Roosevelt’s visit to the republic in the summer of 1934 prepared the way for opening negotiations on this and other
matters. A Panamanian mission arrived in Washington in November, and discussions on a replacement for the
Hay-Bunau-Varilla Treaty continued through 1935. On March 2, 1936, Secretary of State Cordell Hull and Assistant
Secretary of State Sumner Welles joined the Panamanian negotiators in signing a new treaty–the Hull-Alfaro
Treaty–and three related conventions. The conventions regulated radio communications and provided for the United
States to construct a new trans-isthmian highway connecting Panama City and Col n.
The treaty provided a new context for relations between the two countries. It ended the protectorate by abrogating the
1903 treaty guarantee of the republic’s independence and the concomitant right of intervention. Thereafter, the United
States would substitute negotiation and purchase of land outside the zone for its former rights of expropriation. The
dispute over the annuity was resolved by agreeing to fix it at 430,000 balboas (the balboa being equivalent to the
devalued dollar) which increased the gold value of the original annuity by US$7,500. This was to be paid retroactively
to 1934 when the republic had begun refusing the payments.
Various business and commercial provisions dealt with longstanding Panamanian complaints. Private commercial
operations unconnected with canal operations were forbidden in the zone. This policy and the closing of the zone to
foreign commerce were to provide Panamanian merchants with relief from competition. Free entry into the zone was
provided for Panamanian goods, and the republic’s customhouses were to be established at entrances to the zone to
regulate the entry of goods finally destined for Panama.
The Hull-Alfaro revisions, though hailed by both governments, radically altered the special rights of the United States in
the isthmus, and the United States Senate was reluctant to accept the alterations. Article X of the new treaty provided that
in the event of any threat to the security of either nation, joint measures could be taken after consultation between the
two. Only after an exchange of interpretative diplomatic notes had permitted Senator Key Pittman, chairman of the
Foreign Relations Committee, to advise his colleagues that Panama was willing under this provision to permit the United
States to act unilaterally, did the Senate give its consent on July 25, 1939.
Data as of December 1987
Panama
THE BISECTED REPUBLIC
The War Years
After ratifying the Hull-Alfaro Treaty in 1939, Panama and the United States began preparation for and collaboration in
the coming war effort. Cooperation in this area proceeded smoothly for more than a year, with the republic participating
in the series of conferences, declarations, and protocols that solidified the support of the hemisphere behind
Washington’s efforts to meet the threat of Axis aggression. This cooperation halted with the inauguration of Arnulfo
Arias.
Arnulfo Arias has been elected to the presidency at least three times since 1940 (perhaps four or five if, as many believe,
the vote counts of 1964 and 1984 were fraudulent), but he has never been allowed to serve a full term. He was first
elected when he headed a mass movement known as Paname ismo. Its essence was nationalism, which in Panama’s
situation meant opposition to United States hegemony. Arias aspired to rid the country of non-Hispanics, which meant
not only North Americans, but also West Indians, Chinese, Hindus, and Jews. He also seemed susceptible to the
influence of Nazi and Fascist agents on the eve of the United States declaration of war against the Axis.
North Americans were by no means the only ones in Panama who were anxious to be rid of Arias. Even his brother,
Harmodio, urged the United States embassy to move against the leader. United States officials made no attempt to
conceal their relief when the National Police, in October 1941, took advantage of Arias’s temporary absence from the
country to depose him.
Arnulfo Arias had promulgated a new constitution in 1941, which was designed to extend his term of office. In 1945 a
clash between Arias’s successor, Ricardo Adolfo de la Guardia, and the National Assembly, led to the calling of a
constituent assembly that elected a new president, Enrique A. Jim nez, and drew up a new constitution. The constitution
of 1946 erased the innovations introduced by Arias and restored traditional concepts and structures of government.
In preparation for war, the United States had requested 999- year leases on more than 100 bases and sites. Arias balked,
but ultimately approved a lease on one site after the United States threatened to occupy the land it wanted. De la Guardia
proved more accommodating; he agreed to lease the United States 134 sites in the republic but not for 999 years. He
would extend the leases only for the duration of the war plus one year beyond the signing of the peace treaty.
The United States transferred Panama City’s water and sewer systems to the city administration and granted new
economic assistance, but it refused to deport the West Indians and other non-Hispanics or to pay high rents for the sites.
Among the major facilities granted to the United States under the agreement of 1942 were the airfield at R o Hato, the
naval base on Isla Taboga, and several radar stations.
The end of the war brought another misunderstanding between the two countries. Although the peace treaty had not
entered into effect, Panama demanded that the bases be relinquished, resting its claim on a subsidiary provision of the
agreement permitting renegotiation after the cessation of hostilities. Overriding the desire of the United States War
Department to hold most of the bases for an indefinite period, the Department of State took cognizance of growing
nationalist dissatisfaction and in December 1946 sent Ambassador Frank T. Hines to propose a twenty-year extension of
the leases on thirteen facilities. President Jim nez authorized a draft treaty over the opposition of the foreign minister and
exacerbated latent resentment. When the National Assembly met in 1947 to consider ratification, a mob of 10,000
Panamanians armed with stones, machetes, and guns expressed opposition. Under these circumstances the deputies
voted unanimously to reject the treaty. By 1948 the United States had evacuated all occupied bases and sites outside the
Canal Zone.
The upheaval of 1947 was instigated in large measure by university students. Their clash with the National Police on
that occasion, in which both students and policemen were killed, marked the beginning of a period of intense animosity
between the two groups. The incident was also the first in which United States intentions were thwarted by a massive
expression of Panamanian rage.
Data as of December 1987
Panama
The National Guard in Ascendance
A temporary shift in power from the civilian aristocracy to the National Police occurred immediately after World War II.
Between 1948 and 1952, National Police Commander Jos Antonio Rem n installed and removed presidents with
unencumbered ease. Among his behind-the-scenes manipulations were the denial to Arnulfo Arias of the presidency he
apparently had won in 1948, the installation of Arias in the presidency in 1949, and the engineering of Arias’s removal
from office in 1951. Meanwhile, Rem n increased salaries and fringe benefits for his forces and modernized training
methods and equipment; in effect, he transformed the National Police from a police into a paramilitary force. In the
spheres of security and public order, he achieved his long-sought goal by transforming the National Police into the
National Guard in 1953 and introduced greater militarization into the country’s only armed force. The missions and
functions were little changed by the new title, but for Rem n, this change was a step toward a national army (see
Historical Background , ch. 5).
From several preexisting parties and factions, Rem n also organized the National Patriotic Coalition (Coalici n
Patri tico Nacional–CPN). He ran successfully as its candidate for the presidency in 1952. Rem n followed national
tradition by enriching himself through political office. He broke with tradition, however, by promoting social reform
and economic development. His agricultural and industrial programs temporarily reduced the country’s overwhelming
economic dependence on the canal and the zone.
Rem n’s reformist regime was short-lived, however. In 1955 he was machine-gunned to death at the racetrack outside
Panama City. The first vice president, Jos Ram n Guizado, was impeached for the crime and jailed, but he was never
tried, and the motivation for his alleged act remained unclear. Some investigators believed that the impeachment of
Guizado was a smokescreen to distract attention from others implicated in the assassination, including United States
organized crime figure “Lucky” Luciano, dissident police officers, and both Arias families. The second vice president,
Ricardo Arias (of the aristocratic Arias family), served out the remainder of the presidential term and dismantled many of
Rem n’s reforms.
Rem n did not live to see the culmination of the major treaty revision he initiated. In 1953 Rem n had visited
Washington to discuss basic revisions of the 1936 treaty. Among other things, Panamanian officials wanted a larger
share of the canal tolls, and merchants continued to be unhappy with the competition from the nonprofit commissaries in
the Canal Zone. Rem n also demanded that the discriminatory wage differential in the zone, which favored United
States citizens over Panamanians, be abolished.
After lengthy negotiations a Treaty of Mutual Understanding and Cooperation was signed on January 23, 1955. Under
its provisions commercial activities not essential to the operation of the canal were to be cut back. The annuity was
enlarged to US$1,930,000. The principle of “one basic wage scale for all . . . employees . . . in the Canal Zone” was
accepted and implemented. Panama’s request for the replacement of the “perpetuity” clause by a ninety-nine-year
renewable lease was rejected, however, as was the proposal that its citizens accused of violations in the zone be tried by
joint United States-Panamanian tribunals.
Panama’s contribution to the 1955 treaty was its consent to the United States occupation of the bases outside of the
Canal Zone that it had withheld a few years earlier. Approximately 8,000 hectares of the republic’s territory were leased
rent-free for 15 years for United States military maneuvers. The R o Hato base, a particularly important installation in
defense planning, was thus regained for the United States Air Force. Because the revisions had the strong support of
President Ricardo Arias, the National Assembly approved them with little hesitation.
Data as of December 1987
Panama
The Politics of Frustrated Nationalism
The CPN placed another candidate, Ernesto de la Guardia, in the presidency in 1956. The Rem n government had
required parties to enroll 45,000 members to receive official recognition. This membership requirement, subsequently
relaxed to 5,000, had excluded all opposition parties from the 1956 elections except the National Liberal Party (Partido
Liberal Nacional–PLN) which traced its lineage to the original Liberal Party.
De la Guardia was a conservative businessman and a member of the oligarchy. By Panamanian standards, he was by no
means anti- Yankee (see Glossary), but his administration presided over a new low in United States-Panamanian
relations. The Egyptian nationalization of the Suez Canal in 1956 raised new hopes in the republic, because the two
canals were frequently compared in the world press. Despite Panama’s large maritime fleet (the sixth greatest in the
world), Britain and the United States did not invite Panama to a special conference of the major world maritime powers
in London to discuss Suez. Expressing resentment, Panama joined the communist and neutral nations in a rival Suez
proposal. United States secretary of state John Foster Dulles’s unqualified statement on the Suez issue on September 28,
1956–that the United States did not fear similar nationalization of the Panama Canal because the United States possessed
“rights of sovereignty” there– worsened matters.
Panamanian public opinion was further inflamed by a United States Department of the Army statement in the summer of
1956 that implied that the 1955 treaty had not in fact envisaged a total equalization of wage rates. The United States
attempted to clarify the issue by explaining that the only exception to the “equal pay for equal labor” principle would be a
25-percent differential that would apply to all citizens brought from the continental United States.
Tension mounted in the ensuing years. In May 1958 students demonstrating against the United States clashed with the
National Guard. The violence of these riots, in which nine died, was a forecast of the far more serious difficulties that
followed a year later. In November 1959 anti-United States demonstrations occurred during the two Panamanian
independence holidays. Aroused by the media, particularly by articles in newspapers owned by Harmodio Arias,
Panamanians began to threaten a “peaceful invasion” of the Canal Zone, to raise the flag of the republic there as tangible
evidence of Panama’s sovereignty. Fearful that Panamanian mobs might actually force entry into the Canal Zone, the
United States called out its troops. Several hundred Panamanians crossed barbedwire restraints and clashed with Canal
Zone police and troops. A second wave of Panamanian citizens was repulsed by the National Guard, supported by
United States troops.
Extensive and violent disorder followed. A mob smashed the windows of the United States Information Agency library.
The United States flag was torn from the ambassador’s residence and trampled. Aware that public hostility was getting
out of hand, political leaders attempted to regain control over their followers but were unsuccessful. Relations between
the two governments were severely strained. United States authorities erected a fence on the border of the Canal Zone,
and United States citizens residing in the Canal Zone observed a voluntary boycott of Panamanian merchants, who
traditionally depended heavily on these patrons.
On March 1, 1960–Constitution Day–student and labor groups threatened another march into the Canal Zone. The
widespread disorders of the previous fall had had a sobering effect on the political elite, who seriously feared that new
rioting might be transformed into a revolutionary movement against the social system itself. Both major coalitions
contesting the coming elections sought to avoid further difficulties, and influential merchants, who had been hard hit by
the November 1959 riots, were apprehensive. Reports that the United States was willing to recommend flying the
republic’s flag in a special site in the Canal Zone served to ease tensions. Thus, serious disorders were averted.
De la Guardia’s administration had been overwhelmed by the rioting and other problems, and the CPN, lacking effective
opposition in the National Assembly, began to disintegrate. Most dissenting factions joined the PLN in the National
Opposition Union, which in 1960 succeeded in electing its candidate, Roberto Chiari, to the presidency. De la Guardia
became the first postwar president to finish a full four-year term in office, and Chiari had the distinction of being the first
opposition candidate ever elected to the presidency.
Chiari attempted to convince his fellow oligarchs that change was inevitable. He cautioned that if they refused to accept
moderate reform, they would be vulnerable to sweeping change imposed by uncontrollable radical forces. The
tradition-oriented deputies who constituted a majority in the National Assembly did not heed his warning. His proposed
reform program was simply ignored. In foreign affairs, Chiari’s message to the Assembly on October 1, 1961, called
for a new revision of the Canal Zone arrangement. When Chiari visited Washington on June 12 to 13, 1962, he and
President John F. Kennedy agreed to appoint high-level representatives to discuss controversies between their countries
regarding the Canal Zone. The results of the discussions were disclosed in a joint communique issued on July 23, 1963.
Agreement had been reached on the creation of the Bi-National Labor Advisory Committee to consider disputes arising
between Panamanian employees and zone authorities. The United States had agreed to withhold taxes from its
Panamanian employees to be remitted to the Panamanian government. Pending congressional approval, the United