GAO Review of Economic Sanctions Imposed Against Panama

Pursuant to a congressional request, GAO discussed U.S. economic sanctions against Panama, involving: (1) suspension of all economic and military assistance to Panama; (2) elimination of all official loans from multilateral lending institutions; (3) suspension of trade preferences; (4) freezing of Panamanian assets in the United States; and (5) suspension of all payments to the military regime from the Panama Canal Commission, the Trans-isthmus pipeline, and by people or organizations in the United States and U.S. citizens and organizations in Panama. GAO noted that: (1) although the U.S. government made exceptions to minimize the sanctions' impact on U.S. businesses in Panama, those firms showed a 17-percent decline in employment and 26-percent decline in sales for 1988; (2) the sanctions worsened Panama's already declining economy by 20 percent in 1988, with unemployment doubling to 23 percent; (3) the military regime attempted to compensate for a $480-million reduction in revenues by drastically reducing 1988 spending by more than 50 percent, but was still operating at a $200-million deficit; and (4) Panamanian economic recovery and reconstruction, while difficult to estimate, will require significant expenditures.