10 year report, the Panama Canal Commission


Material Information

10 year report, the Panama Canal Commission FY 1980 to FY 1989 : a decade of progress in canal operations and treaty implementation
Alternate title:
Ten year report, the Panama Canal Commission : FY 1980 to FY 1989 : a decade of progress in canal operations and treaty implementation
Portion of title:
10 year report, the Panama Canal Commission a decade of progress in canal operations and treaty implementation
Physical Description:
36 p. : ill. ; 28 cm.
United States -- Panama Canal Commission. -- Economic Research and Market Development Division
The Commission
Place of Publication:
Publication Date:


Subjects / Keywords:
Canals -- Panama   ( lcsh )
Panama Canal (Panama)   ( lcsh )
non-fiction   ( marcgt )


Statement of Responsibility:
report compiled and prepared by the Economic Research and Market Development Division of the Office of Executive Planning.
General Note:
Cover title.

Record Information

Source Institution:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
oclc - 21204093
sobekcm - AA00006075_00001
lcc - HE537.8 .T36 1989
System ID:

Full Text



FY 1980 to FY 1989


Gift of the Panama Canal Museum

The Panama Canal Treaty entered into force on October 1, 1979. On that historic
date, the Panama Canal Commission assumed the important responsibility of
managing, operating and maintaining the Panama Canal for the benefit of all nations of
the world through the end of the century. After ten years of progress and treaty
implementation, the Canal is in excellent condition and continues to provide exceptional
transit service at competitive cost. The achievements of the past decade are a tribute to
the thousands of Panama Canal employees who, under the leadership of the
Administrator. Mr. D. P. McAuliffe. and Deputy Administrator, Mr. Fernando
Manfredo. Jr., have maintained the sense of purpose, commitment and excellence
which are the tradition of this great enterprise. The Panama Canal Commission will
continue to build on this legacy and on December 31, 1999, an improved and
well-maintained waterway will be transferred to the Republic of Panama as required
by the Panama Canal Treaty.


Revised transit regulations now permit cruise
vessels and containerships up to 965' in overall
length, like the "Margrethe Maersk," to be
approved for transit.

Message from the Administrator

and Deputy Administrator

Mr. D. P. McAuliffe,
Administrator (left),
and Mr. Fernando
Manfredo, Jr.,
Deputy Administrator,
have been serving
the Panama Canal
Commission since
its establishment
on October 1, 1979.

The implementation of the Panama Canal Treaty on October 1. 1979, marked a new relationship between
the United States and Panama. Under the new arrangement, Panama was provided with an increasingly
important role in the operation of the waterway. One thing that remained constant, however, was the
enduring mission of the waterway to provide reliable, cost-effective transit service while operating on a
self-sustaining basis.
During the past ten years, nearly 115,000 merchant vessels transited the waterway carrying over one and
one-half billion tons of cargo to ports throughout the world. Noteworthy was the increase in size of ships using
the waterway with the proportion of Panamax vessels, the largest that can transit the Canal, rising dramatically.

At the outset of the decade, this increase in large ships severely tested the Canal's capacity to provide efficient
transit service. That challenge was successfully met through aggressive capital investment, accelerated
maintenance programs and a series of operational improvements. Today, the Canal is in excellent operating
condition with sufficient capacity to meet traffic demand through the life of the treaty and beyond.
An important aspect of the treaty was the requirement for increased participation by qualified
Panamanians at all levels of the Commission. This mandate has been followed successfully and has resulted in a
steady increase in the proportion of Panamanian employees since the effective date of the treaty. Panamanians
now comprise over 85 percent of the work force with much of the increase occurring in the higher skilled
positions vital to the Canal operation. Consistent with the requirement to expand the Panamanian component
of the Canal workforce, the Panama Canal Commission placed major emphasis on training programs to ensure
that employees were kept up to date in technological and professional areas, and that well-trained Panamanian
candidates were available for vacancies in the agency.
A great deal has been done to modernize and improve the waterway. These achievements have been
accomplished by Canal employees who, with their pride and special dedication, have been the key element in
preserving the proud tradition and high standards which represent the legacy of the Panama Canal. Despite a
decade of sweeping organizational and political changes, and recent civil disturbances in Panama, which have
caused unprecedented difficulties and personal hardships for all employees, the Canal continues to provide
efficient, safe transit service to international shipping.
In the early part of the next decade, the demanding requirements inherent in thefuture responsibility of the
Republic of Panama as the next steward of the Panama Canal will warrant attention. The Panamanian
employees will need assurances as to the type organization that will manage the Canal beginning with the year
2000, as well as terms and conditions ofemployment and other personnelpolicies they can expect. The maritime
industry must be assured well in advance that the Canal will continue to serve world commerce in a beneficial
manner and at competitive toll rates. We are confident that the waterway will be operationally soundand that a
virtually one hundred percent, fully-trained Panamanian workforce will be in place to meet the needs of world
shipping by the year 2000.
It is clear that the Canal today exists in a dynamic and rapidly changing environment. Fundamental
changes are occurring in international transportation that could have a significant impact on the future role of
the Canal. Nevertheless, as the volume of international trade expands, the all-water routes through the Panama
Canal should continue to capture an important share of seaborne commerce. With continued efficient,
quality service at competitive rates, the waterway should remain a preferred transportation alternative well
into the future.

Administrator Deputy Administrator

The luxury cruise ship "Star Princess" set a new
Canal toll record on May 18, 1989 paying


Organization 4

Board of Directors 5

Canal Traffic and Tolls Revenue 7

Improvements, Modernization and Maintenance 1 1

Financial 18

Implementation of Panama Canal Treaty 23

Employee and Community Relations 27

Future of the Waterway

Historical Calendar











I rM I I






The Panama Canal Commission is an agency of the Executive Branch of the United States Government, provided for by the
Panama Canal Treaty of 1977, and established by the Panama Canal Act of 1979 (Public Law 96-70). The President of the United
States exercises authority over the Commission through the Secretary of Defense and the Secretary of the Army. The Commission is
supervised by a nine-member Board of Directors; five are nationals of the United States appointed by the President with the advice
and consent of the Senate, and four are Panamanian nationals proposed by the Republic of Panama for appointment by the
President of the United States. At the operational level, the Commission is managed by a U.S. Administrator and a Panamanian
Deputy Administrator. In accordance with the treaty, effective January 1, 1990, a Panamanian citizen is scheduled to serve as
Administrator, with a United States citizen fulfilling the responsibilities of Deputy Administrator. The Administrator, regardless of
nationality, is appointed by the President of the United States with the advice and consent of the Senate, and the
Deputy Administrator is appointed by the President. Panamanian nationals for these top level positions are proposed by the
Republic of Panama.
The Commission was established on October 1, 1979, to carry out the responsibilities of the United States with respect to the
Panama Canal under the treaty. The agency is tasked with managing, operating and maintaining the Canal through the expiration of
the treaty at noon, Panama time, on December 31, 1999, at which time the Republic of Panama will assume full responsibility for the
Canal. A separate Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, which has no expiration date,
provides for the peaceful transit by vessels of all nations on terms of equality.

Panama Canal Commission

Board of Directors

Present and Past Members

Honorable Michael Blumenfeld
Washington, D.C.
FY 1980-FY 1981

Honorable William R. Gianelli
Washington, D.C.
FY 1981-FY 1989

Honorable Robert W. Page
Washington, D.C.
FY 1989-Present


Honorable John A. Bushnell
Washington, D.C.
FY 1980-FY 1986

Honorable John W. Clark
New Orleans, LA
FY 1980-FY 1982

Honorable Clifford O'Hara
New York, NY
FY 1980-FY 1982

Honorable William Sidell
Poway, CA
FY 1980-FY 1986

Honorable Andrew E. Gibson
Short Hills, NJ
FY 1982-Present

Honorable William W. Watkin, Jr.
Brevard, NC
FY 1982-Present

Honorable Richard N. Holwill
Washington, D.C.
FY 1986-Present

Honorable Walter J. Shea
Annapolis, MD
FY 1986-Present


Honorable Edwin Fabrega
Panama, R.P.
FY 1980-FY 1983

Honorable Roberto M. Heurtematte
Panama, R.P.
FY 1980-FY 1982

Honorable Tomis Paredes
Panama, R.P.
FY 1980-FY 1983

Honorable Ricardo A. Rodriguez
Panama, R.P.
FY 1980-FY 1983

Honorable Luis A. Anderson
Panama, R.P.
FY 1983-FY 1989

Honorable Fernando Cardoze
Panama, R.P.
FY 1983-FY 1986

Honorable Oyden Ortega
Panama, R.P.
FY 1983-Present

Honorable Carlos Ozores
Panama, R.P.
FY 1983-Present

Honorable Carlos Velarde
Panama, R.P.
FY 1986-FY 1989

Administrator . .... Honorable D. P. McAuliffe
Deputy Administrator ... Honorable Fernando Manfredo, Jr.

Assistant to the Chairman and Secretary .. .Michael Rhode, Jr.

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Specialty vessels like the car carrier "Green Lake"
regularly transit the Canal, delivering fully assembled,
damage-free automobiles along the U.S. Gulf and
Eastern seaboard.


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Canal Traffic and

Tolls Revenue


Canal traffic and tolls revenue ebbed
and flowed through the decade of the
1980's as world economic and trade
patterns shifted and new developments
continued to transform the transporta-
tion industry. At the outset of the period,
huge flows of Alaskan North Slope
(ANS) oil combined with spiralling
shipments of grain and coal to push
Canal business to all time highs in FY
1982. The bubble burst suddenly the very
next year with the diversion of ANS to a
newly opened trans-Panama oil pipeline,
plummeting demand for U.S. coal, and a
worldwide economic recession. The
result was the most severe decline in
Canal traffic since the Great Depression
and by FY 1984, use of the waterway had
fallen to the lowest level since FY 1977.
A growth pattern re-emerged in mid-
decade led by sharp increases in
containerized cargo and automobiles,
coupled, in more recent years, with a
resurgence of the volatile grain trade.
The expansion of the container and
automobile trades encouraged the build-
ing of many third generation container-
ships and larger, specialized vehicle
carriers. By FY 1988, these two vessel
types alone accounted for over one-third
of total Panama Canal net tons and tolls
revenue. Containerships and vehicle
carriers contributed heavily to the overall
increase in large vessel transits during the
decade. Transits by PANAMAX vessels
(beams of 100 feet or greater) rose from
14 percent of all oceangoing transits in
FY 1979 to almost 23 percent by FY
In the last year of the decade, a
slowdown in U.S. and Japanese econ-
omic activity and a sharp decline in the
grain trade, precipitated a fall in Canal
traffic from the near record levels reached
in FY 1988. Nevertheless, over 12,000
oceangoing vessels, carrying almost 152
million long tons of cargo, passed
through the waterway in FY 1989 and
traffic is anticipated to rise further in the
ensuing decade.

Traffic and Tolls Revenue Highlights

Canal traffic and tolls revenue surged
to record levels in FY 1982. In that year.
14,142 oceangoing vessels, carrying 185.7
million long tons of cargo transited the
Canal. The main factor behind the record
setting traffic was the ANS oil trade. At
its peak in FY 1982, the ANS trade
generated more than 1,500 tanker transits
and about $50 million in annual tolls
revenue. In October 1982, ANS oil
diverted from the Canal to a newly
opened trans-Panama oil pipeline, re-
ducing the Canal's total tolls revenue by
about 15 percent and prompting Com-
mission management to raise toll rates by
9.8 percent in March 1983. The loss of the
ANS trade also reduced average ship size
through the Canal. For the first time in 20
years, the trend toward larger vessels was
interrupted. By FY 1984, vessels in the
100-ft beam and over category had
dropped to 2,170 compared with 2,681 in
the peak year FY 1982.
The loss of the ANS oil occurred in
conjunction with a worldwide recession
and plummeting demand for coal. The
Canal coal trade, which had experienced
a temporary resurgence in the early
1980's, reached 23 million tons by FY
1982, but fell by over half to 11 million
tons in FY 1983. By the end of the decade,
coal shipments through the Canal had
dwindled further as the U.S. share of the
Far East coal market continued to decline

1980 1983 1988






1980 1983 1986 19t



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The "Guia," one of the Canal's newest tugs,
aligns the PANAMAX-size containership"Ever
Gleamy," as it prepares to enter a lock chamber.



and bypass movements via the Cape of
Good Hope on ships too large to transit
Grain was another commodity that
contributed to the FY 1982 boom in
Canal business. The grain trade, in-
fluenced by many factors, is highly
volatile and has fluctuated sharply over
the years. In FY 1982, an all-time high of
37.6 million long tons was recorded.
Almost 80 percent of the grain moved via
the Canal consisted of U.S. exports to the
Far East, with Japan and China as the
main destinations. Chinese imports of
wheat from the U.S. through the Canal in
FY 1982 reached record levels, with the
tonnage at almost 8 million tons. Grains
continued strong in FY 1983, but plunged

over 23 percent to 28.1 million tons the
following year, affected by diversions of
U.S. corn exports destined for the Far
East from Gulf ports to West Coast ports.
Grain shipments rebounded sharply in
FY 1987 and FY 1988, rising 41 percent
and 11 percent, respectively, in the two
years. This trade was a key factor in the
post FY 1982 record level achieved by
Canal traffic in FY 1988. With character-
istic volatility, however, the grain trade
plunged 18 percent in FY 1989,
accounting for much of the year's severe
downturn in traffic.
The sustained recovery in Canal traffic
that began in the mid-1980's was fueled,
to a great extent, by sharp increases in the

container and automobile trades. The
primary driver behind the increases in
both groups was the expansion of the
U.S. economy, with the strong dollar
fueling sharp increases in U.S. imports,
particularly from the Far East. The
expansion of trade stimulated the
emergence of third generation container-
ships and larger, specialized automobile
During the latter part of FY 1984, the
world's largest containerships, deployed
in round-the-world services, began using
the Canal. By the end of fiscal year 1986,
these container operations were in full
gear and total containerized cargo via the
Canal had increased to 16.9 million tons
compared with 12.2 million in FY 1983.
The increase in U.S. imports from the Far
East was of such magnitude that both the
all-water route via the Canal and the
competitive U.S. intermodal system
experienced container cargo increases of
major proportions. As the yen ap-
preciated against the dollar, however,
U.S. imports of container cargo via the
Canal began to decline. U.S. export
growth began to outpace import growth
with net container shipments in FY 1987
and FY 1988 continuing to display
increases, although not at the spectacular
rates of the previous three years. In the
last years of the decade, although the
container trade continued strong, the
Canal experienced a decline in the growth
rates of the container movement and



1980 1983 1986

1980 1983 1986


market share was lost to the U.S.
intermodal system with its rapidly
expanding double stack trains. Despite
the success of intermodalism, the Canal
container trade is anticipated to grow
further in the years ahead.
Japanese exports of automobiles to the
U.S. was the leading factor in the Canal's
recovery from the FY 1983 trough.
Japanese automobile shipments through
the Canal rose 35.3 percent to 1.8 million
tons in FY 1986 from FY 1985 levels and
continued strong in FY 1987. The large,
new vehicle carriers are the highest paying
vessel types at the Canal and the trade
accounted for approximately one-fifth of
all tolls revenue in the latter half of the
decade. The increasing trade in auto-
mobiles halted in FY 1988 and shipments
have been declining through FY 1989.





The downward trend reflected a shift in
sourcing patterns as production of
Japanese cars in plants established in the
U.S. began to replace imports. The
declining dollar against the Japanese yen
and the need to avoid import restrictions
were factors that stimulated the trans-
plant of Japanese car manufacturing
plants to the U.S. By FY 1989, the loss of
Japanese vehicle shipments had ac-
celerated, contributing to a general fall-
off in Canal business.
The erosion in traffic which began in
FY 1989 is expected to continue in FY
1990 as the pace of economic activity in
the regions that largely determine Canal
trade growth slows further. Over the long
term, however, use of the waterway is
forecast to rise and the Canal will remain
a vital link in world trade. ME

Panama Canal Traffic and Tolls Revenue

(Long tons)

Tolls Revenue


Parallel lock chambers give added
transit and maintenance flexibility.



Modernization and


High mast lighting

To meet the challenges and keep pace
with the growing demands placed on the
waterway in the early years of the decade,
Commission management intensified
efforts to modernize and improve the
waterway. This commitment continued
throughout the decade with the Com-
mission investing over one billion dollars
to complete major Canal improvement
projects already underway, implement
new capacity programs and improve
navigational safety. Major maintenance
programs were also accelerated with a
view towards minimizing downtime and
extending the productive life of Canal
improvements. The long-term objective
of these actions was to continue to ensure
safe, efficient and reliable transit service
for world shipping well into the next
Recognizing the increasing competi-
tive nature of the transportation industry
and the need to develop a greater
awareness of the advantages offered by
the Panama Canal, the Commission
established a marketing program in 1983.
Primary among the goals of the
marketing function was the strengthening
of ties with existing Canal customers,
exploring and developing new market
sources, and maintaining a perception in
the marketplace that the Canal is an
efficient and economically advantageous
transportation alternative for world
trade. Since its inception, top manage-
ment officials of the Commission,
accompanied by marketing personnel,
marine and public relations represen-
tatives, have participated in selected

Marine Traffic Control Center

maritime expositions and conferences,
personally conducted economic/market-
ing surveys of major Canal customers
and other maritime related organizations,
and developed closer relationships with
leading port authorities worldwide. Face-
to-face meetings between customers and
Canal management officials provided the
opportunity for candid discussion of
problems and a more immediate response
to those concerns. Other marketing
efforts which produced a positive re-
sponse were briefings and presentations
by Commission officials locally and
abroad to important segments of the
maritime industry, representatives of
U.S. and foreign governments, military
associations, civic organizations and
private industry. Extensive use of ad-
vanced telecommunications, trade jour-
nals, periodicals and press conferences
also has kept world shipping abreast of
new Canal technology, equipment and
improvement programs. These mar-
keting efforts have been extremely
important in promoting the Canal as a
dedicated service organization which is
responsive to customer needs.
The Canal today is a well engineered,
efficient facility incorporating state-of-
the-art technology including an extensive,
modern communications network. Ships
arriving at the waterway encounter
minimum delays and, on average, spend
less than 24 hours in Canal waters. An
experienced, skilled team of Commission
professionals ensures arriving vessels
receive a secure, rapid, around-the-clock
transit. A transit reservation system was

Locks overhaul

implemented for vessels desiring a
guaranteed day of Canal transit.
A number of significant accomplish-
ments to increase the capacity, efficiency
and safety of the Canal were achieved
during the decade by building on earlier
laid foundations, as well as by the
initiation of new efforts.

Capacity Expansion and Channel

High Mast Lighting-Completion of
the high mast lighting project at all
locks in the early 1980's effectively
extends the number of hours during
which large vessels can transit, as well
as provides improved visibility at
night for smaller vessels. The in-
creased capability of the locks to
transit more vessels at night has been a
major capacity enhancement.
Additional Locks Towing Locomo-
tives-Fifteen towing locomotives,
costing more than $1 million each,
have been acquired. Expanding the
fleet to 80, this new equipment
provides improved transit capability
at the locks.
Replacement of Locks Towing Loco-
motive Turntables-This is an on-
going major project to replace towing
locomotive turntables at all locks to
allow earlier attachment of locomo-
tive wires to vessels to provide greater
control during lockages. The installa-
tions also provide switching and
parking facilities for additional lo-
comotives and facilitate relay lock-


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Channel deepening and maintenance dredging
are critical to the safe and efficient transit of

ages conducted during locks over-
Upgraded Tugboat Fleet-This is a
continuing program to acquire new,
more powerful and highly maneuver-
able tugboats to provide more
efficient service to transiting ships,
particularly wide beam vessels. Con-
tracts for the construction of ten new
tugs were awarded during the decade
at a cost of between $3.0-$4.2 million
each. The Commission transit tug-
boat fleet now numbers 17 and
additional replacement tugs are on
Acquisition of High Speed Launches-
Five special high speed launches were
recently acquired to provide rapid,
secure and uninterrupted movement
of pilots and other key personnel to
work stations along the Canal. The
launches serve as alternative transpor-
tation to the hazardous and deteri-
orated highway across the Isthmus.
Vessel Tie-up Station-A multi-million
dollar mooring station constructed
just north of Pedro Miguel locks
increases the efficiency of the Pacific
locks by providing a holding area for
northbound and southbound vessels
with special Gaillard Cut restrictions.
The station can also accommodate
disabled ships and provide a safe
haven for vessels during periods of
heavy fog.
Expansion of Gatun Lake Anchor-
age-The substantial enlargement of
the Gatun Lake Anchorage permits

New high speed launch

Controlling lake levels

more efficient utilization of Gatun
Locks. Relocation of buoy markers
and clearing the anchorage area
added 270 additional acres and
enlarged the anchorage by approxi-
mately 35 percent. The adjoining
Explosives Anchorage provides an
area to hold ships carrying hazardous
cargo at a safe distance from the locks,
other vessels and townsites.
Deepening of the Ship Channel-
Completion of this major dredging
program to deepen the Canal channel
from south Gatun Locks to north
Miraflores Locks involved the re-
moval of 6.3 million cubic yards of
earth and rocks. Increased water
availability for lockages now virtually
assures a maximum allowable draft of
39.5 feet year-round for transiting
vessels. This project has proven to be
of considerable economic value to the
maritime community by allowing
vessels to fully load to maximum
Canal draft without restrictions. Since
the project was completed in May
1984, there has been no requirement
to reduce draft.
Canal Widening Projects-Completion
of Canal widening projects at Mamei
Curve, Bohio Curve, Gamboa Reach
and south Miraflores Locks approach
provide for improved maneuver-
ability, navigational safety and visibil-
ity in the Canal channel. These
projects involved eight years of major
dredging and excavation work cost-
ing millions of dollars. Other excava-
tion projects to improve visibility and

Vessel tie-up station

stabilize slopes along the Canal
channel were accomplished at La Pita
Hill and Lirio Hill. Widening of the
Pacific entrance channel was begun in
FY 1989 with completion scheduled
for FY 1990.
Operational and Safety
Related Improvements:

Installation of Major New Computer-
ized Traffic Management System in
the Marine Traffic Control Center-
A major upgrading of the computer-
ized traffic management system pro-
vides for more efficient and safe
coordinated movement of vessels
throughout the Canal. The new
system features provide an integrated
source of data available to key
operational units along the length of
the Canal. Ongoing improvements
will further expand system capabil-
ities in the future.
Transit Reservation System-A re-
servation system allows customers to
schedule a guaranteed day of Canal
transit for a nominal fee. Initially
implemented on a trial basis at the
request of Canal customers, the
system was approved for permanent
use following careful analysis and
public hearings. The revenues re-
ceived are used to assist in funding the
Canal's capital program. The system
has been used extensively, particularly
by liners with fixed schedules and
ships carrying perishable cargoes.
Longer Vessels Approved for Transit-
Revised transit regulations permit

L .. I


Removal, rehabilitation and reinstallation of the
massive 700 ton miter gate leaves is one of
several major maintenance efforts during a locks



Buoy maintenance
passage of most oceangoing vessels
whose total length does not exceed
950 feet. Containerships and pas-
senger vessels up to 965 feet in total
length are now approved for transit.
Streamlined Vessel Accident Investiga-
tion Procedures-Streamlined acci-
dent investigation procedures have
effectively minimized delays to
shipping by reducing the response
time of key personnel needed to
investigate, assess and develop find-
ings in marine accident cases. While
the Canal has an excellent ship safety
record, marine safety has always been
an important concern.
New Signal Station-A new modem
signal station was constructed on top
of Building 1105 at Cristobal. Marine
type radars are being installed in both
the Atlantic and Pacific signal stations
to permit earlier vessel identification,
provide improved communication
between Canal transit officials and
arriving vessels and to enhance safety.
Buoy Conversion-Modifications to
Canal buoys, beacons and naviga-
tional markers now conform with the
standards set by the International
Association of Lighthouse Author-
ities (IALA). Used by most countries
around the world, the IALA system
provides for clearly defined and
uniform navigational markings.
Installation of a Synchrolift-A $3.7
million elevator-type dry dock with
net lifting capacity of 1,600 long tons
at the Mount Hope Industrial
Division improves maintenance ca-


ability for overhaul of locks miter
gates and much of the Canal's floating
equipment. Installed in April 1985, it
also serves to augment the adjacent
Mt. Hope dry dock and launch repair
New Locks Firefighting Systems-
A multi-phase program will upgrade
and augment firefighting equipment
and facilities at all locks with the latest
in marine foam protection systems.
When completed, the new system,
costing several million dollars, will
provide greater protection against
major hazardous risks and avoid
potential damage to locks facilities,
machinery, equipment, personnel and
transiting vessels.
New Weather Monitoring and Re-
servoir Management Equipment-
An integrated network of state-of-the-
art computer, radar and electronic
equipment with satellite imagery
provides accurate, current data on
weather conditions, lake levels, and
potential and actual inflows to the

Maintenance Programs

Maintenance is the cornerstone of the
day-to-day operation of the Panama
Canal and these programs receive top
priority. Key programs responsible for
maintaining the Canal in prime condition
Annual Locks Overhauls-Program-
med annual overhauls of selected
locks involve extensive upper and
lower chamber work and replacement
or repair of underwater equipment.
This work normally includes removal,
complete rehabilitation and reinstal-
lation of several of the massive miter
gates; and inspection and repair of all
electrical systems and components,
valves, seals and culverts. Ac-
complishment of locks overhauls
requires more than 1,000 employees
and an annual investment of some $5

Towing Locomotive Rehabilitation
Program-During the decade, 57
locks towing locomotives and three
electric locomotive cranes were re-
habilitated at the Commission's mod-
ern, fully-equipped towing locomo-
tive repair facility. The locomotive
repair facility significantly increases
the locks capability to overhaul
locomotive traction units and wind-
lasses. Each unit was rehabilitated at
approximately one-fourth the cost of
a new locomotive, while also ex-
tending its service life by an estimated
20 years.
Locomotive Tow Track Rehabilita-
tion-Extensive maintenance and
rehabilitation of approximately 50,000
linear feet of the locomotive tow
track's waterside rail was accom-
plished as well as the critical sections
of the landside rail, rack sections and
conductor slot. Waterside rail was
upgraded from 90 to 105 pound rail to
handle greater stress loads exerted by
the increasing number of large vessels.
A unique procedure, the "alternate tie
method," was developed which per-
mitted the removal and replacement
of alternate rail ties together with the
concrete foundations, thus permitting
the track to be repaired without
interfering with the movement of
transiting vessels.

Locomotive tow track work

Overhaul of Flood Gates at Dams and
Spillways--Major overhauls of flood-
gates at dams and spillways were
conducted. The efficient functioning
of floodgates is essential to controlling
maximum lake levels during periods
of heavy inflows.
Maintenance of Power and Water Sys-
tems-This is an ongoing project to
improve and maintain the capacity
and reliability of the Canal's power
and water systems.
Replacement of Damaged or Worn
Fendering at all Locks-All old
fendering is being replaced with new
state-of-the-art high strength, wider
load distribution-surface fendering
which is more durable and resistant to
abrasion and deterioration.
Overhaul of Floating Equipment-This
is an ongoing program to maintain
Canal dredges, tugs, launches, barges
and other floating equipment in top
Routine Dredging of the Ship Channel-
Depth surveys and routine dredging
are conducted throughout the year to
ensure maximum allowable channel
draft for large vessels.


A major landslide in Gaillard Cut,
which dumped approximately one-
half million cubic yards of rock, earth
and debris into Canal waters, oc-
curred on October 13, 1986. About
half of this material caused a
narrowing of the navigable channel in
the area of Gold Hill. Commission
resources and equipment were im-
mediately dispatched to the slide area
to begin removal of slide material and
to settle unstable areas resulting from
the slide. Two dredges and related
equipment were simultaneously con-
tracted from the United States to
assist in the removal effort. Precau-
tionary transit measures, temporarily
instituted in the interest of naviga-

tional safety, were progressively
withdrawn until full channel width
and normal Canal operations were
restored on December 23, 1986.
The ready response and effective
restoration efforts by the Commission
team were responsible for main-
taining the Canal channel open
throughout the crisis. The interna-
tional maritime community expressed
extreme gratitude and appreciation to
the Commission for the rapid restora-
tion of the channel to normal
conditions and for the manner in
which the traffic was handled during
the challenging situation.
The Commission continued to
implement landslide control measures
to improve bank stabilization in the
slide area, including extensive pre-
ventive excavation and drainage
improvements. Reforestation of the
affected areas was also undertaken to
control erosion and minimize the
environmental impact of these pro-
jects. A Geotechnical Advisory Board,
composed of four eminent geotech-
nical engineers from the United States
and Canada, was established to
develop findings and make recom-
mendations in connection with slide
control efforts.
The Board convened on a number
of occasions to recommend ap-
propriate slide control measures and
perform on-site inspections to exam-
ine techniques and progress. The
Board's final report complimented
measures being taken by the Panama
Canal Commission and emphasized
the importance of continued main-


Gaillard Cut Widening-In the
mid 1980's, the possibility of a
potential limitation to the transit
capacity of the Canal led Com-
mission management to undertake
a major, multi-faceted study to

determine the feasibility of widen-
ing Gaillard Cut to allow un-
restricted, two-way passage of all
vessels, regardless of beam size.
Technical analysis was required to
establish a theoretical channel
design, obtain geotechnical in-
formation, and to determine con-
struction methodology and cost.
Analytical support was obtained
from the Computer Aided Opera-
tions Research Facility (CAORF)
at Kings Point. The U.S. Army
Corps of Engineers also assisted
Commission engineers and tech-
nicians in the geotechnical in-
vestigation and construction meth-
odology. Other elements of the
study included an environmental
analysis; evaluation of a variety of
financing options; and a long-range
traffic demand forecast of cargo
tonnage, revenues, transit levels
and ship size characteristics through
the year 2010. Still pending are
economic and operational analyses,
based on current long range traffic
forecasts, to determine if, and when,
the widening should be accomplished.
The project, if undertaken, would
require the removal of approximately
34 million cubic yards of material at
an estimated cost of between $300 to
$400 million in current dollars.
In addition to the various technical
studies to determine feasibility and
need, Canal customers will be given
ample opportunity to present views
on the project's desirability as well as
on the funding implications if it is
determined that the project will be
necessary in whole or part. Ap-
propriate liaison with all concerned
parties, including the U.S. Congress,
will be conducted prior to any
decision on the project. OI

A PANAMAX-size containership navigates
past the Cucaracha landslide, while dredges
worked around the clock to clean up slide

SA partial view of Gaillard
___________Cut looking north.


Computers are commonplace in most
Commission offices, improving pro-
ductivity and removing the tedium of
complex compilation and computation
of data.

On October 1, 1979, the Panama
Canal Commission began operation as
an appropriated-fund agency, assuming
all the assets and liabilities of the Panama
Canal Company and the Canal Zone
Government, its predecessor agencies.
Although receiving its annual funding
requirements through the appropriation
process, all costs associated with oper-
ating and maintaining the waterway
continued to be borne solely by revenues
generated from Canal operations, ex-
clusive of any U.S. taxpayer monies. To
accomplish this, a special fund was
established in the U.S. Treasury into
which Canal receipts would be deposited,
and from which funds necessary to cover
Commission expenditures would be
appropriated. This funding arrangement
separated Commission resources from
other U.S. Government monies and gave
the Congress the means to monitor the
Canal's ability to operate on a self-
financing basis as mandated by U.S. law.
In order to incorporate the concepts and
requirements of appropriation laws and
regulations, the Commission made
changes to its system of financial records
inherited from the former Canal agencies.

These changes covered the broad areas of
management policies and procedures, the
agency's budgeting process, and the
capabilities of recording all accounting
transactions under businesslike accrual
accounting methods while maintaining
financial data as required under govern-
mental appropriated-fund procedures.
Effective with treaty implementation,
the Commission increased toll rates by
29.3 percent, the largest rate jump in the
Canal's history. A rate increase of this
magnitude was required in order to pay,
out of Commission earnings, over $70
million dollars annually to the Govern-
ment of Panama as a result of certain
payment formulas agreed to in the treaty.
A major milestone in the financial
history of the Canal was the approval of
the Commission's Statement of Ac-
counting Policies and Related Principles
and Standards by the Comptroller
General on September 14, 1982. With this
stamp of approval, the Commission
became one of the few Federal agencies
having in place an approved system of
accounting policies and principles upon
which the processing and reporting of all
its accounting transactions are based.
In October 1982, construction of the
trans-Panama oil pipeline was com-
pleted, and with its opening, the number
of oil-carrying vessels transiting the canal
from Alaska's North slope to the East
coast of the United States began to
decline dramatically, resulting in an
annual revenue loss of approximately $50
million. As a result of this, the
Commission, after implementing major
cost-reduction measures, was again
forced to raise toll rates, effective on
March 12, 1983, by 9.8 percent in order to
maintain revenue levels at or near Canal
operating costs.
As worldwide inflation continued on
the rise, the Commission recognized the
need for more timely reporting of the
Canal's day-to-day financial situation.
Consequently, the Commission, in 1984,
began to upgrade its data-processing
capabilities. Included in this major

undertaking was the installation of
multiple IBM mainframe computers,
installation of on-line/real-time process-
ing in certain critical systems, and data
entry and inquiry capability from remote
locations. At the same time, personal
computers were introduced into the
Commission on a wide-scale basis, both
as stand-alone systems and as on-line
work stations integrated with the Com-
mission's central computer facility. At the
forefront of the agency's computerized
applications were the Commission's
Financial Management System (FMS)
and Marine Traffic Control System
The FMS is a state-of-the-art system
which fully integrates fund control and
accounting functions as well as providing
integrated software for processing and
producing the Commission's General
Ledger, Budgetary Control reports, and
Accounts Receivable and Payable rec-
ords. Electronically interfaced with the
new system were the previously com-
puterized systems of payroll processing,
inventory management and control, and
project and job reporting. The MTCS
was developed jointly with the Canal's
Traffic Management Division, and pro-
vides centralized scheduling and control
over vessel transits and their movements
within Canal basin and harbor areas.
Data within the system also provides the
basis for pilot assignments, linehandler
schedules, and towboat and launch
requirements. Beginning in FY 1990, the
MTCS data bank will be the source for
electronically preparing billings for tolls
and other navigation services.
In late 1985, Congress enacted legisla-
tion authorizing the Commission to
purchase insurance which would indem-
nify the Canal against a major loss
resulting from an accident or natural
event of severe or catastrophic propor-
tions. Under this authority, the Com-
mission purchased an all-risks catas-
trophe policy in December 1987, and
became, essentially, the first Federal
agency operating under the umbrella of

commercial insurance protection. This
insurance has been renewed in each
subsequent year; and based on the
Canal's track record, should be available,
at Panama's option, after the year 1999.
In January 1988, with enactment of
Public Law 100-203, the Commission
was converted from an appropriated-
fund to a revolving-fund agency, thereby
removing it from the annual govern-
mental appropriation process, but re-
taining Congressional oversight of the
Commission's annual budget. As a result
of this legislation, Congress formally
acknowledged the financial indepen-
dence of the Canal free from the use of
any U.S. taxpayer monies. The costs of
operating the waterway, including all
capital replacements and improvements,
are funded solely from income received
from Canal customers; and toll rates and
other service fees are promulgated on a
cost-recovery, break-even basis. As with
any large commercial enterprise, the
management and application of Com-
mission resources are continuously modi-
fied to respond to fluctuations in Canal

Some 1,000 on-line workstations throughout the
Commission are monitored by network control
operators in the central computer facility. The
facility includes five major mainframe com-
puters and supports numerous state-of-the-art
on-line applications.

7 Y -
Employee check cashing services continued
without interruption during a lengthy banking
crisis in Panama.

traffic and work load; and under a
revolving-fund structure, management is
guaranteed the flexibility to meet such
challenges. In the year 2000, when
stewardship of the Canal is passed to the
Government of Panama, the revolving-
fund format will serve as a good example
for their consideration in determining
what type of financial structure the
waterway should operate under.
In March of 1988, the Government of
Panama ordered all banks operating in
the Republic to close their doors. This
decree was in response to the political
upheavals and the deteriorating econ-
omic conditions plaguing the country. As
a result of this unprecedented action, the
Commission, overnight, was denied
access to its funds on deposit with the
Chase Manhattan Bank and Citibank
and stripped of all local commercial
banking services and support. Crowning
the agency's banking dilemma was the
attendant loss of its ship-guarantee
procedures which had been in place since
the Canal began operations. The corner-
stone of these procedures was the security
deposits held in local banks that served as
collateral, guaranteeing in advance,
payment of all toll and navigation fees for
services provided vessels.
In response to this loss, the Com-
mission instituted emergency ship-clear-
ance procedures to ensure the uninter-
rupted flow of Canal traffic, and
arranged with its customers to im-
mediately establish offshore security
deposit accounts with banks located in
the United States earmarked as Panama
Canal guarantees. Canal invoices pre-
sented for payment against these ac-
counts were credited to the Commission
account in the U.S. Treasury via Fedwire.
This procedure will remain unchanged
for the foreseeable future.
Further exacerbating the seriousness
of the agency's financial position resulting
from the collapse of the Panamanian
Banking System was the prospect of all
outstanding Commission checks be-
coming non-negotiable, since through

standard check-clearance processes, they
would eventually be presented for
payment against closed accounts. To
protect against this occurring, new
accounts were opened at the Chase
Manhattan Bank and Citibank in New
York, and procedures established where-
in all Commission checks flowing
through the Federal Reserve system
would be short-stopped at New York for
final payment. This temporary procedure
effectively blocked all Commission
checks from being forwarded to Panama
for clearance.
Another major hurdle overcome in the
agency's effort to normalize its check and
cash-handling procedures was the need to
provide check-cashing services to the
Commission's work force and to Civil
Service annuitants whose U.S. Treasury
checks had previously been deposited or
cashed at local banks. Augmentation of
the agency's cashier force and significant
increases in Commission cash balances
on paydays answered employee check-
cashing requirements, while in response
to the Civil Service annuitant problem, a
payday program was implemented, in
coordination with the U.S. military
finance offices operating in Panama, to
pay these individuals each month.
Finally, in order to meet its banking
needs, the Commission opened checking
accounts at the American Express
banking facility located on a United
States military base in Panama. These
accounts currently meet the day-to-day
checking requirements of the agency.
In one of many actions designed to
facilitate an orderly transfer of the Canal
to Panama in 1999 free of all liens and
debts, the Commission changed its
method of accounting for injury claims
under the Federal Employees' Com-
pensation Act (FECA). In view of the
Commission's finite life and because the
liability for injury payments would
continue beyond the year 1999, the past
practice of recognizing injury claim costs
as a Canal operating expense during the
year in which the benefits were paid was

inappropriate. Accordingly, in 1989, the
Commission changed to the accrual
accounting method for FECA claims and
began recognizing the full cost of those
claims, including projected future benefit
payments, at the time accidents occur.
Legislation was enacted to establish an
interest-bearing account in the U.S.
Treasury, entitled The Panama Canal
Commission Compensation Fund, into
which the Commission, based on ac-
tuarial formulas, deposits funds monthly
in amounts adequate to cover the costs of
all present and future employee FECA
payments. Also, effective with that
legislation, the administration of all
claims and processing of benefit pay-
ments was turned over to the Department
of Labor.

During 1989, the Commission suffered
a falloff in Canal traffic due to changing
world trade patterns, and the growing use
by Canal customers of alternate means of
transportation between the East and
West coasts of the United States. Because
of rising costs due to inflation and a
projected minimal growth in traffic levels,
the Commission announced a toll-rate
increase of 9.8 percent to be effective
October 1, 1989.
During its first 10 years of managing
the Canal, the Panama Canal Com-
mission has met its Congressional
mandate of operating the waterway as
near a break-even basis as possible,
generating over $4 billion in revenues
while incurring essentially a like amount
in expenditures. ne

The growing container trade represents an
important segment of Canal cargo move-


(Dollars in Thousands)

I) 1980 1 I981 144 1982 1 Y193 t1 1984 1 N 1985 V 14986 Ft 1987 t1 1988 i 1989 191 \
I otal opeiatiing
rclenLi .... S369.409 S38X.026 S431.984 S393.957 S404.415 S406.723 S424.301 S436.135 S449.409 S435.739 S4,14(.098
i oeal opciating
e\peine~.... 366.710 33X.943 430.655 398.0901 397.578 405.604 422.2XX 436.725 S451.227 443.355 4.141.208
Net income
or los') .... S2.699 (S917) S1.29t (54.133) 56.837 S1.119 S2.013 (S590) (S1.818) (S7.6161 (51.110)

The operation of the Panama Canal is conducted on a self-financing basis. This is in accord with the Panama Canal Act of 1979
which established the Panama Canal Commission as an agency of the Executive Branch of the United States Government with the
responsibility for the management, operation and maintenance of the Panama Canal.
The Commission is expected to recover through tolls and other revenues all costs of operating and maintaining the Canal,
including interest, depreciation, capital for plant replacement, expansion and improvements, and payments to the Republic of Panama
for public services and annuities, in accordance with paragraph 5 of Article Il1 and paragraphs 4(a) and (b) of Article XIII, respectively,
of the Panama Canal Treaty of 1977. In addition, paragraph 4(c) of Article XIII of the Treaty provides for a profit payment to the
Republic of Panama, of up to $10 million per year, out of Canal revenues to the extent that operating revenues exceed expenditures in
any one year.
During the ten years since its establishment, the Panama Canal Commission has generated operating revenues and expenses
totaling $4.1 billion, each, with a nominal $8.9 million paid to the Government of Panama under the provisions of paragraph 4(c) of
Article XIII of the Treaty. Throughout this period, the Commission also spent almost $1.1 billion to maintain the Canal channels
and its infrastructures. In addition, the Commission has invested some $260 million in capital improvements and plant replacements
during that period.
The cumulative financial results for this ten-year period demonstrates that the Commission has operated essentially on a break-
even basis as required by the law. It has met this statutory requirement while at the same time modernizing the Canal to assure the
efficient, safe and economical transit of vessels for the future. This is an extraordinary accomplishment given the complexities inherent
in the Canal operations and the changes wrought by the Panama Canal Treaty of 1977. On October 1, 1979, a toll rate increase of 29.3%
was implemented to offset increased payments to Panama out of Canal revenues mandated by the treaty. A later increase of 9.8% was
implemented in March 1983, due primarily to the loss of the North Slope oil traffic following the opening of the trans-lsthmian oil
pipeline. A toll increase of 9.8% was approved to be effective at the beginning of FY 1990 due to inflation and the projected minimum
gro"uih in traffic levels.

In less than one day, tourists on board luxury
cruise liners can enjoy a transit through the
Canal and a two ocean cruise.

Implementation of

The Panama Canal


Concurrent with the dramatic increase
in Canal traffic demands in the early
1980's, the management of the Panama
Canal Commission faced the complex
task of implementing the Panama Canal
Treaty. Prior to entry into force of the
treaty, the Canal organization consisted
of two U.S. Government agencies, the
Canal Zone Government and the
Panama Canal Company. The Canal
Zone Government administered the
various civil functions such as: schools,
hospitals, postal services, sanitation, fire,
police protection, and the judicial system.
The Panama Canal Company included
commercial operations such as ports, the
Panama Railroad, and commissaries, as
well as the basic marine and engineering
functions directly connected with the
operation of the waterway. The admin-
istration of both organizations was the
responsibility of the Governor of the
Canal Zone/President, Panama Canal
Company, who was responsible to a
Board of Directors appointed by the
Secretary of the Army in his capacity as
principal stockholder of the Canal
Company. The Secretary also served as
the direct representative of the President
of the United States in the supervision of
the Canal Zone Government.
Pursuant to the terms of the treaty, the
Canal Zone Government and Panama
Canal Company were disestablished. The
Republic of Panama assumed jurisdic-
tion over the former Canal Zone,
including all aspects of law enforcement,
the responsibility for operating Canal
area ports and the Panama Railroad, and
for providing many of the public services.
The Canal's former health and educa-
tional services were transferred to the
U.S. Department of Defense while the
primary functions directly associated
with the operation of the Panama Canal
were retained by the new Panama Canal
Implementation of the treaty had an
immediate effect on the lives of em-
ployees, their families, other residents of
the surrounding communities, and on the
many service oriented entities or activities

operating within the former Canal Zone.
All independent activities such as
churches, social and fraternal organiza-
tions, commercial activities and land
leases operated under the laws and
regulations of the Canal Zone came
under the jurisdiction of the Republic of
The establishment of the new Panama
Canal Commission, with responsibilities
essentially limited to the efficient and safe
passage of ships through the waterway,
combined with the transfer of some
major functions to the U.S. Department
of Defense and the Republic of Panama
resulted in a massive reorganization of
the Canal work force. The total full-time
permanent work force of the Canal
organization just prior to entry into force
of the treaty exceeded 12,000 employees
including U.S. citizens, Panamanians,
and a small number of citizens of other
nations. With the advent of the treaty, the
new Panama Canal Commission work
force was reduced to about 8,000
employees. At the end of the decade,
there were approximately 7,600 per-
manent Commission employees.

To conduct the orderly passage of
jurisdiction to Panama, the treaty
provided for a 30-month transition
period during which the criminal and civil
laws of the United States were applied
concurrently with those of Panama in
those parts of the former Canal Zone
where the U.S. retained installations or
had been granted use rights. During the
transition period, the Panama Canal

In a joint spirit of coopera-
tion, Panamanian and Com-
mission firefighters have en-
sured effective delivery of
fire protection services in the
Canal area.



I- -

View of Gatun Locks looking south-Carefully planned maintenance and
improvement programs have kept the Canal in excellent operating condition
throughout the ten years following entry into force of the Panama Canal Treaty.

Commission was permitted to exercise
police authority and to maintain a police
force. Throughout this period, joint
U.S./Panama police patrols provided
law enforcement for the Canal area.
Additionally, the court systems in the
former Canal Zone were permitted to
handle all pending and most new criminal
cases, but only those civil cases on the
courts' dockets prior to October 1, 1979.
Under a Prisoner Transfer Agreement
concluded in 1980, prisoners serving
sentences in the Canal Zone Penitentiary
at Gamboa at entry into force of the
treaty were given the option of com-
pleting their terms in the Panamanian
penal system or requesting transfer to a
detention facility within the United States
operated by the U.S. Bureau of Prisons.
On March 31, 1982, the Commission's
transitionary police force and the U.S.
judicial system on the Isthmus were
Title to all housing formerly owned by
the Panama Canal Company passed to
Panama at entry into force of the treaty,
with the United States granted the use of
those units for housing eligible Com-
mission employees and their dependents.
The Commission continued to manage,
maintain, improve, rent and assign the
houses during the decade. However, since
the treaty provided that housing in excess
of Commission needs would be trans-
ferred to Panama, 2,786 housing units, or
nearly 65 percent of Canal agency's pre-
treaty inventory of 4.300 units, were
released to Panama. That figure exceeds
the treaty mandated requirement for at
least 30 percent of all Commission
administered housing to be transferred
within 10 years after entry into force. It
also exceeds, well ahead of schedule, the
requirement to transfer to Panama at
least 60 percent of Commission housing
by the end of the 20-year treaty period.
The Commission also transferred to
Panama a number of other buildings and
structures in addition to housing which
the Canal agency determined to be
unnecessary to the performance of its
mission or which were specifically

identified for transfer in the treaty
In addition, the treaty negotiators
recognized the need fora formal, effective
channel of communication between the
United States and Panama. Accordingly,
the treaty established a Coordinating
Committee for that purpose. Sub-
sequently, a number of binational
subcommittees were established by the
Coordinating Committee to address
specific areas of interest such as fire
protection, housing, and lands and
facilities matters. The treaty also created a
binational Ports and Railroad Com-
mittee as a subcommittee of the
Coordinating Committee.
These forums successfully resolved a
wide variety of binational issues in a
practical, cooperative way. Among its
accomplishments, the Coordinating
Committee developed procedures for
effecting the transfer of custody of U.S.
citizen employees of the Commission and
their dependents who were detained by
Panamanian civil authorities. That body
also resolved various housing related
issues, effected the transfer of excess
Commission housing and other property,
and addressed matters pertaining to land
and facility utilization. In addition, the
Coordinating Committee served as the
initial level for receiving and reviewing
treaty related complaints and protests,
and passed on to the diplomatic level
those which were not successfully
Although forums were in place to
coordinate pre-treaty actions of U.S.
Federal agencies, effective implementa-
tion of the treaty also required a high
degree of cooperation and communica-
tion among the Canal agency, U.S.
Southern Command, U.S. Embassy and
other Federal agencies operating in the
Republic of Panama. The massive
overnight transfer of properties, func-
tions, personnel and associated costs on
October 1, 1979, to other Federal
agencies presented one of the most
significant challenges to the Canal
organization in the initial phase of treaty

implementation. To provide for a smooth
and effective transition, various com-
mittees and points-of-contact were estab-
lished within each agency to address
specific areas and problems. Periodic
group meetings were held with agency
representatives to discuss matters of
mutual interest and the progress of the
transition process. These measures con-
tributed greatly to a successful transfer-
of-functions as prescribed by the treaty.
A variety of mechanisms and high level
forums were also utilized, in which a
continuum of issues regarding United
States-Panama relations were discussed
and where problems were resolved.
The long-term and multi-phase char-
acteristics of treaty implementation also
required constant interaction between all
Federal agencies throughout the decade.
These efforts were later intensified by the
presence of serious ongoing political and
economic problems in the Republic of
Panama from June 1987 forward, which
tended to shift attention toward the safety
and security of Canal area facilities,
personnel and dependents to ensure a
continuity of efficient Canal operations,
while moving ahead with the original
objectives of treaty implementation. 0e



Signing ceremony extending the collective
bargaining agreement between the Panama
Canal Pilots Branch and the Panama Canal

A skilled Panama Canal pilot
guides a large bulk carrier during
lockage operations.


/ `

Employee and



During the pre-treaty years, when the
work force numbered more than 12,000
and the administration exercised com-
plete jurisdiction over the former Canal
Zone, the Canal agencies shared an
intimate relationship with Canal area
communities and the thousands of
employees and their families residing
there. Practically every aspect of personal
and social life was touched in one form or
another by the activities, services and,
laws and regulations of the former Canal
Zone Government and the Panama
Canal Company. Commercial activities
related to the efficient functioning of the
Canal, fraternal and social organizations,
houses of worship, and public service
organizations were equally affected.
These activities operated in a structured
and protected environment, heavily
patronized or actively supported by
employees and the Canal community in
Recreational and social activities pro-
vided diversion for employees and their
families and issues of community concern
were debated at regular town meetings,
with duly elected representatives bringing
issues to the attention of the Canal's
administration. Personal, corporate and
employment related matters requiring
legal attention could be addressed
through the U.S. judicial system on the
Isthmus. Employment policies and pro-
grams of the Canal organization were
subject to or patterned after the U.S. civil
service system.
While many Canal area activities and
services were either discontinued or
transferred in conformity with the
provisions of the treaty, a two and one-
half year transition period allowed
employees to adapt gradually to the new
environment. With cooperation and
dedication on the part of individuals from
both the Republic of Panama and the
United States, the transition period
transpired almost flawlessly.
Resident Advisory Committees were
formed within the communities to
assume some of the functions of the

former Civic Councils. These committees
provided an avenue of continued com-
munication between the Canal ad-
ministration and the community. The
Office of Ombudsman, created by
legislation, served as an additional
channel for all employees and the
community to express and resolve issues
of mutual concern; an open-door policy
within the Canal administration sup-
plemented other internal agency channels
of communication.
Another major aspect of the Panama
Canal Treaty was the recognition by the
United States and Panama, that Pan-
amanians would participate increasingly
in all facets of the Canal operation. To
accomplish this objective, preference was
given to the hiring of Panamanians based
on the merits of the candidates and
without establishing hiring quotas. The
following chart reflects the impact of the
Treaty on manpower levels and the
progression of Panamanian participation
for selected periods for the first decade of
the Panama Canal Commission.

Permanent Work Force
Throughout the decade, actions to
increase Panamanian participation were
accomplished in a manner generally
consistent with the United States federal
merit system principles, the Panama
Canal Treaties and the Panama Canal
Act of 1979. The Panama Canal
Employment System provided for job
security and the retention of important
employee benefits which were critical to
maintaining a skilled and motivated work

Technical personnel receive classroom instruc-
tion as well as hands on training.

Permanent Work Force
Third Country
t.S. Panamanian National Total Panamanians
09 79 (Pre-Treaty)...... 3.095 8,432 612 12.139 69.5C
10 79................ 2.105 5.521 350 7,976 69.2 (
10 81................. 1,865 5.765 377 7,907 72.9C(
10/83 ................. 1,651 5.922 228 7.801 75.9C(
10/85 ................. 1.353 5.992 181 7.526 79.6C'
10,87 ................. 1.169 6.269 141 7.579 82.7%(
10/89........... ...... 993 6.513 96 7.602 85.7%

force. It also served to attract capable
Panamanians who would be responsible
for managing and operating the Canal in
the years ahead. Personnel policies and
training programs were designed to allow
the Commission to achieve its goal of a
virtually 100 percent Panamanian work
force by the year 2000, while continuing
to insure fair and equitable treatment to
all employees for the duration of the
Since the first day, Commission policy
established training as one of the most
important missions of the Canal agency,
second only to the transiting of vessels
through the waterway. Accordingly, high
priority was given to training programs to
accelerate Panamanian participation
throughout the organization. A full scope
of training programs was designed,
ranging from clerical, administrative and
managerial fields to the professional,
craft and pilot force.
The following table compares Pan-
amanian participation in key occupations
upon entry into force of the treaty with
the levels as of September 30, 1989.

Skilled Crafts ...............
Professional and Managerial..
Floating Equipment ........
Power Group ...............
Canal Pilots ................
T total ................

Key Occupations

October 1979
Number of
Panamanians Y
568 58 7
44 13.8
39 20 0
9 230
4 1.7
664 38.1

September 1989
Number of
860 8
143 4
187 7
30 6
61 2
1.281 6


Other Employee Programs
Recognizing the significant impact of
Treaty implementation on the lives and
morale of employees and the community
in general, the Commission took certain
measures to ameliorate its effects. For
example, an Equity Package, consisting

of free housing, utilities expanded travel
benefits and U.S. diplomatic pouch mail
service was granted to eligible employees
whose U.S. military shopping and postal
privileges expired on September 30, 1984,
in accordance with treaty requirements.
Additionally, with changing world
events and more than two years of
unresolved political problems in Pan-
ama, personal and industrial security
became increasingly important issues.
Security assessment surveys were con-
ducted to evaluate Commission needs for
plant protection and physical security. To
provide greater employee safety and
security, access to Commission worksites
and facilities was limited. Although the
Commission maintained a small trained
guard force for the protection of vital
Canal installations, the Panama Defense
Forces and, ultimately, the United States
military forces in Panama were prepared
to provide necessary backup security. In
support of this responsibility, U.S. forces
have conducted a number of readiness
exercises at Canal installations in co-
operation and joint planning with the
Panama Canal Commission. The Canal's
guard force was augmented by expanded
use of closed-circuit television monitoring
systems and more foot patrols and
mobile units were utilized at vital
installations. Increased use of electronic
intrusion and motion detection systems
and installation of high intensity lighting
in many of these areas, including
Commission- managed employee hous-
ing, were provided to add to the level of
In view of the important benefits of
employee fitness, the Commission
strongly encouraged and supported
employee health and recreation pro-
grams. Occupational health clinics were
maintained at major Canal facilities to
provide a range of health care services.
These facilities were equipped and staffed
to handle new requirements for drug and
alcohol testing and counseling. A number
of physical fitness facilities were also
established in areas relatively close to
Commission work sites for use by all

employees and dependents. Trained
instructors directed and supervised the
fitness and recreational programs. These
services provided some relief to em-
ployees and dependents from stresses
brought about by the treaty implementa-
tion process, changes in the work
environment, and the political and
economic difficulties in Panama.

Industrial Relations
At the beginning of the decade, the
Panama Canal Commission embarked
on an entirely new direction in labor-
management relations. The Federal
Service Labor-Management Relations
Statute, included in the Civil Service
Reform Act of 1978, was made applicable
to the Panama Canal Commission. In
addition, the Panama Canal Act of 1979
amended the labor relations statute to
include all non-U.S. citizen employees of
the Commission. This latter action was
unique in the history of U.S. Federal
labor-management relations. The Pan-
ama Canal Act also preserved the pre-
treaty practice that permitted employees
to be represented by labor organizations
without regard to their supervisory status.
With the application of the Statute, the
International Organization of Masters,
Mates and Pilots, Marine Division,
AFL-CIO, pilot membership group,
became the first labor union to be
certified as an exclusive representative in
the Commission. Contract negotiations
with the pilots union began in May 1980
and the first contract became effective on
January 2, 1981. Later in 1981, other
labor organizations were certified to
represent each of the Commission's four
remaining bargaining units as follows: the
Maritime/ Metal Trades Council, AFL-
CIO Panama Area (a union coalition
consisting of the National Maritime
Union, the International Organization of
Masters, Mates and Pilots [Atlantic &
Gulf], and the Panama Area Metal
Trades Council) representing both a
professional and non-professional bar-
gaining unit; the National Marine

Engineers Beneficial Association and
District No. 1-Pacific Coast District,
AFL-CIO, representing a licensed marine
engineer unit; and Local No. 13,
International Association of Firefighters
AFL-CIO, representing a unit of fire-
fighters. These four bargaining units,
together with the pilots unit, comprised
the organized labor structure of the
Panama Canal Commission representing
over 95 percent of the Commission work
Following the negotiation of the pilots
contract in 1981, successful negotiations
were completed with the remaining
bargaining units. The professional bar-
gaining unit contract-the fifth and last
original contract-became effective on
April 11, 1984.
Traditional labor-management rela-
tions activities during the period between
mid- 1984 and early 1989 were about
equally divided between routine contract
administration activity and renegotiation
of two of the original five collective
bargaining agreements. As a result of
efforts to promote more constructive
labor relations, unions gained greater
access to the Commission's top manage-
ment officials. From June 1987 through
the end of the; decade, however, an ever-
increasing preoccupation with external
political affairs became the focus of
virtually all employees and the unions.

Security awareness is emphasized
throughout the Commission. Access to
Canal worksites and facilities is limited.

Political and Economic
Crisis in Panama

An unforeseen challenge, over which
the Commission had no control, was a
political and economic crisis in the
Republic of Panama, which began in
June 1987. As the crisis continued to
worsen, both U.S. and Panamanian
employees were subjected to increased
difficulties and personal hardships.
Of particular concern was the in-
creasing harassment of Commission
employees by the regime of General
Noriega. Following the application of
U.S. economic sanctions in April 1988,
Canal payments to Panama required
under the Treaty, were placed in escrow
in the United States rather than being
transferred to the Noriega regime.
Included in these sanctions, were the
income, social security and educational
tax monies deducted from the salaries of
Panamanian employees by the Panama
Canal Commission. On July 5 of that
year, based on humanitarian criteria, the
Commission was authorized to reinstate
certain payments to the Panama Social
Security System.
As an outgrowth of the sanctions issue
involving the various payroll tax deduc-
tions, Noriega regime officials strictly
enforced a decision prohibiting Pan-
amanian Commission employees from
obtaining national tax-clearance cer-
tificates (Paz y Salvos). Consequently,
Panamanian employees were effectively
denied permission to travel abroad,
purchase or sell real estate, engage in
commercial activities, or to receive
packages through the mail or customs.
Further complications developed as the
regime later determined that the Paz y
Salvo was also required for employees to
obtain license plates for personal vehicles,
thus depriving Panamanian Commission
employees use of their automobiles for
travel to and from work. In addition,
Panama's Ministry of Finance and
Treasury initiated legal action against 36
Commission employees to collect these
tax monies, and threatened to include

other employees in this action. In some
cases, private bank accounts were frozen
and personal vehicles seized.
Other actions contributing to
heightened tension included a national
strike; suspension of civil liberties;
restrictions on free speech and the news
media; sporadic closure of public offices,
institutions and schools in Panama;
intermittent use of roadway checkpoints
by Panama law enforcement officials to
conduct random searches of pedestrians
and motor vehicles and confiscation of
personal effects; imposition of fines for
unsubstantiated charges; civil distur-
bances; and, an extended bank closure
declared by the Panama National
Banking Commission, which subse-
quently issued severe restrictions on
withdrawals from checking, savings and
time deposit accounts.
Commission housing areas and Canal
operating facilities incurred significantly
increased reports of vandalism and
property theft, including many privately
owned and some official motor vehicles.
At various times, diminishing food
supplies in public markets and a general
perception that the local shopping areas
were unsafe caused particular concern for
many employees forced to live on the
To ensure the welfare of Commission
employees, as well as a continuity of
Canal operations, extraordinary meas-
ures were undertaken, including im-
plementation of a range of contingency
plans. The Commission began providing
food boxes at cost to employees, when
food supplies in Panama stores were
severely depleted or inaccessible due to
civil disturbances. Occasional use of
temporary emergency lodging and ra-
tions became necessary for employees
held over at their duty stations. On
March 1, 1989, a costly emergency shuttle
bus service on both sides of the Isthmus
was made available for employees at
designated pick-up points in the terminal
cities, which the Commission was not
able to discontinue until the end of
August. Employees who were prevented

from using their privately owned vehicles
to travel to work because Panama
authorities refused to issue license plates
were allowed to claim a $7 per day
transportation allowance. High speed
launches were also utilized to shuttle
employees between work stations along
the Canal when safe overland transporta-
tion was not possible. The overall cost of
these transportation initiatives exceeded
one half million U.S. dollars per month.
Eligible U.S. employees were also
granted special authorization tor limited
U.S. military shoppette (convenience
store) privileges, because of the political
and economic difficulties. Additionally, a
voluntary relocation plan was approved
for dependents of U.S. employees
desiring to leave Panama to temporarily
reside in the United States.
Despite high levels of frustration
brought about by the yet unresolved
political and economic crisis, Com-
mission employees continued to perform
admirably. Accident and safety levels
were within normal range, the absentee
rate was exceptionally low, and vessels
continued to transit the waterway safely
and efficiently. Although Canal opera-
tions remain normal, it is imperative that
the political crisis be resolved to allow the
Commission to dedicate itself to the
essential task of providing efficient transit
service, and fulfill the treaty commit-
ments for the orderly transfer of the
Canal to Panama on December 31,
1999. This will also enable Panama to
redirect its attention to the demanding
requirements inherent in its future
responsibility as the next steward of the
Panama Canal. No

Future of the


Ten years after the implementation of
the Panama Canal treaties, the Panama
Canal remains an important interna-
tional transportation artery. Over 93
percent of the world's oceangoing ships
are able to pass through the waterway
and, each year, some 12,000 vessels
transit the Canal carrying more than 150
million tons of cargo over many of the
world's principal trade routes. Cargo
passing through the waterway accounts
for some 5 percent of all the world's
oceanborne trade.
Looking ahead, current estimates
forecast modest growth in most Canal
trades. Cargo through the waterway is
expected to reach more than 220 million
tons by the year 2010. Concurrently,
oceangoing transits should rise from 33
per day at present to 38 daily. While
Panamax vessels, the largest the Canal
can accommodate, are anticipated to
reach about 36 percent of Canal transits
in the next two decades, the average size
growth rate will tend to slow.
With regard to trade patterns, the
United States and Japan are expected to
continue as the most important users of
the Panama Canal. Some Central and
West Coast South American countries,
however, are proportionally more de-

pendent on the waterway. The Canal
offers many of those Latin countries the
only efficient, cost-effective means to
transport large quantities of cargo.
Future economic growth in those nations
will continue to be closely linked with the
Panama Canal.
Although the Canal provides an
absolute advantage to many countries of
the world, the waterway operates in an
increasingly competitive world. Alterna-
tives to the Canal abound including the
intermodal transport system in the
United States, pipelines, use of larger
vessels to bypass the waterway, and a
variety of trade relationships which could
change if Canal service deteriorates or
tolls are raised excessively. The emer-
gence of these alternatives requires that
the Canal continue to provide efficient,
low-cost transit service to the maritime
industry, if the waterway is to remain a
vital link in the world transportation
Internally, Canal management also
faces a number of major challenges in the
years ahead. While the Panama Canal
Commission will continue to fulfill its
mission in the coming decade, the
Republic of Panama must prepare to
assume stewardship of the waterway and

the vital international responsibility to
maintain high quality transit service
beginning in the year 2000. The nature of
the new organization, treaty responsibil-
ities, quality training, prudent financial
management, tolls policies, application of
modem technology, and personnel pro-
cedures are all critical areas which
Panama must address. Existing Com-
mission employment, wage, equal op-
portunity and collective bargaining
principles and systems are designed to
accommodate the special objectives of
the Canal operation and they have
contributed significantly to a stable,
highly motivated work force. Job security
and assurances that equitable and well-
defined systems will be continued are
essential to ensure the retention of a
highly skilled Panamanian work force, as
well as allow the Canal to continue to
attract qualified employees from the
domestic labor market. With the achieve-
ment of these goals and orderly, planned
maintenance programs, innovative im-
provements and adequate capital invest-
ment, the Panama Canal should remain a
modem, efficient enterprise serving world
commerce far into the future. 0 M



The Panama Canal can safely handle
commercial oceangoing vessels with
beams up to 106 feet.

Historical Calendar

September 30- Final day of operation of the Panama Canal Company and
the Canal Zone Government, in accordance with the Panama Canal
Treaty signed on September 7, 1977.
October 1-Entry into force of the Panama Canal Treaty. Panama gains
jurisdiction over the former Canal Zone. First day of operation of the
Panama Canal Commission, a new agency of the United States
Government, responsible for managing, operating, maintaining and
improving the Canal through December 31, 1999. Major organization
changes took effect, resulting in a substantial transfer of functions and
reduction-in-force. A toll rate increase of 29.3 percent also was
implemented to offset increased payments to Panama out of Canal
revenues mandated by the treaty. The Federal Service Labor-
Management Relations Statute was amended to include non-U.S. citizen
employees of the Commission. A new Panama Area Wage Base became
effective for employees hired on or after this date. Panama Social
Security System (CSS) coverage became applicable to all non-U.S.
employees hired on or after this date.
November 15-Completion of project to install high mast lighting at
Miraflores Locks.
November 30-Gamboa Reach ship channel widening project was

May 28-The Joint Commission on the Environment, established under
the treaty, held its first binational meeting in Panama.
June 2-4-The Panama Canal Commission binational Board of Directors
held its first meeting at the Administration Building, Balboa Heights,
with Mr. Michael Blumenfeld serving as Chairman.
June 7-The second largest oil spill in Canal waters occurred when the
TEXACO CONNECTICUT, carrying Alaskan North Slope crude oil,
struck the east bank of the Canal north of Gaillard Cut. Of the estimated
4,000 barrels of oil spilled, 1,361 barrels were recovered.
June I-The Coordinating Committee, established under the treaty, held
its first binational meeting in Panama City.

January 2-Pilot contract became effective. This was the first-ever
collective bargaining agreement between the Canal agency and a labor
April 29- By Executive Order, President Ronald Reagan approved the new
official seal of the Panama Canal Commission.
May 31-The new tugboat H. R. PARFITT arrived in Cristobal for
delivery to the Commission. This was the first tug equipped with a
cycloidal omnidirectional propulsion system.
July 17-Mr. William R. Gianelli was appointed Chairman, Board of
Directors of the Panama Canal Commission, to succeed Michael
July 22-The new, conventionally propelled tugboat ALIANZA was
formally accepted by the Commission.
July 31-General Omar Torrijos, Panama's signatory of the Panama Canal
Treaty of 1977, died in a plane crash in the interior of Panama.
September 19-The SS CRISTOBAL. the Commission's only remaining
steamship, made its last Panama to New Orleans voyage.
October 15-The new Alianza-class tugboat PROGRESO was formally
accepted by the Commission.
December 15-Record cargo of 65,299 long tons transits Canal aboard the
December 27-Four new locks towing locomotives were delivered to the
Panama Canal.

January 10-A new wage system replaced the Panama Area Wage Base,
reducing the growing differences between post and pre-treaty wage rates,
and improving the Commission's competitive position in recruiting
skilled, technical and professional occupations.
February 23-Three new locks towing locomotives were delivered to the
Panama Canal.
March 31-End of the 30-month transition period. The Panama Canal
Commission's transitionary police force and magistrate's court, as well as
the U.S. District Court were disestablished. Also, the Panama Canal
Employment System replaced the Canal Zone Merit System and, this was
the last day that non-U.S. citizen employees of the Commission were
eligible to use U.S. military health facilities for non-job related medical
April 4-A new signal tower was installed atop the Cristobal Administra-
tion Building, to improve traffic control and vessel communication at the
Atlantic harbor.
April 28-The first report of Africanized bees in the Canal area was made at
the Mount Hope Industrial Division drydock, twenty-five years after
their accidental release in Brazil. Special control teams were established
to combat the bees.
July 1-The new Alianza-class tugboat AMISTAD was formally accepted
by the Commission.
July 3-Three new locks towing locomotives were delivered to the Panama
September 23-Completion of project to install high mast lighting at Gatun
October 4-Testing of trans-Panama oil pipeline began. Alaska North
Slope oil (ANS) started diverting from the Panama Canal.
December 8-The Office of Health and Safety was eliminated and the
Occupational Health and Safety Divisions were transferred to the Office
of Personnel Administration. Concurrently, the Personnel Director was
appointed as the Designated Agency Safety and Health official.
December 15-Mamei Curve Widening Project was completed, improving
navigational safety and visibility.

February 7-A new marketing unit was established within the Office of
Executive Planning to handle the Commission's marketing functions.
March 12-A toll rate increase of 9.8 percent was implemented to offset
revenue losses stemming primarily from diversion of Alaskan North
Slope oil to the trans-Panama oil pipeline.
May 6-Meteorological and Hydrographic Branch installed a WSR-74
S-Band severe weather radar system, to supply data for watershed
management programs.
July 11-The Pilot Understudy Program, designed to provide
Panamanians an additional means of entry into the pilot force, accepted
its first class of nine trainees.
December 20-Completion of a project to install pneumatic fender units at
the wing wall knuckles of all locks to prevent vessel contact with the wall
during transit.

January 18-The new labor-management Safety and Health Committee
was inaugurated.
April 4-A transit reservation system was implemented on a permanent
basis for Canal customers desiring a guaranteed transit date.
May 18-Project to deepen Gaillard Cut by three feet was completed.
July 1-Completion of a project to install and integrate new closed circuit
television cameras and system components at strategic points along the
Canal, with the Marine Traffic Control Center in La Boca.

August I-The Commission upgraded its data processing capabilities by
implementing the use of multiple IBM mainframe computers, and on-
line, real-time, remote data entry and inquiry capability by field units.
August 3-A new supervisory control and data acquisition (SCADA)
system was installed to allow power dispatchers to more effectively
monitor and control Commission power systems.
August 29-Completion of project to install high mast lighting at Pedro
Miguel Locks.
October 1-U.S. military postal, commissary and exchange privileges,
extended to eligible Commission employees, were terminated in
accordance with the treaty. An "Equity Package", comprising free rent,
electricity and travel benefits for eligible employees, was instituted by the
Commission to help compensate for the loss of these privileges. The
Commission also implemented, state-of-the-art financial management
systems software in order to fully integrate fund control and accounting.
The new system provided the Commission's first on-line real-time data
entry and inquiry for financial systems to Commission field units.

March 15-The first class of nine Panamanians in the Pilot Understudy
Program were promoted to Pilot-in-Training.
April 2-Installation of a new tug and miter gate repair facility was
completed at the Mt.Hope Industrial Division.
July 15-Completion of project to install a new locomotive turntable at the
south end of Miraflores Locks.
July 23-The new modified Alianza-class tugboat ESPERANZA was
christened at the Dredging Division.
August 15-Construction of a vessel tie-up station was completed just
north of Pedro Miguel Locks to improve utilization of the Pacific locks.
September 26-Agreement signed at the United Nations by the United
States, Panama, and Japan to form a tripartite commission to study
alternatives and!or modifications to the Panama Canal.
October 15-Gatun Lake Explosive Anchorage Expansion project was
completed, to provide greater anchorage space for vessels transporting
dangerous cargoes.
November 5-Pre-employment and incident/accident alcohol and drug
testing was implemented in the Commission.
December 20- Project to deepen Gatun Lake ship channel by three feet was
December 23-The President of the United States signed into law the
Panama Canal Amendments Act, Public Law 99-209, amending the
provisions governing vessel accidents.

January 8-Installation of a new locomotive turntable was completed at the
south end of Miraflores Locks.
January 30-A project to install new higher capacity telephone trunk lines
and touch tone capability was completed for all locks.
May 5-A major new computerized traffic management system was placed
into service in the Marine Traffic Control Center in La Boca to improve
traffic management and control.
June 6-The Federal Employees' Retirement System (FERS) replaced the
Civil Service Retirement System (CSRS) for U.S. citizen employees hired
since 1983.
August 1-Recommissioning ceremony was held for the newly renovated
MINDI dredge.
August 4-The new modified Alianza-class tugboat PAZ was formally
accepted by the Commission.
October 3-Gatun Lake Anchorage Expansion Project was completed.
October 13-A major landslide occurred in the area of Gold Hill in Gaillard
Cut, nearly closing the Canal. Ship traffic was limited to one-way
passage in the slide area. Normal transit operations were restored on
December 23.

January 14-Five new locks towing locomotives were delivered to the
Panama Canal.

March 13-The Meteorologic and Hydrographic Branch upgraded its
weather satellite receiving equipment to an independent and fully
operational Mode AAA Weather Satellite Receiving Station. This
equipment allows the Commission to monitor weather patterns on a real
time basis over a broad geographical area affecting the Canal's
June 8-Serious political difficulties in Panama begin to surface from
accusations against General Manuel Antonio Noriega by the former
second in command of the Panama Defense Forces.
November 4-Record single day's tolls revenue of $1.333 million collected.
November 20-Pacific entrance dredging project was completed.
December 21-The new tugboat GUIA, equipped with a cycloidal omni-
directional propulsion system, was delivered to the Commission.
December 24-The Commission purchased catastrophe insurance
coverage to protect it against unpredictable revenue losses and expenses
arising from catastrophic events.

January I-The Commission was converted from an appropriated fund to
a revolving fund agency with the passage of the Panama Canal Revolving
Fund Act. The agency also began standardizing towboat charges for
routine transit service.
January 29-The Balboa Central Telephone Office changed over to a new
switch system, offering improved and broader telephone services to the
February 26-General Manuel Antonio Noriega's regime deposed
Panama's President, Eric Arturo Delvalle, one day following that
President's attempt to dismiss General Noriega.
March 3-Deteriorating political and economic situation in Panama
requires the Panama Banking Commission to declare an extended bank
holiday closing all banks for an indefinite period. The Panama Canal
Commission was compelled to transfer its accounts to the U.S. military
banking facility in Corozal.
March 12-The new Guia-class tugboat LIDER was delivered to the
March 28-Due to serious political disturbances in Panama and
diminishing food supplies in public markets, Panama Canal Commission
began to issue food packages to employees, payable by payroll deduction.
April 2-Eligible Commission employees were granted limited purchase
privileges at shoppettes (convenience stores) operated by the U.S.
military exchange system, with the approval of the U.S. recognized
President of Panama, Eric Arturo Delvalle.
April 8-President Ronald Reagan signed an Executive Order freezing
Canal payments to Panama and placing them in escrow in the U.S. This
included income tax and Panama Social Security monies deducted from
the salaries of Panamanians employed by the Panama Canal
April 15-The maximum overall length allowable for commercial
passenger and container vessels transiting the Canal was increased to 965
May 27-Dredging of the Atlantic entrance channel to the Canal was
July 5-Based on humanitarian criteria, the Commission was authorized to
reinstate certain payments to the Panama Social Security System, which
were suspended by the April 8 Executive Order.
July 13-The Panama Canal Commission Board of Directors suspended
the regulation pertaining to the number of regular meetings to be held in
Panama pending resumption of normal relations between the U.S. and
August 16-Panama notified the Commission that public services in the
Canal area would be provided on a lesser scale, with the exception of fire
and police protection.
September 15-Dredging work to level the bottom profile of the Pacific
entrance channel was begun.
October 14-Construction work was initiated for the installation ofa new
locks fire protection system at Miraflores Locks. Completion is
scheduled during FY 1990.
November 18-The Miraflores Locks approach channel radius was
increased to allow greater maneuverability of wide beam vessels in this

December 23-A long-term project to rehabilitate 57 locks towing
locomotives and 3 electric locomotive cranes was completed.
December 15-Completion of a project to replace all PCB type
transformers at Gatun Locks with new cast coil transformers. A similar
project is underway at Pedro Miguel and Miraflores Locks.

January 1-The administration of the Federal Employees Cofnpensation
Act was transferred to the U.S. Department of Labor, which assumed the
reponsibililv for adjudicating and processing claims of Commission
employees under the Act.
March 1-Contracted bus service and transportation allowance were
provided to eligible Panamanian employees due to problems stemming
from the political crisis in Panama. The bus service was discontinued on
August 31, 1989.
April 3-A project to install a new locomotive turntable at the north end of
Gatun Locks was initiated.
April 16-The Office of Inspector General (formerly the Office of General
Auditor was established as required by U.S. law.
May 7-Presidential elections were held in the Republic of Panama.
Former U.S. Presidents Gerald Ford and Jimmy Carter, several U.S.
Congressmen and international observers were on the Isthmus to witness
the balloting process.
May 10-The Noriega regime annulled Panama's May 7 presidential

May 18-Record toll of $109,653.60 paid by passenger ship SIAR
May 19-The Commission began to authorize eligMe employees to
relocate their dependents at Commission expense under a revised
Voluntary Temporary Relocation Program, due to continuing
deterioration of the political and economic situation in Panama.
June 1-Mr. Robert W. Page was elected as Chairman, Board of Directors
of the Panama Canal Commission, to succeed William R. Gianelli.
July 10-A project to install a new locomotive turntable at the north end of
Miraflores Locks was initiated.
August 11-Widening of Bohio Curve was completed to improve
navigational safety and manruier.jb,li
August 15-The Panama Canal celebrated its 75th year of service to world
shipping, commemorating the first official transit of the SS Ancon on this
day in 1914.
August 19-Two new 50-foot high speed passenger launches were delivered
to the Panama Canal, to serve as trans-lsthmian waterbuses beginning
October I.
September 1-The Noriega regime announced the appointment of a
provisional president and cabinet.
September 30-A long-term program to rehabilitate some 50,000 feet of
towing locomotive track at the locks, including water and landside rail,
rack sections and conductor slot was completed. The Panama Canal
Commission ended the first decade of operations under the Panama
Canal Treaty of 1977.

'' i' A large automobile carrier passes
under the "Bridge of the Americas" as
it prepares to leave the Canal for the
open seas following a southbound
transit. Another vessel initiating a
northbound transit is visible in the




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