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The U.S. military presence in Panama - a dominant factor in Panamanian politics since its U.S.-sponsored secession from Colombia in 1903 - is slowly but inexorably drawing to a close.

The 1977 Panama Canal Treaties require the last of the 7,300 troops based here to leave by midnight on Dec. 31, 1999.The last eight bases - with about 70,000 acres and more than 3,600 buildings - are gradually being transferred to the Panamanian government. Southern Command (Southcom) itself is due to move to Miami in 12 months.

But Panama's joy at the gringos' departure is tempered by nervousness at the potential economic impact. The Pentagon estimates that it will leave a $370 million gap in Panama's economy - 13 percent of its gross domestic product.

Most independent experts put the figure much lower.

"It's not true that there will be such a large negative impact," says Panamanian President Ernesto Perez Balladares. "The fact that the troops' departure coincides with the handover of the canal to Panama means there will be an almost immediate compensation."

Nevertheless, recent polls show that three-quarters of Panamanians would like to see a military presence continue.

Wary of a nationalist backlash, the government began to tentatively explore the issue with Washington a year ago. But the talks were suspended when a Southcom colonel said publicly that the U.S. would not pay rent for bases.

Time is running out, because there's no money in the Pentagon's budget for a presence in Panama beyond 2000. "The budget cycle of the Pentagon is such that the window will soon be gone," said Ambler Moss, a former U.S. ambassador to Panama. "They must be pretty damn close to the deadline now."

Moss, now director of the North-South Center at the University of Miami, believes the sort of U.S. presence that might be negotiated would have little direct impact on the economy but would reassure foreign investors of the country's stability.

From 1968 until 1989, when a U.S. invasion toppled Manuel Antonio Noriega, Panama was a military dictatorship. The post-invasion government abolished the armed forces.

Without the foreign, predominantly Asian, investors which the government hopes to attract, the handover is a distinctly mixed blessing. Moss estimates that it will cost $25 million just to maintain the buildings when the troops have gone.

Much of the infrastructure that once formed part of the old Canal Zone deteriorated rapidly once it was transferred to the Panamanian government. The trans-isthmian road is now "one big pothole," according to an occasional user, and the railway, handed over in 1979, is no longer regarded as safe by the U.S. military.

Some of the bases have no obvious alternative use. Although picturesque Fort Amador, at the Pacific end of the canal, probably will be redeveloped as a tourist site, Howard Air Force Base could become an expensive white elephant.

In June, Perez Balladares announced that he was willing to lease the base, rent-free, as the headquarters for a multi-national anti-narcotics force - a proposal Washington is looking at "very seriously," the U.S. embassy says.

Many Panamanians think the U.S. is desperate to maintain a foothold, but the public position is that all current tasks - including drug interdiction - can be performed equally well without its help.

Perez Balladares, once a close associate of the late Gen. Omar Torrijos, father of the canal treaties, is also keen to dispel the idea that Panama needs the U.S.

"The colonial relationship is over," he said. "We are not asking them to stay, we are defining a new relationship" - one he described as a "strategic alliance."

The precise nature of the relationship will not become clear until after the U.S. presidential elections. Meanwhile, the Panamanian government and the opposition are trying to devise a strategy to stop a nationalist dream turning into an economic nightmare.

(Distributed by Scripps Howard News Service.)