1940: Panama

Politics.

Continuísmo, now common practice in all Central America republics, except Costa Rica, for maintaining control of the presidency, was adopted in Panama when President Arnulfo Arias, less than three weeks after his inauguration Oct. 1, presented a project for constitutional reform to the National Assembly which would extend his term, and that of the Congress, from four to six years. The new Constitution was unanimously accepted Nov. 22 but, since Panamanian procedure calls for ratification by two successive Assemblies, the government held a national plebiscite in mid-December and, subsequently, issued a decree abrogating the 1904 Constitution and announcing the effectiveness of the new basic law on Jan. 2, 1941. The revised Constitution has been bitterly attacked by all except the small governing clique. Even the President's brother, Harmodio Arias, a key figure in the republic's politics, who has heretofore supported the President, in his newspaper, the Panama-American, criticizes its strict artificial controls over national economy and its provision for price-fixing and the establishment of official monopolies. The new Constitution retroactively denies citizenship to Panamanians descended from certain vaguely defined races, whose further immigration is prohibited.

The supporters of Ricardo J. Alfaro, opposition candidate in the presidential elections held June 2, finally refrained from voting, declaring fair elections were impossible. The Alfaro candidacy was supported by the Peoples' Front, composed of liberals and Socialists but not of Communists. Arnulfo Arias, termed the 'national candidate,' had the active support of the administration and of the Panamanian political machine. About a month before he left office acting-President Ernesto Boyd decreed general amnesty for political prisoners accused of conspiring against the government during the elections.

Economic Situation.

The External Debt Readjustment Plan, filed with the Securities Exchange Commission, provides for the reduction to 3¼ per cent of interest on Republic of Panama 5 per cent Dollar Bonds, $11,313,500 of which are outstanding. The deadline for acceptance of the government's offer is Jan. 24, 1941. It has received the endorsement of the bondholders' committee. The biennial budget for 1939-40 estimated revenues and expenditures at $22,795,000.

Since Panama's European trade has been negligible, practically all of its exports of bananas, cocoa, coconuts and hardwoods being sold in the United States, this country is least disturbed of any of the Latin American republics by the war in Europe. Moreover, the decision of the United States to construct a third set of locks for the Panama Canal, for which appropriation was made this year, and to increase the Canal's defenses and defense forces, is certain to have a favorable effect on Panama's economic situation. The country has no exchange problem and its unfavorable trade balance is compensated by the tourist trade and the pay rolls of the Canal and the United States Army in the Canal Zone. For military reasons the United States is also supplying money and materials to aid highway construction. To this end the sum of $2,500,000 was made available to the Republic by the Export-Import Bank early in 1940, while a grant of $1,500,000 was made by the United States Congress.

Reactions to European War.

Allegations in the United States press of the pro-Nazi, 'anti-Yankee' inclinations of the Arias Government, as indicated in his inaugural address and obstructionist tactics regarding the acquisition of air bases, run counter to the reported assurances made in March by Colombia, Panama and Costa Rica that they would permit the use of their airfields by United States military planes whenever necessary for defense of the Panama Canal. The lease of British naval and air bases in the Caribbean in exchange for United States destroyers has special significance as a measure of Canal defense.

In March President Boyd protested to Great Britain in behalf of the American republics against the violation of the 'safety zone' set up by the Declaration of Panama in the case of the scuttling of the German freighter Wakama off the coast of Brazil, but since none of the European belligerents has accepted the 'safety zone,' or paid heed to such protests, it was more-or-less a routine gesture.

The European War reduced the tolls of the Panama Canal during the fiscal year ended June 30 by $2,516,346, and traffic was cut by 500 ships. Tolls collections for the year, $21,144,675, were the lowest since 1933.