Panama's history has been shaped by the evolution of the world economy and the ambitions of great powers. Rodrigo de Bastidas, sailing westward from Venezuela in 1501 in search of gold, was the first European to explore the Isthmus of Panama. A year later, Christopher Columbus visited the isthmus and established a short-lived settlement in the Darien. Vasco Nunez de Balboa's tortuous trek from the Atlantic to the Pacific in 1513 demonstrated that the isthmus was, indeed, the path between the seas, and Panama quickly became the crossroads and marketplace of Spain's empire in the New World. Gold and silver were brought by ship from South America, hauled across the isthmus, and loaded aboard ships for Spain. The route became known as the Camino Real, or Royal Road, although was more commonly known as Camino de Cruces (Road of the Crosses) because of the frequency of gravesites along the way.

Panama was part of the Spanish empire for 300 years (1538-1821). From the outset, Panamanian identity was based on a sense of "geographic destiny," and Panamanian fortunes fluctuated with the geopolitical importance of the isthmus. The colonial experience also spawned Panamanian nationalism as well as a racially complex and highly stratified society, the source of internal conflicts that ran counter to the unifying force of nationalism.

Modern Panamanian history has been shaped by its transisthmian canal, which had been a dream since the beginning of Spanish colonization. From 1880 to 1900, a French company under Ferdinand de Lesseps attempted unsuccessfully to construct a sea-level canal on the site of the present Panama Canal. In November 1903, with U.S. encouragement and French financial support, Panama proclaimed its independence and concluded the Hay/Bunau-Varilla Treaty with the United States.

The treaty granted rights to the United States "as if it were sovereign" in a zone roughly 10 miles wide and 50 miles long. In that zone, the U.S. would build a canal, then administer, fortify, and defend it "in perpetuity." In 1914, the United States completed the existing 83-kilometer (50-mi.) lock canal, which today is one of the world's greatest engineering triumphs. The early 1960s saw the beginning of sustained pressure in Panama for the renegotiation of this treaty. From 1903 until 1968, Panama was a constitutional democracy dominated by a commercially oriented oligarchy. During the 1950s, the Panamanian military began to challenge the oligarchy's political hegemony. In October 1968, Dr. Arnulfo Arias Madrid, twice elected president and twice ousted by the Panamanian military, was again ousted as president by the National Guard after only 10 days in office. A military junta government was established, and the commander of the National Guard, Brig. Gen. Omar Torrijos, emerged as the principal power in Panamanian political life. Torrijos' regime was harsh and corrupt, but he was a charismatic leader whose populist domestic programs and nationalist foreign policy appealed to the rural and urban constituencies largely ignored by the oligarchy.

Torrijos' death in 1981 altered the tone but not the direction of Panama's political evolution. Despite 1983 constitutional amendments, which appeared to proscribe a political role for the military, the Panama Defense Forces (PDF), as they were then known, continued to dominate Panamanian political life behind a facade of civilian government. By this time, Gen. Manuel Noriega was firmly in control of both the PDF and the civilian government.

The United States froze economic and military assistance to Panama in the summer of 1987 in response to the domestic political crisis and an attack on the U.S. embassy. General Noriega's February 1988 indictment in U.S. courts on drug-trafficking charges sharpened tensions. In April 1988, President Reagan invoked the International Emergency Economic Powers Act, freezing Panamanian Government assets in U.S. banks and prohibiting payments by American agencies, firms, and individuals to the Noriega regime. When national elections were held in May 1989, Panamanians voted for the anti-Noriega candidates by a margin of over three-to-one. The Norieiga regime promptly annulled the election and embarked on a new round of repression. By the fall of 1989, the regime was barely clinging to power, and the regime's paranoia made daily existence unsafe for U.S. forces and other U.S. citizens.

On December 20, President Bush ordered the U.S. military into Panama to protect U.S. lives and property, to fulfill U.S. treaty responsibilities to operate and defend the Canal, to assist the Panamanian people in restoring democracy, and to bring Noriega to justice. The U.S. troops involved in Operation Just Cause achieved their primary objectives quickly, and troop withdrawal began on December 27. Norieiga eventually surrendered voluntarily to U.S. authorities. He is now serving a 40-year sentence for drug trafficking.

Panamanians moved quickly to rebuild their civilian constitutional government. On December 27, 1989, Panama's Electoral Tribunal invalidated the Norieiga regime's annulment of the May 1989 election and confirmed the victory of opposition candidates under the leadership of President Guillermo Endara and Vice Presidents Guillermo Ford and Ricardo Arias Calderon.

President Endara took office as the head of a four-party minority government, pledging to foster Panama's economic recovery, transform the Panamanian military into a police force under civilian control, and strengthen democratic institutions. During its 5-year term, the Endara government struggled to meet the public's high expectations. Its new police force proved to be a major improvement in outlook and behavior over its thuggish predecessor but was not fully able to deter crime. Ernesto Perez Balladares was sworn in as President on September 1, 1994, after an internationally monitored election campaign.

Perez Balladares ran as the candidate for a three-party coalition dominated by the Democratic Revolutionary Party (PRD), the erstwhile political arm of the military dictatorship during the Torrijos and Norieiga years. A long-time member of the PRD, Perez Balladares worked skillfully during the campaign to rehabilitate the PRD's image, emphasizing the party's populist Torrijos roots rather than its association with Noriega. He won the election with only 33% of the vote when the major non-PRD forces, unable to agree on a joint candidate, splintered into competing factions. His administration carried out economic reforms and often worked closely with the U.S. on implementation of the Canal treaties.

On May 2, 1999, Mireya Moscoso, the widow of former President Arnulfo Arias Madrid, defeated PRD candidate Martin Torrijos, son of the late dictator. The elections were considered free and fair. Moscoso took office on September 1, 1999.

During her administration, Moscoso has attempted to strengthen social programs, especially for child and youth development, protection, and general welfare. Education programs have also been highlighted. More recently, Moscoso was focused on bilateral and multilateral free trade initiatives with the hemisphere. Moscoso's administration successfully handled the Panama Canal transfer and has been effective in the administration of the Canal.

Panama's counternarcotics cooperation has been excellent, and the Panamanian Government has expanded money-laundering legislation and concluded with the U.S. a Counternarcotics Maritime Agreement and a Stolen Vehicles Agreement. In the economic investment arena, the Panamanian Government has been very successful in the enforcement of intellectual property rights and has concluded with the U.S. a very important Bilateral Investment Treaty Amendment and an agreement with the Overseas Private Investment Corporation (OPIC). The Moscoso administration has been very supportive of the United States in combating international terrorism.

Panama's economy is based primarily on a well-developed services sector that accounts for nearly 80% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, and flagship registry, medical and health, and other business.

A major challenge facing the current government under President Mireya Moscoso is turning to productive use the 70,000 acres of former U.S. military land and the more than 5,000 buildings that reverted to Panama at the end of 1999. Administratively, this job falls to the Panamanian Inter-Oceanic Regional Authority (ARI).

GDP growth for 2000 was about 2.3% compared to 3.0% in 1999. Though Panama has the highest GDP per capita in Central America, about 40% of its population lives in poverty. The unemployment rate surpassed 14% in 2002.

Beginning March 1, 2001, Panama will serve as host for the 2001-03 Free Trade Area of the Americas negotiations. Additionally, Panama is negotiating free trade areas with Mexico and its Central American neighbors.

The Constitution prescribes that there shall be no prejudice with respect to religious freedom, and the practice of all forms of worship is authorized. However, the Constitution recognizes that the Roman Catholic faith is the country's predominant religion and contains a provision that it be taught in the public schools. Such instruction or other religious activity is not, however, compulsory .

The Constitution does not specifically provide for the separation of church and state, but it implies the independent functioning of each. Members of the clergy may not hold civil or military public office, except such posts as may be concerned with social welfare or public instruction. The Constitution stipulates that senior officials of the church hierarchy in Panama must be native-born citizens.

The majority of Panamanians in the late 1980s were at least nominal Roman Catholics. The Antillean black community, however, was largely Protestant. Indians followed their own indigenous belief systems, although both Protestant and Catholic missionaries were active among the various tribes. Roman Catholicism permeated the social environment culturally as well as religiously. The devout regarded church attendance and the observance of religious duties as regular features of everyday life, and even the most casual or nominal Roman Catholics adjusted the orientation of their daily lives to the prevailing norms of the religious calendar. Although some sacraments were observed more scrupulously than others, baptism was almost universal, and the last rites of the church were administered to many who during their lives had been indifferent to the precepts of the faith or its religious rituals.

In the mid-1980s, when nearly 90 percent of the population was Roman Catholic, there were fewer than 300 priests in the country. Virtually every town had its Roman Catholic church, but many did not have a priest in residence. Many rural inhabitants in the more remote areas received only an occasional visit from a busy priest who traveled among a number of isolated villages.

Religious attitudes, customs, and beliefs differed somewhat between urban and rural areas, although many members of the urban working class, often recent migrants from rural regions, presumably retained their folk beliefs. According to one anthropologist, the belief system of the campesinos centered on God, the Devil, the saints, and the Virgin. Christ was viewed as more or less the chief saint, but as peripheral to the lives of men. The Virgin Mary served as an inspiration and model to women, but there was no comparable model for men.

Although the campesinos believed that each individual "is born with a destiny set by God," they also believed that the destiny could be altered if the individual succumbed to the constant blandishments and enticements of the Devil. The rural dwellers possessed a clear sense of reward and punishment that centered on All Souls' Day. On that day all who died during the previous year are summoned to judgment before God and the Devil. The life record of each person is recited by Saint Peter, and the good and bad deeds are weighed out on a Roman balance scale, thus determining the person's afterlife.

Throughout the society, birth and death were marked by religious rites observed by all but a very few. One of the first social functions in which newly born members of the family participated was the sacrament of baptism, which symbolized their entry into society and brought them into the church community. In the cities, church facilities were readily available, but in rural areas families often had to travel some distance to the nearest parish center for the ceremony. The trip was considered of great importance and was willingly undertaken. In fact, baptism was generally considered the most significant religious rite.

If the family lived near a church that had a priest in regular attendance, children received an early exposure to the formal teachings of the church and were usually taken to mass regularly by their mothers. As they grew older, they took an increasing part in church liturgy and by the age of ten were usually full participants in such activities as catechism classes, communion, and confession. As they approached manhood, boys tended to drift away from the church and from conscientious observation of church ritual. Few young men attended services regularly, and even fewer took an active part in the religious life of the community, although they continued to consider themselves Roman Catholics.

Girls, on the other hand, were encouraged to continue their religious devotions and observe the moral tenets of their faith. Women were more involved in the church than men, and the community and clerics accepted this as a basic axiom. There was social pressure on women to become involved in church affairs, and most women, particularly in urban areas, responded. As a rule, they attended mass regularly and took an active part in church and church-sponsored activities. Religious gatherings and observances were among the principal forms of diversion for women outside the home, and to a great extent these activities were social as much as devotional.

The Criminal Code and the Administrative Code, respectively, defined crimes against public order, public security, public trust, decency, the person, and property, as felonies (delitos) or misdemeanors (faltas), depending on the seriousness of the crime. Although sentences also were prescribed according to the seriousness of the crime, in nearly all cases the codes established upper and lower limits within which a court had discretion in sentencing. In crimes of violence against government officials, more severe sentences were prescribed.

Capital and corporal punishments were prohibited. The most severe penalty permitted for a single offense was a twenty-year imprisonment, and prison sentences were differentiated as to place of confinement. All prisoners could be required to perform prison labor whether or not it was included in a sentence. The most severe sentence, a specific type of imprisonment (reclusión), included the place of confinement--Coiba Penal Colony on the Isla de Coiba--and the manner of serving--hard labor. A sentence of reclusión could range from thirty days to twenty years. The sentence of simple imprisonment (prisión) could range from thirty days to eighteen years, but serving in Coiba was not inherent in the sentence. Depending on the seriousness of their crimes, prisoners sentenced to reclusión could be eligible for parole after three-quarters of the term had been served, and those sentenced to prisión could be eligible after serving two-thirds of the term.

Detention (arresto) was a penalty assessed for less serious offenses and could extend to eighteen months, usually served in a local jail. A punishment without physical restraint (confinamiento) limited the offender to a specified place of residence that had to be at least thirty kilometers from the scene of the crime and from where the victim resided. The period of the confinamiento was at the discretion of the court unless prescribed in law. Fines (multas) were the least severe penalties and in some cases were added to jail sentences. If an offender failed to pay or defaulted on payments, a multa was convertible to arresto in a ratio of money to time prescribed by law.

Conditional penalty (condena condicional) was a suspended sentence used at the discretion of a court in the sentencing of a first offender, except on a major felony charge. The sentence required residing at a fixed address and reporting any change, frequent visits to the court, and checks by the police on the offender's conduct. Many misdemeanors were punished by suspended sentences, fines, or short periods in jail. Sentences of public labor without confinement could also be adjudged at the discretion of a court.

Provisions for appeal existed in the system, and many categories of cases required automatic review in a higher court. Time limits were set on the preparation of appeals, and court action on them, as well as on the time taken for automatic review. Few cases could be appealed to the Supreme Court, an appeal usually requiring that an error be shown in the handling by a lower court. Prosecutors also had the right of appeal.

The cases of minors were handled in a special system designed to combat juvenile delinquency and to keep young offenders from contact with hardened criminals. The Guardianship Court for Minors (Tribunal Tutelar de Menores), established in 1951, worked closely with the Defense Forces, DENI, and various social agencies to handle the cases of young offenders and to provide them with guidance and assistance if possible. Cases involving persons under age eighteen were not made public.

Although trial by jury is established by Article 197 of the Constitution, the same article stipulates that "the law will determine the cases to be decided by this system." In practice most criminal cases, except for those heard in the night courts of Panama City and Colón, were conducted by deposition, and the accused was not present during the proceedings. Only the most serious criminal cases, that is, those involving homicide or other heinous crimes, were heard by juries in the presence of the accused. Decisions were usually made by judges or magistrates after consideration of depositions from defense attorneys and prosecutors. Defendants and their attorneys were entitled to be fully informed of charges and the evidence on which charges were brought, and they could appeal the charges or later appeal the sentence.

One of the continuing sources of complaints concerning the system of criminal justice has centered around use of the night courts in Panama City and Colón. Judges, operating from 6:00 P.M. until 6:00 A.M., have been accused of dispensing justice in an arbitrary and summary manner. Some offenders have found themselves serving a sentence (of up to one year) without ever having been allowed to consult an attorney. The independence of the judiciary has also been called into question because of executive interference and, more particularly, because of interference from the G-2 of the Defense Forces, which has assumed de facto right of review in criminal cases.

The number of persons arrested for felonies and misdemeanors rose from 18,491 in 1980 to 20,073 in 1983 or from 9.5 per 1,000 inhabitants in 1980 to 9.6 per 1,000 inhabitants in 1983. When figures were broken down according to province, the greatest number of arrests in 1983 were found in the most populous province, Panamá, which accounted for approximately 50 percent of the total. Chiriquí and Colón ranked second and third in number of arrests, and in each case the principal cities (David and Colón) accounted for very high percentages of the totals. The statistics gave no details concerning the crimes for which the listed arrests were made.

Crimes by juveniles (persons under eighteen) increased during the early 1980s. The number of cases handled by the Guardianship Court for Minors rose from 2,923 in 1980 to 3,136 in 1983. Although juvenile offenses ran the gamut from homicide (17 in 1983) to traffic infractions serious enough to be taken to court (275 in 1983), the largest increases were in the categories of property damage, attacks against persons, and fights.

The crime rate in Panama is low compared to industrialized countries. An analysis was done using INTERPOL data for Panama. For purpose of comparison, data were drawn for the seven offenses used to compute the United States FBI's index of crime. Index offenses include murder, forcible rape, robbery, aggravated assault, burglary, larceny, and motor vehicle theft. The combined total of these offenses constitutes the Index used for trend calculation purposes. Panama will be compared with Japan (country with a low crime rate) and USA (country with a high crime rate). According to the INTERPOL data, for murder, the rate in 1998 was 1.95 per 100,000 population for Panama, 1.10 for Japan, and 6.3 for USA. For rape, the rate in 1998 was 13.48 for Panama, compared with 1.48 for Japan and 34.4 for USA. For robbery, the rate was 141.65 for Panama, 2.71 for Japan, and 165.2 for USA. For aggravated assault, the rate in 1998 was 11.83 for Panama, 15.40 for Japan, and 360.5 for USA. For burglary, the rate in 1998 was 16.14 for Panama, 187.93 for Japan, and 862.0 for USA. The rate of larceny for 1998 was 629.34 for Panama, 1198.13 for Japan, and 2728.1 for USA. The rate for all index offenses combined was 814.39 for Panama, compared with 1709.88 for Japan and 4615.5 for USA. (Note: data were not reported to INTERPOL by the USA for 1998, but were derived from the Uniform Crime Report for 1998. Data for robbery and larceny for Panama were drawn from the United Nations report for 1994. Data for rape for Panama were drawn from INTERPOL report for 1995. No data were reported for motor vehicle theft for Panama in any year and are not included in the total for index offenses.)

For the first several years of its existence, Panama depended on the legal code inherited from Colombia. The first Panamanian codes, promulgated in 1917, were patterned on those of Colombia and other Latin American states that had earlier broken away from the Spanish Empire; therefore, Panama's legal heritage was based on Roman law as passed on through Spain and its colonies. Nevertheless, several features of Anglo-American law have also been accepted in Panama. Habeas corpus, a feature of Anglo-American legal procedure that is not found in many Latin American codes, has been constitutionally guaranteed in Panama. Judicial precedent, another Anglo-American practice, has also made some headway; however, judges and magistrates usually have had little leeway in matters of procedure, delays, and degrees of guilt.

The Public Ministry provided for in the Constitution has defended the interest of the state; fostered the enforcement and execution of laws, judicial decisions, and administrative orders; supervised the official conduct and the performance of duty of public officials; prosecuted offenses of constitutional or legal provisions; and served as legal adviser to administrative officials. The functions of the Public Ministry were fulfilled by the attorney general of the republic, the solicitor general, the district attorneys, and the municipal attorneys. There were two alternates for each official of the ministry; all were appointive positions. The attorney general, the solicitor general, and their alternates were executive appointees; district attorneys and municipal attorneys were appointed by their immediate superiors in the judicial system. They in turn appointed subordinate personnel in their own offices.

In addition to the stipulations of "free, prompt, and uninterrupted" administration of justice and the establishment of the Public Ministry, the Constitution has several other statements about the application of laws, the treatment of citizens under the law, and the handling of prisoners. Article 21 guarantees freedom from arbitrary arrest, and Article 22 provides for habeas corpus. Article 29 prohibits the death penalty. Article 42 provides that "In criminal matters, a law favorable to the accused always has priority and retroactivity, even though the judgement may have become final." Article 163 gives the president power to grant pardons for political offenses, to reduce sentences, and to grant parole. Article 187 states that a person convicted of an offense against public order may not hold any judicial office in the future. Article 197 establishes trial by jury.

Under a section of the Constitution headed "Individual and Social Rights and Duties," private citizens are assured that they can be prosecuted by government authorities only for violations of the Constitution or the law. The procedure for arrests is also described, stating that arrests may result from response to complaints made to the police or from direct action on the part of police or DENI agents at the scene of the crime or disturbance. The validity of citizen's arrest is recognized: "An offender surprised flagrante delicto may be apprehended by any person and must be delivered immediately to the authorities." No person may be held for more than twenty-four hours by the police without being brought before competent authority. The Constitution forbids arrest or detention for violation of purely civil obligations or for debts.

During the course of an investigation, the accused and all witnesses are questioned, the latter under oath. The Constitution guarantees that no accused person may be forced to incriminate himself or herself, and the authorities are forbidden to force testimony from any close relative, whether related by blood or marriage, that is, "within the fourth degree of consanguinity or the second degree of affinity." Investigators may enter a person's home only with consent or a written order (search warrant) from a competent authority or to assist victims of crime or natural disaster. In general, all testimony must be presented in written form and be signed by investigators, accused, and witnesses. If a case warrants prosecution, it is referred to the appropriate court. Although bail is permissible in some cases, it is a privilege subject to many restrictions and may be denied at the request of the prosecutor if a judge concurrs.

There was considerable evidence that many of these constitutional provisions were not realized in the daily lives of Panamanian citizens in the late 1980s. The most striking example was the case of Dr. Hugo Spadafora. Spadafora was a former senior government official, who had criticized the role of the Defense Forces in politics and the alleged role of Noriega in drug trafficking. Spadafora's headless body was found in Costa Rica near the border of Panama in September 1985 after reports that he had been taken into custody by members of the Defense Forces. There also were allegations that Dr. Mauro Zúñiga, head of an opposition group called the National Civilian Coordinating Committee (Coordinador Civilista Nacional--COCINA), was abducted and beaten.

Although the Constitution provides for habeas corpus and the prompt and uninterrupted administration of justice, several incidents suggested that these principles were sometimes violated. It should also be noted that various articles of the Constitution guaranteeing basic rights were suspended during the temporary state of emergency declared in 1987. Moreover, the government responded with excessive brutality to popular marches and demonstrations in Panama in mid-1987. According to a December 1987 United States Senate staff report on Panama, over 1,500 persons were arrested between June and September 1987. Credible evidence suggests that many of them were subjected to cruel and inhuman treatment while in jail.

The Police Forces (Fuerzas de Policía) in the mid-1980s included a number of major units and several smaller ones performing relatively minor functions. Most important was the National Department of Investigations (Departamento Nacional de Investigaciones--DENI), which has historically been viewed by many Panamanians as a kind of secret police. For most of its history, Panama has had organizations similar to the DENI. The undercover police began with the decree-law, issued by President José D. Obaldía in 1909, establishing a ten-man section in the Panama City Police and a five-man section in Colón, to engage exclusively in undercover police investigations. In effect, Obaldía created a detective organization supervised by the commander of the National Police.

In 1941, during the presidency of Arnulfo Arias Madrid, the enlarged detective agency became the National Secret Police and was removed from the jurisdiction of the police commander, although it remained under the Ministry of Government and Justice. According to the decree establishing it, the National Secret Police was to be the investigative agency dealing with infractions of the law as well as with conspiracies against the state or against national security.

In May 1960 President Ernesto de la Guardia, with the approval of the cabinet and the Permanent Legislative Commission, issued a decree-law that created the DENI to replace the National Secret Police. The new agency was removed from the Ministry of Government and Justice and placed in the Public Ministry under the direction of the attorney general. DENI powers were carefully delineated in the 1960 law; primarily an investigatory agency, it acquired broader authority that made it the Panamanian counterpart of the United States Federal Bureau of Investigation. Besides investigating crime, DENI was to maintain surveillance on known political extremists and potential subversives. DENI agents were authorized to maintain surveillance of hotels, pensions, and boarding houses in Panamanian cities in order to follow the movements of transients who might be potential violators of the law. The agency was also charged with administering a national identity bureau and with keeping records of all criminals and criminal activities. A fingerprint file was established by recording the prints of each citizen who applied for the national identity card (cédula).

DENI became a member of the International Organization of Criminal Police (Interpol). Sometime after the coup d'état of 1968, it was subordinated to the G-2 of the National Guard's General Staff. In the mid-1980s, the DENI was commanded by a major and headquartered in Ancón near Panama City. The overall strength of this organization and location of its agents were not publicized; however, it was generally assumed that Panama City, Colón, and David were its main areas of activity.

The Police Forces also included the Traffic Police (Dirección Nacional de Tránsito Terrestre), which was founded as a separate entity in 1969. Headquartered in Panama City, the Traffic Police regulated and controlled traffic throughout the country. Units were stationed in the cities and suburbs as well as on the back roads and highways, including the Pan-American Highway. In performing its countrywide duties, the Traffic Police coordinated with other FDP personnel in the posts and stations of eleven of the twelve military zones; coordination was not possible in the Twelfth Military Zone, located in the Comarca de San Blas, because of the lack of roads. Responsibilities of the Traffic Police included issuing, renewing, and revoking drivers' licenses and vehicle registrations; investigating accidents and infractions of the vehicle laws; inspecting vehicles for safety hazards; and developing training programs for safe driving. In the late 1980s, the force was commanded by a major.

The Police Forces also included small police units called the Tourism Police (Policía de Turismo) and Community Police (Policía Comunitaria), both commanded by lieutenants. The Immigration Department and the First Public Order Company (Doberman) first came under the control of the Police Forces in 1983. The Immigration Department was staffed by civilians, but was fully integrated into the FDP; its head reported directly to the FDP commander. The First Public Order Company, commanded by a captain, was charged with riot control and was the primary instrument used for this purpose in the 1980s.

Panama has had no military forces since 1989. The Panamanian Public Forces consisted of the Panamanian National Police (PNP), the National Maritime Service (SMN), the National Air Service (SAN), and the Institutional Protection Service (SPI). A 1994 constitutional amendment formally prohibits the establishment of a permanent military, although it contains a provision for the temporary formation of a "special police force" to protect the borders in case of a "threat of external aggression."

The Constitution prohibits the use of measures that could harm the physical, mental, or moral integrity of prisoners or detainees, and the public security forces generally performed in a professional and restrained manner. However, there was at least one reported case of excessive use of force against prison inmates during the year, and abuse by prison guards was an occasional problem. The General Penitentiary Directorate (DGSP) asserted that the problem had been reduced and that only minor incidents occurred.

The Constitution stipulates that arrests must be carried out with a warrant issued by the appropriate authorities, and the Government generally respected this provision in practice. Exceptions were permitted when an officer apprehended a person during the commission of a crime, or when an individual interfered with an officer’s actions. The Constitution also provides that suspects are to be brought promptly before a judge; however, lack of prompt arraignment remained a problem during the year. The law requires the arresting officer to inform the detainee immediately of the reasons for arrest or detention and of the right to immediate legal counsel, to be provided to the indigent by the State. Police arrested and detained children for minor infractions during neighborhood sweeps.

The Constitution also provides for judicial review of the legality of detention and mandates the immediate release of any person detained or arrested illegally. The Constitution prohibits police from detaining suspects for more than 24 hours without bringing them before a judge. Under the law, the preliminary investigation phase may last from 8 days to 2 months and the follow-on investigation phase another 2 to 4 months, depending on the number of suspects. The courts frequently granted extensions of time limits, leaving those accused in detention for long periods without having been charged formally. The law permits these extensions; however, many legal authorities (including court officials) criticized judges for excessive use of this measure.

Extended pretrial detention continued to be one of the most serious human rights problems, due in part to the elaborate notification phase in criminal cases. According to government statistics, as of December, 5,821 prisoners were pretrial detainees, or about 55 percent of the prison population. The average period of pretrial custody was 12 months, and pretrial detention in excess of the maximum sentence for the alleged crime was common.

Legal alternatives to prison existed; however, they were not implemented widely. Options such as house arrest were used in some cases involving the elderly or minors but required that the defendants have access to and understanding of their legal options. There was a limited program of work or study in lieu of some sentences.

The Constitution establishes the Supreme Court as the highest judicial body in the land. Judges must be Panamanian by birth, be at least thirty-five years of age, hold a university degree in law, and have practiced or taught law for at least ten years. The number of members of the court is not fixed by the Constitution. In late 1987, there were nine justices, divided into three chambers, for civil, penal, and administrative cases, with three justices in each chamber. Judges (and their alternates) are nominated by the Cabinet Council and subject to confirmation by the Legislative Assembly. They serve for a term of ten years. Article 200 of the Constitution provides for the replacement of two judges every two years. The court also selects its own president every two years.

The Constitution defines the Supreme Court as the guardian of "the integrity of the Constitution." In consultation with the attorney general, it has the power to determine the constitutionality of all laws, decrees, agreements, and other governmental acts. The court also has jurisdiction over cases involving actions or failure to act by public officials at all levels. There are no appeals from decisions by the court.

Other legislation defines the system of lower courts. The nation is divided into three judicial districts: the first encompasses the provinces of Panamá, Colón, and Darién; the second, Veraguas, Los Santos, Herrera, and Coclé; the third, Bocas del Toro and Chiriquí. Directly under the Supreme Court are four superior tribunals, two for the first judicial district and one each for the second and third districts. Within each province there are two circuit courts, one for civil and one for criminal cases. The lowest regular courts are the municipal courts located in each of the nation's sixty-five municipal subdivisions. In the tribunals, the judges are nominated by the Supreme Court, while lower judges are appointed by the courts immediately above them.

The Constitution also creates a Public Ministry, headed by the attorney general, who is assisted by the solicitor general, the district and municipal attorneys, and other officials designated by law. The attorney general and the solicitor general are appointed in the same way as Supreme Court justices, but serve for no fixed term. Lower-ranking officials are appointed by those immediately above them. The functions of the Public Ministry include supervising the conduct of public officials, serving as legal advisers to other government officials, prosecuting violations of the Constitution and other laws, and arraigning before the Supreme Court officials over whom the Court "has jurisdiction." This provision pointedly excludes members of the FDP.

Several constitutional provisions are designed to protect the independence of the judiciary. These include articles that declare that "magistrates and judges are independent in the exercise of their functions and are subject only to the Constitution and the law;" that "positions in the Judicial Organ are incompatible with any participation in politics other than voting;" that judges cannot be detained or arrested except with a "written order by the judicial authority competent to judge them;" that the Supreme Court and the attorney general control the preparation of the budget for the judicial organ; and that judges "cannot be removed, suspended, or transferred from the exercise of their functions except in cases and according to the procedures prescribed by law."

The major defect in the judicial system lies in the manner in which appointments are made to the judiciary. Appointments of judges and of the attorney general are subject to the approval of the Legislative Assembly, but that body has functioned as a rubber stamp for candidates selected by the executive. Lower-level appointments, made by superiors within the judicial organ, are not subject to assembly approval. In addition, the first two Supreme Court justices appointed after the 1984 elections were both former attorneys general, closely associated with the government and even involved in some of its most controversial actions, such as the investigation of the murder of opposition leader Spadafora. As a result, the opposition has denounced regularly the judicial system for being a political organ controlled by the FDP and the PRD. Numerous external observers, including the Inter-American Commission on Human Rights of the Organization of American States (OAS), the United States Department of State, and various human rights organizations, also have criticized the lack of independence of the Panamanian judiciary and of the Public Ministry.

The Constitution provides for an independent judiciary; however, the judiciary was susceptible to corruption and outside influence, including manipulation by other branches of government.

The President appoints nine Supreme Court magistrates to 10-year terms, subject to Legislative Assembly ratification. The Supreme Court magistrates appoint appellate (Superior Tribunal) judges, who, in turn, appoint circuit and municipal court judges in their respective jurisdictions. Judicial appointments are supposed to be made under a merit-based system, but the top-down appointment system lent itself to political influence and undue interference by higher-level judges in lower-level cases in which they often had no jurisdiction.

At the local level, mayors appoint administrative judges, or "corregidores," who exercise jurisdiction over minor civil cases and who hold wide powers to arrest and to impose fines or jail sentences of up to 1 year. In the past this system had serious shortcomings: Defendants lacked adequate procedural safeguards; administrative judges outside of Panama City usually were not attorneys; many had not completed secondary education; and some were corrupt. In practice, appeal procedures were nonexistent. The authorities encouraged corregidores to improve their procedures, and the number of local sentences imposed declined from 3,000 to 500 over 3 years. Nonetheless, affluent defendants still tended to pay fines while poorer defendants went to jail, which contributed to prison overcrowding.

In 1998 the Inter-American Development Bank loaned the Government $18.9 million to reform the judicial system; the Government contributed another $8.1 million to the program. Intended to improve judicial training, strengthen the investigative capabilities of the Attorney General's office, and reduce the civil courts’ backlog of cases, the program was scheduled to continue through 2004.

The Constitution provides that persons charged with crimes have the right to counsel, to be presumed innocent until proven guilty, to refrain from incriminating themselves or close relatives, and to be tried only once for a given offense. If not under pretrial detention, the accused could be present with counsel during the investigative phase of the proceeding. Judges could order the presence of pretrial detainees for the rendering or amplification of statements, or for confronting witnesses. Trials were conducted on the basis of evidence presented by the public prosecutor. Under limited circumstances, the law permits trials without the accused being present. The Constitution and the Criminal Procedure Code provide for trial by jury at the defendant's election, but only in cases where at least one of the charges is murder.

The Constitution obliges the Government to provide public defenders for the indigent. However, many public defenders were appointed late in the investigation, after the prosecutor already had evaluated the bulk of the evidence and decided either to recommend trial or to dismiss the charges. Public defenders' caseloads remained extremely high, averaging some 550 cases per attorney per year. Only 5 new public defenders have been hired since 1992; there were 38 nationwide, with a similar number of assistants. This heavy workload undermined the quality of representation, with many prisoners meeting their public defender for the first time on the day of trial. The inadequate number of public defenders also caused a backlog in trial dates, which also contributed to the problem of prison overcrowding.

Article 27 of the Constitution declares that the prison system is based on the principles of security, rehabilitation, and the protection of society. Provisions have been made to establish training programs designed to teach skills and trades that will afford prisoners the opportunity of reentering society as useful citizens after they complete their sentence. The same article also prohibits physical, mental, and moral abuse of prisoners. Juvenile offenders who were sentenced by a court were cared for in a special system that provided protection and education and attempted to rehabilitate minors before they came of age. Women were also segregated in the penal system.

The Department of Corrections was established in 1940 to administer the country's penal system for the Ministry of Government and Justice. Operation of the prisons had previously been a direct function of the National Police. The intention of the government officials who established the Department of Corrections was to end the inherent abuses in the system, but the new department was never properly staffed, and police had to be used as jailers. The same situation continued in the mid-1980s; because of understaffing in the Department of Corrections, most jails were staffed by members of the Defense Forces, and the prison system was still considered an entity of the FDP. Other abuses apparently also continued. Major complaints expressed about the penal system concerned overcrowding, poor sanitation facilities, and lack of adequate medical attention.

The Isla de Coiba has been the site of the Coiba Penal Colony, Panama's most severe prison, since 1919. Although most of its prisoners were sentenced by courts to specified terms, sometimes persons were sent to Coiba while awaiting the results of pretrial investigation or awaiting sentencing, a violation of judicial regulations, if, as indicated in the criminal code, Coiba was the most severe regime in the prison system. The prisoners were housed in a main camp and in several small camps scattered about the island, but there was no indication that pretrial detainees were segregated from prisoners serving sentences. In the main camp, there were some facilities for rehabilitation training and a small school; however, many of the inmates had little or no access to those facilities because they lived some distance from the main camp. Work was required of all prisoners including those awaiting trial or awaiting sentencing. Labor was unremunerated for the majority of prisoners, most of whom were engaged in farming and animal husbandry in areas that they or former prisoners had cleared of jungle growth. Some mechanics and other skilled craftsmen received small wages for their labor.

Another major prison, the Model Jail (Cárcel Modelo) in Panama City was built in 1920; over the years, however, it acquired a reputation that belied its name. Its biggest problem, one not unique to the Model Jail or to Panama, was overcrowding. Cells intended to house three inmates were frequently found to have as many as fifteen; this severe overcrowding may have accounted for the large number of pretrial detainees that were sent to Coiba. First offenders confined to the Model Jail were not always segregated from hardened criminals, a pattern that prevailed throughout most of the prison system. Prisoners awaiting trial were often confined for extended periods before their cases appeared on a court docket, and there were complaints that rights to habeas corpus had been violated by holding some offenders incommunicado.

There was a jail in each provincial capital. The same complaints of overcrowding and abuse of rights were reported from the outlying provinces.

In contrast to the conditions under which male prisoners served sentences and awaited trial, women received much better care. The Women's Rehabilitation Center (Centro Feminino de Rehabilitación) in Panama City appeared to be an ideal prison. The center was under the supervision of the Department of Corrections, as were all prisons in Panama, but it was operated by nuns who had established a reputation for discipline tempered by humaneness and decency. Few complaints were reported from prisoners at the women's center. When first arrested, however, women were sometimes held overnight or for several nights at the Model Jail where, even though segregated, women experienced conditions that differed little from those described for men.

The Constitution prohibits the use of measures that could harm the physical, mental, or moral integrity of prisoners or detainees, and the public security forces generally performed in a professional and restrained manner. However, there was at least one reported case of excessive use of force against prison inmates during the year, and abuse by prison guards was an occasional problem. The General Penitentiary Directorate (DGSP) asserted that the problem had been reduced and that only minor incidents occurred.

In year 2002, prison conditions remained harsh and, in some cases, life threatening, due largely to budget constraints. As of December, the prison system, which had an official capacity for 7,348 persons, held 10,529 prisoners. Most prisons were dilapidated and overcrowded, although Nueva Esperanza prison was newly refurbished. Many of the problems within the prisons resulted not only from obvious overcrowding but also from the lack of separation of inmates according to the type or severity of the crime committed. Pretrial detainees shared cells with sentenced prisoners, in part due to lack of space.

Medical care was inadequate, and prisoners sometimes suffered because of the negligence of the guards. Tuberculosis, AIDS, and other communicable diseases were common among the prison population. The European Union funded some legal, medical, and dental staff for prisons, and there was at least one doctor in each major facility. As of December, there were a total of 18 deaths in prisons during the year: 15 from illnesses, 2 from inmate murder, and 1 suicide.

There were some minor improvements in the prison system overall, including more training of civilian prison guards and PNP guards, who received courses on inmates' rights and penitentiary procedures, especially targeted at new officers and custodians. Other improvements included limited Internet access and computer literacy training for the first time in some women's prisons, more opportunities for work and training in prison, and more construction of new facilities.

Abuse by prison guards, both PNP and civilian, was a recurrent problem. Police officials acknowledged that they received and investigated 27 cases during the year; 20 for abuse of authority, and 7 for mistreatment of prisoners.

In November PNP guards reportedly hit and sprayed tear gas on 18 prisoners in the David prison; 2 were sent to the local hospital. Some prisoners then began a limited hunger strike. The Minister of Government and Justice ordered an investigation, and the PTJ director said that such events occurred on a regular basis in the prisons. At year’s end, the Public Ministry was investigating the incident.

In one high-profile case of guard abuse, 10 members of the PNP were suspended for beating naked prisoners with baseball bats in the (since closed) Modelo prison in 1998; they were convicted and jailed awaiting sentencing at year’s end.

The main prisons in Panama City included La Joya (a maximum-security facility), Tinajitas, the Feminine Center (women's prison), and the Juvenile Detention Center. Two additional facilities, La Joyita and El Renacer, held inmates generally accused of less serious crimes.

La Joya, holding most prisoners accused of serious crimes, had a planned capacity of 1,500 but housed 2,278 inmates in December. Gang violence was a problem. Conditions at La Joyita remained problematic, including inmate claims of severe overcrowding, poor sanitation, and abuses by prison custodians against inmates. At year's end, the facility held 2,444 inmates; it was designed to hold 1,770 inmates. Conditions on the island penal colony of Coiba remained harsh and dangerous. The DGSP no longer sent inmates to Coiba and planned to close it; in December the number of inmates had dropped to 52, compared with 114 in 2000. Coiba prisoners suffered from malnutrition and shortages of potable water.

Prison conditions in Colon province also were harsh. Although Nueva Esperanza, a consolidation and update of an older prison in Colon, opened during the year, by December its intended capacity of 800 was already exceeded, as it held 1,222 prisoners. In Nueva Esperanza, both male and female pavilions had separate sections for inmates convicted of administrative felonies, so they were not put together with inmates convicted of violent crimes.

The former public prison frequently had no running water or functioning sewage system and failed to provide the most basic health needs, and the DGSP no longer had any inmates there. The PNP still used it for short periods of time when they had a detainee under their responsibility, but transferred persons to Nueva Esperanza prison as soon as possible.

There were prisons of significant size in David and Santiago. Small jails attached to local police stations around the country sometimes housed prisoners for the entire length of their sentence. The authorities frequently did not address cases of abuse and neglect in these provincial jails, due to their low profile in the prison system. Early in the year, the Ombudsman visited La Chorrera prison in Panama province to highlight the extremely delapidated conditions there.

In December 25 prisoners in the Santiago prison in Veraguas province initiated a hunger strike to protest "physical and social mistreatment" by jail authorities, alleging that they did not provide medical care, damaged inmates' personal effects, and made family visits difficult. The penal authorities denied these claims and asserted that these prisoners were treated well, and often had relatives and friends bring in drugs and weapons. At year's end, the matter was under investigation.

The DGSP largely depended on 1,500 PNP officers to supply both internal and perimeter security at all prisons. There were over 250 civilian corrections officers (or "custodians"), but due to insufficient funding, the DGSP was not able to hire new civilian custodians during the year. As a result, regular PNP officers still were used to fill staffing gaps. PNP officers were sometimes untrained for prison duty and found the assignment distasteful, which contributed to tension and abuses within the prison system. The Government sent 30 civilian custodians to a 4-month training program in Colombia. Custodians handled inmates within La Joya, El Renacer, and the central women's prison, which used only female guards. The DGSP did not have authority to discipline prison guards with criminal or civil sanctions; only the PNP disciplinary board could sanction a PNP agent or a custodian.

Throughout the country, conditions at women's prisons and at juvenile detention centers were noticeably better than at adult male prisons. However, female prisoners, especially those in the primary detention area, reportedly suffered from overcrowding, poor medical care, and lack of basic supplies for personal hygiene.

There was one modern juvenile detention center near Panama City; however, several juvenile detention centers throughout the country suffered from inadequate resources to provide for education or adequate supervision of children, many of whom spent the majority of their time in a bare cell.

About 9 percent of prison inmates were foreigners (primarily Colombians), most of whom were serving sentences on drug charges. Although Panama and Colombia had a prisoner exchange treaty, the Government complained that Colombia did not respond or was very slow to comply with requests to accept prisoners, reportedly due to overcrowded conditions in Colombian prisons.

The law and the Penal Code provide for conditional release programs for inmates charged with minor offenses who have served a substantial part of their sentence; however, this provision was not implemented consistently in practice. A conditional release program was part of the organizational reforms that authorities introduced in 1998. During the year, the DGSP provided conditional release forms to the President for her signature in a more timely manner than in previous years.

Domestic violence against women continued to be a serious problem. The 1995 Family Code criminalized family violence (including psychological, physical, or sexual abuse), but convictions were rare unless a death occurred. In September 2001, the code was revised to strengthen the penalties for domestic violence and to include penalties for domestic sexual assault. The PTJ registered 1,801 cases of domestic violence during the year, compared with 673 during 2001. As of November, the PTJ also received 506 cases of rape and 99 cases of attempted rape during the year, compared with 395 cases of rape and 82 cases of attempted rape in all of 2001. The Center for Women's Development estimated that victims reported as few as 20 percent of sexual assaults to judicial or law enforcement authorities. Spouses or other family members frequently were the perpetrators. The Foundation for the Promotion of the Woman, among other women's advocacy groups and government agencies, operated programs to assist victims of abuse and to educate women on their legal rights.

The Labor Code prohibits sexual harassment; however, it remained a problem. Anecdotal evidence suggested that many women were propositioned for sexual favors at the time of their initial job interview.

The 1995 Family Code recognizes joint or common property in marriages. However, insufficient resources hampered government efforts to enforce the code's provisions effectively. According to a Supreme Court justice, 80 family judges were required to handle this caseload; however, only 20 had been appointed due to lack of resources.

The Constitution mandates equal pay for men and women in equivalent jobs, but wages paid to women were on average 30 to 35 percent lower and increased at a slower rate. There were credible reports of irregular hiring practices based upon age and "appearance." A 1998 law prohibits discrimination on the basis of sex.

The Ministry of Women, Youth, Family, and Childhood was largely a consolidation of departments previously operating in other government ministries, and its activities did not attract a great deal of public attention. Through the National Directorate of Women and the Center for Gender Training, the Ministry promoted equality of women in the workplace and equal pay for equal work, attempted to reduce sexual harassment, and advocated legal reforms. A number of private women's rights groups concentrated on disseminating information about women's rights, countering domestic abuse, enhancing employment and other skills, and pressing for legal reforms.

Minors (under 18 years of age) represented 37 percent of the population. Education is compulsory through the equivalent of 9th grade, but children did not always attend school due to traditional attitudes, financial considerations of the family, lack of transportation, and insufficient government resources to enforce the requirement. The problem was most extreme in Darien Province and among indigenous groups. The Government furnished basic health care for children through local clinics run by the Ministry of Health, but clinics were difficult to reach from rural areas and often lacked medicine. A central children's hospital in Panama City operated with government funds as well as private donations.

The Ministry of Women, Youth, Family, and Childhood concentrated on child welfare problems such as children begging in the streets and roaming cities at night, infant and child malnutrition, and juvenile delinquency and gangs. The Ministry also sponsored a youth conference that attracted several thousand participants. A U.N. Development Program report showed that despite a relatively high proportion of public spending devoted to social programs, poor results on human development indicators suggested that the funds were not used efficiently.

The Superior Tribunal for Minors and Superior Tribunal for Families are judicial authorities charged with overseeing the protection and care of minors. The Minister of Women, Youth, Family, and Childhood acted much like an ombudsman, and the office proposed and reviewed laws and monitored government performance. Through November the PTJ registered 224 cases of child abuse, compared with 102 through September 2001. Neglect of children was a problem. Malnutrition and inadequate medical care were generalized problems, most severe among rural indigenous groups. Child labor and trafficking in children were problems.

Inadequate resources and training available to the family courts resulted in several controversial decisions, including one highly publicized case in which a child was returned to an abusive situation.

Juvenile courts continued to report a high incidence of juvenile delinquency in major urban areas. The authorities reported a continued increase in such crimes as drug trafficking, armed robberies, kidnapings, car thefts, and murders attributed to juveniles. Youth participation in criminal gangs was an increasing problem. Police arrested and detained children for minor infractions during neighborhood sweeps.

The Penal Code prohibits trafficking in women and children; however, trafficking remained a problem. The Penal Code provides for prison sentences of 2 to 4 years for the promotion or facilitation of the entry to or exit from the country of a person for the purposes of prostitution. In some circumstances, the penalty is increased to 6 years. Minor corruption, legal technicalities, and lack of resources contributed to the Government's inability to combat the problem fully. Traffickers occasionally bribed or evaded local law enforcement officials. Prostitution is not illegal; most prostitutes came with that explicit intention. During the year, police and immigration officials occasionally conducted raids on houses of prostitution.

The country was a destination for women and girls trafficked for sexual purposes from Colombia and the Dominican Republic. Trafficking in women and girls for sexual purposes occurred within the country, but the extent of the practice was unknown.

According to a report by the NGO International Human Rights Law Institute, trafficking assumed a cover of legality under a visa program for "alternadoras" (escorts) managed by the Directorate of Migration and the Ministry of Labor. In 2000 more than 700 women from Colombia were granted such visas for temporary work, stating the club or massage parlor where they intended to work, so most came with the explicit intention of prostitution rather than being deceived with promises of other employment. During the year, only about 40-50 alternadora visas were granted.

The country was primarily a transit point for aliens seeking to reach the United States, some of whom were trafficked into indentured servitude. The majority of the estimated 30,000 aliens transiting Panama originated in Ecuador and Peru, but a significant and increasing number came from India and China. Their travel was facilitated by a network of alien smugglers, travel agents, hotels, and safe houses. Prosecutions were rare, but one person was convicted for alien smuggling during the year. Anecdotal evidence indicated that illegal aliens transiting through the country were subject to frequent hardship. They commonly were deprived of adequate food and shelter. Chinese aliens particularly were vulnerable to poor treatment, and ultimately those trafficked for the purpose of forced labor were coerced into working off their debt, which could be as high as $30,000, as indentured servants. The Government did not conduct educational campaigns to warn of the dangers of trafficking, and there were no programs to aid victims.

Panama's role as a major transit point for illicit drugs heading to North America and other global markets is enhanced by its proximity to major drug-producing countries, location on key transportation routes, openness to trade, and weak controls along borders and coasts. Its dollar-based economy, Colon Free Zone (CFZ), and large, well established, and until recently, loosely regulated banking sector, make Panama attractive to money laundering. Panama's law enforcement agencies have maintained excellent relations with their U.S. counterparts. With USG support, during 1998, the Government of Panama (GOP) made significant improvements in its National Maritime Service (SNM-coast guard ) and National Air Service (SAN) enabling them to become effective partners in international efforts to intercept illicit drug shipments. Preliminary data show 1998 Panamanian interdiction efforts seized near-record amounts of illicit narcotics. The GOP has anti-money laundering mechanisms in place, but its ability to identify, investigate, and prosecute money laundering suffered from an inadequate legal framework. Talks on a full Maritime agreement remain stalled and negotiations to establish a Multinational Counternarcotics Center failed in September 1998. A party to the 1988 UN Drug Convention, Panama has its own 5-year (1996-2001) counternarcotics plan stressing prevention, treatment, and law enforcement.

In late 1998, the GOP introduced a bill in the National Assembly to move the Technical Judicial Police (PTJ) from the control of the Attorney General to the Supreme Court. This proposal received strong criticism in the press and from attorneys. Given the judiciary's past susceptibility to political manipulation and threats, placing the PTJ under the courts could adversely affect the anti-drug effort, hopes for administration of justice reform and U.S.- PTJ cooperation.

Panama remained a major drug transit country because of its proximity to drug-producing nations and its still inadequate border, airport, and maritime controls. While it has become a consumer of illicit narcotics, Panama has not become a significant producer of drugs or precursor chemicals.

Panama's large and sophisticated banking and trading center, its U.S. dollar currency, and Colombia as a neighbor make it an attractive target for money laundering, including that connected to drug trafficking. However, there are no verifiable estimates on the total amount of money laundering, whether narcotics related or not, that takes place via banks, other financial institutions, real estate, or the CFZ.

The GOP enacted a major banking reform to bring Panama into compliance with Basel Accord standards. The reform replaced the National Banking Commission with a Banking Superintendent. The new Superintendent has begun organizing the office, hiring and training staff, and drafting implementing regulations as well as issuing a strong reminder to the banks of their responsibilities under Panama's money laundering laws and regulations.

Panama continued to implement its own national counternarcotics plan. "The National Drug Strategy - 1996-2001." The strategy, under the authority of the Attorney General, coordinates GOP and NGO work and stresses prevention, treatment, rehabilitation, reinsertion into the labor force, control of supply, and interdiction.

In August, Panama hosted the "Second Hemispheric Congress on the Prevention of Money Laundering," organized by the GOP's Financial Analysis Unit (UAF) and the Panama Banking Association. Attending officials and experts from Latin America, the U.S., and Europe gathered to focus on money laundering issues.

GOP agencies seized 11.771 metric tons of cocaine, 16.53 metric tons of marijuana and 22 kilograms of heroin in 1998. The Technical Judicial Police (PTJ) seized 75 percent of the total; the National Police (PNP), Customs (DGA), and SMN accounted for the rest. Cocaine seizures in 1998 surpassed record 1997 seizures. Heroin seizures decreased from 1997's level; crack seizures through September amounted to almost five times those in 1997. Marijuana seized in 1998 exceeded 1997's total of 14.1 metric tons.

Through October 1998, authorities arrested 1532 persons on drug charges (675 for possession, 857 for trafficking). While no arrests of major traffickers took place, 1998 saw a dramatic example of close U.S.-GOP cooperation; Panama expelled to the U.S. a major Colombian maritime narcotics smuggler, Jose Castrillon Henao, under arrest since 1996. The GOP and the U.S. also worked closely in a successful effort to disrupt a major international drug trafficking and money laundering organization based in Central America.

There are reports of drug labs and small-scale coca harvesting in remote areas of Darien province along the Colombian border, managed by armed men, perhaps Colombian paramilitaries or guerrillas of the FARC (Colombian Revolutionary Armed Forces).

Panama's Joint Information Coordination Center (JICC) continued effective cooperation with GOP and U.S. agencies, such as the El Paso Intelligence Center (EPIC).

Notable changes in leadership of the law enforcement establishment took place. The Director of the JICC was changed, as was the National Security Advisor. The GOP replaced the National Air Service (SAN) leadership when investigators found flawed maintenance procedures after the fatal crash of an INL-provided helicopter. SAN morale and effectiveness rose notably, allowing the service to assume a growing role in interdiction efforts as a result of this change. After the Minister of Government and Justice resigned in November, a new Minister, who is particularly interested in prison reform, took office.

In late 1998, the GOP introduced a bill in the National Assembly to move the Technical Judicial police (PTJ) from the control of the Attorney General to the Supreme Court. Given the judiciary's past susceptibility to political manipulation and threats, placing the PTJ under the courts could adversely affect the anti-drug effort.

The GOP remains under strong domestic pressure to adopt major and long-needed economic reforms, maintain fiscally responsible policies, and respond to many urgent social needs. As a result, the GOP, remained dependent on other countries to provide critical law enforcement resources. This situation limits the ability of GOP agencies to participate as equal partners with foreign counterparts. The National Maritime Service (SMN) and the National air Service (SAN), for example, suffered shortages of fuel and other basic supplies, and had difficulty keeping skilled personnel. In 1998, however, with U.S. support, the SMN obtained new ships, and headquarters and docking facilities on the Pacific coast. The U.S. and the GOP are cooperating to establish an Atlantic base for the SNM.

The move of the PTJ to the Judiciary could complicate the traditional good working relations of USG and Panamanian law enforcement counternarcotics agencies. Although time will tell, the Judiciary's unprotected position makes them, and now the PTJ, susceptible to threats and manipulation from criminal and political sources.

Law 13 of 1994 established penalties for manufacturing and trafficking in precursor chemicals, but Panama lacks a comprehensive chemical control law or regulatory/enforcement infrastructure. Panama began development of a national chemical control program in 1998with cooperative efforts between the PTJ, Customs, the Ministry of Health and the Colon Free Trade Zone. The PTJ is the lead agency conducting investigations, issuing and revoking chemical handling permits and tracking chemical shipments. However, there is much work ahead developing legislation, defining the roles of cooperating government agencies and controlling shipments of precursor chemicals without impeding legitimate trade in the Colon Free Zone.

There were no reported cases of major law enforcement officials involved in drug-related corruption in 1998.

The GOP discourages the production and distribution of narcotic or psychotropic drugs or other controlled substances, and the laundering of proceeds from illegal drug transactions. There is no evidence that senior officials engaged in, encouraged, or facilitated the illicit production or distribution of drugs. The U.S. and Panamanian approaches to handling money-laundering cases differ considerably. Panamanian officials have sought to warn, perhaps unwitting, Panamanian citizens and firms against involvement in potential money laundering transactions; the U.S., on the other hand, emphasizes building a prosecutable case against those involved in such transactions.

Panama is a party to the 1988 UN Drug Convention, the 1961 Single Convention on Narcotic Drugs and its 1972 Protocol, and the 1971 Convention on Psychotropic Substances. The GOP ratified a Mutual Legal Assistance Treaty (MLAT) with the U.S. in 1991, which went into effect in 1995. The GOP participates in CICAD, the Caribbean Financial Action Task Force (CFATF) and the Basel Committee's Offshore Group of Bank Supervisors (OGBS). In addition, Panama has bilateral agreements on drug trafficking with the United Kingdom, Colombia, Mexico, Cuba, and Peru; it has MLATS with the UK, Colombia, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.

Panama became the first Latin American country to join the Egmont Group in 1997, an alliance of some 30 nations with centralized financial analysis units to combat money laundering. As noted, Panamanian laws will need revision to allow the UAF to share information to develop money-laundering prosecutions.

In 1998, the USG signed letters of agreement to provide counternarcotics assistance training to the SAN. However, after an investigation of a fatal crash of an INL-provided helicopter revealed faulty maintenance procedures by the SAN, the USG and the GOP canceled an agreement whereby INL loaned the SAN six helicopters. The U.S. withdrew the damaged helicopter and the five surviving aircraft. The U.S. supported law enforcement training, language training for members of the UAF, and drug abuse prevention seminars by the Ministry of Education, among others.

The GOP and the USG announced in September the unsuccessful conclusion of negotiations for the establishment in Panama of a Multinational Counternarcotics Center (MCC). The two sides could not reach agreement on the parameters of the center, which would have involved a limited U.S. military presence for counternarcotics operations, disaster relief and humanitarian missions beyond the December 31, 1999 reversion of the canal and U.S. military properties in Panama. Negotiations for a Comprehensive Maritime Counternarcotics Agreement between the USG and the GOP concluded in 1997. As of the end of 1998, however, the GOP had still not signed the agreement.

Preliminary information received late in 1998 indicated that limited coca cultivation in the Darien may have resumed. A joint eradication campaign in 1996 eliminated around 125 hectares of illicit coca cultivation in Darien. In September 1998, the SAN undertook an aerial eradication of 6.6 hectares of marijuana on San Miguel and Pedro Gonzalez islands.

Panama is an important hub for the distribution of South American-origin cocaine. The drugs pass through Panamanian waters in fishing craft and "go-fast" boats and either continue on to other Central American countries or are dropped off in Panama. The shipments that get dropped off in Panama are repackaged and moved northward on the Pan-American Highway or depart in sea freight containers. Cocaine (and heroin, see below) is also moved to the U.S. and Europe by couriers transiting Panama by air, particularly to Spain, the Netherlands, Germany, and the United Kingdom.

Multi-kilogram (over 100 kilograms) cocaine shipments transit Panama destined for North America or Europe. As reported in prior years, however, about 20 percent of seizures consisted of drugs meant for Panamanian consumption. Cocaine traffickers often pay Panamanian employees in kind; much of this cocaine subsequently gets turned into crack or "bazuco" for sale to Kuna Indians and urban youth. Kuna leaders have expressed concern over the impact of the drug trade on their society.

Colombian-origin heroin continued to appear in significant quantities during 1998, indicating that South American drug organizations remain committed to increasing their share of the high-value heroin market.

The use of cocaine remained a major concern. Local studies show Panama with one of the highest levels of cocaine use in Central America. The Ministry of Education seeks to promote demand reduction through a five-year (1994-1999) plan which includes training for teachers, information programs, anti-drug abuse training for youth, school curriculum programs, an anti-smoking program, and support for the National Drug Information Center (CENAID). These efforts receive the support of the Ministry of Health's treatment and rehabilitation programs and those of the Catholic Church, Panamanian NGO "Cruz Blanca," the University of Panama, the "Panama Coalition for a Drug- Free Community," and the "Pride Foundation." The Office of the First Lady of Panama has had a particularly active role in furthering drug awareness among youth.

The U.S. provides equipment, training, and information to enhance the performance of GOP counternarcotics institutions. The USG seeks to strengthen Panama's judicial system, encouraging the enactment of more effective laws and regulations, and ensuring strict enforcement. U.S.AID has begun to develop a comprehensive Administration of Justice (AOJ) program to address critical flaws in the system of justice legislation.

Panama appears politically committed to improving its counternarcotics performance as evidenced by continuing cooperation with the U.S. on major drug trafficking cases. Another example of excellent cooperation is the quick passage of legislation to allow expulsion of a foreign national resulting in being transferred to the U.S. to await trail on drug trafficking and money laundering charges. However they are less effective in suppression of money laundering. The GOP cooperates with U.S. requests to board and search Panamanian-flagged vessels suspected of drug smuggling. In 1998, U.S. and Panama carried out "Operation Conjuntos," a land and sea interdiction operation on Panama's Caribbean coast. The operation involved U.S. Coast Guard, U.S. Navy, U.S. Army, DEA, SMN, SAN, and PNP. The U.S. Immigration Service and U.S. Customs, with GOP counterparts and the PNP also executed a major interdiction operation along the Costa Rican border against alien and drug trafficking.

The USG has numerous programs with the GOP and supports many counternarcotics-related assistance projects. During 1998, the U.S. Coast Guard continued to work closely with the SMN, helping build it into an effective maritime interdiction force. During the year, U.S. Coast Guard and U.S. Navy elements worked closely with the SMN and the SAN in several high-speed chases of Colombian go-fast boats, resulting in seizures, arrests, and aborted drug runs.

The USG provided training, equipment, and other support to the PTJ, the JICC, the Office of the Drug Prosecutor, the National Banking Commission, the Bank Superintendent, Customs, Immigration, UAF, UIF, and the National Committee for Criminal Statistic Analysis (CONADEC). The U.S. ceased supporting the CFZ canine unit following changes in the Unit that lessened its effectiveness. The new CFZ administrator expressed an interest in revamping the unit and providing it additional resources.

The U.S. continued to help fund Ministry of Health drug prevention literature, as well as anti-drug seminars, workshops, and conferences by the Ministry of Education, Panama's Medical Association, the National Psychiatric Hospital, and CONAPRED. It also funded training and attendance at seminars for GOP officials.

In June 1998 a State Department-funded U.S. Customs Regional Panama/Costa Rica Narcotics Interdiction Course was conducted in Volcan, which included 15 Panamanian participants representing Customs, Technical Judicial Police, Immigration and drug prosecutors. Panamanian Customs has attributed numerous land border seizures to this program. In addition, U.S. Customs presented six Air and Sea Carrier Initiative Program Seminars in Panama City in 1998, as well as security site surveys at Tocumen International airport. Sixteen Panamanian officials attended three International law Enforcement Academy (ILEA) South courses in Panama and Costa Rica in 1998. Six Panamanian officials participated in an OAS-funded Regional Port Security Seminar in September 1998.

Panama is one of seven countries participating in the U.S. Customs Americas Counter Smuggling Initiative (ACSI), designed to deter narcotics smuggling in commercial cargo shipments and conveyances by enhancing cooperative law enforcement and private sector security programs at manufacturing and export facilities. Customs ASCI teams were deployed to Panama twice in 1998.

Fundamental reform of the judicial system remains a primary need to ensure efficient and fair processing of those accused of drug (and other) crimes and to free the courts from influence-peddling and manipulation. The placement of the PTJ under the courts will require special vigilance. A principal goal of the U.S. will be conclusion of the Comprehensive Maritime Counternarcotics agreed to in 1997. Within the understandable limits posed by the many demands on its budget, we must encourage the GOP to provide sufficient funds to law enforcement agencies to ensure they have adequate personnel, training, and equipment. The USG will work with the GOP to continue to implement and refine the banking reforms announced in 1998. A major goal will be to seek enactment of legislation that will extend the existing law against drug money laundering to include the proceeds from all serious crimes, and to permit the UAF to share information with counterparts.

ACKNOWLEDGEMENTS

Internet research assisted by Randall Ahmann and Emmanuel Martinez