Panama grapples with decisions on operation of canal Uncertainty prevails as transition approaches

PANAMA CITY — PANAMA CITY -- With the shipping industry looking on warily and domestic interests jockeying for position, Panama's Congress has begun drafting the law that will govern the operation of the Panama Canal when the United States gives up control of the waterway three years from now.

Panamanian officials have said that they hope to complete the process before year's end. But a host of sticky issues are still being debated by various segments of Panamanian society, from intellectuals and labor unions to politicians and civic groups.


The issues include the powers of the board of directors that will assume jurisdiction on Dec. 31, 1999, and the extent to which the existing U.S.-inspired labor code will carry over.

The shipping companies that send more than 13,500 vessels through the canal each year would like to see as few changes as possible in its regulations and administrative structure, formed under the past 82 years of U.S. stewardship.


But President Ernesto Perez Balladares sowed doubts about his intentions after taking office in September 1994, when his government undid legislation, sponsored by his predecessor, intended to remove the administration of the canal from the realm of partisan politics.

"We have been very keen to ensure that the canal be run efficiently and structured in such a way that it is not susceptible ZTC to the vagaries of Panamanian politics, which, heaven knows, tend to swing back and forth quite a bit," said Chris Horrocks, secretary general of the International Chamber of Shipping, a London-based trade group that represents shipping associations from 36 countries.

"If a week is a long time in politics, three years is an awfully long time in Panamanian politics."

Since the signing of the Panama Canal Treaties in 1977, the waterway has been run by a nonprofit U.S. government corporation, the Panama Canal Commission, which is supervised by a nine-member board. All the appointees, five of whom are Americans and four of whom are Panamanians appointed by this country's president, must be confirmed by the U.S. Senate.

In place of the commission, Panama seems to be leaning toward a larger board of directors, all of whom would be Panamanian citizens, serving terms as long as nine years.

As things now stand, said Octavio Tapia Lu, director of the Panama Canal and International Studies Institute at the University of Panama, the new board would have broader powers and "could easily change regulations, so that the rules of the game are not fixed."

Jorge Ritter, who was foreign minister under the dictatorship of Gen. Manuel Antonio Noriega and is now executive director of the Transition Commission for the Transfer of the Panama Canal, said the Panamanian government is well aware of the problems.

Steps will be taken, he said, to assure that the board's role is limited to "supervision and orientation," but it would be unfair to disqualify potential nominees simply because they have a partisan background.


"Being a friend of the president cannot be the only credential to accede to a post on the canal commission," Ritter said. "But neither can it be an impediment."

Shipping groups would like to see some formal affirmation that the canal's current status as a nonprofit enterprise will be maintained. Some members of Perez Balladares' party, including legislators, have criticized that approach and hinted that they would prefer to spend some of the canal's $500 million in annual revenues on government housing or construction programs instead of plowing it back into maintenance.

The Panama Canal Commission recently decreed an 8.2 percent toll increase, which will go into effect Jan. 1, and be followed by a 7.5 percent increase a year later.

Though shippers complain about the toll increases, which will finance a widening of part of the canal and modernization of its equipment, they also recognize, a European diplomat said, that beginning such a program now ensures that necessary improvements "cannot be put into reverse or slowed down" after the 1999 turnover.

Concerns have also been fed by the way in which the Panamanian government awarded recent contracts to modernize two ports that, though not formally part of the canal, are located at either end of the waterway.

The bidding criteria were "changed in midstream" to the detriment of U.S. companies, said William Hughes, the U.S. ambassador here, and the eventual winner was a Hong Kong company.


The Panamanian government has defended its decision, saying that it chose the offer that was most profitable and advantageous for the country.

As for the drafting of new legislation to run the canal, Alberto Aleman Zubieta, the U.S.-educated engineer who was appointed administrator of the Panama Canal in August, said he feels "quite comfortable" with the process and its results.

Pub Date: 12/15/96