Panama: Political and Economic Conditions and U.S. Relations

With four successive elected civilian governments, Panama has made notable political and economic progress since the 1989 U.S. military intervention that ousted the regime of General Manuel Noriega from power. The current President, Martin Torrijos of the Democratic Revolutionary Party PRD, was elected in May 2004 and inaugurated to a 4-year term on September 1, 2004. The most significant challenges facing the Torrijos government have included dealing with the funding deficits of the countrys social security fund developing plans for the expansion of the Panama Canal and combating unemployment and poverty. After protests and a protracted strike by construction workers, doctors, and teachers in 2005, the Torrijos government was forced to modify its plans for reforming the social security fund. In April 2006, the government unveiled its ambitious plans to build a third lane and new set of locks that will double the Canals capacity. A constitutionally required referendum on the expansion project was held on October 22, 2006, with 78 of voters supporting the project. The United States has close relations with Panama, stemming in large part from the extensive linkages developed when the Panama Canal was under U.S. control and Panama hosted major U.S. military installations. The current bilateral relationship is characterized by extensive cooperation on counternarcotics efforts, assistance to help Panama assure the security of the Canal and its border with Colombia, and negotiations for a bilateral free trade agreement. The United States provided Panama with 19 million in foreign aid in FY2005, and an estimated 14.4 million in FY2006. The FY2007 request is for 17.4 million, with 4 million under the Andean Counterdrug Initiative and 3.2 million in development assistance. U.S.-Panamanian negotiations for a bilateral free trade agreement FTA began in late April 2004. Some observers believe that an agreement still could be finalized by the end of 2006.