PANAMA CITY -- In the patriotic afterglow of Operation Just Cause, U.S. officials spoke expansively of their responsibilities in Panama, the hemisphere's newest democracy. More than a spectacular drug raid that netted the country's ruler, Gen. Manuel Antonio Noriega, the invasion marked the start of an ambitious $1 billion, U.S.-sponsored rebuilding effort that would, in President Bush's words, "repair the wounds, repair the damage."

But so far, the U.S. security role has overshadowed a slow-starting effort to shore up Panama's institutions and jump-start its feeble economy. Building a true democracy, U.S. officials say, will take years.

For now, the 10,000 U.S. troops here remain the only power guaranteeing the existence of the wobbly civilian government installed last Dec. 20.

After a coup attempt by a former police chief failed Dec. 5, U.S. officials in Panama scrapped their plan to have all U.S. troops off Panamanian soil and back on U.S. bases here by the first week of December.

Although the invasion continues to enjoy broad support, the ongoing presence of American troops on city streets has stoked Panama's always prickly nationalism and led to criticism that the United States is running a parallel government.

The United States has traditionally maintained about 10,000 troops here, but until the invasion their mission was to defend the Panama Canal and their movements were limited to U.S. areas near the canal.

But now, the U.S. presence throughout Panama is so conspicuous that American colonels who would be obscure figures at home have become household names in Panama. Top Panamanian officials confer with their U.S. advisers daily, sometimes several times a day.

The CIA, having opposed setting up an intelligence section in the police force, is busy creating one in the office of the presidency. In the waiting room adjoining the police chief's office, an American military adviser bustles in and out, his pink polo shirt and blue jeans a sharp contrast with the khaki uniforms of the Panamanian police.

The continued U.S. military presence underscores a conflict in Washington's policy in Panama, diplomats acknowledge. "One objective is to reduce Panamanian dependency on the United States," said a top American diplomat here. "The other objective is not to let the democratically elected Panamanian government go down the drain."

Perhaps the greatest headache for American policy in Panama has been the Panamanian police force, a lightly armed force culled from Noriega's notoriously anti-democratic army.

American and Panamanian officials had insisted that they were making steady progress toward turning Noriega's soldiers into freedom-loving cops. But since the Dec. 5 coup attempt, joined by more than 100 uniformed police, few believe it.

"The Panamanian government had to ask for American help {to put down the coup attempt} because it couldn't trust its own 'loyal' members of the Public Force," said Eusebio Marchosky, a senior prosecutor in the Controller General's office.

Washington's answer to the problem of Panama's police force can be found in a modern office building behind a McDonald's, just around the corner from the Vatican Embassy where Noriega took refuge from U.S. troops last year.

On the top floor, a handful of officials from the U.S. Department of Justice are in the process of spending $12 million to turn Panamanian soldiers into police, to teach investigators how to investigate and judges how to judge.

This is the home of Panama's new police academy, where the course materials, professors, visiting lecturers and curriculum are hand-picked by a U.S. government project called the International Criminal Investigative Training Assistance Program.

"They're very receptive," Nelson Borrero, a Justice Department official, said of the Panamanians. "But you know you can only do so much. After that, it's up to the Panamanians."

Despite appearances, the American presence in Panama has not been limited to security concerns.

In the aftermath of the invasion, it was not only U.S. troops with M-16s who fanned out around the country, but also teams of technical specialists, some of them from the Special Forces.

More than 300 of them, including engineers and administrative specialists, formed a kind of instant Peace Corps. Known as the Military Support Group, they set to work repairing bridges and roads, and patching up health clinics and schools.

But by the start of this month, the operation had dwindled to about 24 soldiers, including a number of high-ranking officers who are counselors to top government officials. Although U.S. officials say their "nation-building" program is not ending, for many Panamanians it never began.

In January, Bush pledged a $1 billion aid package for Panama and rushed $48 million in emergency aid to the country. The president said the package was "as close to instant relief as we can hope for."

But by April, the aid for Panama was wrapped in with a proposed aid package for Nicaragua, and leaders in the administration and on Capitol Hill began to balk at the total.

The administration request for Panama was reduced to $500 million. By the time Congress passed the bill, it was worth $420 million. Since then, bureaucratic wrangling and arguments about strings and conditions attached to the money have caused further delays. To date, less than $120 million -- just over a fourth of the package -- has been delivered to Panama.

As a result, the almost universal feeling here is that the United States, while wielding enormous influence over the government, has reneged on its financial commitments.