Created: 8/5/1968

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Intelligence Memorandum

The Postelection Outlook in Panama

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The Postelection Outlook in Panama


Arnulfo Arias will enter the'presidencyctober following one of the most viciouscampaigns in Panama's history. Hisover the government candidate resultedrolonged legal struggle over the votefor deputies to the National Assembly and the composition of the assembly remainsined. Arias is trying towo-thirds majority in order to give his National Union coalition control of the assembly.

So far Arias hasillingness to tackle Panama's many problems. The unpredictable nature of the man makes it difficult, however, to determine whether he will remain reasonable once in office or will return to the authoritarianism of his earlier, short-lived administrations. he appears anxious to maintain goodwith the US, and to have laid the groundwork for close cooperation, his handling of the canal treaty issue will be central to the course of future US-Panamanian relations.

Rote: This memorandum was produced solely by CIA. It was prepared by the Office of Current Intelligence and coordinated with the Office of National Estimates, the Office of Economic Research, and the Clandestine Services.

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Afternath of8 Election

It is now all but certain that Arnulfo Arias will assume the presidencyhird time on 1 His victory in May followed what is generally conceded as one of the most vicious political campaigns in Panamanian history. The electionwas characterized by flagrant fraud--exceptional even by Panamanianthe part of the These tactics backfired, how* ever, when criticism of electionand efforts to rig the returns in favor of governmentDavid Samudio caused Guard Commandant Vallarino to shift his support to Arias.

President Robles appears to have accepted Arias' victory, but Samudio and his die-hard followers have not. Thus far, however, their attempts to deny the legitimacy of the National Elections Board's decision in favor of Arias have done little more than prolong tensions; they are unlikely to preclude installation of an Ariasin October* Even if Arias is removed fromat some future date, those who control the power levers are not likely to look to Samudiouccessor regardless of what his legal claims may be.

The focal point of postelection politicalhas been the struggle for control of theTribunal, which is legally designated as the final arbiter of electoral disputes. During the past several months. National Union (NU) leader Arias has used his majority on the elections board to stall the vote count for deputies to the unicameral Nationalwhile his supporters sought to gain ascendancy on the three-member tribunal. The impasse was broken onuly when the National Guard escorted an Arias partisan to his seat on the tribunal, removing the threat that it would rule for Samudio in any dispute over the vote count. Arias has stated privately that he is determined to arrange the "election" of enough deputies to ensure future passage of his proposed He reportedly hasimple majority in the

assembly, and if he has his way, he maywo-thirds majority, orotaleats,

4. Whatever the outcome of the current legal imbroglio, the constitutional questions surrounding the electoral controversy are likely to provide contentious issues for months to come. Samudio has still not given up, but he appears to have exhausted most of the available legal In view of Samudlo's lack of popularhowever, efforts by his news media to maintain the fiction of his "victory" arc likely to fare poorly* Most of the elite families of Panama have demonstrated their willingness to go to almost anyhave already formed an alliance with their old enemyto keep Samudio froa the presidency* The most that Samudio can hope for is to win enoughin the National Assembly to oppose what1 ever programs the Arias administration Left-wing journalists aligned with Samudio have already adopted the line that Arias was forced on Panama by the US, in collusion with the National Guard,oans of ensuringof canal treaties detrimental to Panama, While this campaign is in part an alibi forit may presage the opposition line for the next assembly session.

Anas' Preinauqural Preparations

S. In what isigorous and sincere attempt to gear hisood start, Arias has begun to lay the groundworkrogramroad range of economic, social, andreforms. His appointmentumber of commissions to study problems such as housing, education, agrarian reform, and government reorganization seems toavorable disposition toward the goals of the Alliance for Progress. Onther hand, this could beacade to keep his followers occupied and interested during the last days of the lame-duck Robles administration. Arias has asked for, and received, US Embassy briefings


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theand his colleagues have indicated anin moving rapidly toreat deal during the next four years, Arias may wall change his posture according to his personal whims once in power. It is much too early to predict whether this enthusiasm will be translated into action once Arias is at the helm,apport haa been established that couldositive basis for future relations with the US.

6. Arias has not yet disclosed hisabout cabinet appointments, presumably to avoid strains within hia coalition before the inauguration. Bis currantarge segment of the oligarchy, havetaker, the lion's share of the spoils of office and they are cautiously awaiting the first move from Arias. Thay are probablyon substantial returns for their investment in Arnulfo, and the bargaining over patronage could be the first real test for the disparate alliance. Since Arias is not known either for his tact or ability to compromise, oldand animosities could be revived if adevelops over the division of governmental appointments. Arias apparently is aware of this potential dilemma, and may exercisein order to avoid the pitfalls of his earlier short-lived administrations. InArias may have to rely heavily on talent from other NU parties because of theof experienced personnel within his own Panamenista Party. It has been overears since he was last in tha presidency, and very few new faces have appeared in the upper echelons of the party -during that time.

Canal Treaties Issue

has generally avoidedthe canal treaties since the election,has concentrated on domestichis advisers have given thethat they do not expect an earlyof treaty negotiations. It isArias is reluctant to raise thisissue until he hashance toit after he takes office.

Arias and the National Guard

Despite the surface rapprochementArias and National Guard Commandantthe president-elect continues todeep reservations about the loyalty of the guard chief and his key officers. The guard's ubiquitous role in the impeachment crisis last March and subsequently in theelections has intensified Arias'of the organization and concern overosition as final arbiter in Panamanian While he is obviously content to letride on this issue for the moment, there are indications that he israstic reorganization to giveirm grip over the military establishment after he takesin October. Without complete control. Ariasepeat of the episode1 when he was removed from officeiolentwith guard forces.

Although it is generally accepted that General Vallarino will have to resign or be removed, many officers would balk at anyoverhaul of the guard. Even Arias'allies are keenly aware of their need for guard support in the event that Arias returns to the authoritarianism of his pastand they would probably look askance at any arbitrary attempts to alter the command structure. ove mightombined attempt by the guard and the oligarchy toArias and replace him with the viceof their own; this scenario has been used in Panama in the past.

Social and Economic Conditions

crisis surrounding themall effect on Panama's economy. over the outlook for politicaland the wait-and-see attitude withgovernment policy under Arias have resulted

in some slackening in foreign investment, but the rapid growth that has characterized thein recent years has not been seriously Predictably, the benefits of this growth have been felt mainly by the wealthy classes, although unemployment is not quite as serious as it was several years ago. Rural underemployment continues, however, toroblem. Efforts by the Robles government to attack urban poverty, begunre only beginning to be felt. Slum areas bordering the Canal Zone have longocal pointial and political discontent, and efforts to eradicate them are only beginning. Modest US financial aid will probably remain essential for rapid social gains under the Alliance for Progress.

Arias hashis government will alleviate theills that have plagued Panama'surban population and the masses ofagricultural workers in theability to meet his political commitmentlivingpositive growthdependextent to which he can push reformshis conservative partners in theUnion and the foreign investors whomuch of the recent economic boom. find himself caught in the sameincumbent President Robles, who was unable

to introduce needed reform measures because of pressures from the oligarchy and the need to reserve whatever strength he had in thefor treaty ratification. Although Arias' campaign platform was moderate by Panamanian standards, his administration may reflect the unpredictable and contradictory nature of the man himself.

There are reasons for cautiousregarding Panamanian prospects over the short tern. Arias seems interested in attacking Panama's myriad problems as well as in maintaining close relations with the US. He will probably face formidablehowever, in keeping the National Guard and the oligarchy on his side, and any hinteturn to his earlierwould erode their support. Ariasregards his election victoryandate for improving the lot of the lower classos andanal treaty beneficial to Panama. His overwhelming concern now appears to bo the formation of his government and the policies it will pursue, but he will probably return to the dominant topicanal treaty revision as soonew administration is inaugurated in the US.

Arias will ben August andthis is his last crack at the He would like to be the president who achievos abrogation of3 canal treaty and ratificationew pact. Much will depend, however, on what he demands from the US in renegotiation and,ettlement is concluded, how well he can mobilize somethingonsensus for enactment.

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