April 30, 1999

Panama presidential poll sets stage for canal transfer

                  PANAMA (AP) -- The winner of Sunday's presidential election in this
                  Central American country will get a big bonus: the Panama Canal.

                  On December 31, the United States is scheduled to turn over the canal's
                  administration to the new president, ending a relationship between the two
                  countries that began with Panama's birth as a nation in 1903.

                  The Panama Canal Commission, a part of the U.S. federal government, will
                  become an autonomous Panamanian agency in charge of the man-made
                  shortcut between the Atlantic and Pacific oceans that handles more than
                  14,000 ships a year.

                  The country of 2.8 million people in the thin waist of the Americas is only
                  recently returning to democracy after a U.S. invasion ended the authoritarian
                  rule of Gen. Manuel Noriega in 1989.

                  'We cannot afford to fail'

                  So the United States and other countries have questions about the
                  Panamanians' ability to run the canal. Panama insists those are misguided.

                  "We cannot afford to fail before the entire world," said Martin Torrijos,
                  the ruling-party candidate. "We are confident that we are capable of
                  running the canal."

                  It was Torrijos' father, the late military strongman Gen. Omar
                  Torrijos, who engineered with then-President Carter the 1977
                  Canal Treaties whose final act of fulfillment will be the transfer of the

                  Mireya Moscoso, 52, the opposition candidate who polls show in a statistical
                 dead heat with Torrijos, pledged to keep the canal free of politics and preserve
                  the ecological balance that provides the water needed to raise and lower ships
                  from one ocean to another through narrow locks at both ends.

                  "As president of Panama, I will be vigilant to make sure corruption and
                  politics never invade the Panama Canal," she said at a campaign rally.

                  Loss of strategic value

                  The view of U.S. officials in Panama is that the canal has lost its importance
                  and the country its strategic value -- and that there is no need for a continued
                  military presence.

                  Railroad crossings and other facilities in the United States have reduced the
                  U.S. reliance on the canal to move goods from one ocean to another.

                  And while Panamanian jungles have long served as U.S. military training
                  grounds, that role has been declining as well. At the end of World War II,
                  U.S. military here numbered 67,000. That number has dropped to 14,000 in
                  recent years, even before the handover process began.

                  Privately, some U.S. officials express concern that the canal will become
                  outdated and may fall victim to Panamanian corruption and mismanagement.
                  They say Panama needs to reassure the international shipping community
                  that the canal will be run efficiently.

                  Panamanians call that sour grapes.

                  "I suppose it would be logical for many to think that we are going to destroy
                  it," said Roberto Eisenmann, former publisher of La Prensa, the country's
                  largest newspaper. But he says critics forget that the actual transfer of the
                  canal started in 1985, when a Panamanian became assistant administrator of
                  the canal, and accelerated when another Panamanian was named

                  Today, more than 95 percent of the commission's 9,000 employees and 75
                  percent of the 300 pilots in charge of guiding ships through the canal are

                  Major upgrade needed

                  The United States now pays Panama a share of the canal's revenues, about
                  $100 million a year. But with the canal in Panamanian hands that income will
                  more than double. Ships paid $545 million in tolls in 1998.

                  It is a big bonus, "but it could also be a problem," Eisenmann said. Traffic
                  continues to increase each year, but to remain competitive, the canal needs
                  to invest heavily in maintenance and expansion.

                  An audit by the U.S. Army Corps of Engineers determined that the canal
                  needs to invest $100 million annually through 2005 in services and
                  equipment to reduce the passage time -- now nine hours -- and increase
                  traffic by 20 percent.

                  The canal, built in 1914, was originally designed to last 75 years.

                  The canal is the biggest jewel in the package the United States will transfer
                  to Panama, but far from the only one. There are also 98,800 acres formerly
                  occupied by U.S. military bases along the canal banks.

                  Panama plans to use the area to develop ecological tourism and build ports
                  and industrial parks.