Created: 5/7/1964

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There are tvo basic and related factors ln the current situation ln Panama which could with little warning erupt into violence much more damaging to US Interests even than the riots of last January. These factors axe the Increasing fragility of the social order ln Panama and the very strong national concensus that has developed in Panamaasic revision of the Canal arrangements with the US. These two factors are related because the latter ls being exploited in an effort to divert publicfrom the former. Whatever the outcome of next Sunday's elections, these explosive factors willelection violence provides tho spark that sets off the highly combustible situation.

2.* The entrenched oligarchy that has dominated the political and economic life of the country since independence is probably as rotten as any in this hemisphere. Panamanian presidents, though oftenas "relatively" honest personally, ars characteristically placed ln power for tbe prime purpose of protecting the interests of thecorruption and chicanery of all sortsatter of courss within the government and presidents are too controlled by their backers to change this system. There ls little hops for any significant progress in any field ln Panama while this group remains ln power.

3. In recent years, and especially during the past several months, there has been noticeable growth ln popular resentment against the oligarchy. It is now widespread especially among the lower economic classes ln the country. This is part of the basis

for the political strength of tho front-runningcandidate, Arnulfo Arias, who Is basing his campaign on opposition to the oligarchy. It iswhether Arias would take any effectiveto reduce the power of the oligarchy if he is permitted to bocome president, but his campaigning has focused popular attention on this issue and has further aroused the fears of the oligarchs, who are polling out all stopsesperate effort to defeat him.

4. Thewith it those upperlinked tofrightened. RumorsImpending general uprising in Panama Cityoligarchy periodically arise. USrecently reportod that he could not

;antialof weapons and developing plans to defend

- their homes against mob attacks. Many of them,sent their families to their country

broad .

&. In their desperation to maintain their threatened hold on power, the politicians of the oligarchy have formed seemingly incongruouswith extreme leftists and Communists. The latter, who seem to recognize that they stand to gain from the continuationhile longer of the decaying power structure, perform useful services for the oligarchy. Theyertain number of votes and many of them are effective agitators and campaigners. For instance, the rabble rousing pro-Castro deputy in the National Assembly, Thelraa King, is running for reelection on the ticketarty supporting one of the oligarchy's twocandidates. Another example is the recent deal between presidential candidate Marco Robles .and pro-Castro Socialist party loader Carlos Ivan Zuniga, who is running for deputy In Chiriqui Robles Is believed to have supplied Zuniga with campaign money in return for the letter's agreement totrong campaign against Arnulfo Arias. Thus both Robles and Zuniga hope to strengthen their chances in the Chiriqui, Arnulfo Arias' home province.

avon more dangerous thanalliances which tbe oligarchy hasfor shortrange advantage ls tbe presenceleftist opportunists and extremistssecond-echoIon jobs throughout theln public information media. These people,whom can be definitively Identified asnevertheless amenable to Coaaunlst andinfluence. They are already on the fringes

of power, strategically situated ln the event of the collapse of the old order. Hen in this category have risen to new positions of Influence since the January riots and President Chiari has given some of them direct responsibility in carrying on current negotiations with the United States.

is ln this context that the veryconcensus insisting on basic changes lnCanal arrangements takes on addedmood of angry nationalism that swept thethis year ls still very near thetbe Canal issue ls the one issue that drawsall Panamanians of all socio-economicpoliticians of tbe oligarchy, who have longln diverting popular resentments awayand against tho United States, still

find thisost useful one in their attempts to strengthen their threatened positions of power. The Canal issue lsost promising Issue for the radical leftists who have already enhanced their Influence and secured positions of potential power through their shrewd manipulation of the fears of the oligarchy.

summarize, lt seems evident thaterious explosion very damaging toInterests ln tbe Canal Zone are It ls impossible to estimate whatpotential explosion might take, or itscould occur in connection with nextor anytime between then andnext October. Through some fortuitousundlacernlble set of circumstances ltoccur. But as of this writing themost ominous.


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