WASHINGTON -- Twenty years after signing a wrenching agreement to give the Panama Canal to the Panamanians as the millennium draws to a close, the United States and Panama are talking about how to keep U.S. forces there after the deal's completed.
Panamanians who once couldn't wait to see the last U.S. soldier leave their territory, worry about what will befall them economically once the United States relinquishes the Panama Canal and really does leave for good. They now want to keep a U.S. presence without appearing to be under America's thumb.
Because of Panama's location between Central and South America, U.S. officials are willing to keep forces in the zone. But they need a better justification than the latest Panamanian innovation: creation of a counter-narcotics center to interdict drug shipments emanating from nearby Andean nations.
U.S. businesses, meanwhile, believe that Panama offers great profit potential in trade and port development, making it not just a bridge between two oceans but a transportation hub for the whole region.
Canal use is limited by the canal's narrow width, which cannot accommodate large container ships, supertankers and aircraft carriers. The waterway competes for East-West trade with both the Suez-Canal in Egypt and rail and highway routes in the United States.
But the narrow isthmus remains one of the hemisphere's most attractive sites for movement of cargo, and port developers see major profit potential in a combination of coastal ports and surface rail routes across Panama.
Some are watching in anger as Panamanians succumb to the advances of wealthy suitors from Hong Kong and elsewhere, and have recruited U.S. senators and the American ambassador to go to bat for them in an environment in which the United States no longer dictates Panamanian decisions.
In a letter March 1 to the Panamanian government, U.S. Ambassador William Hughes cited "a growing perception in American business circles that Panama's investment climate is unattractive."
All of this makes for difficult negotiations, bruised feelings and even a hint of intrigue. The relationship is clouded by a Yankee-go-home nationalism deeply imbued in the Panamanian national consciousness.
Under a painfully negotiated 1977 treaty, the Panama Canal and tens of thousands of acres of present and former U.S. military bases will complete the transfer to Panamanian sovereignty at noon on Dec. 31, 1999. U.S. troop strength is already dropping, from the customary 10,000 to 4,000 projected for later this year.
The transfer will end nearly a century of U.S. control over a sizable swath of the Central American nation that began with construction of the canal -- an engineering marvel that joined the Atlantic and Pacific oceans -- and endured coups and revolutions, and the U.S. invasion.
At the time of the agreement in 1977, many Americans reacted to President Jimmy Carter's decision to return the Canal Zone as he were giving Texas back to Mexico. But the historic shift from what has essentially been a U.S. colony has been under way for several years and in many respects proceeding smoothly. The canal's top executive and 90 percent of its employees are Panamanian.
Contrary to fears voiced in the past by American cargo carriers and even some Panamanians, canal efficiency doesn't appear to be threatened.
"We expect the operation will continue pretty much the same," says James C. Galligan, marketing vice president for Mitsui O.S.K. Lines, a major international carrier.
"There's a good chance they will run it more efficiently than we've run it," adds Joe B. Reeder, an undersecretary of the Army who doubles as chairman of the Panama Canal Commission.
Success of the canal matters to many ports, including the Port of Baltimore.
"It's obviously still an extremely important gateway to the Port of Baltimore," says Penelope W. Menzies, executive director of the World Trade Center Institute, an organization that helps Maryland exporters.
Lisa Shenkle, spokeswoman for the Maryland Port Administration adds: "South America for Baltimore is our fastest growing trade route."
The Panamanians are happy to take over the canal operation itself -- user fees add tens of millions of dollars to the country's cash-strapped economy. They are less pleased these days about the complete elimination of a U.S. military presence and the security attraction that offers investors.
In September, the Panama-based U.S. Southern Command, which controls all American military activity in the hemisphere south of Mexico, will abandon its hilltop headquarters at Quarry Heights and its view of the Pacific for an office park near Miami International Airport.
"Obviously there is going to be an adjustment, but there are no regrets," says Fernando Eleta, the No. 2 official at the Panamanian Embassy in Washington.