Despite growing isolation, Panama's ruler retains upper hand. Opposition sees long, but `irreversible,' effort to oust him

A single white handkerchief. That's all it took to ignite a spontaneous antigovernment rally Friday night at the New Panama Gymansium, where fans were waiting for a home-town hero to take on the world's lightweight boxing champion. Within seconds, many of the 15,000 spectators began waving handkerchiefs, napkins, tee-shirts - anything white - to symbolize their opposition to the military-led government. They chanted defiantly: ``Justice, Justice.''

It was a passionate rejection of the regime headed by military strong man Gen. Manuel Antonio Noriega - and a clear reflection of the country's rising political temperature.

But even as the conflict between General Noriega and the business-led opposition intensifies, few analysts predict that the unrest will immediately boil over into violence or radical change.

The two sides ``are in a log jam,'' says one Western diplomat, noting that the seemingly impregnable but isolated defense forces face a rapidly growing but strategically immature opposition.

Some opposition members, who are fighting for Noriega's ouster and the establishment of open democracy, agree that such a face-off may take months to resolve.

``It's still premature to reap the fruits of what we've sown,'' says activist professor Miguel Antonio Bernal, criticizing opposition leaders who claim that Noriega's rule is on the brink of collapse. ``They are underestimating the strength of Noriega. This man has been trained to be a dictator; the opposition has only been prepared to raise a fight from Monday to Friday between 9 and 5.''

Indeed, Noriega's muscle-flexing last week squelched several initiatives planned by the Civic Crusade, an opposition group spearheaded by the Chamber of Commerce here. (Noriega shut down three opposition newspapers, lashed out at foreign journalists, expelling one, and reclaimed the streets from opposition protesters.)

On Thursday afternoon, protesters were to mount an automobile caravan following the funeral of a university student killed by a national guardsman. But thousands of government supporters arrived on the scene first, effectively intimidating the protesters.

On Friday, the sixth anniversary of the death of revered military leader Omar Torrijos Herrara, an estimated 50,000 demonstrators - many, state employees paid or required to attend - prevented the opposition from taking to the streets.

Perhaps the opposition's most frustrating roadblock has been the lack of newspapers to spread announcements and information. The Civic Crusade has been reduced to leaflets and phone calls.

But opposition leaders are buoyed by evidence that Noriega is increasingly alone at the center of power. ``He's bound within his fortress,'' says Ricardo Arias Calder'on, leader of the Christian Democratic Party. ``That isolation is crucial to his fall.''

An example of this isolation was Luis Alberto Arias's resignation five weeks ago as head of the National Bank - the government's primary fiscal agent. According to friends and banking sources, Mr. Arias resigned because of disputes over economic policy with the military high command. In interviews, several current high government officials also seemed disgruntled by Noriega's refusal to heed the signs of economic danger.

Although the region's wealthiest country, Panama has suffered recently from high unemployment (14 percent) and one of the highest per capita debts in the world ($5 billion for 2.2 million people).

During two months of unrest, capital flight has claimed between 10 and 15 percent of Panama's $39 billion in total banking assets, sources say. An estimated $90 million in local Panamanian deposits have been withdrawn from the National Bank and the savings and loan, mainly to be placed in larger, more secure international banks based here.

So far, there are no apparent cracks in the military itself. Any discontented Army personnel remain loyal to the system through fear or vested financial interest, say government sources. Many analysts read the July 27 raid on the house of retired Col. Roberto D'iaz Herrera as a clear warning to others tempted to follow in his path. The colonel's charges of corruption and murder set off anti-Noriega protests in early June.

In order to break the strong military bond, a banker with opposition ties says, ``it all has to happen together'' - economic turmoil, daily demonstrations, further withdrawal of United States economic and military aid, and the military's internal collapse. ``It is something that is going to take a long time, perhaps, but it's irreversible.''

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