Sputnik Escalates the Cold War
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Central American Spanish-speaking nation bordered by Colombia to the southeast, Costa Rica to the northwest, the Caribbean Sea to the north, and the Pacific Ocean to the south. Roughly the size of the U.S. state of South Carolina, Panama is 30,193 square miles in area and had a 1945 population of 703,000 people. During the Cold War, Panama's economics and politics were shaped overwhelmingly by its relationship to the United States. Washington propped up reliable, mainly authoritarian governments in Panama City, while American firms, through direct investment as well as the sheer weight of their activities in the Panama Canal Zone, controlled much of the Panamanian economy.

The United States sought a high degree of influence over Panama largely because of the crucial importance of the Panama Canal, a major economic, military, and geostrategic asset. Despite much tension and controversy, Washington succeeded in protecting its interests through a mix of force, pressure, and concession that shaped Panama's history during the Cold War.

Panama assumed geostrategic importance in the late nineteenth century, when a waterway across the Central American isthmus became technically feasible. In 1903, in a ploy to construct and control a canal, President Theodore Roosevelt's administration facilitated a secessionist rebellion in the Colombian province of Panama and then signed a treaty with the new Panamanian government. Besides assuring the new government's dependence on Washington, the deal awarded the United States the right to operate the canal in perpetuity while also ceding total control over a 10-mile band of territory surrounding the waterway to the United States.

The asymmetry of the treaty and the colonial mentality of Americans who settled in the Canal Zone proved to be major irritants during the decades that followed. Panamanians demanded that the United States end discrimination against local workers, share its revenues more evenly, and respect Panamanian sovereignty.

U.S.-Panamanian tensions became more significant during the Cold War. Americans feared that the Soviet Union or its allies might be able to exploit widespread anti-Americanism and glaring economic inequalities exacerbated by a post–World War II depression. In 1947, mounting resentment against the United States clearly manifested itself when Panama's National Assembly unanimously rejected American plans to build new military bases around the canal. Riding a wave of nationalism that united Panama's highly stratified society, the Panamanian government insisted in 1953 that Washington agree to revise the canal treaties.

The United States responded to Panamanian discontent in various ways during the 1950s and 1960s. Washington sought to blunt unrest by increasing economic aid to Panama. In the early 1960s, for example, the country became a major recipient of U.S. assistance under President John F. Kennedy's Alliance for Progress.

In addition, Washington sought to head off further radicalization of Panamanian opinion by offering concessions to the relatively reliable conservatives who still dominated Panamanian politics. In 1955, President Dwight Eisenhower's administration agreed to increase and equalize pay for Panamanian canal workers and to increase the canal annuity paid to Panama. New explosions of anti-American agitation occurred in 1958–1959 and early 1964, the latter prompting President Lyndon B. Johnson to agree to write new treaties recognizing Panamanian sovereignty over the Canal Zone.

Johnson's pledge resulted in neither quick agreements nor political stability. Panama remained wracked by poverty and political turbulence despite an impressive 6.4 percent average annual gross national product (GNP) growth rate during 1950–1970. In 1968, a group of National Guard officers overthrew the oligarchy that had controlled Panamanian politics for decades, and charismatic National Guard Colonel Omar Torrijos took power the following year. Stressing nationalist and populist themes, Torrijos made stiff new demands of the United States when canal talks reopened in the early 1970s. After fitful progress, on 7 September 1977 the two sides signed new treaties, which provided for the gradual return of the canal to Panamanian control by the end of the century.

The 1977 treaties created new U.S. anxieties about the security of the canal and pushed Panama toward yet another political crisis. With violence and leftist movements sweeping across Central America in the early 1980s, the Pentagon poured money into the Panamanian military, known as the Panama Defense Force, and facilitated the rise to power of Manuel Noriega, the Defense Force's corrupt and brutally repressive leader. In 1986, however, the United States reversed course and began pressing for his removal. As the need for a reliable strongman declined, Noriega's critics pointed to evidence of drug trafficking, gun running, and other illegal activities. Meanwhile, opposition groups within Panama demanded the restoration of democracy and civil liberties.

When Noriega repeatedly refused to step down, and with increasing violence against Americans in the Panama Canal Zone, President George H. W. Bush ordered an invasion of Panama on 20 December 1989. U.S. forces put down resistance in four days of fighting and took Noriega into custody in January 1990. As the Cold War came to an end, democratic rule returned to Panama, but the United States once again dictated Panama's destiny.

Mark Atwood Lawrence

Further Reading
Jorden, William J. Panama Odyssey. Austin: University of Texas Press, 1984.; Lafeber, Walter. The Panama Canal: The Crisis in Historical Perspective. New York: Oxford University Press, 1978.

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