Short On Cash, Long on Coping

By John Moody

After hiding for more than two months behind shuttered windows and CLOSED signs, Panama's bankers were ready for a stampede of cash-starved customers when the institutions reopened last week. With good reason: it was the first time since March 3, when the government controlled by General Manuel Antonio Noriega decreed a bank holiday, that depositors at most of the country's 120 banking institutions were allowed to make limited withdrawals. Yet the queues that curled around street corners last Monday were calm and orderly. Grunted one depositor, Roy Stone, as he waited to enter a Chase Manhattan branch in Panama City: "It's a beginning."

The bank reopening is the latest sign that the Reagan Administration's effort to oust Noriega by applying economic pressure is failing to work as planned. The U.S. sanctions imposed last March included a freeze on $50 million in Panamanian bank accounts in the U.S. and suspension of trade preferences on $96 million in annual commerce between the two countries. The moves were expected to paralyze Panama's economy and spark internal pressure for Noriega's departure. But Panamanians are learning to cope with the cash shortage, and the U.S. sanctions may be causing only longer-term damage to Panama's economy.

Moreover, the general is still hanging tough. Reagan Administration officials disclosed last week that a State Department representative has been bargaining with Noriega, offering him incentives to leave the country. Under one Administration proposal, the U.S. would drop federal drug-trafficking charges against Noriega if he agreed to depart. But the strongman publicly rebuffed that idea last week, declaring, "Panama's sovereignty is not negotiable."

Since Panama uses U.S. dollars as its currency, the sanctions have managed to reduce drastically the supply of circulating money. But most of the country's 2.3 million people have evidently found ways to cover the necessities and then some. Discotheques are still crowded on Friday nights, and home-video rentals are booming. Some consumers are even finding bargains as businesses compete for scarce dollars by offering bonuses. One fast-food chain offers a double-size barrel of fried chicken for the price of a single, served up in what it calls the "crisis pack."

Many citizens are carrying a new kind of make-believe money. Unable to meet a $62 million monthly payroll, the government began issuing salary checks in $20, $50 and $100 denominations, then persuaded merchants to treat them as cash. Businesses use the scrip to pay taxes and utility bills.

The U.S. Government and American corporations have unwillingly helped to soften the pinch. The Panama Canal Commission, which is jointly administered by Panama and the U.S., is bringing cash into the country by airplane to meet its $3.3 million biweekly payroll. Moreover, despite the freezing of U.S. toll payments, the canal racked up a record $30.3 million in revenues during March.

Panama's short-term ability to get by may be only forestalling severe economic setbacks. Orville Goodin, Panama's Finance Minister, predicted last week that the country's output of goods and services will shrink 20% in 1988 from last year's level. Tourism, which in 1987 brought in $187 million, is practically moribund.

Harmed most of all may be Panama's banking industry, which has served as a haven for thousands of depositors who demand confidentiality and security. After anti-Noriega demonstrations broke out last summer, nervous investors quickly yanked at least $500 million. When banks reopened last week, the government allowed depositors to make a monthly withdrawal of only 25% of checking-account balances, to a maximum of $10,000, and just 5% of savings accounts. Bankers fear that the restrictions, designed to control the cash drain, will ruin Panama's reputation as a safe haven. Says one: "We have been mortally wounded."

Many domestic business leaders believe confidence can eventually be restored, but only after the political upheaval has ended. Steve Maduro, president of the 110-year-old Felix B. Maduro department store chain, remains optimistic, although he concedes that his March and April sales were 70% lower than during the same period last year. The firm has closed one store and put its 240 employees on half days with half pay. Less generous employers have added some 25,000 Panamanians to the rolls of the unemployed, boosting joblessness to an estimated 20% in recent months.

Because of the layoffs and currency shortage, the hardest-hit Panamanians are probably the members of the middle class. To help workers who are unable to cash their paychecks, the government is selling so-called dignity bags of rice, beans and other staples at a discount from regular prices. The crisis has brought relatively little new hardship for the poor, so far. Hereberto Lombaro, 33, says he makes about $20 a day selling fruit-flavored ices from a pushcart. "I don't care what the Americans do," he says, grinning up at the cloudless sky. "As long as it stays hot, I'll have customers."

The heat is still very much on -- from the sun and the U.S. The Noriega regime believes the Administration intends to prolong the crisis so that the U.S. can step in later with a generous aid package in return for big concessions. Among them: long-term leases for U.S. military bases and cooperation from Panamanian banks in prosecuting American tax cheats. But as the standoff continues, Noriega may find new benefactors. Libyan Leader Muammar Gaddafi, for instance, is said to be ready to loan Panama $20 million. However, Swiss bankers have reportedly turned down Noriega representatives who tried to set up a numbered account as a conduit for the money.

With reporting by Michele Labrut/Panama City