Message to the Congress Reporting on the Economic Sanctions Against Panama

To the Congress of the United States:

1. I hereby report to the Congress on developments since the last Presidential report of October 14, 1988, concerning the national emergency with respect to Panama that was declared in Executive Order No. 12635 of April 8, 1988. This report is submitted pursuant to section 401(c) of the National Emergencies Act (50 U.S.C. 1641(c)), and section 204(c) of the International Emergency Economic Powers Act (50 U.S.C. 1703(c)).

2. Since the last report of October 14, 1988, there has been one amendment to the Panamanian Transactions Regulations, 31 C.F.R. Part 565 (the "Regulations"), administered by the Office of Foreign Assets Control ("FAC") of the Department of the Treasury. Effective January 3, 1989, persons owing funds to the Government of Panama may apply for a specific license authorizing the crediting of the amounts owed, plus applicable interest, to a blocked reserve account on their books or with a commercial bank. These procedures are designed to serve as alternatives to payment of the amounts owed into a blocked account at the Federal Reserve Bank of New York (the "FRBNY"). At the same time, they will enable FAC to maintain a record of payments withheld from the Noriega/Solis regime. Any persons who have already made payments into the FRBNY and who wish to credit the funds instead to a blocked reserve or bank account may also apply for a license authorizing such a transfer.

With this report, I am enclosing a copy of the amendment to the Regulations. 54 Fed. Reg. 21 (Jan. 3, 1989).

3. FAC continues to monitor compliance with the Regulations and advise affected parties of their provisions. FAC is currently in the process of notifying by letter over 170 companies with subsidiaries in Panama of the latest amendment to the Regulations permitting the establishment of blocked reserve or bank accounts and advising them that they must either establish such an account on their books or with a commercial bank by license from FAC or transfer monies owed to the Government of Panama to the FRBNY. Information received from Panama indicates that certain U.S. firms with operations in Panama may have failed to withhold Panamanian taxes from employee paychecks in possible violation of the Regulations. FAC has notified the responsible corporate officers that a written explanation of company practices would be required. Responses are due in the near future.

4. The objective of Administration policy remains support for a return to civilian constitutional rule and the development of an apolitical military establishment in Panama. In furtherance of our policy, the Administration has imposed economic sanctions against the Noriega/Solis regime. Our judgment remains that the root cause of the current crisis is the fact that the Panamanian people have lost confidence in a political system widely perceived as corrupt, repressive, and inept. A genuine Panamanian resolution of the political crisis is necessary to restore confidence in the Panamanian economy, a precondition to the return of economic stability and growth in Panama. Accordingly, our efforts have been directed at supporting Panamanian efforts to resolve the underlying political crisis as rapidly as possible.

5. The expenses incurred by the Federal Government in the 6-month period from October 14, 1988, through April 1, 1989, which are directly attributable to the exercise of powers and authorities conferred by the declaration of the Panamanian national emergency are estimated at $411,960, most of which represents wage and salary costs for Federal personnel. Personnel costs were largely centered in the Department of the Treasury (particularly in the Office of Foreign Assets Control, the Office of the Assistant Secretary for Enforcement, the Office of the Assistant Secretary for International Affairs, and the Office of the General Counsel), the Department of State, the Federal Reserve Board, the National Security Council, and the Department of Defense.

6. The policies and actions of the Noriega/Solis regime in Panama continue to pose an unusual and extraordinary threat to the national security and foreign policy of the United States. I shall continue to exercise the powers at my disposal to apply economic sanctions against Panama as long as these measures are appropriate and will continue to report periodically to the Congress on significant developments, pursuant to 50 U.S.C. 1703(c).

George Bush

The White House,

April 6, 1989.