Military dictatorship
Amid negotiations for the Robles–Johnson treaty, Panama held elections in 1968. The candidates included Dr. Arnulfo Arias Madrid for the Unión Nacional (National Union). Arias Madrid was declared the winner of elections that were marked by violence and accusations of fraud against other candidates under Alianza del Pueblo. On October 1, 1968, Arias Madrid took office as president of Panama, promising to lead a government of "national union" that would end the reigning corruption and pave the way for a new Panama. A week and a half later, on October 11, 1968, the National Guard (Guardia Nacional) ousted Arias and initiated the downward spiral that would culminate with the United States' invasion in 1989. Arias, who had promised to respect the hierarchy of the National Guard, broke the pact and started a large restructuring of the Guard. To preserve the Guard's and his vested interests, Lieutenant Colonel Omar Torrijos Herrera and Major Boris Martínez commanded another military coup against the government.
The military justified itself by declaring that Arias Madrid was trying to install a dictatorship, and promised a return to constitutional rule. In the meantime, the Guard began a series of populist measures that would gain support for the coup. These measures included price freezing on food, medicine and other goods until January 31, 1969, as well as rent freezes and legalization of the permanence of squatting families in boroughs surrounding the historic site of Panama Viejo Parallel to this, the military began a policy of repression against the opposition, who were labeled communists. The military appointed a Provisional Government Junta that was to arrange new elections. However, the National Guard would prove to be very reluctant to abandon power and soon began calling itself El Gobierno Revolucionario (The Revolutionary Government).
Under Omar Torrijos's control, the military transformed the political and economic structure of the country, initiating massive coverage of social security services and expanding public education.
The constitution was changed in 1972. To reform the constitution, the military created a new organization, the Assembly of Corregimiento Representatives, which replaced the National Assembly. The new assembly, also known as the Poder Popular (Power of the People), was composed of 505 members selected by the military with no participation from political parties, which the military had eliminated. The new constitution proclaimed Omar Torrijos as the Maximum Leader of the Panamanian Revolution, and conceded him unlimited power for six years, although, to keep a façade of constitutionality, Demetrio B. Lakas was appointed president for the same period.
In 1981, Torrijos died in a plane crash. Torrijos' death altered the tone of Panama's political evolution. Despite the 1983 constitutional amendments which proscribed a political role for the military, the Panama Defense Force (PDF), as they were then known, continued to dominate Panamanian political life. By this time, General Manuel Antonio Noriega was firmly in control of both the PDF and the civilian government.
In the 1984 elections, the candidates included Nicolás Ardito Barletta Vallarino (supported by the military in a union called UNADE),previous leader Arnulfo Arias Madrid (for the opposition union ADO) and ex-General Rubén Darío Paredes, who had been forced to an early retirement by Manuel Noriega, running for the Partido Nacionalista Popular (PAP; "Popular Nationalist Party"). Barletta was declared the winner of elections that had been considered to be fraudulent. Barletta inherited a country in economic ruin and hugely indebted to the International Monetary Fund and the World Bank. Amid the economic crisis and Barletta's efforts to calm the country's creditors, street protests arose, and so did military repression. Meanwhile, Noriega's regime had fostered a well-hidden criminal economy that operated as a parallel source of income for the military and their allies, providing revenues from drugs and money laundering. Toward the end of the military dictatorship, a new wave of Chinese migrants arrived on the isthmus in the hope of migrating to the United States. The smuggling of Chinese became an enormous business, with revenues of up to 200 million dollars for Noriega's regime (see Mon 167).
The military dictatorship assassinated or tortured more than one hundred Panamanians and forced at least a hundred more dissidents into exile. (see Zárate 15). Noriega's regime was supported by the United States and it began playing a double role in Central America. While the Contadora group, an initiative launched by the foreign ministers of various Latin American nations including Panama's, conducted diplomatic efforts to achieve peace in the region, Noriega supplied Nicaraguan Contras and other guerrillas in the region with weapons and ammunition on behalf of the CIA.
On June 6, 1987, the recently retired Colonel Roberto Díaz Herrera, resentful that Noriega had broken the agreed-upon "Torrijos Plan" of succession that would have made him the chief of the military after Noriega, decided to denounce the regime. He revealed details of electoral fraud, accused Noriega of planning Torrijos's death and declared that Torrijos had received 12 million dollars from the Shah of Iran for giving the exiled Iranian leader asylum. He also accused Noriega of the assassination by decapitation of then-opposition leader, Dr. Hugo Spadafora.
On the night of June 9, 1987, the Cruzada Civilista ("Civic Crusade") was created and began organizing actions of civil disobedience. The Crusade called for a general strike. In response, the military suspended constitutional rights and declared a state of emergency in the country. On July 10, the Civic Crusade called for a massive demonstration that was violently repressed by the "Dobermans", the military's special riot control unit. That day, later known as El Viernes Negro ("Black Friday"), left many people injured and killed.
United States President Ronald Reagan began a series of sanctions against the military regime. The United States froze economic and military assistance to Panama in the middle of 1987 in response to the domestic political crisis in Panama and an attack on the US embassy. The sanctions failed to oust Noriega, but severely hurt Panama's economy. Panama's gross domestic product (GDP) declined almost 25 percent between 1987 and 1989.
On February 5, 1988, General Manuel Antonio Noriega was accused of drug trafficking by federal juries in Tampa and Miami. Human Rights Watch wrote in its 1989 report: "Washington turned a blind eye to abuses in Panama for many years until concern over drug trafficking prompted indictments of the general [Noriega] by two grand juries in Florida in February 1988".
In April 1988, US President Ronald Reagan invoked the International Emergency Economic Powers Act, freezing Panamanian government assets in all US organizations. In May 1989 Panamanians voted overwhelmingly for the anti-Noriega candidates. The Noriega regime promptly annulled the election and embarked on a new round of repression.
The United States invaded Panama on December 20, 1989, codenamed Operation Just Cause. The U.S. stated the operation was "necessary to safeguard the lives of U.S. citizens in Panama, defend democracy and human rights, combat drug trafficking, and secure the neutrality of the Panama Canal as required by the Torrijos–Carter Treaties". The US reported 23 servicemen killed and 324 wounded, with the number of Panamanian soldiers killed estimated at 450. The estimates for civilians killed in the conflict ranges from 200 to 4,000. The United Nations put the Panamanian civilian death toll at 500, Americas Watch estimated 300, the United States gave a figure of 202 civilians killed and former US attorney general Ramsey Clark estimated 4,000 deaths. It represented the largest United States military operation since the Vietnam War. The number of US civilians (and their dependents), who had worked for the Panama Canal Commission and the US military, and were killed by the Panamanian Defense Forces, has never been fully disclosed.
On December 29, the United Nations General Assembly approved a resolution calling the intervention in Panama a "flagrant violation of international law and of the independence, sovereignty and territorial integrity of the States". A similar resolution was vetoed in the Security Council by the United States, the United Kingdom, and France. Noriega was captured and flown to Miami to be tried. The conflict ended on January 31, 1990.
The urban population, many living below the poverty level, was greatly affected by the 1989 intervention. As pointed out in 1995 by a UN Technical Assistance Mission to Panama, the fighting displaced 20,000 people. The most heavily affected district was the El Chorrillo area of Panama City, where several blocks of apartments were completely destroyed. The economic damage caused by the fighting has been estimated at between 1.5 and 2 billion dollars. Most Panamanians supported the intervention.