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Willie Nelson – Pancho And Lefty Lyrics 9 years ago
It may be obvious to you and me. I'm less certain it's obvious to everyone, given many of the earlier comments expressing confusion about what's going on.

The opening part of the song is indeed the most difficult to parse.

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Willie Nelson – Pancho And Lefty Lyrics 10 years ago
I think these lines make it pretty clear the relationship between Pancho and Lefty:

The day they laid poor Pancho low,
Lefty split for Ohio.
Where he got the bread to go,
There ain't nobody knows.

Lefty sold Pancho out to the Federales, and is now guilty about it.

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