Panama's government indefinitely closed all banks today because of...


PANAMA CITY, Panama -- Panama's government indefinitely closed all banks today because of a cash shortage it said was caused by the freezing of Panamanian government assets in the United States.

The move appeared to be an initial victory for supporters of deposed President Eric Arturo Delvalle, who are trying to remove Panamana's de facto ruler, Gen. Manuel Antonio Noriega, by requesting the freezing of Panama's assets worldwide.


A communique issued by Mario de Diego, head of Panama's banking commission, said private bankers and government officials had come to the conclusion 'that the required availability of American dollar bills does not exist for the functioning of the national banking system.'

Panama uses the U.S. dollar for its currency.

'The National Banking Commission has resolved to order the suspension of service to the public by the banks of the national system as of March 4, 1988, until further notice,' De Diego said.


De Diego said the cash shortage was caused in part by a 'extraordinary and unusual' demand for cash as well as by a restraining order issued by a federal judge Wednesday in New York.

The U.S. District judge barred the transfer of $10 million in Panamanian assets from the Republic National Bank in New York to the National Bank of Panama pending a hearing Monday.

The order resulted from a U.S. suit filed by supporters of Delvalle, who was ousted Feb. 25 a day after trying to fire Noriega as Defense Forces chief following the general's indictment on drug charges in two federal courts in Florida.

But the National Assembly, controlled by Noriega backers, called Delvalle's act unconstitutional and deposed him in an emergency session. The assembly named Noriega ally Manuel Solis Palma as his replacement. Delvalle escaped from a virtual house arrest and now is in hiding, reportedly in Panama.

Delvalle has endorsed a plan to remove Noriega by winning the freezing of Panamanian assets and depriving the country of badly needed funds.

De Diego said as a result of the New York restraining order, the National Bank of Panama was no longer able to supply dollars to the private banking system.


The National Bank had announced Thursday it could not pay out cash reserves to local banks. Businessmen said Thursday, commercial banks were were open but refused to cash checks. Some said they were worried about issuing payroll checks that would not be honored.

De Diego said Panama's 12 Panamanian-owned banks as well as the foreign banks operating in Panama would have to obtain dollars for their operations by other means. De Diego did not specify what other means.

It was unclear if the banks would be allowed to conduct internal business.

Foreign banks were pulling their funds out of Panama and putting them into offshore accounts in the Cayman Islands, banking sources said.

Banks had not been expected to open Friday. When Continental Bank kept its doors closed beyond its scheduled 8 a.m. opening time, a guard at the door said the managers 'have not come into work and I don't know if they will.'

Noriega did get one favorable sign from Japan today. A senior Japanese Foreign Ministry official told several major Japanese newspapers that Japan, which had a $2.3 billion trade surplus with Panama last year, was nearing a decision to recognize the new government backed by Noriega.


Noriega has visited Japan in each of the past three years and Japan has deep financial interests in Panama. Nearly half of the ships traveling through the Panama Canal are either coming from Japan or going to Japan.

But the United States has continued to back Delvalle as the country's ruler.

President Reagan, at the end of a two-day summit of NATO leaders in Belgium, said Thursday administration officials 'still have a lot of talking to do' on whether they would move to freeze Panamanian assets to push for Noriega's ouster.

Secretary of State George Shultz, also speaking in Brussels, said a presidential order freezing assets in the United States was under discussion as one of several options 'to restrict the flow of money into the (Panamanian) treasury.'

It is estimated Panama may have $50 million in assets in the United States.

The State Department is considering a request by Delvalle supporters to suspend payments of revenues generated by the Panama Canal to Panama.

Thursday, opposition leaders called off a 4-day-old strike against Noriega, saying the deepening financial crisis was paralyzing the economy.

'We don't want to confront a monetary panic,' said Aurelio Barria, a leader of the opposition Civic Crusade, at a news conference Thursday night.


Barria said the worsening financial crisis caused by the campaign to freeze the nation's assets around the world would cause a 'de facto paralyzation' of the economy even without a strike. 'Business can't work without currency,' he said.

'We are trying to avoid a financial panic that could lead to violence when workers find out that their paychecks are not worth anything,' Barria said when explaining why the strike was being suspended.

Barria had questioned whether banks would open Friday 'because of a fear of a run on the banks.'

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