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UNCLAS SECTION 01 OF 04 PANAMA 001591 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT FOR WHA/CEN 
SOUTHCOM ALSO FOR POLAD 
VANCOUVER FOR CG ARREAGA 
 
E.O. 12958: N/A 
TAGS: PHUM PGOV PREL ECON SNAR PINR PM POLITICS FOREIGN POLICY
SUBJECT: PANAMA'S COLON: FLINT MICHIGAN ON THE CARIBBEAN 
 
REF: PANAMA 0594 
 
SUMMARY & COMMENT 
------------------ 
¶1.  (SBU) When the USG began to draw down military forces 
from its bases in the Panama Canal Zone in the 1970s, the 
port city of Colon, on the Canal's northern terminus, was hit 
hard, experiencing the same rapid decline that made one-time 
car manufacturing center Flint, Michigan infamous.  By the 
2000 Canal hand-over, the fall of this former Caribbean jewel 
was complete.  Embassy Panama has succeeded in directing more 
GOP attention to this strategically important city (reftel) 
and Panama's politicians are just starting to devise policies 
to solve Colon's "inner-city" social pathologies: 
unemployment, deteriorating housing, family disintegration, 
and crime, compounded by government inadequacy and racial 
discrimination (see Para 13).  Colon is a crucial focal point 
for regional U.S. security initiatives, such as stopping the 
flow of illegal arms, drugs, and money through the Canal and 
Colon Free Zone.  Economic growth, job creation, and GOP 
remedies to decrease the broad gap in living standards 
between Panama City and Colon are critical to U.S. long-term 
security interests.  End Summary and Comment. 
 
A Culture of Entitlement 
------------------------ 
¶2.  (SBU) Colon's problems are in part psychological.  The 
source of Colon's by-now-mythic prosperity was the U.S. Canal 
Zone and its irreplaceable jobs.  The departure of those jobs 
left the city depressed economically, socially, and mentally, 
perhaps not unlike the aftermath of the U.S military's 
withdrawal from Clark and Subic Bay in the Philippines.  That 
depression is the flip side of Colon's sense of superiority 
over the capital that prevailed during the 1900s.  Its 
passing has given rise to a paradoxical culture of 
entitlement and dependency, as a younger generation often 
refuses to come to terms with its changed circumstances. 
Colon may be one of the few places in the world where the 
unemployed have formed unions and regularly go on "strike." 
 
¶3.  (SBU) On July 13, 2005 President Torrijos announced in 
Colon a virtually unprecedented $24 million infrastructure 
development project for Colon province "to combat poverty and 
unemployment," promising that it was only the beginning. 
(The plan includes building a police center, road 
improvements, buying fire engines, dredging projects and 
improvement of aqueducts.)  In addition, under GOP pressure 
the U.S.-owned Manzanillo International Terminal (MIT) and 
Panama Ports, two large Colon container port facilities, 
agreed to donate millions of dollars to the Colon social 
development fund as part of a port expansion deal.  The total 
$9-10 million MIT-PP donation (most of which is MIT money) is 
ear-marked for education and health care initiatives.  Local 
university professors and students and unions of the 
unemployed demonstrated against the GOP's $24 million plan, 
calling it "insufficient." 
 
Colon's 1950s-1970s Heyday 
-------------------------- 
¶4.  (U) U.S. spending was the foundation of Colon's economic 
prosperity since 1903.  In 1950s, 1960s, and early 1970s 
heyday, beautiful, colonial, Caribbean Colon surpassed Panama 
City in elegance and economic advancement, and Colon was 
known for its civic pride.  The U.S. military employed 
hundreds of Colon residents, mostly English-speaking blacks 
of West-Indian descent at nearby bases, particularly the 
giant, sprawling Ft. Sherman.  Wages were high, much higher 
than the prevailing rate on Panama's economy, and benefits 
were priceless.  Base workers had free transportation and use 
of the base post office and commissaries.  Others got jobs as 
maids, cooks, and gardeners.  Until the early 1970s, Indian 
merchants still offered the finest linen money could buy, 
shops offered fine Lemoges china, and at least seven movie 
theaters adorned the 16 tidy, grided streets of Colon's 2.9 
square kilometers. 
 
Age-Old Resentments... 
---------------------- 
¶5.  (SBU) Other Panamanians resented Colon's superior 
attitudes and derived a measure of schadenfreude from the 
city's fall.  Vindictive attitudes linger.  During the Canal 
Zone era, Colon residents got jobs faster than other 
Panamanians because they spoke English.  If Colon prospered 
in the past, Panamanians reasoned, then Colon's current 
misfortunes are just.  While the Panama Canal Authority 
continues to be a major employer in Panama, Colon job 
applicants of West Indian descent tell stories of being told 
"your time is over."  But it's worth mentioning that some of 
the GOP's key players -- including Minister of Government and 
Justice Hector Aleman and Minister of the Presidency Ubaldino 
Real, not to mention former Vice President Kaiser Bazan -- 
are from Colon. 
 
Rapid Decline and Unemployment 
------------------------------ 
¶6.  (U) In the 1970s, as the U.S. military draw-down 
coincided with the shutdown of the Panama-Colon railroad and 
the decline of the oil refinery industry, Colon deteriorated 
rapidly.  According to the Panamanian Census Bureau, in 1980 
Colon had 46,000 residents over the age of ten and the 
unemployment rate stood at 13.4%.  By 2000, Colon's over-10 
population had shrunk to 33,000, and unemployment had jumped 
to 21.9%.  As Colon's economy worsened, the black 
middle-class fled for jobs in Panama City, often abandoning 
buildings they could no longer rent or sell.  Indigenous and 
Latino farmers from nearby Colon province moved in. 
Suddenly, squatter families began to occupy small rooms in 
the dilapidated buildings, living without plumbing and 
storing their beds in the rafters. 
 
Creating a Ghetto 
----------------- 
¶7.  (U) In the late 1970s and early 1980s, the Panama's 
military governments razed Colon's decaying but elegant 
wooden structures and replaced them with unsightly cinder 
block towers.  What wasn't torn down, mysterious fires 
continued to destroy, creating a war-zone atmosphere but 
consoling owners that the squatters had to move.  Walking 
through Colon City today, the decay and poverty appear so 
intractable it is hard to imagine the city's prosperity just 
30 years ago. 
 
Crime and Violence: Nowhere to Hide 
----------------------------------- 
¶8.  (U) As Colon's decay became pronounced, crime and 
violence increased.  Colon City's four prosecutors currently 
each receive about 30 cases of domestic violence per week and 
the Ministry of Youth cannot find enough shelter for the 
affected children.  Despite contributions from the Embassy's 
Narcotics Affairs Section (reftel), Colon City has few law 
enforcement resources.  Police investigators maintain only a 
superficial presence in Colon, with 100 under-equipped 
officers rotating in three shifts.  Colon Prosecutor Yolanda 
Austin attributed much of Colon's crime problem to lack of 
resources combined with its small size.  "With only 16 
streets, everyone knows everyone and the police cannot 
protect witnesses." 
 
GOP Centralization: That Sucking Sound 
-------------------------------------- 
¶9.  (SBU) GOP centralization has reinforced Colon's problems 
by removing resources and making Colon (and other Panamanian 
cities) hard to govern because local politicians lack the 
power of the purse.  Tax revenues from the Colon Free Zone 
and ports are distributed on a national level.  Colon's 
elected mayor does not have resources to fix Colon's 
problems.  Even Colon's GOP-appointed Governor Olgalina 
Quijada has no budget for projects and must essentially beg 
the GOP for funding.  As a result, only one block separates 
Colon's overwhelming poverty from the gleaming showrooms for 
international wholesale buyers in the Free Zone.  And one 
cross street -- Calle Primera and Melendez -- separates the 
homes of prosperous Indian and Arab Free Zone Merchants from 
the Colon residents they do not employ. 
 
Filling the Vacuum: The Unemployed Movement 
------------------------------------------- 
¶10.  (SBU) Many Colon-watchers name "the unemployed" as the 
true power players in Colon.  Indeed, for at least a decade, 
being the head of an unemployed union was one way to get 
ahead in Colon.  While Governor Quijada has plans to phase 
out the program, about 800 of the "unemployed" -- most of 
them women -- are paid for make-work jobs, 75% of them in 
positions within the public sector.  The dissatisfied 
unemployed frequently close the road leading to Colon and the 
Free Zone in protest, most recently in April 2005 over the 
high cost of gasoline. 
 
A Legacy of Governmental Neglect 
-------------------------------- 
¶11.  (SBU) Until the Torrijos administration took office in 
2004, the Panama-Colon road (built by the U.S. military in 
the 1940s) was not repaired once in ten years.  Previous 
administrations justified the inattention, saying that they 
did not want the road to compete with the new Panama-Colon 
toll road, a road that is still not complete.  While the new 
GOP wants to shift $2 million of Colon's $10 million in taxes 
back to Colon programs, the GOP may struggle to overcome its 
historic tendency to shift resources out of Colon.  For 
example, GOP acquisition of reverted land from the former 
Canal Zone drained resources from Colon, as the Governor 
moved out of Colon to a USG-era building located outside the 
city.  Similarly, the Ministry of Housing (MIVI) is using a 
multi-million-dollar InterAmerican Development Bank loan to 
renovate 14 colonial buildings in Colon as a pilot project 
for reinvigorating Panama City. 
 
GOP Outreach: Community Consultations 
------------------------------------- 
¶12.  (SBU) The GOP is tackling its over-centralization 
problem by conducting community consultations at the 
provincial level that culminated in a July 9 "Community 
Council" in Kuna Yala (Colon Province) attended by President 
Torrijos and the cabinet.  According to Governor Quijada, 
consultations with Colon Province's five districts and 40 
corregimientos yielded four priorities: Colon-Panama road 
widening, improved water quality and waste management, more 
housing, and more police.  The consultations may succeed in 
identifying local needs (Embassy will align its Colon efforts 
to the outcome), they offer no long-term solution to 
governmental inadequacy and over-centralization. 
 
Racial Discrimination vs. Economic Dependency 
--------------------------------------------- 
¶13.  (SBU) There is no doubt that racial discrimination plays 
a part in Colon's problems.  Colon is largely a "black" city. 
 One Free Zone contact told Human Rights Officer outright 
that Colon residents are not good workers because they are 
from the "black race."  Many Panamanians in the capital, in 
the Free Zone, and in the GOP believe that Colon residents 
are lazy and don't want to work.  Free Zone businesses in 
Colon often hire workers almost exclusively from Panama City. 
 One middle class former Colon resident explained that people 
from Colon often hide that fact when applying for a job 
because businesses discriminate against them in hiring. 
 
¶14.  (SBU) The negative feedback loop that sets in between 
Colon workers and employers serves to perpetuate the 
stereotype.  Indeed, so ingrained is the image of Colon 
"laziness" that it is blamed for the results of GOP policies. 
 For example, as English-Spanish call centers become an 
engine for job growth in Panama, some Panamanians lament 
Colon residents' "laziness" for losing their English 
mother-tongue.  Forgotten are past GOP policies that forced 
West Indians into Spanish language schools in the mid-1900s 
and gave them "Spanish" names. 
 
Only More Investment Will Solve Colon's Problems 
--------------------------------------------- --- 
¶15.  (SBU) Complicating the issue is the lack of employment 
opportunities on a par with what was available to Colon 
residents when the U.S. military bases operated at full 
capacity.  Although big investments have been made at 
Manzanillo and Panama Ports, the hundreds of new dock jobs 
pay only a fraction of what Colon workers earned in the past. 
 In addition, since the Panama Canal Authority (ACP) took 
over Canal operations, its increased efficiency has decreased 
its need for employees.  The result is fewer, lower-quality, 
lower-paying jobs.  Only sustained private economic 
investment outside the Free Zone can change Colon's 
intractable culture of economic dependency on outside 
authorities to sustain the standard of living. 
 
DANILOWICZ