US-Panama Drug Pact to End Bitter Rift

AFTER a nasty, year-long dispute, the United States and Panama are set to sign, as soon as today, a controversial treaty to help track drug traffickers and money launderers. But Panama has successfully resisted intense US pressure to include tax evasion crimes under the pact's scope, for fear the accord would hurt Panama's banking sector, Panamanian officials say.

Although US and Panamanian officials express satisfaction over the agreement, the dominant mood is relief that the signing will end a bitter quarrel that soured relations between the two nations.

``It's kind of like this big sigh of relief,'' says a US official ``But it hasn't been signed yet, so we're not sighing yet.''

The Mutual Legal Assistance Treaty requires both nations to swap information on crime investigations and allows US prosecutors access to bank records of suspected drug bandits. The accord still must be ratified by the US Senate and Panama's National Assembly. The text is not yet public.

Panama resisted US efforts to cooperate on tax evasion cases, causing negotiations to drag on for more than a year. Panamanian bankers and lawyers consider the fiscal issue critical because Panama is a tax haven for foreigners, permitting some to avoid taxes and shield illicit corporate activities.

Offshore banks and ``dummy'' corporations are a pillar of Panama's economy, employing thousands of lawyers and bank workers and pumping millions of dollars into the country. Bankers argued the pact would harm Panama's financial sector, discouraging investment by foreigners fearful of US prying into financial records.

Panamanian Foreign Ministry officials say the pact will allow cooperation on tax evasion cases only if they are tied to other criminal activity. The accord will unlock bank records related to drug investigations and may be a deterrent, discouraging drug lords from washing profits in Panama.

Still, Panamanian officials warn that the treaty's provisions may not significantly slow money laundering, which is often masked by clever financial deals and corporate laws that conceal company ownership.

Many Panamanian businessmen argued the treaty is unnecessary, because Panamanian laws already allow foreign governments to request records related to crime cases. But others said the treaty is desirable.

``Money laundering here is not as bad as it is perceived to be abroad,'' says a leading economist. ``But the perception is bad.''

Although exclusion of tax-evasion crimes has muted criticism of the pact, the agreement is not without its critics. Some lawyers and bankers are angry that the final text has not yet been made public and that Panama's Foreign Ministry concluded talks without consulting them. Still, the pact is expected to be easily ratified by the National Assembly.

Both Panama and Washington appear anxious to put the dispute behind them. The pro-US Panamanian government's reluctance to sign the accord embarrassed Washington, which had hoped the 1989 toppling of Gen. Manuel Antonio Noriega would usher in a new era of cooperation on antidrug matters. Panamanian charges that the US used bullying tactics to push them to sign was also embarrassing.

The prolonged debate also focused negative publicity on Panama's financial sector, keeping Panama from receiving $84 million in US economic aid that Congress linked to treaty approval.

Panamanians also hope the treaty signing will remove the cloud blackening their normally cozy relationship with the US.

``The treaty was the main stumbling block,'' says Roberto Eisenmann, director of the daily newspaper La Prensa. ``You could assume that this will improve things.''