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    "ocrText": "COPY NO. 1\nFOR THE PRESIDENT\nOF THE UNITED STATES\nPANAMA\nSENTCO UNITED STATES\nME\nM\nGulf of Mexico\nHAVANA\nMIAMI\nGUATEMALA.\nacific\nC\nt\nA\nt\ncean\nD\n100°\nn\nPANAMA\nGALAPAGOS IS.\n&\nOcean\nc\nTHE ARCHIVES 5. \"NATIONAL RECORDS TRAMAN AND LIBRERY\nSe.a\nAT\nSERVICE\nQUITO\nBOYERNMENT\nCARACAS\ns\nS\nO\nU\nT\nH\nA\nM\nE\nR\nI\nC\nA\nDECLARSIFIED\nZO. 11652, Sec. 3(E) and S(D) or x\nC.I.A.\nu\n6-13-78\nOBD letter, May 0, 1972\nMARTHL NAME Date 7.5.28\nCENTRAL INTELLIGENCE AGENCY\nCOPY NO.\nSR 26\nDISSEMINATION NOTICE\n1. This copy of this publication is for the information and use of the recipient\ndesignated on the front cover and of individuals under the jurisdiction of the recipient's\noffice who require the information for the performance of their official duties. Further\ndissemination elsewhere in the department to other offices which require the informa-\ntion for the performance of official duties may be authorized by the following:\na. Special Assistant to the Secretary of State for Research and Intelligence, for\nthe Department of State\nb. Director of Intelligence, GS, USA, for the Department of the Army\nc. Chief, Naval Intelligence, for the Department of the Navy\nd. Director of Intelligence, USAF, for the Department of the Air Force\ne. Director of Security and Intelligence, AEC, for the Atomic Energy Com-\nmission\nf. Deputy Director for Intelligence, Joint Staff, for the Joint Staff\ng. Assistant Director for Collection and Dissemination, CIA, for any other\nDepartment or Agency\n2. This copy may be either retained or destroyed by burning in accordance with\napplicable security regulations, or returned to the Central Intelligence Agency by\narrangement with the Office of Collection and Dissemination, CIA.\nWARNING\nThis document contains information affecting the national\ndefense of the United States within the meaning of the\nEspionage Act, 50 U.S.C., 31 and 32, as amended. Its trans-\nmission or the revelation of its contents in any manner to\nan unauthorized person is prohibited by law.\nThe President\nCENTRAL INTELLIGENCE GROUP\n2430 E STREET N.W.\nMarch 9, 1948\nWASHINGTON 25, D.C.\nRECEIPT IS ACKNOWLEDGED OF XI0RX9ECREK. SECRET, DOCUMENT FROM THE\nCENTRAL INTELLIGENCE GROUP, BEARING THE IDENTIFYING NUMBER SR-26\n.\nDATED march 48\n. ABBREVIATED SUBJECT copy # 1\nWITH\nENCLOSURES.\nPLEASE RETURN THIS RECEIPT\nIMMEDIATELY TO:\nSIGNATURE\nCentral Records\nPOSITION\n115 South Building\nCENTRAL INTELLIGENCE GROUP\nDEPARTMENT OR AGENCY\n2430 E STREET N.W.\nWASHINGTON 25, D.C.\nTIME\nDATE\nFORM NO. 38-15\n(1979)\nFEB 1947\nThe President\nCENTRAL INTELLIGENCE GROUP\n2430 E STREET N.W.\nWASHINGTON 25, D.C.\nRECEIPT IS ACKNOWLEDGED OF TOP SECRET SECRET, CONFIDENTIAL DOCUMENT FROM THE\nCENTRAL INTELLIGENCE GROUP. BEARING THE IDENTIFYING NUMBER SR-26\n.\nDATED\n. ABBREVIATED SUBJECT copy # 1\nWITH\nENCLOSURES.\nPLEASE RETURN THIS RECEIPT\nIMMEDIATELY TO:\nSIGNATURE\nCentral Records\nPOSITION\n115 South Building\nCENTRAL INTELLIGENCE GROUP\nDEPARTMENT OR AGENCY\n2430 E STREET N.W.\nWASHINGTON 25, D.C.\nTIME\nDATE\nFORM NO. 38-15\nFEB 1947\n(1979)\nto\n301TOR\n7915038 THEMU300\nTO: NON-CIA RECIPIENT\nPAPT PLACE SIGNED RECEIPT IN ENVELOPE AND TRANSMIT TO:\naux\nCENTRAL INTELLIGENCE AGENCY\n2430 \"E\" STREET, N.W.\nWASHINGTON 25, D.C.\nTO: CIA RECIPIENT\nPLACE SIGNED RECEIPT IN OUTGOING MESSENGER BOX FOR RETURN\nTHROUGH AGENCY MESSENGER SERVICE.\nATTENTION: CIA CENTRAL RECORDS RETURN TO:\nNAME OF SENDER\n108\nROOM NO. BUILDING Sonit\n115\nNOTICE TO RECIPIENT\nCentral Intelligence Agency\nPLEASE SIGN THIS RECEIPT IMMEDIATELY AND RETURN\nDOCUMENT RECEIPT\nAS INDICATED ON REVERSE SIDE.\nRECEIPT IS HEREBY ACKNOWLEDGED OF DOCUMENT (S) FROM\nIDS, Central Records\nMAY 24 1948\nDESCRIPTION OF DOCUMENT\nCIA NO.\nDOCUMENT DATE\nDOCUMENT NO (S).\nNO. OF COPIES\nATTACHMENTS\nCLASS.\n-\nMap. # 10883 to\n1 copy\n$\nSR-26\nDATE\nSIGNATURE OF RECIPIENT\nThe President\nTIME\nDEPARTMENT OR AGENCY\nOFFICE OR BRANCH\nFORM NO.\n38-16 REPLACES PREVIOUS EDITIONS OF FORMS 38-16 AND 38-15 WHICH ARE NOT TO BE USED.\nAPR 1948\nPublished March 1948\nSECRET\nSR-26\nPANAMA\nTABLE OF CONTENTS\nSUMMARY\ni\nSECTION I- POLITICAL SITUATION\n1. GENESIS OF THE PRESENT POLITICAL SYSTEM\nI-1\n2. PRESENT GOVERNMENTAL STRUCTURE\nI-1\na. The Legislative Branch\nI-1\nb. The Executive Branch\nI- 2\nc. The Judicial Branch\nI- 2\n3. POLITICAL PARTIES\n1-3\na. The United Liberal Party (Partido Liberal Unido-PLU)\nI-3\nb. The Authentic National Revolutionary Party (Partido Nacional Revo-\nlucionario Autentico-Autenticos-Arnulfistas)\nI-3\nc. The National Democratic Front\nI- 4\nd. The National Revolutionary Party (Partido Nacional Revolu-\ncionario-PNR)\nI- 4\ne. The Popular Union Party (Partido Union Popular)\nI-5\nf. The Socialist Party (Partido Socialista)\nI-5\ng. The People's Party (Partido del Pueblo)\nI-5\n4. CURRENT ISSUES\nI-6\na. The Defense-Sites Issue\nI-6\nb. Arnulfo Arias\n1-7\nc. Racial Tension\n1-7\n5 OTHER INFLUENTIAL GROUPS\nI-8\na. The Federacion Sindical de Trabajadores de Panama (FSTP)\nI- 8\nb. CIO Local 713 of the United Public Workers of America\nI- 9\nc. Frente Patriotico de la Juventud (Patriotic Youth Front)\nI- 9\nd. Federacion de Estudiantes de Panama\nI-9\n6. STABILITY OF THE PRESENT ADMINISTRATION\nI-10\nSECTION II- ECONOMIC SITUATION\n1. GENESIS OF THE PRESENT ECONOMIC SITUATION\nII- 1\n2. DESCRIPTION OF THE PRESENT ECONOMIC SITUATION\nII- 1\n3. ECONOMIC STABILITY\nTRUMI\nII- 4\nHARRY\nNATIONAL\nARCHIVES AND\nRECORDS\nLIBRARY\nSERVICE\"\nSECRET\nGOVERNMENT\nSECTION III - FOREIGN AFFAIRS\nSECTION IV - MILITARY SITUATION\n1. GENESIS OF PRESENT MILITARY POLICIES\nIV- 1\n2. WAR POTENTIAL\nIV- 3\nSECTION V — STRATEGIC CONSIDERATIONS AFFECTING US SECURITY\nSECTION VI- PRESENCE OF SABOTAGE ELEMENTS IN PANAMA\nSECTION VII - PROBABLE FUTURE DEVELOPMENTS\nAPPENDIX A-Map of Panama\nAPPENDIX B-Population Characteristics and Statistics\nAPPENDIX C-Receipts of the Republic of Panama from the Canal Zone for the Fiscal\nYears 1939-1945\nAPPENDIX D-Biographical Data\nCENTRAL INTELLIGENCE AGENCY\n2430 E Street, N. W.\nWashington 25, D. C.\n21 May 1948\nMEMORANDUM FOR RECIPIENTS OF SR-26\nSUBJECT: Addenda to SR--26, Panama\n1. Attached herewith is Map No. 1.0383 which is to be inserted in\nthe copy of subject report sent you under separate covers\n2. Attached Map should be inserted after Appendix Д--Мар No. 10884,\n\"Panama.\"\nFOR THE ASSISTANT DIRECTOR FOR COLLECTION AND DISSEMINATION:\n180awley T.J. CAWLEY\nSpecial Assistent to the\nDeputy Assistant Director\nInclosure - Map No. 10883\nSUMMARY\nThe strategic importance of Panama to the US arises from the fact that its ter-\nritory adjoins the Panama Canal. As a consequence, any country that initiates\nhostile operations against the US can be expected to launch concurrent hostile opera-\ntions against Panama. Since Panama is physically incapable of protecting itself,\nand since the US cannot afford adequate protection to the Canal in case of war\nwithout military control of the territory of Panama which adjoins it, the two countries\nhave closely bound themselves to one another by formal treaty.\nThe two countries are also closely linked economically. Thirty-seven to 40 per-\ncent of Panama's national income is derived from the US Canal Zone, and the US\ntakes approximately 90 percent of Panama's exports and supplies her with approxi-\nmately 87 percent of her imports.\nPanama's international position, as a result of the intimacy of these ties with the\nUS, is thus that of a quasi protectorate, and this subordinate position forms the basis\nof all problems inherent in the relations between the two countries.\nPanama's spirit of nationalism requires that any government in office - if it is\nto survive politically - deny any inference that it is a quasi protectorate of the US\nand strive to promote its position as a sovereign and independent country within the\nfamily of nations. However, Panama, as the host nation of the Canal, is aware of\nthe benefits to be derived from close relations with the US and is consequently re-\nluctant to press its independence beyond the point which might jeopardize the support\nfor which it depends on the US.\nSomewhere between these two opposing objectives each administration in Panama\nmust formulate its basic policy. Since the attitudes which particular Panamanian\npolitical parties and individuals adopt toward this dichotomy of policy is variable, the\nrelationships between the two countries is not constant, but rather continuously subject\nto re-examination and reorientation according as one or the other of the two objectives\nseems more relevant to the particular ad hoc decision Panama finds itself obliged to\nmake.\nNote: The information in this report is as of 1 December 1947. It was circulated to the IAC agencies\nfor comment on 26 January 1948.\nThe intelligence organizations of the Departments of State, Navy, and Air Force have con-\ncurred in this paper. The Intelligence Division, Department of the Army, concurs with those\nsections which have direct military implications.\nSECRET\nSECTION I\nPOLITICAL SITUATION\n1. GENESIS OF THE PRESENT POLITICAL SYSTEM.\nPanama was originally a province of Colombia; its status as an independent country\ndates back to 1903, when it was recognized as such by the US. Among the factors\nthat precipitated the separatist revolt against Colombia were: (a) dissatisfaction on\nthe part of influential Isthmian citizens with the remote and allegedly centralized and\ncorrupt rule of the province by the authorities in Bogotá; (b) these citizens' fear that\nColombia's dilatory tactics would preclude the construction of a trans-Isthmian canal\nby the US; and (c) the activities of French interests seeking to assure construction of\nthe canal in Panama.\n2. PRESENT GOVERNMENTAL STRUCTURE.\nThe traditions of Colombian Roman law were incorporated into the civil code\nadopted by the nascent Panamanian Government, which also used the US-inspired\nColombian constitution as a model for its own. Indirectly, the Constitution of the\nUS thus influenced the governmental forms adopted: the latter were, for example,\nbased on the concept of separation of powers among the executive, legislative, and\njudicial branches, though with a greater concentration of power than the US had,\nat that time, ever known. Because its framers feared retaliation by Colombia and\nrecognized the paramount interests of the US, they included in the original 1904 Con-\nstitution the provision that the \"US may intervene in any part of the Republic of\nPanama to re-establish peace and constitutional order in the event of their being\ndisturbed.\"\nPanama's present constitution, although based on that of 1904, was adopted in\nMarch 1946. Many Panamanians had, by the early forties, become convinced that\nsome of its provisions, especially those pertaining to citizenship, fundamental guaran-\ntees, labor, and the right of the US Government to intervene were no longer satisfactory.\nA National Constitutional Assembly (the predecessor of the present Jiménez Adminis-\ntration as the Government of Panama) was accordingly convened to draft the con-\nstitution now in effect.\nThe Panamanian Government consists of a legislative branch (the National As-\nsembly), an executive branch, and a judicial branch.\na. The Legislative Branch.\nThe unicameral National Assembly convenes annually and is composed of\ndeputies popularly elected for a period of four years. There is one deputy for each\n15,000 people, a guarantee of one deputy each to provinces with less than 15,000 in-\nhabitants. The National Assembly has legislative powers analogous to those of the\nUS Congress, including the judicial function of trying the President, judges of the\nI-1\nSupreme Court, members of the Tribunal of Administrative Controversy, and its own\nmembers in any case involving violation of the constitution. It also performs such\nnonlegislative functions as that of passing on certain executive appointments, appoint-\ning investigative commissions, and \"censuring\" Ministers of State.\nAs in some European countries, there is a Permanent Legislative Commission, made\nup of five Assembly members, that sits during Assembly recesses, prepares projects for\nconsideration by the Assembly in its next session, and acts as a \"watchdog\" vis-a-vis\nthe President with respect to the prerogatives of the legislative branch.\nb. The Executive Branch.\nThe constitution provides for a President and two Vice Presidents, elected by\ndirect suffrage for a period of four years, for an appointive Secretary General of the\npresidency, and for Ministers of State appointed by the President (collectively they\nconstitute a Council of Cabinet). In general, the executive powers are analagous to\nthose of the US Constitution, except that the Panamanian Executive has wider appoint-\nive powers. The Panamanian system is not federal in character: the governors of the\nprovinces and the heads of some of the municipalities are appointed by the President.\nThere are no provincial legislative bodies.\nc. The Judicial Branch.\nThe constitution provides for a Supreme Court of Justice of five \"magistrates\"\n(named by the President with the unanimous approval of the Council of Cabinet and\nsubject to approval by the National Assembly), and there are subordinate courts\nand tribunals established, as in the US, by law rather than by constitutional provision.\n\"The guardianship of the integrity of the Constitution,\" according to the language of\nthat document itself, \"is confided to the Supreme Court.\" The so-called Public Minis-\ntry, headed by an Attorney General elected for a 10-year term by the National As-\nsembly, is, under the Panamanian Constitution, regarded as part of the Judicial Branch:\nits duties include the prosecution of crimes, the promotion of the execution of the laws,\n\"defense\" of the interests of the nation \"and its provincial and district subdivisions,\"\nand the supervision of the \"official conduct of public functions.\"\nThe privilege of municipal self-government is vouchsafed by the constitution, which\nexpressly provides that the \"State rests on a community of autonomous municipalities.\"\nHowever, the mayors of some municipalities are appointed by the President, while others,\nnotably those of Panama City and Colón, are elected for a four-year term. Some of\nthe municipalities have elected municipal councils.\nAlthough the theory of the constitution is, in general, respected in actual practice,\nthis does not mean that constitutional democracy is on as firm a footing in Panama as\nin the US or Great Britain. Political bickering and intrigue are \"in the blood\" of the\ncountry's influential leaders, and the Panamanians do not place so high a value on\nobservance of the supreme law as do the Anglo-Saxon countries. Furthermore, a\nlarge portion of the electorate - despite its several decades of experience with demo-\ncratic government- remains venal, and the extensive patronage powers of the Execu-\ntive and the emoluments to be gained from public office give the \"ins\" great oppor-\nSECRED\nI-2\ntunities to influence the outcome of elections. Since this means, in effect, that the\nparty or group in power can hardly be ousted by electoral methods, the golpe de fuerza\nis a familiar Panamanian political technique. It is, indeed, hardly too much to say\nthat a President who has gained power through a cleverly managed coup is likely to\nbe respected and followed.\nFreedom of assembly, of speech, of religion, and of the press are guaranteed\nby the constitution, as is private property; and these guarantees are for the most\npart observed by the Panamanian Government. The constitution expressly rejects the\nprinciples of economic laissez faire, recognizing that \"relations between capital and\nlabor are an affair of ordinary law\", guarantees the \"conditions necessary for a normal\nlife\" to the worker, and \"compensation proportionate to investment\" to capital. Labor's\nrights to strike and to a minimum wage are also guaranteed.\nA unique feature of the Panamanian Constitution is the provision that vir-\ntually excludes all foreigners save US citizens from retail trade and authorizes a\nsimilar exclusion from wholesale trade. This provision reflects the power of the shop-\nkeeper and the trader in Panamanian political life.\n3. POLITICAL PARTIES.\nBoth the composition and the alignment of Panamanian political parties undergo\nconstant change. At the present time it is possible to identify seven political parties\nwhich are important enough to have, in one way or another, an impact upon events,\nand can, therefore, be expected to influence the 1948 Presidential elections.\na. The United Liberal Party (Partido Liberal Unido - PLU).\nAs the major political support of the Jiménez Administration, the United\nLiberal Party regards the 1946 Constitution as the embodiment of its guiding prin-\nciples. Despite the party's broad official pronouncements concerning the benefits to\nbe gained from state control and planning, its actual practice indicates a strong prefer-\nence for laissez faire in economic matters. It opposes the \"infiltration\" of Panama by\nforeigners (an emphasis from which, however, it excepts US citizens), pleads for popular\nacceptance of the idea of government-sponsored public works (its reasoning on this\npoint is along pump-priming and developmental lines rather than socialist lines),\nand favors certain specific measures (completion of the Pan American Highway, in-\ntensified inter-American cooperation, lower taxes, a balanced budget, etc.). There is\nreason to believe that it is decidedly more sympathetic to the US point of view on the\ndefense-sites problem than day-to-day Panamanian policy (which it controls) would\nsuggest, apparently because it fears that it will alienate its political following if it\naccepts US proposals without prolonged negotiation. The party's leader is President\nEnrique Jiménez, and its 1948 Presidential candidate is Domingo Diaz Arosemena.\nb. The Authentic National Revolutionary Party (Partido Nacional Revolucion-\nario Autentico - Autenticos - Arnulfistas).\nThis is the personal party of Arnulfo Arias, who, when ousted from the\nPresidency in 1941, carried with him into this new organizaton the allegedly \"authentic\"\nI-3\nWORK\nmembers of the Partido Nacional Revolucionario. Since Arias enjoys great personal\npopularity, the party is the chief opposition group in present-day Panamanian politics.\nIt has, however, few commitments, either on economic policy or on political organiza-\ntion, and is apparently ready to follow Arias' mood of the moment, which seems to vary\nwith his own conception of what is likely to restore him to the Presidency. The major\nconstant in Arias' political faith is his ardent patriotism, which frequently takes the\nform of noisy insistence upon the danger that Panama, as a \"quasi protectorate\" of the\nUS, will fail to safeguard its independence. He has, therefore, been an indefatigable\ncritic of the Panamanian Government's course of action in the defense-sites negotia-\ntions, has made a number of pro-Argentine pronouncements, and has not hesitated to\nidentify himself as a \"nationalist.\" A further manifestation of his patrioteering\ntendency is his open hostility to Panama's British population. There are 100,000 to\n125,000 persons in Panama who are either British subjects or descendants of British\nsubjects and Arnulfo Arias has publicly advocated discriminatory legislation against\nthem. He constantly attacks the Jiménez Administration for its alleged weakness,\ncorruption, and \"subservience\" to the US.\nThere is evidence that Arias is himself venal, and that a portion of his energy\nhas been channeled into the accumulation of a private fortune. He is unlikely to be-\ncome pro-USSR on ideological grounds, although a widening rift between the USSR\nand the US might tempt him, for reasons of expediency, to favor a foreign policy that\nwould embarrass US efforts on behalf of hemisphere defense. He would not, there-\nfore, from the US point of view, be a desirable successor for Jiménez. It should be\nnoted that he has not yet made formal announcement of his candidacy, but is ex-\npected to do so about 1 December 1947.\nc. The National Democratic Front.\nThis party, recently formed by a group of prominent politicians, can be ex-\npected to emerge as one of Panama's leading political parties. It includes among its\ndirectorship Ernesto de la Guardia (who has brought to the Front the support of the\nLiberal Reform faction of President Jiménez' original coalition government) and Har-\nmodio Arias, Panama's most influential behind-the-scenes politician.\nAlthough the Front has not yet officially announced its candidate or platform,\nit is expected to nominate J. J. Vallarino, Panama's Ambassador to the United States,\nas its candidate for President in the 1948 elections.\nThe Front, because of the leaders who comprise its governing council, can be ex-\npected, during the forthcoming campaign, to attack both Arnulfo Arias and Domingo\nDiaz vigorously. Its views on issues, rather than personalities, do not yet appear to\nhave been formulated.\nd. The National Revolutionary Party (Partido Nacional Revolucionario - PNR).\nThe National Revolutionary Party differs little, as regards platform, from\nDiaz' party, although there is some reason to expect it to be the more successful of\nthe two in appealing for the support of the shopkeeping and trading middle classes\nof Panama City and Colón- - if for no other reason than because of its more critical\nSECRET\nI-4\nSECRET\nattitude toward government expenditures on public works. Unlike some of Panama's\nother parties, it is a genuine opposition party in the sense that it regards itself as a\ngenuine competitor of the PLU for power in the state. Once in power it would probably\ncontinue the public works program, the manifestations of hostility to foreigners, and\nthe dickering on the defense-sites problem, along with many other characteristic\npolicies of the Jiménez Administration. It might even launch a broader program of\nsocial reform than that now under way. The party has nominated José Fabrega as\nits candidate for 1948.\ne. The Popular Union Party (Partido Union Popular).\nThis is smaller than Panama's other parties although it claims the 7,500 ad-\nherents the law requires for participation in Presidential elections. It addresses itself\nto simple folk in the provinces by denouncing the \"evil plutocracy\" in the capital where\n\"Arnulfo Arias, the Nazi, public enemy No. 1 of the Government,\" affirms PUP's leader,\nDr. Sergio Gonzalez Ruiz, \"walks arm in arm with Don Enrique Jiménez, the Liberal\nPresident, while they defend the interests of democracy.\" Since, however, the grip\nof Panama City and Colón upon the country's politics seems secure, these appeals are\nnot likely to be heeded within the predictable future.\nf. The Socialist Party (Partido Socialista).\nLed by a political adventurer named Demetrio Porras, the Socialist Party makes\nits influence felt through the so-called \"League of Tenants and Wage Earners.\" Most\nmiddle and lower-class Panamanians are tenants, and the rents they pay for the\nmiserable dwellings they occupy are, by any standard, high. Porras has recognized\nand exploited the resultant widespread popular resentment by inciting the tenants to\ncivil disobedience. In this way he has won a popularity that makes him a factor to\nbe reckoned with in Panamanian politics. At the same time, as a pleader for tenants\nin rent cases, he has won a considerable reputation as a lawyer. There is some evidence\nthat he has, on occasion, accepted financial support from Moscow, but there is reason\nto believe that he is swayed primarily by considerations of local political advantage.\nAs Panamanian Ambassador to London he has been to all intents and purposes a\npolitical exile, and has therefore been unable to continue his campaign against the\nlandlords. His party has consequently lost strength, so that it now holds only two\nseats in the National Assembly. However, with Porras now back in Panama and a\nprobable candidate for President on the Socialist Party ticket, the movement he leads\ncan fairly be expected to begin to attract sizable numbers of new followers.\ng. The People's Party (Partido del Pueblo).\nWith only 375 to 400 active members, the People's Party is technically not a\nparty at all. As the successor to the Panamanian Communist Party, which went out of\nexistence in 1943, it maintains close relations with Lombardo Toledano's CTAL in\nMexico, with Vanguardia Popular in Costa Rica, with the Democratic Socialist Party\nin Colombia, and with other Communist and Communist-front organizations in Latin\nAmerica. The leadership of Local 713 of UPWA-CIO in the Canal Zone is known to\nlook upon the party with, to say the least, a friendly attitude. Celso Solano and\nI-5\nSECRET\nCristóbal L. Segundo, as the party's spokesmen, have endeavored to win support\nfor Panamanian recognition of the USSR and to rally opinion against the US with\nregard to the defense-sites problem. For instance, they have organized a so-called\nProvisional Committee for the Return of the Bases which, like front organizations\nelsewhere, seeks wide non-Communist support for a purpose which, while clearly\nCommunist, is not put forward as such. On domestic questions the party's present\npractice is to give what it calls \"conditional support\" to all \"progressive\" groups and\nmeasures, and it has thrown its weight vigorously behind President Jiménez' public\nworks program. At the same time, however, it makes propaganda- - in the language\nof economic determinism and the class struggle- - for whatever themes happen to be\nfashionable in Moscow, and, in its present phase this of course commits it to working-\nclass \"unity\" against racial discrimination in the Canal Zone, against Wall Street, and\nagainst the Panamanian \"traitors\" who allegedly serve the interests of the US and the\nUnited Fruit Company. The party is at present engaged in a struggle for control of\nthe Federation of Students and the Popular Youth Front.\n4. CURRENT ISSUES.\nBecause of Panama's relatively high level of post-war prosperity, the issues that\ndivide its political parties are rarely of an economic character. There is some current\ndiscussion of high prices and thus of inflation, but no particular party has taken a\ndefinite stand for or against any specific policy in this area, although the \"outs\",\nhoping to improve their prospects at the polls, blame the government and at least imply\nthat if they were in power, prices would come down. They also point to the venality\nand corruption of the government as a \"cause\" of the general economic imbalance.\nHowever, in the absence of a definite scandal, this is not likely to become a vital issue\nin the next campaign.\nThe existence of Communists both in Panama and in the Canal Zone is well known,\nbut the Panamanians have shown little concern about their activities and do not regard\nthe USSR itself as a threat to their security. Communism, in short, remains a minor\npolitical issue.\nMost current political debate turns, in point of fact, upon purely local issues and,\neven more than in most other Latin American countries, is characterized by the person-\nalism that pervades all Panamanian politics. The defense-sites problem, because it\nconcerns foreign relations and does not lend itself to statement in terms of personali-\nties, is an exception. The other two big issues of the moment, however, are the person-\nality of Arnulfo Arias and the alleged excess of the country's alien residents, mostly\nnegroes of British West Indian origin.\na. The Defense-Sites Issue.*\nIn 1942 the US and Panamanian Governments entered into an executive agree-\nment under which the US leased certain sites in Panama for use as bases in the\ndefense of the Canal and the Republic itself. The agreement gave the US jurisdiction\n* Subsequent to the writing of this report Panama's National Assembly rejected the proposed\nUS-Panama defense-sites agreement, and the US has begun to withdraw from the bases.\nI-6\nSECRET\nover the sites, and no major issues appear to have arisen concerning the exercise of\nthat jurisdiction. The debate over the defense-sites concerns, rather, the stipulation\nin the agreement that the US would evacuate the sites \"one year after the date on which\nthe definitive treaty of peace which brings about the end of the present war shall have\nentered into effect.\"\nThe Panamanian Government holds that the instruments signed at the end of\nhostilities by the German and Allied military commanders in Europe, together with\nthe instrument of unconditional surrender signed aboard the USS Missouri in Tokyo\nBay on 1 September 1945, should be regarded as a \"definitive covenant of peace\" ending\nthe armed conflict. The US view is that the definitive covenant of peace is still in\nprocess of negotiation. Many Panamanians support the Panamanian Government's\nview; but others either support the US view or insist that, since continued US juris-\ndiction over the bases is in the interest of both countries, what the treaty says is a\nmatter of small importance as compared to the need for prompt negotiation of a\nnew agreement authorizing the US to use the bases. Every phase of the negotiations\nconcerning the terms of the proposed agreement has been followed in great detail by\nthe Panamanian press and radio and has given rise to a spate of rumors, charges,\nand counter-charges regarding the motives, competence, and good faith of the Pana-\nmanian negotiations.\nb. Arnulfo Arias.\nArnulfo Arias is both the most popular and the most hated and feared of\nPanama's political leaders. Because he is known to be a tireless plotter who is deter-\nmined to be President again, and because he frequently espouses extreme nationalist\nmeasures which, if adopted, would involve open discrimination against large elements\nof Panama's population, his every public move precipitates vitriolic political debate.\nEven the details of his personal life are grist for Panama's political mill, and rank\nequally with the Government's public works program as a topic for discussion.\nc. Racial Tension.\nSince work was first begun on the Panama Canal, large numbers of British\nWest Indian negroes have taken up residence in the Republic. They and their descend-\nants today account for approximately 20 percent of the population (some estimates\nplace the total number at 125,000). Although many of them are full participants in\nthe social and cultural life of the country, the extreme nationalists among the rest\nof the population have taken as one of their major propaganda themes the negroes'\nalleged threat to the \"purity of the race.\" Since most Panamanians are themselves\nof mixed white and Indian origin, \"racial purity\" is not, in Panamanian conditions,\neasy to define; and the line the nationalists propose to draw by means of discriminatory\nlegislation would be linguistic rather than racial. It would not, that is to say, exclude\nnon-whites as such, but only non-whites of non-Spanish-speaking origin.\nAlthough no Panamanian politician ever states this objective baldly (so that\ndiscussion of the issue proceeds largely by indirection), the race question is a continu-\nI-7\nous and weighty factor in Panamanian politics. The nationalists have, moreover, al-\nready achieved a limited measure of success in their campaign for discrimination.\nThe country's present citizenship laws, for instance, are worded in such fashion as to\nplace disabilities upon the English-speaking negroes, and many informed observers\nbelieve that the negroes' demonstrated susceptibility to the activities of both West\nIndian agitators (many of whom are Communists) and of US labor organizers reflects\ntheir dissatisfaction with the increasingly disadvantageous position they occupy in\nPanamanian society and economy. The vast majority of the 7,000 members of the\nwidely discussed CIO Public Workers local union are not Panamanians but persons of\nBritish West Indian origin. Thus, insofar as the British West Indian negroes come to\nbe regarded as adherents of foreign ideologies, racial tension is likely to increase,\nthe more since many Panamanian mestizos in the interior believe the negroes threaten\ntheir own position in the labor market. Even today few Panamanians would admit\nopenly and publicly that they exercise and approve of discrimination against any racial\nor linguistic group. Most Panamanians, that is, think of themselves as champions of\nnondiscrimination, and this ideological factor may operate to prevent further deterio-\nration of the negroes' economic and social status; SO also may the fact that the political\nparties have lately begun to use the negroes as weapons in the struggle for power.\nIn the months since May, for instance, numerous negroes have received political party\nassistance with their applications for citizenship papers, presumably in return for\ntheir promise to vote in a certain manner in the 1948 elections. If this development\nleads to the enfranchisement of a considerable percentage of the British West Indian\nnegroes, their vote will become an important factor in Panama's political equilibrium,\nand they would probably be able, as time passed, to reverse the present trend toward\ndiscrimination, and demand the equal opportunity to which, under the prevailing\npolitical ideology in Panama, they are theoretically entitled.\n5. OTHER INFLUENTIAL GROUPS.\nThe following four ostensibly nonpolitical groups are so influential as to demand\nattention in any survey of Panamanian political life.\na. The Federación Sindical de Trabajadores de Panamá (FSTP).\nThis is the dominant labor organization of the Republic. It includes eighteen\nindependent unions which claim a total of 20,000 members. The majority of the im-\nportant executives of the Syndicate are Communist Party members and maintain\nintimate ties with labor leaders in Mexico, Cuba, and Colombia. The Syndicate's plat-\nform is also avowedly Communist in orientation: it stresses the class struggle, capital-\nizes politically on the race problem and on the tenant dissatisfaction with the housing\nsituation. It has been openly and aggressively hostile to the US position on the defense-\nsites problem, and has consistently exploited nationalist and patriotic sentiment for\nthe purpose of rallying opposition to US leadership in the hemisphere. The Syndicate\nhas not, however, yet become an effective political force on issues that do not bear\ndirectly on labor problems as such. Nor is there any reason to expect its influence to\nincrease noticeably in the foreseeable future.\nI-8\nSECRET\nb. CIO Local 713 of the United Public Workers of America.\nNow a year old, CIO-UPWA 713 has approximately 7,000 regular dues-paying\nmembers, most of them unskilled negro laborers employed in the Canal Zone. The\nunion, which claims about 17,000 members, demands for them a minimum hourly\nwage of forty cents, a generous retirement program, and, most insistently, discon-\ntinuance of alleged discrimination as regards job rights and opportunities. Avail-\nable evidence suggests that most of the union's members are not themselves Com-\nmunists; but the three organizers sent by UPWA from the US are known to be persons\nclosely linked with the Communist movement, and data point definitely to Communist\ninfluence in the management of the union's affairs. The union has sought to dis-\nassociate itself from labor organizations and labor problems within the Republic of\nPanama, but because so large a percentage of its members live there, it is drawn\nwilly-nilly, into Panamanian domestic politics - the more unavoidably since working\nconditions and job regulations in the Zone are frequently the subject of negotiations\nbetween the Panamanian Government and the Canal Zone authorities.\nSince a high percentage of the union's total membership is drawn from West\nIndian negroes rather than typical Panamanian mestizos or whites, it is not surpris-\ning - its Communist connections entirely to one side - that it is alert and active\nwith respect to problems involving alleged racial discrimination; and since it is alert\nand active on this point, it is not surprising either that it continues to attract negro\nmembers. The union's political importance, both present and future, lies precisely\nin the fact that, prior to its appearance, the negroes had no effective representation\nin their dealings with the Zone authorities (neither the Panamanian Government\nnor the British Legation had at any time interested itself in their welfare).\nc. Frente Patriotico de la Juventud (Patriotic Youth Front).\nOne of the country's two influential youth organizations, the Front has some\n1,500 members. It was founded by Arnulfo Arias who, during his time in Germany and\nItaly, had observed the youth movements in those countries, and had concluded that\na similar movement could play an important role in his own long-term plans for\nPanama. Arias has, moreover, succeeded in keeping control of the movement, so that\nhe is in a position to exploit its considerable nuisance value for political purposes. Some\nrecent reports state, however, that the Communists have now penetrated the organiza-\ntion, and are bent upon capturing it. The young men who have been attracted to\nits membership (Arias' flamboyant personality appears to be the major attraction)\nlive mainly in Panama City and Colón and seem to have no common tie save their\ndislike of the US and of the present Panamanian Government. The movement's\npublic behavior suggests that its members are characterized by a high degree of\nirresponsibility.\nd. Federación de Estudiantes de Panamá.\nThis influential youth organization dates from 1942, and now has a member-\nship of approximately 2,000. Along with other Latin American student organizations,\nit is totally unlike the student organizations in the English-speaking world. Its leaders\nI-9\nSECRET\nare full-time professional agitators, not students but men from 25 to 35 years of age;\nand the members, who are in their teens, correspond, from the standpoint of training\nand maturity, to US high school rather than US university students. Their major\ncharacteristic is their excitability, which can on brief notice be translated into demon-\nstrations and riots in the streets; and it is this characteristic that makes them valuable\nto their founders. Within the Federación, as within the Frente, a struggle for control\nis now in progress between Arnulfo Arias and the Communists, both of whom it serves\nby its anti-US activity on such issues as the defense-sites problem.\n6. STABILITY OF THE PRESENT ADMINISTRATION.\nIn June 1940, following a turbulent campaign, Arnulfo Arias was elected Presi-\ndent. His pro-Fascist orientation became evident soon after his inauguration, and\nhe was speedily ousted. - in part because of a growing conviction that he was taking\nsteps that might, in view of the difficult international situation, oblige the US, for\nreasons of self-defense, to adopt measures against his Government. After his departure\nfor Cuba on 7 October 1941, Adolfo de la Guardia, his own Minister of the Interior, was\nnamed as his successor.\nIn the ensuing months the new government rescinded the decrees by which Arias\nhad attempted to frustrate the US program of aid to the democracies, and put in their\nplace decrees predicated upon the idea of cooperation with US policy. On 4 January\n1943, the Panama National Assembly extended De la Guardia's term of office by two\nyears.\nBy December 1944, however, the National Assembly was showing signs of inde-\npendence vis-a-vis the Executive. De la Guardia suspended the Constitution, dis-\nsolved the Assembly, and called for a 6 May 1945 election for members of a new consti-\ntutional convention. This election was held as scheduled; and the present administra-\ntion, under Enrique Jiménez as provisional President, owes its mandate (15 June 1945)\nto the resultant Constituent Assembly rather than to normal electoral processes. The\nfirst Presidential elections under the constitution drawn up in the early months of\nthe provisional administration are scheduled for May 1948.\nArnulfo Arias returned to Panama in 1945, and quickly succeeded in resuscitating\nhis Authentic National Revolutionary Party. Meanwhile a shift occurred in the United\nLiberal coalition that placed President Jiménez in office. In this sense the present\nadministration is not stable.\nJiménez, not himself a candidate for re-election, has pledged that the 1948 elections\nwill be impartial. His party has nominated an aged, political wheel horse named\nDomingo Diaz Arosemena, but the \"democratic\" elements Jiménez included in his\noriginal coalition have already broken away in anticipation of the 1948 elections, and\nare about to nominate a candidate of their own. This suggests that many persons\nconnected with the Jiménez administration will appear as active participants in, per-\nhaps even as candidates of, new splinter parties. Diaz is, in this background, unlikely\nto poll a majority vote.\nI-10\nArnulfo Arias' recent line is that he is opposed to political intrigue and fully\nsubscribes to the electoral process. There is, however, no reason to believe that such\nstatements reflect his real views; and his mere presence in Panama keeps alive the possi-\nbility, however remote at the moment, of a sudden coup that would, by giving him con-\ntrol of external policy, revive many of the vexed problems he posed for the US through\nthe months preceding his ouster. There are two principal obstacles in the path\nof such a coup: (1) Chief of Police José A. Remón, whose position in the Panamanian\npolitical framework will be discussed below (in the chapter on the Police Force); and\n(2) the not inconsiderable personal influence of Arnulfo's elder brother, Harmodio Arias.\nReports now current in Panama state that Harmodio Arias, before throwing his\nsupport to the National Democratic Front in the coming elections, promised his support\nto Arnulfo in the 1952 elections. Harmodio is reported to have urged his brother to\nrun for President in 1948 so as to keep his name before the public, preparing himself to\naccept defeat with good grace. Harmodio has also reportedly urged his brother to\nassume certain pro-US attitudes in the hope that by 1952 the US will forget his one-time\nNazi leanings and not oppose his re-election.\nArias' popularity would probably assure him a majority in the 1948 elections if he\nwere to have the support of his brother Harmodio. Without his brother's support, he is\nunlikely to win. Diaz, however, has the handicap of age and the further handicap of\ncolorlessness, and as spokesman for the party that must explain the recent defense-sites\nnegotiations to a suspicious, increasingly nationalistic electorate, his campaign must\nproceed uphill. Fabrega, the candidate of the Revolutionary Party, will appeal for votes\nin terms indistinguishable from Diaz', save that he will be free to criticize (and will not\nbe called upon to justify) the involutions of Panamanian policy on the defense-sites\nissue. The candidate of the National Democratic Front will probably have the support\nof Panama's leading newspapers and radio stations. He will also have the added advan-\ntage of being free to attack the defense-sites negotiations of Jiménez and, at the same\ntime, claim credit for the popular domestic policies of the Administration.\nInsofar as the choice is narrowed to Diaz, Fabrega, and Vallarino (the probable\ncandidate of the National Democratic Front), the US will have no paramount interest\nat stake in the election. If, on the other hand, Arias, as is expected, offers himself as a\ncandidate, the elections would assume great importance from the US point of view. As\na democratically elected President, able to claim the support of the majority of\nPanamanians, Arias would be even more dangerous than as a self-appointed dictator.\nRegardless of any protestations he might make in the course of the campaign, he could,\non assuming office, be expected to oppose various US policies and to miss no opportunity\nto forward (along with his own interests) the interests of groups or individuals opposed\nto the position of the US' dominant position in the Caribbean.\nI-11\nSECRET\nSECTION II\nECONOMIC SITUATION\n1. GENESIS OF THE PRESENT ECONOMIC SYSTEM.\nThe Panamanian economy is based in large part upon the transit of goods and pas-\nsengers across the Isthmus. This has been true ever since colonial times, when the\nIsthmus was already being used as a point of transshipment for goods originating on\nthe west coast of South America and destined for Spain. Second in importance to the\neconomic activities associated, directly or indirectly, with the construction, administra-\ntion, and defense of the Panama Canal and with the transportation of goods and pas-\nsengers through the Isthmus, are agricultural pursuits. Fifty-two percent of the\npopulation is engaged in agriculture. No other activity or complex of activities employs\nnearly so many people as these two, or makes nearly so large a contribution to the\nnational income.\nAlthough the Constitution of the Republic authorizes detailed regulation of indus-\ntry, agriculture, and labor, in actual practice there is a minimum of government control.\nMoreover, the Panamanian Government will probably maintain its policy of minimum\ninterference in private enterprise (although it will continue to encourage nationaliza-\ntion of domestic trade). The present laissez faire policy enjoys the active support of\nthe middle classes in the terminal cities of Colón and Panama, and these are undoubt-\nedly the most powerful and vocal element in the Republic's life.\n2. DESCRIPTION OF THE PRESENT ECONOMIC SITUATION.\nIf strict government controls were imposed upon its economy, as well as broad\nagricultural reforms, Panama could feed itself without outside help. In the absence of\nsuch controls it will continue to import those foods that cannot be produced domesti-\ncally without adverse effects upon the Republic's standard of living.\nRice is Panama's basic food. Domestic production, which is encouraged by the\ngovernment, totaled 1,147,094 quintals in 1945, a quantity insufficient to meet the\ndomestic demand (49,024 quintals were imported from neighboring countries). In\n1945 the country imported 4.3 million dollars worth of foodstuffs (principally processed\nfoods and cattle from the US). This accounted for 18.4 percent of the country's total\nimports.\nThe inadequacy of the country's agricultural labor supply and the retarded devel-\nopment of its transportation facilities are the main deterrents to agricultural expansion\nin Panama.\nPanama's principal exports are bananas, cacao, abaca, rubber, and coconuts.\nMost of these exports go to the US. In 1945 there were 116 million commercial banana\nplants in the Republic. These were controlled chiefly by two US companies, the one\nwith large plantations of its own in Chiriqui and Bocas del Toro, the other the principal\nII-1\npurchaser of bananas from private growers in the Provinces of Colón, Panama, and the\nCanal Zone.\nCacao is produced primarily for export although a small percentage is processed\nlocally. For the period 1942-45, exports totaled 6.8 thousand metric tons.\nPanama's natural resources are virtually undeveloped and to a large extent\nunknown. The Province of Darién is reputedly rich in gold, silver, and copper deposits,\nand from time to time private companies have been organized to explore and develop\nthem. Limited capitalization, inadequate transportation facilities, disease, and inabil-\nity to find profitable ore deposits caused all these companies to fail. In 1939 gold was\nmined in the amount of $105,000, along with well-nigh negligible quantities of silver,\ncopper, and manganese.\nPanama has extensive forest resources, which, if developed, would enable the\ncountry to market more than fifty species of commercially valuable cabinet, building,\nand dye woods. Transport difficulties have been a determining factor to date in pre-\nventing their successful exploitation.\nThe waters adjacent to the Republic abound in edible fish, but here also develop-\nment up to the present time has been on a small scale. The country's pearl-fishing\nindustry and its mother-of-pearl industry both make a small contribution to the\nnational income.\nNeither crude oil nor asphalt is produced in Panama. The Sinclair Oil Company\nis, however, now engaged (under a government concession) in exploring for possible\noil resources. The country has no petroleum refineries and chooses rather to depend\non the Canal Zone distribution facilities for its supplies of petroleum products.\nPanama's industrial potential is limited by its small population, its scant purchas-\ning power, its limited natural resources, its continuing capital famine, and its inade-\nquate and relatively expensive transportation facilities. In 1943 less than 2 percent of\nthe population was engaged in industry, and no significant new industrial development\ntook place during the war.\nIndustrial development has proceeded slowly in Panama, and up to the present has\nbeen largely confined to the production of light consumers' goods in small factories or\nshops. Thus manufacturing industries play a minor role in the national economy.\nThe largest of the enterprises are those that produce electric power, alcoholic beverages,\nsoft drinks, foodstuffs, and, recently, soap. Other significant manufactures are cloth-\ning, ceramic products, wood products, leather and leather products, chemicals, and\ncement. Practically all manufacturing takes place in Panama City, Colón, and David,\nwith the greatest concentration in Panama City.\nWith the exception of electric power, alcoholic beverages, sugar, and possibly soap,\nPanama is unable to satisfy its domestic industrial needs. It has no significant indus-\ntries that could be converted to important wartime uses. Because of its limited indus-\ntrial productivity, it is not an important market for foreign raw materials. It will\nremain for some time at least an important source of bananas, and also, to a limited\nextent, coconuts and abaca fiber.\nThe per capita national income for Panama was estimated in 1945 at $190.00.\nThis compares favorably with that of Panama's neighbors, but it should be noticed that\nII-2\nSECRET\n37 percent of the income on which this figure is based apparently originated in the\nCanal Zone. In 1944 the corresponding figures were $202.00 and 40 percent, respec-\ntively.\nThe national budget over the years shows no significant imbalance. In 1944,\nreceipts totaled $27,198,000 and expenditures $26,300,000. In 1945 there was a deficit\nof $4,631,000. The three main sources of government revenue are import taxes, inter-\nnal revenue, and the lottery. In 1944 the latter accounted for approximately 25 per-\ncent of the total revenue. The main item of expenditure is public works.\nThe total public debt of Panama as of 31 December 1946 was $19,869,468.78, of\nwhich $15,826,005.10 is external debt held mostly in the US. Interest rates on the for-\neign debt have been considerably reduced in recent years.\nThe value of the balboa, Panama's currency unit, is pegged to the dollar at the\nrate of one balboa to one dollar.\nPanama's imports and exports for the years 1940-1946 are as follows:\nYEAR\nIMPORTS\nEXPORTS\n1940\n$23,936,657\n$4,054,866\n1941\n32,917,392\n4,283,145\n1942\n37,928,071\n2,229,028\n1943\n40,267,592\n1,965,995\n1944\n38,100,000\n2,927,229\n1945 2\n45,648,100\n4,507,842\n1946\n57,057,498\n7,792,177\n1947\n17,581,342\n2,290,814\n1 Bananas accounted for $922,099-31%-of total.\n2 Bananas accounted for $2,047,759-45%-of total.\n3 Bananas accounted for $4,154,432-61%-of total.\n& First quarter approximate.\nIn 1942 the US supplied Panama with 75.7 percent of her total imports and took 90\npercent of her exports; and these percentages have remained fairly constant through\nsubsequent years.\nThese international trade figures do not, however, represent the true picture of\nPanama's international balance of payments since exports are only a minor source\nof dollars. Dollars are derived chiefly from the operation of the US Government in the\nCanal Zone. Total Panamanian receipts from the Canal Zone during the fiscal year\n1945 amounted to $69,266,000, as compared to out-payments of only $17,383,000. The\nlargest single receipt item is the wages paid by the US Government to Panama residents\n(during the US Government's fiscal year ended 30 June 1946 there were 35,000 Panama\nresidents on the US Government pay roll who received $31,970,000 in wages). Addi-\ntional sources of dollars are sales of goods and services to the US Government and to US\ncitizens (residents and transients) in the Canal Zone. Thus, despite the strikingly\nunfavorable merchandise trade balance, Panama does not suffer a dollar shortage.\nII-3\nSECRET\nThat Panama's ability to satisfy its heavy import requirements and, consequently, its\nprosperity, is mainly dependent on factors beyond its control is, however, apparent.\n3.\nECONOMIC STABILITY.\nAt the present time the Panamanian economy is relatively stable. Although US\nexpenditures in both the Zone and the Republic have declined appreciably since the\ncessation of hostilities, the resultant slack has to some extent been absorbed by the\nPanamanian Government's own public works program, much of which had been\nadjourned for the duration of the war. Furthermore, the present administration has\nmade an attack upon the nation's continuing economic problems in a promising man-\nner, that is, by planning projects for Panama's economic and agricultural development.\nThere is reason to believe, too, that the policies embodied in the 1946 Constitution have\ntended to encourage both US and Panamanian businessmen to expand their commer-\ncial and industrial commitments.\nSECRET\nII-4\nSECRET\nSECTION III\nFOREIGN AFFAIRS\nPanama's foreign policy is based on a compromise between its wish to retain its\nposition as a quasi protectorate of the US and its desire to assert for itself unlimited\nnational sovereignty.\nUnder the Treaty of 1903, the US guaranteed Panama's independence: Article 136\nof the original Panama Constitution conceded to the US a legal right to \"intervene\nin any part of the Republic of Panama to re-establish peace and constitute order in the\nevent of there being a disturbance.\" Inasmuch as none of the other American Repub-\nlics has granted any such right to the US, this clause in Panama's Constitution clearly\ncreated a special situation, which has lent itself to description by anti-US elements in\nterms of tutelage and about which even pro-US Panamanians have-without for a\nmoment denying the urgency of the US interest on the Isthmus-shown increasing\nsensitiveness in recent years. This contrasts sharply (the constitutional provision\nentirely apart) with Panamanian attitudes through the earlier years of the Republic,\nwhen the special position of the US tended to be taken for granted. Thus when, in\n1909, the US asserted that it was entitled to prevent Panama from getting into a contro-\nversy with another government that might render imperative US intervention on\nPanama's behalf, Panama offered no objection; and on occasion the Panamanian Gov-\nernment has itself invoked the constitutional provision cited in order to permit US\nintervention in its domestic affairs (on one such occasion the President of Panama\norally requested intervention). Moreover, US intervention, in the absence of such\nauthorizations or requests, has been accepted without any question of, for example, an\nappeal to other powers.\nA shift in attitude became perceptible around 1933; and, increasingly through sub-\nsequent years, Panama has taken steps that appear to have been motivated in large\npart by a desire to draw attention-inside Panama, in the US, and over Latin America\nas a whole-to its equality of status with the US. As an active member of the Pan\nAmerican Union and the United Nations, as a power represented by diplomatic and\nconsular establishments throughout the world, and as an ardent partner in the Good\nNeighbor Policy and hemisphere cooperation, it today, at first glance, appears to possess\nall the external paraphernalia of full sovereignty, and might on this showing fairly be\nexpected to adjourn its fears concerning the possibility that it will be considered a US\nprotectorate. For the Panamanians, however, the nub of the question is, on the one\nhand, the US' supposed right of intervention and, on the other hand, their own complete\nunwillingness (US attitude entirely to one side) to sever the bonds of interest which\n(as they themselves know) make it impossible for the US to remain indifferent to events\nwithin Panama. The major objective of Panamanian foreign policy is, in this back-\nground, that of retaining the political and economic benefits that accrue from the fact\nof US reliance upon the Panama Canal for its defense and its commerce, while weaken-\nIII-1\nSECRET\ning and wearing down the \"rights\" which the US has traditionally regarded as necessary\nconcomitants of that reliance.\nTo some extent the Panamanians have made progress toward the achievement of\nthis objective, as may be seen from the following facts: (1) the US has intervened in\nneither of Panama's two most recent revolutions; (2) no Panamanian President would\ntoday venture to call upon the US to intervene in any internal Panamanian crisis; (3)\nthe 1936 US-Panamanian Treaty withheld intervenient rights from the US that it had\nenjoyed under the original 1903 Treaty, although it established the principle that all\nproblems affecting the security of the Republic and the Canal in case of aggression and\ninternational conflagration would be handled on a consultative basis; and (4) the most\nrecent Constitution (1946) omits the article under which the US had enjoyed special\nintervenient prerogatives. None of these facts should, however, be taken as implying\nthat Panama is likely to press forward with this line of policy beyond the point at\nwhich the US might begin to withdraw its economic support and its military protection\nfrom the Canal, or that these superficial developments have substantially modified the\nrealities of US-Panamanian relations. So long as nearly half of Panama's national\nincome is derived from the sale of goods and services (domestically and via export\nchannels) to Americans, Panama can be counted upon to stop short of alienating\neither public or official opinion in the US.\nThe Panamanians are well aware that, for instance, a fortnight's embargo on com-\nmercial relations between the Zone and the Republic would plunge them into an eco-\nnomic crisis which would speedily bring down upon the existing Government's head the\nvengeance of its own people.\nAll the major considerations affecting Panamanian foreign policy today arise out\nof the conflict set forth above. The Panamanian Government concedes-though with\nincreasing reluctance-that the presence of the Panama Canal within its territory gives\nthe US a paramount interest there; and at the margin it never actually denies that,\ncorollary to that interest, the US has a continuing need for sites in Panamanian terri-\ntory on terms roughly parallel to those of the 1942 defense-sites agreement. By the\n1942 agreement, the US gained \"complete use of such areas and exclusive jurisdiction\nin all respects over the civil and military personnel of the US situated therein, and their\nfamilies,\" and was, moreover, \"empowered to exclude such persons as it sees fit without\nregard to nationality.\" But, for reasons of domestic politics, the signing of a new\nagreement in which such terms will be set down in black and white is a step which\nneither the present Government faced as it is with an election in 1948) nor any alterna-\ntive Government can be eager to take. Too many influential Panamanians not only\nsee in it a reaffirmation of the Republic's subservient position vis-a-vis the US, but also\nfeel that it goes further than the original Hay-Bunau Varilla Treaty of 1903 on the\npoint of extraterritorial privileges.\nOnly the fact that the 1942 agreement was negotiated in time of war prevented a\nsharp issue from arising at that time; and the eagerness of the Panamanians, on pat-\nently faulty textual grounds, to terminate the agreement as soon as hostilities ceased\nwas a sure indication that pressure was strong inside Panama against any and all\nIII-2\nSECRET\ndocumentary avowals of the US special position. That the pressure has not diminished\nsince is indicated by (1) the fact that President Jiménez, when the current defense-sites\nnegotiations began, tried to associate both Arnulfo Arias (as leader of the Authentic\nNational Revolutionary Party) and Harmodio Arias with him in recognizing the neces-\nsity of a new agreement along roughly the lines desired by the US, and (2) the fact that\nthe Arias brothers refused the gambit. (Had they agreed Jiménez could probably have\nproceeded with the agreement, without regard to its domestic political effects.) The\nresults of the conference were never announced, but Harmodio Arias believes that peace-\ntime jurisdiction over the defense sites should vest exclusively in Panama, and Arnulfo\nArias is personally hostile to any sort of US control over the defense sites-although for\ndomestic political reasons or for motives of personal ambition he may temporarily adopt\npro-US attitudes.\nThe original 1903 Treaty between the US and Panama and the 1936 Treaty be-\ntween the two countries are the only special political treaties which Panama has at\nthe present time.\nThe Panamanian Government, pointing to US-USSR economic and political rivalry,\nhas adopted a hostile attitude toward the Soviet Union. It does not maintain diplo-\nmatic relations with the Soviet Union; it can be counted on to favor the US against the\nSoviet Union not only in any future war situation but also, and even more certainly, in\nany short-of-war clash or conflict of interest; and there is no likelihood that the Pana-\nmanian Communist Party and its several \"front\" organizations will be sufficiently\nstrong within the foreseeable future to modify the Government's attitude on these\npoints, even though the present ability of the Communists to exploit Panama's feeling\nof nationalism affords it an influence beyond that which its numbers deserve. There\nare, moreover, reasons for believing that the pro-US, anti-USSR orientation of Pana-\nmanian foreign policy has deep roots in the minds and hearts of the Panamanian people,\nquite apart from the motives of real-politik. The Panamanians have prospered under\ntheir system of free enterprise; they are deeply committed to its Spanish, thus\nChristian, cultural traditions; and their demonstrated allegiance is to hemisphere\nsolidarity and inter-American unity rather than to a fanciful world-wide union of the\nworking classes. The dominant political group in the country, moreover, the middle\nclass, has proved highly resistant to the appeal of Communist propaganda and Commu-\nnist theory.\nPanama's present foreign policy appears to involve four themes:\n(a) Denial-at least upon the verbal or formal level-of any inference that\nPanama is a quasi protectorate of the US, with, however, no evident intention\nof modifying the realities of its special position.\n(b) Friendship and cooperation with the US.\n(c) Promotion of the concept of hemisphere solidarity.\n(d) Adherence to the United Nations.\nWhile it is conceivable that at one time or another an ill-advised demagog might\nseek to modify what has been termed above the realities of US-Panamanian relations,\nit remains true that (a) no leader known to be committed to such a course is likely to\nIII-3\nbe elevated to the Presidency in Panama, and (b) any leader who suddenly adopted\nsuch a policy after becoming President would promptly be forced out of office. In\nshort, Panama's fate is inextricably linked to that of the US, and in such fashion that\nPanama's nationalist aspirations must, now and in the future, be subordinated to its\nrole as the host of the Panama Canal.\nOn the other hand, the Panamanians are keenly aware that the US, committed as\nit is to hemisphere solidarity on the basis of consultation among twenty-one equal and\nsovereign republics, will never press its special interests in Panama to the point of\nimpairing Panama's status as one of those republics. Believing this, the Panamanians\nsee the strength of their position as lying in the fact that, while enjoying the economic\nand political benefits of a quasi protectorate, they can demand the rights and privileges\nof an equal sister nation. This belief now pervades all US-Panamanian negotiations\non Panama Canal defense, and accounts in large part for the Panamanians' conviction\nthat they can drive a hard bargain in such negotiations.\nThe United Nations has little practical meaning for Panama other than as a forum\nbefore which to ventilate Panamanian protestations of equality and independence.\nPanama is certain to remain an active participant in the UN; but it will continue to\nrely for its security upon the armed forces of the US.\nIII-4\nSECTION IV\nMILITARY SITUATION\n1. GENESIS OF PRESENT MILITARY POLICIES.\nPanama has neither an army, a navy, nor an air force. The US maintains exten-\nsive military, naval, and air establishments not only in the Canal Zone but in the Repub-\nlic itself, and has a treaty obligation to defend Panama. The Panamanians, well aware\nof the Canal's strategic importance for the US, know that even in the absence of such\ntreaty obligations, the US would move rapidly to defend them should their security be\nendangered. They have, therefore, always felt that armed forces for the defense of\ntheir national patrimony would be an unnecessary expense, and for this reason they\nhave not, since the country's establishment, provided for a national defense force.\nSince the outbreak of World War II, however, there has been a growing body of\nopinion (particularly among officers in the National Police who have had military\ntraining in various Latin American military academies or in the US) in favor of revers-\ning the no-armed-forces policy. Plans in this sense now reportedly exist on paper, and\nprovision has actually been made for the conversion of the Panama National Police into\na Panama Army during any national emergency. No such plans are likely to be\nadopted in the foreseeable future. Influential Panamanian politicians will be reluctant\nto recommend expenditures for an integrated military establishment, and will, as\ncivilians, probably continue to think of the military as a potential threat to their careers.\nThe fact that the present Panamanian Government has taken no steps toward reor-\nganizing and improving the Panama National Police in its present form suggests a\nwish to keep it weak. During the bilateral staff conversations with the US in 1945, the\nPanamanians showed considerable interest in acquiring a US military mission, but no\nformal request has been made.\nThe commander of the Panama National Police Force, provided he has the support\nand loyalty of his men, is in a position to wink at, provoke, or even initiate political\ndisturbances, and could probably overthrow any Panamanian Government. The mis-\nsion of the Police Force, according to Panamanian law, is dual. It is charged with (1)\nthe protection of the State and the maintenance of internal order, and (2) the functions\nusually assigned to police forces in democratic countries: namely, protection of persons\nand property; prevention of crime and infractions of the law; and the capture and\nprosecution of criminals. The present active strength of the Police Force is approxi-\nmately 2,246 (159 officers, 2,051 enlisted men, and 36 employees who do not wear the\nuniform).\nThe President of the Republic is the Commander in Chief, and exercises his powers\nthrough the Ministry of Interior and Justice. General headquarters is in Panama City.\nThe force is divided into a headquarters section, a central section consisting primarily\nof a mounted or cavalry squadron designed to be used in connection with crowd disper-\nsions, parades, riot duty, etc.; special detachments for five geographical zones; an\nIV-1\nSECRET\nimmigration section; a paymaster section; a prison section; a traffic section; a Presi-\ndential guard whose loyalty is crucially important during times of political unrest and\npossible revolutionary activities because it polices the Presidential palace; and a record\nsection. The National Police is fairly well equipped with small arms, and the Central\nPolice Station in Panama City is a modern functional building. Since the cavalry and\ntraffic units of the police occupy adjoining annexes, the nerve center of the National\nPolice in the event of revolutionary activity would be this one building. Any revolu-\ntionary group unsupported by the Police Force would attempt as a matter of course to\nstop movement in and out of this building as a first step toward overthrow of the\nestablished government.\nAs an armed force, the value of the Panama National Police is practically nil: it is\ninadequately trained, badly organized, and poorly equipped. As a police force, it is,\nwhen judged by US standards, mediocre. The appropriate standards are, however,\nLatin American, and from that point of view the nub of the matter is that because of\nthe control it exercises over all arms and weapons, it is able to maintain law and order in\nnormal conditions. Its resources for handling crowds and mob violence are, however,\nextremely limited. Although the commissioned officers of the National Police appear\nto be fairly able men, dishonest practices are traditional in the organization. Many of\nthem, moreover, have outside business interests, not infrequently in prostitution and\ngambling.\nThere is no evidence of Communist infiltration in the Panama National Police.\nColonel José A. Remón, who is regarded as pro-American, is the Commandant and\nDirector of all Panama National Police activities. His loyalty to the present Jiménez\nAdministration is unquestioned, the more since he is a bitter personal enemy of Arnulfo\nArias, whose revolutionary activities he has dealt with officially on many occasions in\nthe past. He may be counted upon to suppress any future revolutionary activities,\nwhether by Arias or by subversive leftist forces. Any future constitutional President\nof Panama except Arnulfo Arias (who would probably remove him from office) could\ncount upon his loyalty. The Deputy Commandant of the National Police is Lt. Col.\nFrancisco Aued Hurane. Aued's father was a Syrian and his mother of German extrac-\ntion. His private commercial connections are notorious. He is disliked by President\nJiménez and distrusted by Colonel Remón. In case of large-scale political disturbances\nAued's sympathies would probably not coincide with those of his chief, and, in the im-\nprobable event of Remón's absenting himself from the Republic of Panama, Aued, in\nactive charge of the Police, would bear watching by the Government. The Military\nAide to the President of Panama is Lt. Col. Manuel de J. Quijano, Jr. He owes his\nposition to the fact that he is the President's son-in-law, and will probably not be con-\ntinued in office by the next President.\nPanama also has a Secret Police, which, like the National Police, has a dual function.\nIts mission is (1) the prosecution and investigation of violations of law (apprehending\nfelons and their accomplices, turning them over to the appropriate authorities, and\nproducing the necessary evidence to prove their guilt), and (2) prevention of activities\ndirected against national security and the State. The Secret Police is autonomous\nIV-2\nvis-a-vis the National Police. The President of Panama is its Supreme Chief, but it is\ndirectly responsible to the Ministry of Interior and Justice. It has a total strength of\napproximately 81 persons, and maintains offices in Panama City, Colón, and David.\nSince its physical equipment consists of approximately 100 revolvers and 6 automobiles,\nit cannot be regarded as a potential rival to the National Police (in the event of revolu-\ntionary disturbances, that is to say, it could not notably affect the outcome by taking\nsides against the National Police). The relation between the two organizations is not,\nhowever, cordial. Some members of the Secret Police have received training from US\ncriminologists, and the organization's recruitment standards, especially with regard to\neducation, are more rigorous than those of the National Police Force. On the other\nhand, there is considerable evidence of sharp practices on the part of its officers, and of\npolitical chicanery in connection with promotions.\nOne of the tasks of the Secret Police is that of following the activities of possible\nsubversive organizations on the Left, for which purpose it uses part-time paid agents\nand informers, many of whom are recent graduates of the National Institute and the\nInter-American University in Panama City, and some, at least, former members of the\nFederation of Students of Panama, which is one of the radical groups that local Commu-\nnists have sought to dominate. The Secret Police has, however, cooperated with G-2 of\nthe US Army with regard to subversive activities. The present chief of Secret Police,\nRaoul Ramon Acevedo Ramirez, is considered loyal to President Jiménez, and would\nprobably transfer his loyalty to any constitutional successor. At one time he was an\nemployee of Harmodio Arias' newspaper, the Panama American, and there is reason to\nbelieve (1) that he would be unavailable for any major political purpose unacceptable\nto his former employer, and (2) that much of the information known to the Secret\nPolice is available to Arias.\nIn the 1943 and 1944 biennial budget for the Republic of Panama the equivalent\nof $4,046,520 was appropriated for the police forces. This represents 11 percent of the\ntotal expenditures of the Republic during the same period, and can be regarded as the\nnational defense budget of the Republic.\n2. WAR POTENTIAL.\nPanama has no organized military reserve. There are approximately 5,000\nex-members of the Police Force who for some purposes can be regarded as trained\nreserves. These men could presumably be called up by the Republic in case of a war\nor an emergency, but it is improbable that many of them would be useful from a military\npoint of view. During the last few years there have been three attempts to set up infor-\nmal para-military organizations which would offer training in the handling of weapons,\nbut none of them was large enough in scope, or lasted long enough to merit attention as\nrelevant to Panama's war potential. It is estimated that approximately 70,000 Pana-\nmanians, exclusive of tribal Indians, are physically capable of bearing arms and thus\navailable as untrained reserve.\nFrom the standpoint of natural resources, it is improbable that Panama could\nmaintain its own defense forces even if it decided to make the attempt. Its industries\ncould not, within the foreseeable future, supply the necessary weapons and equip-\nIV-3\nment; and its budgetary position precludes large-scale acquisitions elsewhere. Nor,\ngiven present conditions as regards health and education, are the militarily acceptable\nconscripts sufficiently numerous to form a strong military establishment comparable to\nthat of other countries Panama's size.\nPanama has few competent scientists, and commands neither funds nor facilities\nfor advanced research. Panama is incapable of producing rockets or atomic, electronic,\nand bacteriological weapons; and its capabilities in this regard are not likely to increase\nin the predictable future.\nThe only kind of war which Panama could support financially would be a small-\nscale struggle with one or another of her weaker neighbors.\nIV-4\nSECTION V\nSTRATEGIC CONSIDERATIONS AFFECTING US SECURITY\nBecause of the Panama Canal's immense strategic value, Panama and Panamanian\nforeign policy are of paramount importance to the US. Concretely, US strategic neces-\nsities would be endangered by any situation in which (a) Panama might ally itself with\na potential enemy of the US, (b) any part of Panama might be occupied by a potential\nenemy of the US, or (c) Panama might become a base of operations for persons sympa-\nthetic to the policies of a potential enemy of the US and/or inimical to the US. Be-\ncause an unfriendly Panamanian Government might permit such a situation to occur,\nthe foreign policy of the Panamanian Government of the day, and the probable policy\nof any administration that might replace it, are matters of continuing interest to the\nUS. The crucial problems in this connection are: (a) the (present or prospective)\nPanamanian Government's attitude toward Panama's special position vis-a-vis the US;\n(b) its ability to maintain public order; (c) its attitude toward US policies and proposals\nat international conferences; and (d) its capacity to associate with it, in its support for\nUS leadership in the Caribbean and in Latin America as a whole, a substantial\nmajority of the Panamanian people.\nIn general, Panama's constitutional democratic system of government and its well\ndefined political and economic ties to the US render improbable any Panamanian politi-\ncal developments unfavorable to US security.\nThere are, however, three factors at work in the political life of Panama that might\nconceivably lead to situations sufficiently embarrassing to US interests in Panama to\nrequire either close observation by the US or positive US action, or both.\nWere Arnulfo Arias again to become President, which although unlikely (in view of\nthe recent decision of his brother to support Ambassador to the US Vallarino), is never-\ntheless conceivable, many of the vexed problems he posed for the US through the months\npreceding his 1941 ouster would probably recur. Nothing in his past record suggests\nthat Arias would, as President, sincerely and honestly accept the realities of US strategic\nnecessities in Panama. At the same time, however, it is unlikely that Arias, should he\nagain become President, could continue indefinitely an unrealistic policy toward the US.\nOpposition forces within the Republic could in this event be counted on, as in 1941, to\nremove him from office.\nThe People's Party and the Socialist Party in Panama are either Communist or\nCommunist inspired, and are thus inimical to the strategic interests of the US in the\narea. At present they do not have sufficient strength at the polls to constitute a real\nmenace to the US position in the Republic. Since, however, it is of continuing interest\nto the US that Panama exclude from its territory persons sympathetic to a potential\nenemy of the US and hostile to the international attitudes and policies of the US, a sub-\nstantial increase in the number of adherents of either the Socialist Party or the People's\nParty would jeopardize US interests. The presence of sabotage elements within the\nV-1\nSECRET\nradical groups of the Panamanian political scene is discussed in Section VII of this\nstudy.\nAlthough the large number of West Indian negroes and negroes of West Indian\norigin (about 20 percent of the total Panamanian population) does not at present con-\nstitute a threat to US strategic interests, the trends as regards the political orientation\nof this minority group are also of continuing interest to the US. The group includes\nthe majority of Panamanians employed by the US to assist it in the operation of the\nCanal. Many of them, because they are English speaking, are denied citizenship in\nPanama; and, as a group, they make no secret of their conviction that they are dis-\ncriminated against both by the Canal Zone and by the British Crown, which is theoreti-\ncally responsible for their protection. They contend, in short, that neither the Pana-\nmanian Government nor the British Government safeguards their interests, and that\nthis is because they are not Caucasians. Consequently, they are susceptible to the\npropaganda of any group that appeals to them in terms of racial discrimination.\nThe success of the Communist-dominated CIO-UPWA local union in recruiting members\namong them might easily stimulate groups openly hostile to US interests in Panama to\ntry to mobilize them for political purposes.\nThe Panamanian economy is capable neither of contributing to nor of jeopardizing\nUS security. At the present time, Panama's economic system is based on free enter-\nprise, despite the fact that the Constitution expressly rejects the principles of laissez\nfaire; and it is unlikely that Panama will, in the foreseeable future, initiate any pro-\ngram of state control over economic activities. There is, in any case, no reason to sup-\npose that such a program would jeopardize US interests. Since Panama does not pro-\nduce important quantities of any strategic materials required by the US or other\nnations, its economic position is irrelevant from that standpoint. The economy of\nPanama is, moreover, so closely linked to that of the US, and its prosperity so dependent\nupon US activity in the Canal Zone, as to guarantee that Panama will, in the future as\nin the past, formulate its economic policy with an eye to US reactions. In a word,\nthe dependence of the Panamanian economy on the US is advantageous to US interests\nsince it affords the US a considerable measure of indirect control over economic and\nPanamanian political trends within the Republic.\nThe only military aspect of the Republic's life that could in any way contribute to\nor jeopardize US security is the police force. It is the task of the police force to protect\nthe State, to maintain internal order, and to insure domestic tranquillity. A strong,\nwell disciplined, and completely nonpolitical police force designed to perform these\nfunctions in Panama, especially in the areas adjacent to the Canal Zone, would be a\nuseful adjunct to US security to the extent that it was able to keep under observation\nand contain any elements within the Panamanian population regarded as hostile to\nUS interests. Since, however, a completely nonpolitical and efficient police force is an\nunlikely achievement within the predictable future, no genuine contribution to US\nsecurity should be counted upon from this quarter.\nV-2\nSECTION VI\nPRESENCE OF SABOTAGE ELEMENTS IN PANAMA\nAt the present time, the existence of considerable sabotage elements within the\nRepublic of Panama constitutes the most important factor tending to jeopardize the\nsecurity of the Panama Canal, and through it, that of the US. The USSR, whether alone\nor assisted by satellite or conquered nations, is the only present potential threat to the\nUS. It is also the only potential threat to Panama, since, in view of the strategic\nnecessities arising out of the presence of the Canal in its territory and of existing treaty\nobligations, a threat to the US is also a threat to Panama. In the event of a decision\nby the USSR to begin hostile operations against the US, concurrent hostile operations\ncan be expected both against the Canal and against the Republic of Panama. In the\nevent of such hostilities, USSR activities in Panama will, it is expected, take the form of\nan extensive sabotage and subversive campaign. This action might possibly be coupled\nwith a limited submarine campaign, and hit-and-run attacks by air forces operating\nfrom either ocean.\nWithin the confines of the Republic of Panama, it is estimated that the USSR's\nsabotage operations will be divided into two distinct fields: (1) sabotage activities aris-\ning out of control of organized labor, which will, by promoting strikes, slow-downs, and\nsit-downs, seek to impair directly transportation, political stability, and public utilities;\nand, only by indirection, the operation of the Canal; and (2) sabotage activities against\nUS naval, military, and air establishments within the Republic and against certain\nfacilities related to the operation of the Canal (examples are the Gatun Spillway and\nthe Madden Dam) designed to disrupt directly the functioning of the Canal as an\nartery of transportation.\nIt cannot be doubted that Soviet agents can filter into the Republic of Panama\nfor the purpose of promoting both types of sabotage. Furthermore, the Soviets can\ncount, for local aid, on the well organized and disciplined management of the People's\nParty, which is the Communist Party of Panama. This group, not large numerically,\nowes its power to the fact that it is the directing force behind the Syndical Federation\nof Workers of Panama, an organization representing some eighteen unions in the\nRepublic (it claims some 20,000 members, but 10,000 is believed to be a more accurate\nfigure). Celso Solano, the Secretary General of the People's Party, is the Number\nOne Communist of the Republic. At present he is known to take orders from Vicente\nLombardo Toledano, the founder and president of the Confederation of Latin American\nWorkers (CTAL). It is estimated, however, that were Lombardo Toledano, in the event\nof developments within Mexico, compelled to adhere to a national line as distinct from\ndirectives from Moscow, Solano would remain loyal to Moscow, and would do everything\nin his power to promote whatever objectives Moscow might dictate.\nLocal 713 of the United Public Workers of America, CIO, which has about 7,000\ndues-paying members among the 32,000 government employees in the Canal Zone, is an\nVI-1\nSECRIT\norganization of proved Communist direction. Although by far the great majority of its\nmembers are not Communists, it is to be expected that in the event of hostilities between\nthe US and Panama on the one hand, and the USSR on the other, such Communist lead-\nership as this union possesses will do everything in its power to promote the interests\nof the USSR by fomenting labor disturbances with a view to impairing the operation of\nthe Panama Canal.\nIn contrast with saboteurs identified with labor and political organizations in\nPanama, it is estimated that those saboteurs who will seek to impair the utility of the\nCanal by means of activities directed against its various installations and those of\nadjacent US army, navy, and air establishments, will not be persons now identified by\nUS intelligence authorities with existing Communist Party or labor organizations in\nPanama or the Caribbean area. It is further estimated that such instructions as these\nsaboteurs may receive will not be transmitted to them by any Communists now known\nto US intelligence authorities. These saboteurs will, on the contrary, receive their\ninstructions from abroad by radio, mail, or other established means of communication,\nor from Soviet or satellite couriers or seamen who will have passed through the Republic\nof Panama immediately prior to the outbreak of hostilities. They will be agents who, in\nthe past, have in no way compromised their usefulness as saboteurs by identifying\nthemselves with recognized Communist activities or Party members.\nVI-2\nSECRET\nSECTION VII\nPROBABLE FUTURE DEVELOPMENTS\nThe Government of Panama (whether in the hands of the present administration\nor in those of its probable successor) will continue to base its policies upon a tacit\nrecognition of the Republic's position as a quasi protectorate of the US. It will, how-\never, continue to promote Panama's claims as a sovereign nation enjoying full equality\nunder international law. As a consequence, Panama may be expected to reject the\nmost recent US proposals on the defense-sites agreement as incompatible with its posi-\ntion as a sovereign nation. Should the US, however, elect, without a formal agreement\nbetween the two countries, to occupy its present bases, Panama will probably acquiesce\nin such occupation until domestic political conditions within the Republic are appro-\npriate for the negotiation and ratification of an agreement acceptable to both countries.\nIf the US were to become involved in a war with an extracontinental power, Panama\ncould be expected to support the US and to permit the use of its territory as a base for\noperations for US troops.\nIt is expected that the present Jiménez Administration will be able to maintain\npublic order and that the election scheduled for May 1948 will, by Panamanian stand-\nards, be peaceful and orderly. Present indications are that Arnulfo Arias will lose the\nelection and that Vallarino or Fabrega may win. Despite Harmodio Arias' reported\npromise to support Arnulfo's candidacy in the election in 1952, there is a possibility, in\nthe event of his death in 1948, that he may be unwilling to accept the popular verdict.\nPanama can be expected to support most of the major US proposals in international\nconferences. At the same time it can be expected, both at the United Nations and in\ninter-American conferences, to put itself forward as the exponent of the doctrine of\nequality under law for all nations, regardless of size or resources.\nThe Panamanian Government can be expected to be able to associate with it the\nmajority of its electorate in its recognition of the US as the dominant country in the\nCaribbean, particularly in those situations in which no commitment to any verbal\nstatement of the position is involved.\nIt is not expected that the Communist People's Party of Panama will, within the\nforeseeable future, substantially increase the number of its adherents or the influence\nit exercises upon the domestic affairs of the Republic. The Socialist Party, on the\nother hand, with its leader, Demetrio Porras, back in Panama, may increase its strength\nsomewhat in the forthcoming elections, but not on a scale that will enable it, as a\nparty, to influence any future Panamanian Government. Communist Party members\nwill continue their subversive activities in the Republic and will make every effort to\nmaintain their control over organized labor unless and until they are instructed other-\nwise from Moscow.\nVII-1\nSECRET\nThe large number of West Indian negroes and negroes of West Indian origin in Pan-\nama will remain one of the basic political and social problems of the Republic. Unless\nand until a particular government-whether the US, which employs many of them, or\nPanama, in which they live, or Britain, which claims many of them as subjects-is able\nto convince them that they are being treated on a basis of equality with other nationals,\nthey will remain highly sensitive to any leadership that promises to take an interest in\ntheir problems. Consequently, it is estimated that the present CIO-UPWA Communist-\ndominated union, to which a substantial number of them now belong and to which\nmany feel a personal attachment, will continue, so long as it makes an issue of the\nalleged racial discrimination in the Zone and in the Republic to command their support.\nVII-2\nAPPENDIX B\nPOPULATION CHARACTERISTICS AND STATISTICS\nEconomically Active Population, 10 Years of Age\nand Over by Provinces and Race\nCensus of 1940\nPROVINCES\nWHITE\nNEGRO\nMESTIZO\nOTHERS\nTOTAL\nPanamá\n12,198\n18,518\n35,562\n2,256\n68,934\nChiriqui\n4,561\n1,302\n23,963\n791\n30,617\nVeraguas\n2,198\n339\n24,761\n276\n27,574\nColón\n4,399\n13,853\n6,593\n1,357\n26,202\nCoclé\n826\n699\n15,972\n182\n17,690\nLos Santos\n3,357\n105\n13,272\n24\n16,758\nHerrera\n1,306\n227\n11,487\n62\n13,082\nBocas del Toro\n220\n2,650\n1,083\n209\n4,162\nDarién\n97\n1,410\n1,151\n41\n2,699\nTOTAL\n29,162\n39,103\n134,255\n5,198\n207,718\nPercent of Total\n14.1\n18.8\n64.6\n2.5\nB-1\nSECRET\nAPPENDIX C\nReceipts of the Republic of Panama from the Canal Zone Classified as to Recipients\nand Purposes for the Fiscal Years 1939 - 1945\n(In thousands of dollars)\nRECIPIENTS AND PURPOSES\n1939\n1940\n1941\n1942\n1943\n1944\n1945\nReceived by Individual Residents of\nPanama for Wages and Salaries\nUS Gov't Agencies (excluding contract\nwork for Army and Navy)\n9,188\n13,475\n26,491\n37,530\n36,474\n30,541\n28,499\nArmy and Navy contract pay rolls\n668\n9,561\n14,961\n18,721\n20,102\n6,943\n3,862\nTOTAL US Gov't Agencies\n9,786\n23,036\n41,452\n56,251\n56,576\n37,484\n32,361\nBusiness concerns in Canal Zone\n831\n865\n968\n1,353\n1,762\n1,603\n1,617\nDomestic servants\n1,034\n1,034\n1,034\n1,851\n2,083\n1,851\n1,658\nTOTAL Wages and Salaries\n11,651\n24,935\n43,454\n59,455\n60,421\n40,938\n35,636\nFor pension and disability relief\n100\n129\n151\n165\n176\n195\n176\nFor rentals\n..\n2\n3\n15\n39\n33\n5\nTOTAL\n11,751\n25,066\n43,608\n59,635\n60,636\n41,166\n35,815\nReceived by Business Enterprises in\nPanama\nWholesale trade\n2,551\n2,890\n3,095\n4,875\n7,393\n7,447\n8,100\nRetail trade and services\n8,960\n11,953\n15,532\n26,202\n26,938\n23,597\n21,596\nUnclassified amounts to business enter-\nprises including contractors' profits\nand capital payments\n671\n1,216\n1,827\n4,454\n2,171\n1,729\n2,366\nTOTAL\n12,182\n16,059\n20,454\n35,531\n36,502\n32,773\n32,062\nReceived by Government of Panama\n(direct receipts only)\nRentals\n430\n430\n437\n573\n700\n755\n667\nLottery\n88\n105\n273\n601\n711\n726\n720\nTOTAL\n518\n535\n710\n1,174\n1,411\n1,481\n1,387\nTotal Receipts\n24,451\n41,660\n64,772\n96,340\n98,549\n75,420\n69,266\nSECRET\nC-1\nAPPENDIX D\nBIOGRAPHICAL DATA\nHARMODIO ARIAS, born 3 July 1886 in Penonomé, Panama, is a graduate of Cam-\nbridge University, England. A lawyer by profession, he has for many years combined\na successful and lucrative law practice with politics.\nDuring his term as President of Panama, 1932-1936, he was personally active in\nthe negotiation of a new treaty with the US which today forms the basis of Panama-\nUS relations. Subsequent to his retiring from the presidency, he has been active in\nthe management of his newspaper, the influential Panama American, as well as\nmany of his business ventures.\nHarmodio Arias has been described by friend and foe alike, as \"inscrutable, very\nintelligent, astute, extremely nationalistic and an anglophile.\" Whatever the truth\nof these statements may be, there can be no doubt that he is a singularly able lawyer, a\nman of considerable prestige among Panamanians and one who possesses extraordinary\nability in foreseeing political trends within his own country. Although there are those\nwho claim he again aspires to the presidency, he probably prefers to be \"the power\nbehind the throne\", a role for which his intelligence, his law practice, his commercial\ninterests, and his many personal connections throughout the world admirably fit him.\nARNULFO ARIAS, younger brother of Harmodio Arias, was born on 15 August 1901\nat Penonomé, Panama. He was educated in the US and was a practicing physician\nand surgeon in Panama from 1925 to 1930. In 1931 he was a leader of the revolution\nwhich resulted in the election of his brother, Harmodio, as President. Since that\ntime, Arnulfo has been active in politics. In 1937 he left Panama and held various\ndiplomatic posts in Europe where he became a friend of Mussolini and many prominent\nNazis while waiting for his turn as President, which had been promised him by the\ngoverning clique in return for his efforts in bringing about the election of Harmodio in\n1932 and Arosemena in 1936.\nIn 1941, after he had returned to Panama and had been President for a year,\npublic opinion turned against him because of his extreme nationalism, his dictatorial\nmethods which showed a resemblance to Nazi practices, and his pro-Axis and anti-US\nattitudes. As a consequence, he was overthrown and exiled.\nSince his return from exile in October 1945, Arnulfo has been tireless in his efforts\nto rebuild his political following and, feeling as he does that three years of his Presi-\ndential term were illegally denied him, he is determined again to become President.\nCapable of inspiring blind confidence among his friends and intense hatred among\nhis enemies, he is extremely popular among a substantial number of Panamanians\nwho admire his personal courage and daring and find a vicarious pleasure in his\npersonal irregularities. Basically Arias' political tenets, other than his ardent and\nextreme nationalism, appear to be amorphous and, as a result, he is particularly sus-\nD-1\nSECRET\nSECRET\nceptible to friendships of the moment. Meanwhile, his elder brother Harmodio's in-\nfluence is not without significance, although Arnulfo has at times been known to oppose\nhis elder brother on basic issues.\nJOAQUIN JOSE VALLARINO was born in Panama on 24 October 1889. He was educated\nin the US, receiving an MD degree from the University of Pennsylvania.\nHe has practiced medicine in Panama since 1913 and is considered one of the\ncountry's outstanding roentgenologists. He was Minister of Foreign Affairs from\n1931 to 1932 and in 1945 was named Ambassador to the US. Personable, well liked by\nboth Panamanians and US citizens, among the latter of whom he has many friends,\nVallarino is considered to be very pro-US. He is not a politician in the usual sense of\nthe word, and his selection as the Presidential candidate of the National Democratic\nFront and the support which Harmodio Arias has promised him in the forthcoming\npolitical campaign were possibly motivated by the feeling that his political inexperience\nwould make him susceptible to control by the governing clique.\nFRANCISCO AUED, Second Commandant of the National Police, was born on 14\nNovember 1910 in Los Santos Province, Panama. He received his early education in\nPanama, and later attended Mexico's Escuela Militar.\nAued entered the National Police as a captain in 1940, and in 1941 was promoted\nto major largely as a reward for his services during the overthrow of former President\nArnulfo Arias.\nMajor Aued is personable and intelligent, but considered basically unfriendly to\nthe US. He is a heavy gambler and has a bad reputation among many Panamanians.\nHe unquestionably exercises the power of his office as Chief of Police in Colón to further\nhis own interests. One of Aued's activities is the \"regulation\" of prostitution.\nIn view of his unsavory reputation and the unlikelihood of his continuing in office\nshould Vallarino become President, Aued can be expected to place his influence behind\nwhoever seeks the presidency by a coup so that he can perpetuate himself in office\non the basis of services rendered. For this reason Aued could be expected to align\nhimself, and that portion of the police force he controls, with Arnulfo Arias should\nthe latter seek to foment a coup in order to gain office.\nJOSE ANTONIO REMON is in command of the Panama National Police. He was\nborn in Panama City in 1909 and received his early education there. Subsequently he\nattended Mexico's Escuela Militar.\nShortly after Remón's return to Panama he was made a Captain in the National\nPolice and later became Chief of the First Section, which covers Panama City and\nits immediate environs. In 1933, rather than accept an assignment to Bocas del\nToro, he went into private business operating a garage. In 1939 he re-entered\nthe National Police and was named Commandant in February 1947.\nRemón is considered to be pro-US and attempts to administer the police force with\nhonesty and impartiality. He is loyal to the present administration and would prob-\nably be loyal to Vallarino were he elected. However, he is a personal enemy of Arnulfo\nD-2\nSECRET\nArias and can be expected to do everything in his power to prevent Arnulfo from be-\ncoming President by illegal means. In view of Aued's reported pro-Arnulfo leanings,\na widening rift can be expected to develop between these two officials of the National\nPolice which may translate itself into the factionalizing of the police force itself.\nD-3\nSECRET\n10883\n05\n80°00'\n55\n50\n40\n45\n35\nUNITED STATES\nFORT\nRANDOLPH\nATLANTIC\nOCEAN\nS\nMANZA\nGULF OF MEXICO\nOF\nCoco Solo\nNew\nFORT\nSHERMAN\nColon\nCristobal\n3\nFrance\nField\nCristobal\nCity\nCoco Solito\nClara\nC\no\nHONDURAS\nCARIBBEAN\nLIMON\nBAY\nGUATEMALA\n20\nHopey\nNICARAGUA\nEL SALVADOR\nMargarita\nVENEZUELA\nCOSTA\nPANAMA\nFORT\nPACIFIC\nCOLOMBIA\nGULICK\nOCEAN\nBRAZIL\nFORT WILLIAM\n25/\n79°30'\nD. DAVIS\nPiña\nE\nGatun\nNew\nN\nrovidence\nE\n15\n15'\nMonte\n+\nCANAL ZONE BOUNDARY\nA\nLagarto\nWhere the Boundary Line is\nomitted it follows the 100\ncontour around Gatun Lake\nM\nNew San Juan\nPANAMA\nMadden\nREPUBLIC OF PANAMA\nCANAL ZONE\n10\n10/\nEscobal\nCANAL\nCANAL ZONE BOUNDARY\nLaguna\nWhere the Boundary Line omitted\nit\nfollows\ncon.\ntour Lake\nMaria\nCANAL TONE BOUNDARY\nWhere\nthe\nLine\nis\nthe\n100\nLake\n05\nEmpire\nREPUBLIC CANAL OF PANAMA ZONE\nParaiso\nMiguel\nRed\nPedro\nLocks\nFORT CLAYTON\nRío Abajo\n86\nQuebrado\nLocks\n00\nMiratiores\nSan Francisco de la Caleta\nCorozal\nCaño\nAlbrook\nField\nCurundu\nCocoli\nDiablo\nCANAL\nHeights\nZONE\nAncon\nPaitillo Pt.\n05\n80°00'\n55\nPanama\nBalboa\nLacona\nArraijan\nPANAMA CANAL ZONE\nFORT\nFerry\nAMADOR\nPANAMA\nBuilt-up Area\n55\n55\nRoad\nCaimito\nHoward Field\nFORT KOBBE\nRailroad\nInternational Boundary\nSánchez\nLa Chorrera\nO\nBASE: ROUTES IN CANAL ZONE AND VICINITY, 1:100,000 (Isthmian Canal Studies- 1947)\nPuerto\nCaimito\nPlate 3, Aug. 1947. From Report of the Governor of the Panama Canal Zone.\nScale 1:150,000\n10\nMILES\nHato\nKILOMETERS\n50\n50\n50\n45\n40\n35\n25\n79°30'\n10883 Map Branch, CIA, 3-48\nU.S.GPO-S\nPROVISIONAL\nRESTRICTED\n10884\n83°\n82°\n81°\n80°\n79°\n78°\n77°\nSuretka\nNombre de Dios\nMiramar\n6\nNO\n4\nColon\n7\nCOSTA\nChagres\nAlmirante\nRio Chepo\nRICA\nSalud\nGOLFO DE LOS\nDonoso\nCANAL\nMadden\n1\nChilibre\nM\nChepo\nA\nEscobal\nDE\nLAGUNA DE\nPlatanal\nPedregal\nM\nZONE\nSAIN\nPacora\n9°\nA\nRobalo,\nCHIRIQUÍ\nMOSQUITOS\nMiguel\nA\n.......\ns\nPaja\nBLAS\n9°\nChiriquí.Grande\nPANAMÁ\nArteda\nLa\nChorrera\nPuerto Caimito\nEl Hato del Volcano\nLino\nBajo Boquete\nL\nRio\nTaboga ID.\nCapira\nDE\nR\nRio Guasaro\nPotrerillos\nZ\nEl Valle\nBAHIA\nLa Pintada\nde Anton\nConcepción Dolegayo\nP\nA\nPto. Zona\nARCH\n00\n2\nGualaca\nPenonomé\nChame\nDE LAS\nGOLFO\nProgreso\nPERLAS\n2\nSanta Fé\nSan Carlos\n3.\nRio\nDE\nDivate\nI\n4\nAlanje\nU\nI\nTabasara\nAnton\nURABA\nCañazas\nRÍO HATO\n2\nPedregal\nSan Felix\nNata\nPuerto Armuelles\nHorconc\nRemedios\nSan\nCalobre\nFrancisco\nO\nAguadulce\nPuerto Obaldía\n1\nPto. Aguadulce\nTole\n$\nLa Mesa\nLas Palmas\nSantiago\nSanta Maria\nO\nPuerto Vidal\nEI Real\nGOLFO DE CHIRIQUI\nOF\nOF\n8°\nAtalaya\nParita\nSona\nHERRE\nChitré\nRio de Jesus\nBLOS Santos\nGOLFO DE PANAMÁ\nDARIEN\nOcu\nBarranco Colorado\nPto. Mutis\nLas Tablas\nPuerto Mensabé\nLas Minas\nMacaracas\nLO\nS:\nPocri\nSANTOS\nPedasi\nLos Altos\nTonosi\nBucaro\nCOLOMBIA\n!\nBASE PANAMA: TRANSPORTATION 1,310,000\nDepartment of State, Map Division,\n10526 April 1947\n7°\n7°\n83°\n82°\n81°\n80°\n79°\n78°\n77°\nUNITED STATES\nProvincia or Intendencia Boundary\nPANAMA\nFormer United States Air Base\nATLANTIC\nPan American\nOther Road\nRailroads\nHighway\nRESTRICTED\nEl Hato del Volcán\nOCEAN\n1:1,910,000\n4'8½\" Gauge\n3' Gauge\n40\nMEXICO\nCUBA\n10\n50\nPaved\nMILES\nALTITUDE\nBR.\nCOSTA RICA\nPANAMA\n20\n40\n50\n60\nFeet\nPanama Railroad\nHONDURAS\nMeters\n5000\nHONDURAS\nAll Weather\nKILOMETERS\n1500\nFerrocarril Nacional De Chiriquí\nGUATEMALA\nPROFILE OF THE PAN AMERICAN HIGHWAY\nEL SALVADOR\nNICARAGUA\nDry Weather\nConcepcion\nDavid\nRemedios\nSantiago\nAguadulce\nSan Carlos\nLa Chorrera\nChiriqui Land Company\nCANAL ZONE\nAntón\nPANAMA\nCOSTA RICA\nUnited Fruit Company\nVEN.\nSoná\nNata\nTrail\n5\nOCEAN\nPANAMA\nAntonio Tagaropulos\n100\n150\n200\n250\n300\n350\nCOLOMBIA\nMILES\n0\n50\n100\n150\n200\n250\n300\n350\n400\n450\n500\n550\nKILOMETERS\nBR.\nU. GPO\n10884 Map Branch, CIA,2\nDISTRIBUTION\nThe President\nChief of Staff to the Commander-in-Chief\nSecretary of Defense\nExecutive Secretary, National Security Council\nChairman, National Security Resources Board\nSecretary, Research and Development Board\nDepartment of State\nDepartment of the Army\nDepartment of the Navy\nDepartment of the Air Force\nAtomic Energy Commission\nJoint Chiefs of Staff\nState-Army-Navy-Air Force Coordinating Committee\nJoint Intelligence Group\nSECRET\nSTATE BARRY ARCHIVES S NATIONAL RECORDS TREMAN AND LIBRARY\n8.5 GOVERNMENT SERVICE\nU.S. GOVERNMENT PRINTING OFFICE\n2187-S-1948"
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