October 14, 1988

To the Congress of the United States:

1. On April 8, 1988, in Executive Order No. 12635, I declared a national emergency to deal with the threat to the national security and foreign policy of the United States posed by the policies and actions of the Noriega/Solis regime of Panama (53 Fed. Reg. 12134, April 12, 1988). In that Order, I ordered the immediate blocking of all property and interests in property of the Government of Panama (including the Banco Nacional de Panama and the Caja de Ahorros) then or thereafter located in the United States or coming within the possession or control of persons located within the United States. I also prohibited the payment or transfer of any funds or other financial or investment assets or credits to the Noriega/Solis regime from the United States and by U.S. persons and U.S.-controlled Panamanian entities located in the territory of Panama. All transfers, or payments owed, that are not authorized by rules, regulations, or licenses, to the Government of Panama are required to be made into a blocked account of the Government of Panama at the Federal Reserve Bank of New York, to be held for the benefit of the Panamanian people.

2. The declaration of a national emergency was made pursuant to the authority vested in me as President by the Constitution and laws of the United States, including the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.), the National Emergencies Act (50 U.S.C. 1601 et seq.), and section 301 of title 3 of the United States Code. I reported the declaration to the Congress on April 8, 1988, pursuant to section 1703(b) of the International Emergency Economic Powers Act. The present report is submitted pursuant to 50 U.S.C. 1641(c) and 1703(c).

3. The Office of Foreign Assets Control of the Department of the Treasury, after consultation with other Federal agencies, issued the Panamanian Transactions Regulations, 31 C.F.R. Part 565, to implement the prohibitions in Executive Order No. 12635 (53 Fed. Reg. 20566, June 3, 1988). The Panamanian Transactions Regulations contain a number of general licenses, authorizing payment to the Noriega/Solis regime of utilities; indirect taxes; fees and taxes paid in connection with basic business activity; fees (other than income taxes) directly owed by individuals; payments for travel-related, telecommunications, and mail transactions; fees related to the purchase and sale of publications; and payments of obligations of the Noriega/Solis regime to persons within the United States.

Two amendments to the Panamanian Transactions Regulations have been issued to date. The first, effective June 15, 1988, authorizes payment of social security taxes to the Noriega/Solis regime by U.S. persons and U.S.-controlled Panamanian entities (53 Fed. Reg. 23620, June 23, 1988). This amendment permits the payment of taxes and fees for health, maternity, and retirement benefits for Panamanian nationals employed by U.S. companies and U.S.-controlled Panamanian companies. The second amendment, effective August 24, 1988, authorizes payment to the Noriega/Solis regime of import duties, other import-related expenses, and port fees (53 Fed. Reg. 32221, August 24, 1988). This amendment facilitates U.S. exports to Panama by permitting U.S. exporters and U.S.-controlled Panamanian importers to pay expenses related to importations.

With this report, I am enclosing a copy of the Treasury Department's Panamanian Transactions Regulations, as amended to date.

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

5. The expenses incurred by the Federal Government in the 6-month period from April 8 through October 8, 1988, that are directly attributable to the exercise of powers and authorities conferred by the declaration of the Panamanian national emergency are estimated at $701,000, most of which represents wage and salary costs for Federal personnel. Personnel costs were largely centered in the Department of the Treasury (particularly in the Office of Foreign Assets Control, the Office of the Assistant Secretary for Enforcement, the Office of the Assistant Secretary for International Affairs, and the Office of the General Counsel), the Department of State, the Federal Reserve Board, the National Security Council staff, and the Department of Defense.

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

Ronald Reagan

The White House,

October 14, 1988.