Mr. Barrett to Mr. Hay.

No. 4.]

Sir: Referring to my telegram of July 25 in regard to the port and tariff question, I shall make a brief statement only. * * *

There is so much agitation of the subject in Panama that it seemed best to inform you of the situation by telegraph. The question is most important because it involves the whole issue of sovereignty in the zone. General Davis is convinced not only that the President’s order of June 24 is in accordance with the treaty but that its continued enforcement is absolutely essential for successful administration of the zone. * * *

The chief difference is now over the entrance and clearance of vessels at La Boca, Port Ancon. The Panama Government contends that the United States is acting in contravention of the treaty and denies the right of the canal authorities to enter and clear ships.

Despite Panama’s objections vessels are arriving and departing from La Boca, but the tension is growing stronger each day and something must be done to end the trouble or to break the deadlock. The Chilian steamer Limari is now discharging cargo, but the Panama authorities threaten to arrest and fine both captain and agent unless she leaves port or complies with Panama’s regulations. The agent has appealed to General Davis and he has replied that he will not permit any interference by other authorities (referring to Panama [Page 588] officials) with the movement of vessels at La Boca. He, however, has informed the agents of all lines, as well as the Panama Government, that all vessels are privileged to stop at a common anchorage near Flamenco Island and then, unloading or loading by lighters through Panama Bay (proper), thus to be entered and cleared by Panama authorities. If, moreover, they desire to clear from Panama for Ancon in order to come in to the La Boca dock for movement of cargo or to clear from Ancon to Panama for the same purpose, the zone officials will readily receive or grant the necessary papers.

But if vessels arrive cleared from some South American or North American port for Ancon in the United States canal zone and they wish to enter, or clear direct from, Ancon they must be permitted to do so without interference. Up to this writing nine merchant vessels have been received at La Boca. Until the arrival of the Limari the Panama Government only protested through the captain of the port; since her arrival the Panama authorities have tried in every way to compel her captain or agent to respect their orders. * * *

In conclusion, I beg to state that I hope to be able through conferences with the Panama minister of foreign affairs and General Davis to bring about a better understanding or, at least, to arrange a modus vivendi agreeable to both governments, until the question at dispute may be finally settled. General Davis and I have gone over the question to-day carefully and I expect to see the Panama minister of foreign affairs to-morrow or Thursday. The present situation is almost intolerable for shipping interests, and some temporary adjustment must be reached before Admiral Walker and colleagues arrive, in order to prevent some unfortunate incident that might endanger the relations of the Panama Government and the canal zone administration.

I have, etc.,

John Barrett.