PANAMA CITY -- After months of cajoling and arm-twisting by the United States, Panama reluctantly signed a law enforcement treaty in 1991 that was supposed to symbolize a new era of co-operation and clean government.
But two years later, the U.S. Senate has refused to ratify the treaty because of concerns that it would allow corrupt Panamanian officials to gain access to sensitive U.S. documents.
The delay has irked many bankers and politicians in Panama who complain that Washington is now balking after using hard-ball tactics to persuade Panama to sign the document.
'They say they want Panama to help fight crime, and then the treaty gets stuck in the freezer in the United States,' said Olimpo Saez, a Panamanian deputy who spent months persuading fellow legislators to support the treaty.
Under military leader Manuel Noriega in the 1980s, Panama's banking center became a laundry for drug profits. So after U.S. troops ousted Noriega and installed President Guillermo Endara in the 1989 invasion, Washington pressured Panama to sign a Mutual Legal Assistance Treaty.
Such agreements have become important tools for uncovering money laundering scams. Similar treaties have been signed with Canada, Mexico, the Cayman Islands and a handful of other nations.
But now, even Endara's administration has come under scrutiny for allowing drug trafficking and money laundering to proliferate.
A key provision of the U.S.-Panamanian treaty would allow investigators from both countries to directly exchange bank account numbers, documents and other evidence.
For now, such cooperation must pass through diplomatic channels so cumbersome that U.S. officials don't even bother to request certain data because the process can take up to a year.
At first, Panama feared the treaty would scare away clients from its booming banking district. But several U.S. senators leaned on Endara to endorse the pact and, at one point, President Bush's administration threatened to freeze $84 million in vital post-invasion assistance unless Panama signed.
'The U.S. Embassy put as much pressure as it could on Panama to sign the treaty as soon as possible,' said Paulino Garcia-Torano, a former president of the Panamanian Bankers Association.
Panama ratified the treaty at a special legislative session on July 15, 1991. Washington, however, promptly lost the treaty in a bureaucratic hopper. When it surfaced, it was blocked by Sen. Jesse Helms, a Republican from North Carolina.
Helms is no stranger to the Central American isthmus. He fought the 1977 Panama Canal treaty because he opposed turning over the waterway to Panama's then-military government.
In the mid-1980s, he helped turn U.S. officials against Noriega by holding Senate hearings on Pamama's ties to Colombian drug cartels.
Helms' main complaint with the current treaty involves U.S. obligations to supply information to Panama. He fears vital criminal evidence could fall into the wrong hands and compromise U.S. investigations.
Such concerns have been heightened by widespread accusations of Panamanian government links to the drug trade.
Last year, Attorney General Rogelio Cruz was separated from his post after he ordered the release of $28 million in frozen bank accounts belonging to suspected drug traffickers.
Scores of suspects jailed on drug charges have been mysteriously released by local judges. In October, a Panamanian legislator was arrested in Tampa and charged with smuggling 330 pounds of cocaine.
'The frequent news of important politicians and businessmen involved in this type of activity has reinforced the idea that the entire national atmosphere is corrupt,' said a recent editorial in the newspaper El Panama America.
Former Panama City mayor Mayin Correa said U.S. drug agents based in Panama are reluctant to reveal information to local police for fear they will tip off smugglers about sting operations.
Under such conditions, she said, it would be crazy for the U.S. Senate to ratify the treaty.
'I wouldn't sign an agreement to turn over information from investigations. I wouldn't have any confidence in Panamanian authorities until there are radical changes,' Correa said.
Despite such problems, a State Department official says the Endara government is getting a bad rap and claims that support for the treaty remains strong. He said the delay in ratification has more to do with bureaucracy than government corruption in Panama.
For instance, the Senate tried to hold hearings on the Panama treaty last year, but Helms was hospitalized for heart surgery and requested that no action be taken until he recovered.
In fact, Helms has delayed action on a series of recent legal assistance treaties. In all cases, he has requested that more explicit language be added to allow the United States greater licence to reject requests for information.
Major changes in the Panama treaty, however, would require approval by the Endara government.
The Senate Foreign Relations Committee has not scheduled a hearing on the treaty because the State Department is working with Helms in an effort to resolve his objections, a committee aide said.
A State Department official said he expects ratification early next year, but was clearly miffed at how one senator's crusade to restrict access could provoke a two-year delay for a treaty designed to promote openness.
'We feel very frustrated that it has taken this long,' the official said.NEWLN:
