Panama faces banking crisis

Press, 8 March 1988, Page 9

Panama faces banking crisis

NZPA-Reuter Panama City

Panama, its banks closed by a cut-off of United States cash and threatened with a trade embargo, begins a week that could make or break its banking industry, business leaders said. Most bankers said it was unlikely that the banks would reopen today after being closed indefinitely on Friday by the Banking Commission to prevent a run on deposits. They said it would be a disaster to reopen before being resupplied with dollars, Panama’s legal tender, which are flown in from the Federal Reserve Bank in Miami and distributed by the Banco National, the nation’s central bank. Panama’s use of the dollar as its national currency helped it win a reputation as a sound offshore banking centre, which with its 10,000 employees, is the second big- 1 gest source of jobs after ' the military. Some bankers said an influx of dollars — and thus a quick reopening of the banks — could help re-establish the industry’s reputation, but it was unclear where such cash might come from. The United States! is backing a move by ousted President Eric Arturo Delvalle to cut off Panama’s cash supply as part of a campaign to pressure the military strongman, General Manuel Antonio, Noriega, to step down.

United States officials are also considering other! moves, such as a trade 1 embargo and the freezing, of SUSBO million ! in 1 annual payments for (the! operation of the strategic! Panama Canal. ! ) Panama City was buzz-) ing with rumours about what steps the Government would take. 1 Some bankers 1 expressed concern that it would be forced to take drastic measures such as introducing new currency) or nationalising accounts or even some canalrelated industry. !

Most bankers said such steps would be disastrous for Panama, which is already suffering from a severe economic crisis sparked by anti-Noriega protests that began eight months ago t !