments made under the previous administration, the transparency of new economic deals, and its administration of the canal.

Both governments need to focus attention on the few remaining tasks so that the transition is completed on a positive note. To do this, communications should be improved both within the governments - especially Panama - and between Panama and the United States. Effective structures, people and habits can help launch a mutually beneficial new relationship, and the stakes remain high for both countries.

4 PANAMA CANAL TRANSITION

[L]

THE CANAL BECOMES A BUSINESS

Close cooperation and extensive planning should result in a nearly "seamless
transition" when Panama assumes full responsibility for operating the canal on 31
December 1999. This is mainly the result of the U.S. and Panamanian members of
the Panama Canal Commission (PCC) working as one team with one mission. Over
the last 20 years, Panamanians increasingly have assumed leadership positions in
canal management and operations. For example the canal's administrator has been
Panamanian since 1990, and the current administrator, Alberto Alemán Zubieta, will
continue in that role under the new Panama Canal Authority (PCA). More than 70
percent of all professionals and managers are Panamanian, as are over 93 percent of
the skilled craftsmen, 82 percent of the floating equipment operators and 72 percent
of all canal pilots. Although Panamanians will fill the vast majority of positions, the
Government of Panama has made provisions for some U.S. and other foreign
nationals to continue to work for the canal. This is important to ensure competition
with international standards for key jobs.

While there will be no noticeable change in the technical operation of the canal, the PCA will be free to manage the canal as a business, whereas under U.S. law the canal has operated mainly as a government service. The prospects are good that the PCA will be able to realize a much greater return for Panama. In 1996, Panama received about $105 million as its share of the revenue generated by the canal. Under Panamanian management, several additional opportunities will become available that could double that return. For example, under current operating arrangements the canal keeps about $300 million in cash reserves in the U.S. Treasury without drawing interest. The PCA will be able to invest these reserve funds and also hopes to benefit from new business opportunities such as ship repair, other maritime services, power generation and water supply that were not possible under the U.S. administration.

Restructuring the workforce probably could save about $25 million annually by a reduction of about 1,300 personnel by the end of this year from the workforce of 10,300.¹ Additional reductions may be appropriate. For example, the canal preference for using in-house personnel to do special project studies could be reconsidered. Contracting with outside firms may provide a better mix of skills and new ideas. In any event, reductions should be accomplished in ways that would minimize the impact on workers who face job losses by coordinating retirements and job changes within the workforce.

Managing the canal as a business also means providing value to customers and
paying more attention to their needs than was the practice in the past. Some users
have characterized the old canal management as adversarial and arbitrary in its

¹ Discussions with Panama Canal Commission researchers, January and April 1999.

THE FINAL IMPLEMENTATION 5

dealings with Panamanians and shipping interests. Satisfaction for most shipping lines means low tolls and rapid transit times.

To help make the transition to a more businesslike approach, the canal management has developed a new set of performance measures (see Table I). These metrics focus on key customer needs such as total time in canal waters and costs per transit. Customer satisfaction in such key areas is essential for the canal to remain competitive with intermodal transportation. Efficiency also will be gauged by several cost and performance measures such as overhead as a percentage of total costs and labor cost per transit. Safety and security, of course, must remain high priorities.

Table I

<table><thead><tr><th colspan="2">PANAMA CANAL<br>NEW CORPORATE PERFORMANCE MEASURES</th></tr></thead><tbody><tr><td><strong>Customer Satisfaction</strong></td><td>Time in Canal Waters<br>Booked Transits<br>Non-booked Transits</td></tr><tr><td><strong>Manpower</strong></td><td>Actual vs. Estimated Work Years</td></tr><tr><td><strong>Financial</strong></td><td>Actual vs. Estimated Labor Costs<br>Overhead Cost as a Percentage of Total Cost<br>Overtime Work Years as a Percentage of Total Basic Work Years<br>Overtime Cost as a Percentage of Total Basic Cost<br>Actual vs. Budgeted Expense, Revenue and Income<br>Direct Transit Cost per Wire*<br>Direct Labor Cost per Wire<br>Total Cost per Transit/Wire<br>Total Cost per Ton<br>Average Inventory Value</td></tr><tr><td><strong>Canal Operations</strong></td><td>Direct Transit Man-Hours per Transit Wire<br>Equipment Availability<br>Operational Transit Delays<br>Number of Accidents<br>Scheduled vs. Transit Vessels</td></tr></tbody></table>

* "Wire" refers to the line between a ship and a locomotive that guides the ship through a set of locks. The number of wires required for each ship increases with the size and tonnage of the ship. Because each wire requires handlers on the ship and onshore, it is one measure of the Canal labor cost required to handle a particular ship.

Source: Panama Canal Commission Secretariat, March 1998.

6 PANAMA CANAL TRANSITION

## Politics and the Organic Law

The Government of Panama has attempted to insulate the PCA from political interference. In 1994, for example, the constitution was amended to establish the PCA as an autonomous agency with independent budget authority. The 11-member PCA board already has been appointed by President Balladares and approved by the legislature. A few appointments were controversial because they involved the president's relatives, but most were well qualified, including several who had prior experience serving on the PCC board. In addition, an international advisory board will be established to provide multinational input to the canal decision-making process.

To implement the constitutional amendment, the legislature passed an organic law giving the PCA authority to make regulations that have the force of law. This will enable the canal to maintain a merit-based personnel system independent from the rest of Panama's labor laws. For example, strikes are prohibited, but a system will be established for resolution of labor disputes. The scope of the PCA authority also will be expanded to include the entire canal watershed area. This is significantly larger than the old canal zone, and prior PCA approval will be needed for any construction or proposed development in this region. This is necessary to ensure that there is adequate water available to supply the canal, since about 52 million gallons of fresh water are used for each ship transit and more than 12,000 ships transit the canal each year.

## Traffic and Tolls

The United States is turning over the canal in good operating condition, free of any liens or debts, as called for by the treaty. Traffic forecasts project continued growth so a substantial revenue stream will be available. Modernization projects already underway should result in a 20 percent increase in the canal's operating capacity, in addition to greater reliability, increased safety and lower maintenance costs. These projects, costing about $1 billion, include widening the narrowest part of the canal by removing about 33 million cubic yards of rock in an 8-mile long narrow stretch so that two-way traffic will be allowed 24 hours a day. Other capital improvement projects include modernizing and increasing the locomotive fleet. The tugboat fleet will be increased from 17 to 24 boats. The electrical-mechanical gears for the lock gates are to be replaced by modern hydraulic systems. Some of these projects will not be completed by the time of turnover, but they are funded through the existing toll base so completion can be assured soon thereafter.

Traffic projections estimate 2-3 percent growth in traffic each year for the next 10-12 years. This means that within 20 years additional canal capacity will be needed to keep pace with likely demand. A study is underway to determine a range of options

[L]

THE FINAL IMPLEMENTATION 7

for increasing canal capacity and the financing required. The PCA will have to make
its longer-term plans clear and have them backed up with credible financing so that
ship builders will continue to design ships that are optimized for the future canal
capabilities.

The PCC has been sensitive to the problems that would be created if tolls were increased soon after Panama takes charge. Therefore, the PCC increased the rates twice in the last few years so that Panama would not have to raise them again in the near term. And the PCA has reiterated that it plans no toll increases anytime soon.

Most important for the PCA, continued transparency of management and operation
will be essential to allay any suspicions of corruption because of the large amounts of
money involved in canal operations. The canal's annual report, for example, must
continue to provide details of revenues, expenditures, capital accounts and other
indicators. It must pass the highest international auditing standards.

The PCA board is expected to become more directly involved in day-to-day canal
operations than was the case for the PCC which met monthly and focused mainly on
policy and major budget issues. While potentially helpful, such a direct role also may
raise concerns about the possibility of politics infecting canal operations.

8 PANAMA CANAL TRANSITION

MILITARY PROPERTIES

The initial concept for transfer of the extensive military properties and facilities in the old canal zone envisioned that they would be transferred to Panama's defense forces (PDF) for like use. At the time treaty implementation planning began, U.S. forces numbered about 10,000, which was about the size of Panama's military forces. Under this approach, the barracks, motor pools, ranges and other facilities would be transferred for similar use by the PDF. The difficulties of extensive cleanup were not anticipated specifically.

This plan, however, had to be changed after the United States intervened against the Noriega military dictatorship in December 1989 and helped reestablish a legitimate government by installing the civilian leadership that won Panama's 1989 presidential election. One of the early acts of the new government was to disband the PDF so that it no longer could threaten civilian rule. As a result, the basic transition plan was modified. The new plan, approved in early 1992, was designed to comply fully with the original 1977 treaty schedule and support the democratic and economic development of Panama. To help with the transfer, Panama developed a master plan for land use of the reverted property and established the Interoceanic Regional Authority (Spanish acronym is ARI) to manage the newly acquired property.

Subsequently, the two governments have worked together so that the property could be absorbed by Panama while still keeping to the original treaty mandate of completing the transfer by the end of 1999. At the beginning of the implementation period, U.S. military forces administered about 93,000 acres and 5,000 buildings.

[L]

THE FINAL IMPLEMENTATION 9

The value of the facilities alone now is estimated at about $3.8 billion, not including the land. By mid-1998, only about 32 percent of the land and 45 percent of the buildings had been transferred. In some cases, ARI requested a delay in the transfer schedule so that Panama could be better prepared to absorb the property. Just the cost of maintaining these facilities in the tropical climate until they can be leased or sold is substantial. Also, some facilities were held until the final year of transition because of ongoing U.S. military operations and the possibility of establishing a multinational counternarcotics center, which failed to materialize. As a result, more than half the property and buildings, valued at about $2 billion, must be transferred in the final year.

Completing the transfer in 1999 is an enormous job for both countries. For the United States, it means redeploying about 76,000 pieces of military equipment, 4,000 military personnel, along with families, including about 3,000 pets. About 175,000 pieces of non-military equipment in Panama will be declared excess and available to Panama in barter arrangements in exchange for services and temporary support during the transition. SOUTHCOM will distribute it throughout Latin America and the Caribbean, with much of it used to offset damages caused by Hurricane Mitch which devastated Central America in November 1998.

For Panama the job is even larger. It requires a country with an $8 billion-a-year economy to absorb assets worth many billions, including the canal and base-related infrastructure, and to convert them to productive use. ARI is responsible for managing this conversion. The average time for converting military bases in the United States to alternative use is three-to-five years. In many cases, ARI has turned bases and facilities around more quickly. For example, Fort Espinar was 85 percent privatized after three years and Albrook Air Station was 90 percent privatized after one year, according to ARI reports.

Unfortunately, well-publicized missteps early in the transfer undermined confidence in the then Government of Panama. The current government has corrected many of the earlier problems, but not without criticism. Cumulatively, these events left some doubt about the ability of the government to manage the property transfer well and to limit corruption.

With the bulk of the job remaining, the two governments need to work together even more closely (see Table II). If they work well together, then public confidence probably will be restored and foreign investment will not be deterred. Among the many business attractions in Panama is the hemisphere's largest free trade zone in Colón, which has an annual turnover of $11 billion. It provides a tax-free environment for export processing and transshipment to markets in North, Central and South America as well as to other destinations. Panama also benefits from using the U.S. dollar as legal tender so that there are no exchange controls and no central bank.

THE FINAL IMPLEMENTATION 11

fraction of the assets being turned over to Panama. Also, the ranges are located within the canal watershed, which further limits their potential for development because of the need to protect the canal from silting and to provide an adequate water supply to operate the canal.

The controversy is mainly over the extent to which unexploded ordnance should be removed. The treaty calls for the United States to take all measures to ensure "insofar as may be practicable" that every hazard to human life, health and safety is removed from any defense site or military area. The treaty also calls for full and open consultation on measures being taken to fulfill these responsibilities. A joint commission on the environment was established under the treaty to advise on such problems, but it has not been successful in resolving the issue.

People in Panama are aware of the dangers posed by unexploded ordnance as seven trespassers have been injured or killed inside the ranges since 1984. Some Panamanians fear the United States will walk away from the problem at the end of the transition. Some also feel that if the ranges were located in the United States, more money would go into clean up efforts.

However, the United States is in fact applying the same standards and methods to clean up the ranges in Panama as it does in the United States and abroad. Roughly 15 percent of the ranges are tropical forest where clean-up is made impractical by rugged terrain and dense vegetation and would be inconsistent with efforts to save rainforests. According to a Defense Department report, of the almost 50,000 acres involved, 41,000 acres will be cleared for unlimited use and about 8,000 acres consisting of remote forest will not be cleared and will therefore need to be restricted. This determination was the result of engineering surveys that divided the ranges into 156 categories of topography, soil type, vegetation and unexploded ordnance density. If a parcel is determined to contain unexploded ordnance and is either inaccessible to demolition personnel and equipment, cannot be cleared without significantly impacting the environment, or poses safety risks for clearance operations beyond Defense Department standards, then the risk on that parcel is managed by contain-and-control measures to keep people away from the unexploded ordnance. Signs are erected, barricades are placed across roads and paths and extensive educational campaigns are conducted to teach those who live or work around the ranges to use the land safely.²

Demands by Panamanians for clean-up at the expense of the United States beyond that contemplated would likely anger many Americans, especially in Congress. Such demands would be perceived as inappropriate, intended to gain as much as possible by an unappreciative government that already benefits from a transfer worth billions.

² See *Range Transfer Report*, October 29, 1998, by U.S. Army South, U.S. Air Combat Command, U.S. Army Technical Center for Explosives Safety, U.S. Air Force Safety Center, U.S. Southern Command Treaty Implementation, U.S. Army Environmental Center, U.S. Department of Defense Explosives Safety Board.

THE FINAL IMPLEMENTATION 13

[L]

## WHAT MIGHT GO WRONG?

What will happen if a problem occurs after the transition that is beyond Panama's capacity to cope? To some extent, this already has been anticipated and agreements are in place to deal with accidents such as spills of hazardous materials, radioactive contamination and similar problems. Under these agreements, PCC emergency response teams would be augmented quickly by the National Response Team (NRT) of the U.S. Environmental Protection Agency. PCC and NRT officials are consulting on possible problems and appropriate responses. Although this is an arrangement between two U.S. government agencies, the PCA should reach similar agreements with the NRT before it takes over at the end of 1999. Furthermore, an international canal advisory panel would provide a useful way both to anticipate problems and mobilize international help.

Potential problems affecting the security and operation of the canal could involve much more than incidents within the canal operating area. Conditions in Panama could be destabilized by several kinds of problems that also would likely affect the canal. For example, a natural disaster could overwhelm Panamanian capabilities. Economic conditions could deteriorate further for the large percentage of the population living in poverty. This could produce political pressures on the government to backtrack on reform and seek to pull more profits from the canal at the expense of needed capital improvements. Violence along the border with Colombia could escalate, requiring a larger, sustained response by the government of Panama. The corrupting influence of drug trafficking and money laundering could reach epidemic proportions, and this could have adverse effects on canal administration and operations.

While such developments are unlikely, the risks are too great to ignore the possibility of worst case scenarios. The best course of action is for both governments to take preventive measures where they can. This might be possible if effective responses are triggered by early warning indicators that conditions are worsening. Such indicators could help donor banks, the United States and other canal users anticipate problems and work together to develop and implement international assistance programs.

One priority for contingency planning is to address natural disasters. Central America is exceptionally vulnerable to earthquakes, storms, flooding and hurricanes. Panama is a logical place from which to stage search and rescue and relief operations, making use of airfields, warehouses and other parts of the existing infrastructure. Panama would benefit both economically and politically from hosting such operations.

The risk of terrorist attack in the canal should be reduced as a result of the transfer of sovereignty. U.S. targets are far more at risk to such attacks and the canal no

14 PANAMA CANAL TRANSITION

[L]

longer will be in this category. In the 1960s and 1970s, the canal was a target for Panamanian nationalists. The 1977 treaty largely defused this threat, and, after 1999, the canal will be an international waterway under Panamanian sovereignty, so any attack would cause losses mainly to Panama and to international shippers.

Nevertheless, while the risk of terrorist attack may be low, the consequences could be very serious, so Panama must continue to assess vulnerabilities and take steps to deter such an attack. The PCC, for example, commissioned a study along these lines in 1997 which provided recommendations for hardening critical facilities.

Other threats have been postulated, but they seem unlikely to directly affect the canal or Panama's basic security. For example, Panama's national police cannot prevent rebels and paramilitaries from crossing the Colombian border and creating unrest in the Darien and San Blas regions. But these activities have been going on for years. Furthermore, these forces are concerned with influencing the situation in Colombia and are not operating to overthrow the government of Panama or to disrupt the canal. Yet if unchecked, the loss of Panamanian sovereignty over the border region may erode confidence in the government

Concerns also have been expressed about a potential threat to the canal posed by China. Unfortunately, some of this thinking is beginning to resonate in Washington. These concerns usually are linked to the Hong Kong based company, Hutchison-Whampoa, which won the contract to operate some of the ports outside the canal. However, it is unlikely that China would want to disrupt the canal or to destabilize Panama.

Nonetheless, in cases where a serious foreign threat emerges, the United States may have to act. Under the Neutrality Treaty and its amendments and understandings added during ratification, the United States and Panama agreed to the right of the United States to act unilaterally to meet any threat to the canal, including the use of U.S. military forces in Panama. This treaty, designed to ensure the permanent neutrality of the canal, has no expiration date. Although politicians in both countries prefer to underplay or even ignore the Neutrality Treaty because discussions would likely highlight different interpretations, it nevertheless remains in effect. Furthermore, ambiguity on this issue will help preserve maximum flexibility.

While it is useful to be prepared for possible serious threats, the circumstances under which any future decision to send forces to Panama might be made by the United States are best left unstated. With the Neutrality Treaty in the backdrop and the 1989 precedent in mind, Panama still will have an implicit security relationship with the United States.

[C]

THE FINAL IMPLEMENTATION 15

ENSURING THINGS GO WELL

Panama will be under close international scrutiny just after the transition, so any problems probably will be magnified. Therefore, the way in which they are handled will be important in building confidence. It will require unprecedented cooperation among leaders of factions in Panama who are not accustomed to working well together. Internal divisiveness, which has characterized much of Panama's history, often results in a president elected without the mandate of the majority of voters. Most recently, it also has resulted in different parties in control of the legislature and presidency, making consensus on important issues more difficult. But this divisiveness should end at the water's edge and ideally, Panama should present to the outside world a unified commitment to manage domestic problems more effectively.

Furthermore, without most of the structure that underpinned the "special relationship," leaders in Panama will have to work much harder to gain the access, attention and resources they have come to expect from the United States. It is not likely Washington will do anything to consciously degrade relations, but once the transfer ceremonies fade into memory, U.S.-Panamanian relations are likely to be boringly "normal." The U.S. ambassador is already becoming the single focal point for bilateral communications, and even he is likely to see his influence in Washington limited after December 31. He will have to fight for resources to sustain even modest assistance programs. To do this effectively, he must make a compelling case for the value of cooperating with Panama on important U.S. interests in the region.

The transfer of the canal provides as opportunity for greater international cooperation. Major canal users, including Japan, Taiwan and China, plus several South American nations, all have important stakes in a smooth transfer and continued efficient operation of the canal. They may be willing to provide assistance to Panama in dealing with potential problems that can adversely affect the operation of the canal. Similarly, the World Bank, the International Monetary Fund and the Inter-American Development Bank should increase their attention to Panama during this critical transition and be prepared to lend assistance and advice if problems develop beyond Panama's capabilities.

The overall focus, however, must be on the economic and political health of Panama because this is the greatest guarantee of the efficient operation of the canal and ultimately, of peace and stability in the hemisphere. Among the most difficult challenges facing the new administration in Panama are poverty, drug trafficking and corruption. One common aspect of dealing with such problems is the judicial system which, according to Panamanian leaders and outside observers, is subject to political manipulation and bribery and is therefore in need of strengthening. Furthermore, Panama's non-governmental organizations, its press and, most of all, the Panamanian public, will have important roles as watchdogs monitoring economic and political developments in this country, which will be theirs to more fully manage.

16 PANAMA CANAL TRANSITION

ABOUT THE AUTHORS

**Charles A. Gillespie, Jr.** heads the Latin America activities of The Scowcroft Group in Washington, D.C. He has served as U.S. ambassador to Chile, Colombia and Grenada. He also has served on the White House staff as special assistant to the President and as the National Security Council's senior director for Latin America. He was principal producer of the 34-nation Summit of the Americas in 1994 and earlier led the State Department effort to achieve implementation of the North American Free Trade Agreement in 1993.

**Brandon Grove, Jr.** is a senior consultant to the public and international affairs firm of APCO Associates in Washington, D.C. and is a director of the Atlantic Council. He formerly served as deputy assistant Secretary of State for Inter-American Affairs, U.S. ambassador to Zaire and director of the Foreign Service Institute. He also served on the policy planning staffs of Secretaries of State Kissinger and Christopher and as director of Panamanian Affairs.

**David E. McGiffert** is a partner with the Washington, D.C. law firm of Covington & Burling and a director of the Atlantic Council. He is a former assistant Secretary of Defense for International Security Affairs, former under secretary of the Army and former assistant to the Secretary of Defense for Legislative Affairs. From 1965 to 1969 he was chairman of the board of the Panama Canal Company.

**C. Richard Nelson** is director of the International Security Program at the Atlantic Council and manager of the Council's work on Panama. He served more than 30 years in the U.S. government, including assignments on the National Intelligence Council as assistant national intelligence officer for science and technology and on the Army and Secretary of Defense staffs. He has taught at the Army's Command and General Staff College, National Defense University, George Mason University and Georgetown University.

[L]

Atlantic Council Publications

All Atlantic Council publications are available, prepaid, from:

Suite 1000, 910 17th Street, N.W. ☐ Washington, D.C. 20006

Selected publications may be read and/or downloaded at: http://www.acus.org/

* indicates publications available in print and on internet

† indicates publications available only on internet

Bulletins and Special Reports: $1.00 each ☐ Occasional/Policy Papers: $10.00 each.

BULLETINS

Bulletins are short monographs by individual authors;
views expressed are not necessarily those of the Atlantic Council.

* The NATO Summit As Seen From Kosovo, *David C. Acheson*, May 1999.

*Foreign Relations Priorities, David C. Acheson.*
May 1999.

*The Panama Canal Transition: The Final Haul, William J. Hughes.* April 1999.

*The Atlantic Bedrock, Charles McC. Mathias.*
March 1999.

*Wanted: A Natural Disaster Response System for the Vulnerable Americas, Robert M. Sayre.*
February 1999.

*The Russian Federation: Political and Economic Update, James A. Duran.* December 1998.

*The United States and France in the Next Decade: A Durable but Prickly Friendship, Steven Phillip Kramer.* October 1998.

*Panama Canal Treaty Implementation: Issues and Update, John M. Williamson.* August 1998.

*Reengineering The Arsenal of Democracy, Norman R. Augustine.* July 1998.

*Managing Nuclear Arms Competition in South Asia: Work the Problem, Don't Fight It! Chas. Freeman et al.* July 1998.

*SERIES: The NATO Enlargement Process: News From the Front, Gayden Thompson, Scott A. Kocher, editors.* #5, May 1998. #4, February 1998. #3, January 1998. #2, November 1997. #1, October 1997. (Issues from August 1998 are published electronically only on the Council's website.)

*Russia and Ukraine: Political and Economic Update, James A. Duran.* May 1998.

†Europe's Future: More Respect for the EU, G. Jonathan Greenwald. March 1998

*U.S.-Iran Relations: A Road Map for Normalization, Graham E. Fuller.* March 1998.

NATO, the WEU, and the ESDI, Joseph I. Coffey.
February 1998.

*New Patterns of Peace and Security: Implications for the U.S. Military, Andrew J. Goodpaster.* December 1997.

Russia and Ukraine: Political and Economic Update, James A. Duran. October 1997.

*The Prospects for NATO Enlargement, Senator Joseph R. Biden, Jr.* September 1997.

America's Security Interests for the New Century,
Robert F. Ellsworth. July 1997.

*The Baltic States in the European Security Framework Scott A. Kocher.* June 1997.

The State of Reforms in the Ukrainian Armed Forces, Stephen D. Olynyk. May 1997.

*NATO and Mediterranean Security, Raymond C. Ewing, Celina Ramjoué.* March 1997.

NATO and Russia, M. van Heuven. January 1997.

*The Course for NATO, Sam Nunn.* January 1997.

Military Security in Bosnia-Herzegovina: Present and Future, Obrad Kesic, Donald C. Snedeker, Gregory D. Vuksich. December 1996.

LC

OCCASIONAL PAPERS

Occasional papers are analyses of specific issues by individual authors; views expressed are not necessarily those of the Atlantic Council.

*The United States and Cross-Strait Rivalry: Strategic Partnership and Strategic Ambiguity, Dennis Van Vranken Hickey. May 1999.

*What Should Be Done About Tactical Nuclear Weapons?, George Lewis & Andrea Gabbitas. March 1999.

*Ballistic Missile Defense Revisited, Leon Sloss. January 1999.

*After The Fall: U.S.-Russian Relations in the Next Stage of Post-Soviet History, Peter J. Stavrakis. December 1998.

*Correcting Dayton's Oversight: Underpinning Bosnia's Democracy with the Rule of Law, Lewis H. Thompson. October 1998.

*International Perspectives on U.S.-Cuban Relations, Pamela S. Falk, C. Richard Nelson, and Kenneth Weisbrode. August 1998.

*French Nuclear Weapons Policy After the Cold War, Pascal Boniface. August 1998.

*Relations Across the Taiwan Strait: Perspectives from Mainland China and Taiwan, Chen Qimao and Wei Yung. March 1998.

*Realities in the Trans-Atlantic Relationship, The 1998 Ernest Bevin Memorial Lecture, David C. Acheson. February 1998.

*Shaping the Nuclear Future: Toward a More Comprehensive Approach, Andrew J. Goodpaster. December 1997.

China and Security in the Asian Pacific Region Through 2010, Alfred D. Wilhelm, Jr. July 1997.

*The Road Beyond Start: How Far Should We Go?, Jonathan Dean. March 1997.

*Start-III Negotiations: How Far and How Fast?, Jack Mendelsohn and Oleg N. Bykov. October 1996.

France and International Security Cooperation, Steven Phillip Kramer. September 1996.

The Marshall Plan: Lessons for U.S. Assistance to Central and Eastern Europe and the Former Soviet Union, Charles Weiss, Jr. December 1995.

The Revolution in Trade between Central and Eastern Europe and Russia, Keith Crane and Matthew J. Sagers. October 1995.

The Prospects for Security Cooperation Among the Major Powers, C. Richard Nelson. October 1995.

A Comprehensive Test Ban Treaty: A New Verification Role for the International Atomic Energy Agency, Roger Kirk. May 1995.

Tibet, China and the United States: Reflections on the Tibet Issue, Melvyn C. Goldstein. April 1995.

Democratization in Central and Eastern Europe: Progress or Regression for Women?, Sharon L. Wolchik. February 1995.

Russia, the United States and NATO: The Outlook for European Security, Marten H.A. van Heuven. November 1994.

U.S. Relations with Cuba: Compendium of Laws, Regulations and Policies. C. Richard Nelson and Kenneth Weisbrode, EDITORS. November 1994.

International Law and Self-Determination, Ralph G. Steinhardt. November 1994.

Ukraine, Ukrainian Minorities and United States Policy, Robert D. Cullen. July 1994.

International Nuclear Safeguards: Promise and Performance, Myron B. Kratzer. April 1994.

Post-Cold War Communists in Central and Eastern Europe: The Challenges to Reform, Seminar Report and Policy Recommendations, Roger Kirk and Michael Kraus. April 1994.

*Further Reins on Nuclear Arms: Next Steps for the Major Nuclear Powers, Andrew J. Goodpaster. August 1993.

Assuring the Nuclear Non-Proliferation Safeguards System, Lawrence Scheinman. May 1992.

POLICY PAPERS

Policy papers present consensus, findings and recommendations from Atlantic Council working groups; views expressed are not necessarily those of the Atlantic Council.

*Building An Asia-Pacific Security Community: The Role of Nuclear Weapons, James E. Goodby and Tomoshisa Sakanaka, CO-CHAIRS, C. Richard Nelson, PROJECT DIRECTOR. May 1999.

*An Appropriate Role for Nuclear Power in Meeting Global Energy Needs, Richard E. Balzhiser and Christian Gobert, CO-CHAIRS, Donald L. Guertin and William J. Dircks, PROJECT CO-DIRECTORS, Joy C. Dunkerley and Stephen P. Pettibone, co-RAPPORTEURS. February 1999.

*Third Party Arms Transfers: Requirements for the 21st Century, John D. Macomber and Charles McC. Mathias, CO-CHAIRS, Jack M. Seymour, PROJECT DIRECTOR, Michael E.C. Ely. RAPPORTEUR. September 1998.

*An Appropriate Role for Nuclear Energy in Asia's Power Sector, Richard E. Balzhiser and Christian Gobert, CO-CHAIRS, STEERING COMMITTEE, KunMo Chung and Hilliard W. Paige, CO-CHAIRS, ASIA SEMINAR, Donald L. Guertin and William J. Dircks, PROJECT CO-DIRECTORS, Joy C. Dunkerley, RAPPORTEUR. December 1997.

*Bosnia's Security and U.S. Policy: Where Now?, Roger Kirk, CHAIR, John Lampe and Jack M. Seymour, Jr., PROJECT DIRECTORS. In cooperation with the Woodrow Wilson Center and the International Research & Exchanges Board. December 1997.

Joint Policy Statements with Joint Policy Recommendations and Related Documents on the Future of Ukrainian-American Relations and Russian-American Relations in a Pluralistic World and United States-Russian Dialogue: Joint Statement, March & April 1997, Andrew J. Goodpaster, CHAIR; Peter Bird Swiers, PROJECT DIRECTOR. August 1997.

Women and Entrepreneurship in Mainland China, Taiwan, Hong Kong and the United States, Beatrice Fitzpatrick, CHAIR, Charlotte Ikels, RAPPORTEUR, Karen Sutter, PROJECT DIRECTOR. June 1997.

Bosnia's Security and U.S. Policy in the Next Phase, Roger Kirk, CHAIR; John Lampe and Jack M. Seymour, Jr., PROJECT DIRECTORS; Job L. Dittberner, RAPPORTEUR. November 1996.

*Defining a New Relationship: The Issue of U.S. Access to Facilities in Panama, Andrew J. Good-

paster and Joaquín J. Vallarino, Jr., CO-CHAIRS; C. Richard Nelson, PROJECT DIRECTOR; William A. Naughton, RAPPORTEUR. August 1996.

*Nuclear Weapons and European Security, Andrew J. Goodpaster, CHAIR; C.R. Nelson, PROJECT DIRECTOR; Steven Philip Kramer, RAPPORTEUR. April 1996.

Ethnic Conflicts: Old Challenges, New Dimensions, Max M. Kampelman, CHAIR; Job L. Dittberner, PROJECT DIRECTOR AND RAPPORTEUR. July 1995.

*A Road Map for Restructuring Future U.S. Relations with Cuba, Sarah C. Carey, CHAIR; C. Richard Nelson, PROJECT DIRECTOR; Kenneth Weisbrode, RAPPORTEUR. June 1995.

France and the United States: Charting a New Course, Robert Anderson and Arthur A. Hartman, CO-CHAIRS. February 1995.

Cooperative Russian-Ukrainian-Japanese-U.S. Recommendations on Energy Pricing, Taxation and Investment for the Russian Federation, John E. Gray, CHAIR; Donald L. Guertin, GENERAL RAPPORTEUR AND PROJECT DIRECTOR; Alexei A. Makarov, Vladimir E. Tonkal and Kunio Kakizawa, HEADS OF NATIONAL DELEGATIONS. February 1995.

*Basic Concepts for the Development of Energy Policies for Russia and Ukraine: A U.S.-Japanese-Russian-Ukrainian Cooperative Approach, John E. Gray, CHAIR; Donald L. Guertin, GENERAL RAPPORTEUR AND PROJECT DIRECTOR; Vladimir L. Likhachev, Miroslav T. Strelkov and Tsutomu Toichi, NATIONAL RAPPORTEURS. November 1993.

The United States, NATO, and Security Relations with Central and Eastern Europe, Andrew J. Goodpaster, CHAIR; David E. McGiffert and Carl E. Vuono, VICE CHAIRS; Raoul Henri Alcalá, RAPPORTEUR; John A. Baker, PROJECT DIRECTOR. September 1993.

United States and China Relations at a Crossroads, Barber B. Conable, Jr. and John C. Whitehead CO-CHAIRS; David M. Lampton and Alfred D. Wilhelm, Jr. CO-RAPPORTEURS. February 1993.

BOOKS

*Reversing Relations with Former Adversaries: U.S. Foreign Policy After The Cold War, C. Richard Nelson and Kenneth Weisbrode*, eds. January 1998. Co-published with University Press of Florida, ISBN 0-8130-1545-6.

*Taiwan 2020 — Developments in Taiwan to 2020: Implications for Cross Strait Relations and U.S. Policy*. 1996. Available through the Atlantic-Pacific Program of the Atlantic Council, 202-778-4999.

*United States and China Relations at a Crossroads*. 1995. Co-published with University Press of America. Available through the Atlantic-Pacific Program of the Atlantic Council, 202-778-4999.

*Energy Technology Cooperation for Sustainable Economic Development*. 1993, ISBN 0-8191-9034-7. Available at bookstores.

*U.S. Energy Imperatives for the 1990s*. 1992, ISBN 0-8191-8337-7. Available at bookstores.

*The United States and Japan: Cooperative Leadership for Peace & Global Prosperity*. 1990, ISBN 0-8191-7713-X. Available at bookstores.

A complete summary of ongoing programs at the Atlantic Council is available in print, gratis, upon request or on the Council's web site at http://www.acus.org/