Dirty Dollars

Ever since 1914, when U.S. engineers connected the Atlantic and Pacific oceans by carving a 43-mile-long canal across the Isthmus of Panama, the two ! countries have been intimately linked. So great is American influence that the U.S. dollar is legal currency in Panama. Yet Panamanians are extremely sensitive to any slight from their northern neighbors, especially since their nation is due to take over full jurisdiction of the canal at the end of 1999. Thus diplomats scurried for cover last June, when Senator Jesse Helms of North Carolina, an opponent of the controversial 1977 treaty that turned over the canal to Panama, charged that the man who runs the country is in cahoots with drug traffickers who smuggle narcotics into the U.S.

The object of Helms' ire was General Manuel Noriega, commander of Panama's defense force and the nation's strongman since 1983. Helms accused Noriega, a onetime intelligence chief and right-hand man of the late populist dictator Omar Torrijos, of being "head of the biggest drug-trafficking operation in the Western Hemisphere." Even Noriega's staunchest supporters in Washington suspected that Helms was on to something. Says one Reagan Administration official: "Noriega gets a cut of every kind of illicit business down there."

Apparently wounded by the charges, the general has decided to try to disarm his critics. And what better way to do that than to have the Panama legislature pass a new law aimed at -- what else? -- drug trafficking? Last week the national assembly did just that, requiring Panama's banks for the first time to provide information about the financial dealings of suspected narcotics kingpins and permitting previously sacrosanct numbered bank accounts to be frozen. The new law also speeds the extradition of foreigners suspected of drug offenses. Panama's banks, like those of Switzerland, have long been a haven for those trying to avoid taxes in their own countries. An estimated $38 billion in funds sits in Panamanian banks, and tax evasion is not even a crime in Panama.

Repeated demands by the U.S. Internal Revenue Service for help in tracing the money of tax cheats have up to now gone unanswered. As Planning Minister Ricaurte Vasquez has observed, "Only two things are certain: death and taxes. We're still working on solving the first one." A Panamanian lawyer who set up several shell companies for former Philippine President Ferdinand Marcos is more direct: "It's none of my business where the money comes from."

South American drug traffickers have appreciated this attitude. Arriving regularly from Colombia, Bolivia or Peru at the Torrijos airport, they hire armored cars and off-duty policemen to escort them and their money to hotels. When a Cuban-born woman called from Miami to ask her Panamanian lawyer for help in making a deposit, he assumed she needed legal advice. What she really wanted was assistance in lugging dozens of shoe boxes filled with small- denomination bills to the bank.