Panama Democracy and Economic Recovery Act

Panama Democracy and Economic Recovery Act- Makes certain policy declarations regarding Panama, including: (1) expressing support for a civilian democratic government in Panama; (2) expressing support for a transition to democracy in Panama using multilateral initiatives and other means; (3) pledging increased U.S. drug enforcement cooperation with a Panamanian Government committed to ending drug trafficking; (4) calling for economic assistance to Panama following the departure of General Noriega; and (5) expressing support for the development and strengthening of democratic institutions in Panama following his departure.

Provides for specified U.S. assistance to Panama if the President certifies to the Congress that: (1) General Noriega is no longer in power in Panama; (2) Panama has demonstrated substantial progress in instituting a civilian government; (3) the Panama Defense Forces will be subjected to civilian control; (4) major political organizations have reached agreement on conditions for free elections; (5) constitutional guarantees have been restored in Panama; (6) major political organizations have reached agreement on plans for the reorganization of the Panamanian judicial system; (7) Panama has agreed to cooperate fully with the United States in drug enforcement efforts; (8) Panama has pledged to enter into negotiations for a mutual legal assistance treaty; and (9) Panama has pledged to reform its bank secrecy laws and to prevent drug-related money laundering. Includes among such assistance: (1) assistance to Panama for use in reducing its arrearages to international financial institutions; (2) emergency food assistance; (3) assistance for development and for electoral activities; (4) assistance to the Panamanian housing finance system; and (5) assistance for the domestic banking community in Panama through a short-term credit facility if the President determines that illiquidity problems exist within the Panamanian banking community as a result of the political situation.

Provides that certain restrictions and prohibitions on U.S. assistance to Panama contained in the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1988 shall not apply in FY 1988 if the President makes such certification. Provides that the cooperation with narcotic laws certification required by the Foreign Assistance Act of 1961 shall be deemed to have been approved by the Congress if the President submits to the Congress: (1) the certification described by this Act; and (2) a national interest certification with respect to Panama. Provides that the limitations on assistance to countries in default of loans made by the United States shall not apply to Panama if: (1) the President submits the certification described in this Act; and (2) Panama agrees that all such loans payable during FY 1988 will be repaid within an agreed upon time period.

States that if the President makes the certification described in this Act: (1) the Overseas Private Investment Corporation and the Export-Import Bank should assist in the reconstruction of the economy of Panama; (2) the President should direct the Secretary of the Treasury to instruct the U.S. executive directors of various multilateral development institutions to seek to provide assistance to Panama; and (3) the President should urge Japan to help provide economic resources to assist Panama in the transition to democracy.