In cash-starved Panama, Horacio Icaza has added one of mankind's oldest forms of trade to his business skills. He barters.

Icaza, whose firm Casa del Medico is the nation's largest medical equipment supplier, recently worked out a deal with the government-owned water and power companies.He pooled some of his employees' water and electric bills, then told the utilities he would erase a similar amount from the debts they owed his firm for laboratory equipment.

They agreed, and debts on both side of the ledger were wiped out without any money changing hands.

Panama, suffering from sweeping U.S. economic sanctions and the nearly two-month closure of its once-formidable banking center, has now become a barter economy.

"It stops people from starving to death, but it doesn't get the economy moving," said a Western European diplomat, who spoke on condition of anonymity.

"Panamanians have surpassed by much the traditional banking ability and capability of Swiss bankers," said former banker Luis H. Moreno. "We have been able to do banking outside of banks."

Panama's economic crisis was caused by the controversy surrounding Gen. Manuel Antonio Noriega, the nation's military leader and the power behind the civilian government. Noriega is under federal indictment in the United States on drug trafficking and money laundering charges.

In a bid to oust Noriega, Washington has cut off military and economic aid to Panama, frozen its assets in the United States and prohibited U.S. companies and individuals from making payments to the government.

The sanctions, combined with the closure of the banking system and a two-week general strike in March, have virtually paralyzed the economy.

The U.S. dollar, the national currency, has become scarce.

Its place has been partially filled by checks issued in small amounts by the government to pay its employees and Social Security recipients.

With those checks, Panamanians can buy groceries at supermarkets or clothing at department stores. They also can send the checks back to the government to pay taxes or utility fees they owe the state-run water, electric and telephone companies.

The checks, say businessmen, have become a quasi-currency.

Some of the savvy dealers approach people waiting to pay their utility bills, offering to swap a government check for their cash.

Still others offer to give government employees and retired people cash for their checks, but at a discounted rate. A $100 check, for example, can bring $80 or so.