Clearly, the Caribbean and Central America represent a political as well as (almost literally) a geographical crossroads of American Foreign policy. Central America is the Western hemisphere's "slim waist"; if the area--or any large part of it--falls into hostile hands, U.S. policy in South America will be effectively blocked. The Caribbean is a closed sea, with the Panama Canal offering the only real access between two great oceans, and the eastern islands serving as a natural outer defense perimeter.
The republican of Panama is situated on the isthmus that connects North and South America. Costa Rica is situated on its west cost, Colombia on its east coast, and the northern and southern coasts are bordered by Caribbean Sea and the Pacific Ocean, respectively. The 2.1 million people in Panama are basically Caribbean Spanish speaking; however, because of the American influence in the Panama Canal Zone, English is widely used.
Panama achieved independence from Spain in 1821 and thereafter joined the Confederation of Greater Colombia. In 1903, Panama proclaimed its own independence after Colombia rejected a treaty enabling the United States to build the canal. From the time that the canal was built, Panama's economy has been oriented toward servicing transit trade and international commerce, and in the 1960s the country achieved rapid economic growth. Progress, however, was seen only in urban areas and nearly half of the population still is engaged in subsistence agriculture and has little contact with the revenues generated through international commerce.
Since 1968 Panama has developed into a major international financial center, thanks in large part to liberal banking laws, its location, good communications and transportation facilities, absence of exchange controls, and use of the dollar as currency. Nonetheless, in the mid-seventies, Panama was a victim of the worldwide recession triggered by the fourfold increase in the price of petroleum. Together with a simultaneous drop in private investment, the country's real growth came to a virtual halt. Thus, the government became hopeful of new canal treaties with the United States which would provide a stable investment climate to encourage private capital to return to the country.
On August 10, 1977, the United States and Panama reached agreement in principle on the basic elements of two new canal treaties, which will replace the 1903 agreement; it provides for the gradual takeover by Panama of the canal, and the withdrawal of U.S. troops, to be completed by 1999. U.S. payments will be substantially increased in the interim, and the permanent neutrality of the canal has been guaranteed.
Growing unrest
The turnover of the canal to Panama has been followed by a new dimension of ideological unrest throughout the isthmus--and there are many who suspect a direct cause-and-effect relationship. Guerrilla war, terrorism, and sporadic violence have long been commonplace in the area but with Nicaragua adding fuel to the fire the United States faces a new and very real "domino" threat in its own backyard.
At stake in the hemisphere's "cold war" of the 1980s, therefore, is the future political and strategic direction of all of Latin America as well as the future security of
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