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On Sunday, a referendum will be held in Panama. It will be a vote to see whether Panamanians want to change their constitution, to make it possible for Ernesto Perez Balladares to be re-elected president in 2000. It looks like a democratic procedure, and technically it is.

Why then are so many Panamanians unhappy about it? Why is there such deep concern among many sectors that some of my friends there are saying, “This is splitting the community apart; we now have all-out war between the `si’ and the `no’ “? And how exactly will this vote affect the future of the Panama Canal, which will be turned over to Panama officially (a felicitous accident?) the very same year that Balladares could conceivably be re-elected?

As Mark Falcoff, a scholar on Latin America and resident at the American Enterprise Institute, writes in his compelling new book, “Panama’s Canal: What Happens When the United States Gives a Small Country What It Wants,” the Panamanians assuredly possess the engineering and management skills to run the canal properly.

But financing the improvements that are soon going to be needed, he points out, “will require careful stewardship of canal revenues.” This, in turn, runs headlong into the country’s political culture and its historical patterns of public administration. Traditionally, Panamanians of all classes have regarded government agencies as booty to be distributed among followers of the ruling party.

“Panama is therefore condemned to operate the canal with a small margin of tolerance for its traditional political vices,” Falcoff writes. “Moreover, with the withdrawal of the U.S. military, Panama loses its place in line as one of the really important Latin American countries for the United States. In effect, there will be no special relationship.”

And therein lies the problem: If Sunday’s vote is to change the constitution, which deliberately allows for only one term of a five-year presidency, many responsible Panamanians fear such a change would drag them back to the old dictatorships and corruption that they are struggling to leave behind. Moreover, since the president’s Revolutionary Democratic Party is the corrupt party of Manuel Noriega’s demagogic left, many fear a Nicaraguan-style “pinata” in the future; that is the term given to any period in which corrupt politicians steal everything not nailed down.

As of this writing, surveys in Panama show that the “no’s” are 18 points ahead of the “si’s” for Sunday. But, regardless of the vote, it is clear Panama has entered a new stage, yet its power-oriented government seems little aware of the difficulties ahead. Because of grave, unaddressed environmental problems arising around the canal, because of the losses in revenues and stability assured in the past by the American military presence, and, yes, because of that nagging old political culture, Panama must, for the first time, stand on its own feet. The world will soon see.