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helpful, e.g. in sustaining automotive manufacturing in Brazil and Argentina, or in stabilising currencies, e.g. help in stabilising the Mexican peso. However, in the long run this meant that Latin America remained dominated by the enormous power of the foreign sector, subject to shocks generated in the international system, and highly in debt to foreign institutions.

We can see some of these issues in the troubled path charted by Panama. Panama is a unique case in that its location at the isthmus linking two oceans made it of strategic interest to Spain, Colombia and the U.S. even before the Panama canal was built, first being used as a land route between naval ports, followed by an 'American' railway built in the 1850s. It thus was subject to enormous outward forces, mainly the U.S., that charted an early path towards modernisation but not towards full independence, even after nominal independence was achieved in 1903. The result was a contested sense of national identity that would emerge slowly, and leave a strong cleavage among the rich elite, ordinary citizens, and indigenous groups, which include the Cuna, Choco and Guaymi peoples (see Szok 2002). It must be remembered, however, that through 1821 Panama had thrown off Spanish control, and sought voluntary union with Gran Colombia, and would then break away with U.S. help in 1903 (Szok 2002).

Panamanians would come to resent exclusive U.S. control of the Canal Zone (an 8 km wide area on each side of the canal, established via the Hay-Brunau-Varilla Treaty), and likewise have mixed feelings over the U.S. invasion in 1989 to remove dictator Manuel Noriega, a former CIA intelligence informant involved in drug networks, to some degree created by U.S. policies of the 1980s (see timeline below). Through 1979-1999 the U.S. had 14 bases in Panama, hosting between 3,600-10,000 troops, both defending the Canal and representing a strong military presence in the region (Lemoine 1999). By 31st December 1999 (through the Carter-Torrijos treaties signed in September 1977), Panama once again gained full control of the Canal, though treaties with the U.S. still insist that the Canal must remain under a neutral administration and must not be threatened by external control, otherwise the U.S. is allowed to 'unilaterally' intervene (Lemoine 1999). Indeed, through 2001 as the PRC normalised ties with Panama, and both PRC and Hong Kong investments flowed into Panama, there were some fears in the U.S. that this would give China too much influence on the region (Xinhua 2001a). Through March 2003, Panama was placed on 'yellow alert' in response to possible security threats in relation to the war in Iraq (Xinhua 2003a).

Furthermore, the possession of one of the world's most strategic waterways has not solved all economic problems: indeed, the small state has had to work very hard to upgrade railways, and has tried with some success to diversify away from agricultural products (bananas, sea food, sugar, coffee) and over-reliance on Canal revenues into manufacturing, international banking, tourism, communications and Internet services provision (BBC 2003a). Panama has also sought to open up trade flows by preparing to sign free trade agreements with the U.S., Taiwan and Singapore through 2003-2004 (UPI 2004a).

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