Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

170. Memorandum From the Assistant Secretary of State for Policy Planning (Bowie) and the Acting Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Secretary of State¹

Washington, April 3, 1957.

SUBJECT

• Nicaraguan Canal

Problem: Should this Government now consider seriously the construction of a trans-oceanic canal across Nicaragua?

1. Economic

(a) The capacity of the present lock canal in Panama is much greater than the demands now being placed upon it. It handled 46 million long tons in 1956. Without major improvements the Canal is considered capable of handling up to 120 million tons per year.

(b) The Panama Canal can accommodate all existing merchant ships, except the largest passenger liners, and tankers in excess of 60,000 tons. Only ten or twelve ships, in being or building, are too large for the Panama locks; and these vessels would not be used on routes requiring Panama transit anyway.

(c) If world trade should continue to expand in accord with recent trends, the capacity of the present Panama Canal may be overtaken in the mid–1970’s. A report by the Panama Canal Company on this question is scheduled to be issued within a month.

(d) It may thus be necessary at an early date to decide as between major improvements in the Panama Canal and the construction of a trans-oceanic waterway elsewhere in Central America. It seems likely that the choice would lie between the Panama waterway and a canal across Nicaragua.

(e) Present construction cost estimates are: $6 billion for a lock canal across Nicaragua; $5 billion for the conversion of the Panama Canal to a sea-level waterway. These figures do not include any amounts for concessionary payments.

(f) Although a Nicaraguan canal would be a shorter route between US Atlantic and Pacific coasts than the Panama Isthmus, the resulting savings would not in themselves be sufficient to justify construction of a canal across Nicaragua. Intercoastal traffic, in fact, is less than 20 percent of total canal traffic.

2. Strategic

(a) The locks of the Panama Canal cannot accommodate the largest modern aircraft carriers of the Forrestal class or those smaller carriers having canted decks. Under existing strategic concepts, however, this is not viewed as a serious limitation so far as our ability to conduct general war is concerned. It is unlikely, on the other hand, that the Panama Canal would be a target for enemy military actions in situations short of general war.

(b) The lock canal at Panama is vulnerable to lengthy interruption in the event of successful enemy sabotage or overt military action. A Nicaraguan canal, however, would also have to be of the lock type and would therefore be equally susceptible to interruption.

(c) Because of the vulnerability of a lock canal, a preferred solution on the part of Defense would be a sea-level waterway at Panama. Defense, however, would give a lower priority to canal improvement than to other elements in US security programs.

3. Political

(a) Panamanian agitation over the canal is not now in large volume. Nevertheless, we must expect that future Panamanian administrations will press for further financial concessions and for participation in the management and operation of the canal.

(b) If it should become necessary to undertake major improvements in the Panamanian waterway, Panama undoubtedly would take the occasion to seek alterations of our treaty rights.

(c) Nicaragua has indicated its readiness to negotiate a canal grant under the existing Bryan–Chamarro Treaty.

Discussion:

1. The foregoing summation of facts suggests that a Nicaraguan canal would not be justified now on economic or strategic grounds. It does not appear that political considerations are sufficient to outweigh the economic and strategic factors.

2. Despite continuing agitation, Panamanian attitudes do not now seriously threaten US control of the Panama Canal. This agitation will no doubt increase, but our diplomatic capabilities for maintaining the essentials of a US position in the Canal Zone are still considerable. In the last analysis, moreover, we probably can hold physical control of the Canal Zone if we consider it worthwhile to incur the political costs of doing so.

3. Any attempt to obtain concessionary rights in Nicaragua comparable with those we have in Panama would give rise to a great volume of anti-American sentiment in Central and South America and elsewhere. Even moderate opinion in Latin America would be strongly opposed to a canal grant of this kind by Nicaragua.

4. It is likely, in any case, that Nicaragua would ask for concessions going beyond the Panama model. Nor could we deal initially with Nicaragua alone, since under the Senate reservation to the Bryan–Chamarro Treaty, it was recited that nothing in the treaty was intended to affect the rights of Costa Rica, El Salvador, and Honduras. In general, the probability is great that in future canal negotiations, whether with Panama or with other nations, we shall be under heavy pressure to agree to share both control and earnings with local governments.

5. Unless we are prepared to give serious consideration to a Nicaraguan canal, our interests would not be served by any attempt to use the threat of a Nicaraguan canal to discourage Panama from attacking our treaty rights in the Canal Zone. First, by falsely exciting political emotions, as well as popular expectations in Nicaragua, we might damage the political standing of a friendly government; Embassy Managua feels strongly that we should not take this risk. Second, discussion of a Nicaraguan canal would inevitably stir up anti-American sentiment in Central and South America. Third, it is by no means certain that the Panamanian Government would be impressed, since it probably is well acquainted with the high cost and other adverse features of a Nicaraguan canal.

6. The Department, on February 13, 1957, commented on a bill introduced into the House to create an Interoceanic Canals Commission to conduct a comprehensive investigation of improvements in the Panama Canal and of alternative canal possibilities.² Our position was that such an investigation was not needed in view of the several studies and surveys made in the recent past and the large amount of data thus available. The Department of the Army is currently commenting in the same vein on this bill and on an identical Senate bill.

Conclusions:

1. We should not give serious consideration to a Nicaraguan canal at this time.

2. If the forthcoming study by the Panama Canal Company indicates the need for major alterations in the Panama Canal to handle traffic requirements in the relatively near future, it may be desirable to institute a detailed interdepartmental review of the canal issue in all its aspects.

1. Source: Department of State, ARA Files: Lot 60 D 667, Panama 1957—Nicaraguan Canal Confidential. ISA, the Office of the Legal Adviser, and the Bureau of Economic Affairs concurred in this memorandum.
2. Reference is to H.R. 3258, introduced in the House of Representatives by Representative Clark W. Thompson (D.–Tex.) on January 17.