The Washington Times
January 11, 1999

Canal enters countdown

                                 Politics is the only fear as nations ready year-end switch

                                 By Tom Carter
                                 THE WASHINGTON TIMES

                                                                                              PANAMA CITY
                                     he old man sat beneath a coconut palm skillfully slicing
                                     into coconut husks with a machete, exposing the white
                                 meat he would later shred and make into cookies to sell.
                                      "I use the [coconut] milk to make the cookies," said Ernesto
                                 Atherly, revealing his secret recipe with a whack.
                                      Mr. Atherly's grandfather came from Barbados to help
                                 build the Panama Canal nearly 100 years ago, and his father
                                 spent years working for the U.S. agency that will continue
                                 running the canal until the end of this year.
                                      Mr. Atherly briefly protested the American occupation of
                                 Panama Canal Zone in the early 1960s but later went to work
                                 for the Americans as well, mowing the lawns at Fort Gulick, a
                                 U.S. base near the city of Colon.
                                      He said that he had enjoyed working for the Americans,
                                 and that he always had been paid well and treated fairly.
                                      That life will end at noon Dec. 31, when the Panama Canal
                                 Commission shuts down and the U.S. military leaves Panama
                                 under the terms of a 1977 treaty signed by President Jimmy
                                 Carter for the United States and President Omar Torrijos for
                                      Asked what he plans to do when the Americans leave, Mr.
                                 Atherly stared back as if he had just been asked about the
                                 tooth fairy.
                                      "You believe that?" he said. "The Americans aren't going to
                                      He then turned to a friend and told him what the visitor had
                                 said, and the two old friends laughed. "The Americans will
                                 never leave," the friend agreed.
                                      By some accounts, half of all Panamanians think there will
                                 continue to be a significant U.S. presence in Panama beyond
                                 the year 2000.
                                      "You hear it all the time. They think something will happen
                                 at the last minute and we will stay," said a U.S. Embassy
                                 official with years of experience in Panama. "A lot of
                                 Panamanians are going to be in for a rude awakening."
                                      But Americans, military and civilian alike, seem resigned
                                 that the American century in Panama will come to a close on
                                 the last day of this year.
                                      In a ceremony that probably will occur on the back terrace
                                 of the elegant and imposing Panama Canal Commission
                                 building in Balboa Heights, the American flag will come down.
                                 If past ceremonies are a guide, a white symbolic key will be
                                 passed and, for the first time, all of Panama's territory, including
                                 the 600-plus square miles of the Panama Canal Zone, will be
                                 held by Panamanians.
                                      With the hand-over less than a year away -- U.S. and
                                 Panamanian government offices alike display makeshift wall
                                 calendars counting the days -- as many questions remain as
                                 answers regarding the future of Panama and its namesake
                                      Almost everyone agrees the United States has been a good
                                 --even excellent -- steward of the 50-mile-long canal and the
                                 10-mile-wide strip of pristine rain forest slicing through the
                                 middle of the Panamanian isthmus. But the canal will be under
                                 Panamanian management in less than a year.
                                      Panama is working overtime to assuage investor and
                                 international anxiety. The message to the world is, relax:
                                 Panama can run the canal, it will be properly maintained, the
                                 environment will be cared for, the democracy is stable and
                                 foreign investments are safe.
                                      "The Panama Canal is and always will be important for
                                 Panama and for the rest of humanity," President Ernesto Perez
                                 Balladares said in a speech in Mexico in September. "On
                                 midday Dec. 31, 1999, the canal will be entirely Panamanian.
                                 The military bases on our territory will only be a memory. The
                                 canal will be neutral, and ... Panama will fulfill its historical
                                      But Panama's democracy, while genuine and vibrant, is
                                 barely 10 years old. There are concerns, not entirely
                                 unfounded, that some brand of personality cult or military
                                 dictatorship could re-emerge.
                                      Polls indicate that up to 70 percent of Panamanians would
                                 like to see some sort of continued U.S. presence.
                                      "Panama is not yet capable of handling the canal," said
                                 Dalinda Hernandez, a housewife shopping in the cereal aisle of
                                 Reys grocery store. "It is my children's future, and I'm not sure
                                 [the transfer] is to the benefit of Panama. The way the United
                                 States has handled it was the best way."
                                      Even some politicians publicly agree, despite a risk of being
                                 labeled anti-nationalist.
                                      "Can we administer and run the canal? Absolutely," said
                                 Mayin Correa, the popular mayor of Panama City. "Are we
                                 capable of managing the millions of dollars worth of assets
                                 being turned over to Panama? No. There is too much

                                 Smooth transition
                                       Panamanian and U.S. officials both describe the transition
                                 from U.S. to Panamanian ownership as "seamless."
                                      For 10 years, the canal has been run by Panamanians.
                                 Today, about 93 percent of the 9,000 canal employees are
                                 Panamanian, including the top administrators.
                                      "There is no lack of technical or managerial expertise to
                                 operate and maintain the canal when Panama takes over,"
                                 Joseph Cornelison, deputy administrator of the Panama Canal,
                                 told businessmen in a recent speech in Washington.
                                      While the canal has been a U.S. government-owned,
                                 not-for-profit utility, the Panamanians will run it as a
                                 government-owned business, free to borrow capital for
                                 expansion and raise tolls as warranted.
                                      There will be some downsizing, and there is considerable
                                 concern about the impact that will have on Panama's work
                                 force, which already suffers from an unemployment rate of 13
                                      Panama is expected to lose about $330 million a year that
                                 U.S. military personnel would have spent on maids, gardeners
                                 and drivers and in other areas of the Panamanian economy --
                                 totaling an estimated 16,000 jobs.
                                      All the Panamanian employees of the military commissaries,
                                 for example, soon will be looking for work; the jobs they find
                                 are not likely to pay as much or provide the same benefits.
                                      "We wish the Americans would stay," said the woman
                                 behind the cash register in a corner store in the colonial quarter
                                 of Panama behind the presidential palace. "Many tourists come
                                 here. Who will buy my Cokes and cookies when the troops
                                 are gone? I'll lose money."
                                      The managers of several downtown restaurants agreed.
                                      "Fifteen to 20 percent of my business is American. About
                                 half of that comes from the bases," said Carlos Madrigal,
                                 manager of Italianni's. "It will hurt when they leave."
                                      Analysts say the pain of the military "draw-down" will be
                                 eased by solid economic growth, estimated at 4 percent in
                                 1998, and a buoyant stock market.
                                      But several questions remain:

                                      Can the Panamanians run the canal with the same
                                      efficiency the Americans have shown for nearly 100
                                      "The old girl is nearly 100 years old; she needs a lot of
                                      maintenance," said Paul Karst, a union leader for federal
                                      canal workers trying to keep jobs and benefits under the
                                      new management.
                                      Is the United States losing a vital strategic and
                                      geopolitical security asset in turning over the canal?
                                      A company with close ties to the Chinese government
                                      has established itself at both ends of the canal. "What if
                                      there is a war in the Atlantic and the Pacific?" asked
                                      Richard Delgaudio, a conservative activist in
                                      Can the Panamanian government overcome the
                                      temptation to see the canal as a golden goose, milking its
                                      treasure at the expense of its long-term good?
                                      "I'm afraid that some Panamanians see the canal as a
                                      kind of El Dorado, as a profit-making business. It's just
                                      not true," said Mark Falcoff, Latin American specialist at
                                      the American Enterprise Institute and author of
                                      "Panama's Canal."
                                      Can a Panamanian government with a history of
                                      patronage and corruption problems resist the temptation
                                      to inject domestic political concerns into the running of
                                      the canal?
                                      "The future of Panama looks good for a lot of reasons --
                                      if they don't bring in the politics," said Nils Petterson, a
                                      telecommunications businessman seeking to invest $10
                                      million in a fiber optics cable network using canal
                                      Will the government, facing huge population pressures,
                                      enforce the laws that protect the forests that surround
                                      the canal and ensure a supply of fresh water without
                                      which it cannot function?
                                      "You can see the edges of the rain forest from here,
                                      where the people are already cutting into the park. Of
                                      course, I am concerned. My business depends on the
                                      rain forest," said Raul Arias de Para, whose hotel for
                                      eco-tourists sits in the treetops overlooking the canal.

                                 Eighth wonder
                                       The Panama Canal is still considered, 84 years after it
                                 opened, one of the greatest engineering achievements of all
                                 time. A new documentary by the Discovery Channel calls it the
                                 "Eighth Wonder of the World."
                                      The 50-mile-long ditch, dug through the jungle at a cost of
                                 nearly 25,000 lives, connects the Atlantic and the Pacific
                                 oceans via the artificial Gatun Lake, which is 85 feet above sea
                                      It could not have been built 30 years earlier.
                                      New technologies in medicine, engineering, electricity,
                                 making steel alloy and dozens of other fields were discovered
                                 and used. The most massive health campaign in the history of
                                 the world was mounted to overcome yellow fever and malaria
                                 in the Panamanian forest.
                                      The canal's opening on Aug. 15, 1914, reduced the length
                                 of a voyage from Peru or Chile to New York to less than
                                 3,000 miles, making it shorter than a trip from New York to
                                 Los Angeles.
                                      Between the time the United States took over the project in
                                 1903 and its completion in 1914, tens of thousands of men dug
                                 232 million cubic yards of dirt, enough to pile an average city
                                 block almost 20 miles high.
                                      A massive system of locks remains as impressive today as it
                                 was at the turn of the century.
                                      "Even compared to sending a man to the moon, I still
                                 consider this the greatest engineering achievement of all time,"
                                 said Mercedes Morris Garcia, spokesperson for the Panama
                                 Canal Commission.
                                      The 40-horsepower engines, each about the size of a small
                                 tractor and built by the General Electric Co., still open and
                                 close the massive 700-ton gates on the locks today, though
                                 they are to be replaced during a $1 billion renovation and canal
                                 expansion now under way.
                                      Since opening, the locks have been filled and emptied by
                                 gravity, requiring 52 million gallons of fresh water to flow from
                                 Lake Gatun into the Pacific or Atlantic Ocean for each of the
                                 700,000 ships that has passed through.
                                      About 30 to 40 ships a day pass through the locks, each
                                 paying an average of $40,000 in tolls. The cruise ship
                                 Rhapsody of the Seas last April paid $165,235, the largest
                                 registered toll, to pass through the canal. The lowest toll, 36
                                 cents, was paid by Richard Halliburton, who swam the canal in
                                      The largest ships the canal can accommodate, known as
                                 "Panamax," pass through the locks with just 24 inches of
                                 clearance on either side. The ships rise 85 feet from sea level
                                 through three locks to Gatun Lake. The ships steam across the
                                 lake and descend through three more locks to the other ocean.
                                      About 14 percent of all U.S. shipping traffic goes through
                                 the canal, but alternatives have become increasingly
                                 cost-effective. Many companies now prefer to ship their goods
                                 in rail containers across the United States.
                                      More than 84 years after the SS Ancon made the first
                                 official crossing of the canal on Aug. 15, 1914, engineers still
                                 marvel at the simplicity and efficiency of the design and salute
                                 the determination and vision of those who built it.
                                      "The creation of a water passage across Panama was one
                                 of the supreme human achievements of all time, the culmination
                                 of a heroic dream of 400 years and of more than 20 years of
                                 phenomenal effort and sacrifice. The 50 miles between the
                                 oceans were among the hardest ever won by human effort and
                                 ingenuity, and no statistics ... can begin to convey the grandeur
                                 of what was accomplished," wrote David McCullough in "The
                                 Path Between the Seas," the definitive history of the canal.
                                      Few disagree.