File No. 819.77/58.
The Acting Secretary of State to the American Chargé d’Affaires.
Washington, September 20, 1911.
Sir: The Dziuk railroad concession, from its origin down to its present status, itself raises questions requiring great circumspection on the part of the Department and of the Legation. The questions which it raises are, moreover, typical ones, so likely to recur from time to time in one or another form that it is evidently desirable to define with sufficient clarity the position of the United States and the plain duty and interest of the Republic of Panama in such cases.
First of all, it will be useful to epitomize what appears to be the history and status of the Dziuk concession.
On October 22, 1910, the Legation wrote the Department that the Balboa and Pacific Estates, Limited, an English corporation, with its home office at 312 Regent Street, London, had, through its Panama agents, applied for a concession to construct a narrow-gauge railroad in the Darien region, District of Chepigana, running from the mouth of the River Pinas to a point on the left bank of the River Tuira. The company desired also an option to continue the road to some point more or less near the headwaters of the River Chucunaque. The Legation at the same time transmitted a copy of the proposed concession as submitted by the company, attention being called to the wholesale grant of public land on each side of the right of way, in addition to the lands necessary for the work of construction. In the same dispatch the company was alleged to be the proprietor of three mines near the mouth of the River Piñas. The Legation stated that the railroad was not designed for the development of these mines, and ascribed the company’s efforts to the desire to secure vast tracts of public lands, without adequate compensation, in a country where the railroad could not for many years prove commercially profitable.
Regarding the economic aspect of the proposed concession, Maj. Gen. George W. Davis was good enough quite unofficially to express to the Department his very valuable views. General Davis pointed out that the country traversed was most sparsely populated, with Indians only; that its timber resources could now be exploited through water transportation cheaper than by rail; that the valley of the Chucunaque was one of the most unhealthy in the world; that the construction would be expensive; and that the railroad, with [Page 1172] practical certainty, could not be profitable either to the company or to the Republic. General Davis also pointed out that two hundred years ago a British attempt to colonize the Darien region had resulted in disaster and great financial loss.
In the same dispatch of October 22, 1910, the Legation stated that the proposition would at once be submitted to the National Assembly, intimating that if the Department considered the project objectionable an intimation by telegraph might remove it from consideration. The draft contract was for ninety-nine years; it had one article seemingly monopolistic as to railroad construction in the territory concerned, and the land grants seemed excessive.
On November 7, 1910, the Department instructed the Legation to suggest to the Government of Panama the desirability of granting only alternate sections of public lands along the railroad, at the same time intimating in general terms the interest of the United States in the development of Panama.
The Legation’s dispatch of October 22, 1910, was read by the Chief of the Isthmian Canal Commission in the War Department, who suggested no change in the Department’s telegram of November 7, 1910. A copy of the correspondence to this point was sent to the War Department on November 11, 1910, and was acknowledged without comment.
In a dispatch of November 8, 1910, the Legation notified the Department that the suggestion to grant only alternate sections of land had been informally made, and that before ratifying the concession such a modification was likely to be made, since both the executive and the legislative branches of the Government of Panama evinced every desire to act in conformity with the wishes of the United States.
On February 1, 1911, the Consulate-General at Panama dispatched to the Department a translation of contract No. 2.
On February 2, 1911, the Washington Herald printed a telegram, dated the previous day at Colon, forecasting the early ratification of a railway concession to the Balboa and Pacific Estates, Limited, and alleging that the concession would provide for a railroad from one end of the Republic to the other and that as an evolution of the old Darien project it was to open up the virgin country of the Pacific slope, to parallel the coast and ultimately to form an important link in the inevitable Pan-American system. After speaking of an English invasion and possible sphere of influence, the article intimated that, contrary to expectation, American opposition had not developed, and that therefore the concession, involving enormous land grants, would be consummated within a few weeks.
After examining this newspaper report, the Latin-American Division, not having before it the second draft contract, gained the impression that the proposed concession had nothing to do with any proposed railroad from Colon to the cocoanut country along the Atlantic, nor with the Panamá-David railroad project then pending, and that, although American exploitation would be far preferable to exploitation by foreigners, still, in general, the material development of Panama through railroad construction should be encouraged if properly safeguarded. Owing, however, to the intimation of possible monopoly in the Darien region and the valley of the Chucunaque, for which [Page 1173] an optional extension was included in the application of the company, the Latin-American Division recommended that the Department inquire whether any contemplated exclusive rights were such as to interfere with a future Pan-American railway system. In the Department’s telegram of February 3, 1911, embodying this inquiry, the Legation was also instructed to report at once whether the concession had been modified to give only alternate land sections.
In its telegram of the following day the Legation replied that the Minister for Foreign Affairs stated that the concession now con-conformed in principle to the suggestion regarding only alternate land sections, and did not confer exclusive rights which could interfere with the Pan-American railroad system, Article III containing the seemingly monopolistic feature having been omitted from the concession. The same telegram added that the concession had been approved.
On February 4, 1911, the Legation transmitted a copy of the same second draft contract which had been sent by the Consulate-General. A copy of this second draft contract was sent to the War Department., on May 13, 1911, and an additional copy with the Legation’s covering despatch of February 4, 1911, was transmitted to the War Department on May 19, 1911.
This despatch from the Legation made it clear that it was the second draft contract which had been approved, and that it had been approved only by the President of Panama. The proposal had not been favorably acted upon by the National Assembly at its regular session, but had been again submitted to it by the President at its special session. The concession so pending, then, was free from the objection as to alternate land sections, and purported to be free from potential conflict with a Pan-American railroad. The second draft contract, however, had been expanded and changed in numerous respects. For example, in addition to embodying a provision similar to that at the end of Article I in the first draft contract, whereby the company was to have the right to continue the railroad to some point more or less near the headwaters of the River Chucunaque, crossing the River Tuira, and partially crossing the valley of the Chucunaque, Article II purports to give the concessionaire an option to construct any other branches deemed necessary for the development of the enterprise (subject to all the stipulations of the contract), upon written application to the Executive Power for permission to begin to locate such branches.
It may here be observed that the Department now for the first time had before it the draft of a project sufficiently elaborated to challenge any measure of serious attention even if it had been, possible to assume that the Government of Panama could have for a moment considered proceeding beyond the most tentative steps, in a matter involving problems of such obvious joint interest, without officially seeking thorough and deliberate consultation with the Government of the United States.
In a despatch of April 19, 1911, the Legation informed the Department that the concessionaries had cabled their representative in Panama, Dr. Inocencio Galindo, directing him to secure from the President of the Republic authority to extend the railroad from Chepo to Panama, since they desired to construct such a branch simultaneously [Page 1174] with what was called the principal line—that is the one to run from Puerto Piñas to the River Tuira. As the Legation pointed out, it was perceived to be obvious that no such extension could be built without traversing a section of the Canal Zone, since the city of Panama is surrounded by the territory of the Zone. The President of Panama, the Legation reported, had not yet taken any action on this fresh proposal. With the same despatch the Legation transmitted published telegraphic correspondence between the Panaman representative of the syndicate and Messrs. Dziuk, Tiktin and Hoffman, speaking for those in Europe supposed to be interested in the project. The tone of the telegrams from Berlin was such as to seem to show clearly enough that their senders looked to these extraordinary extensions of the concession as the really essential part of the project which had been so innocently proposed as a small railway concession in the Darien region. Mr. Galindo, in his replies to Berlin, demurred, and asked for formal documents. In its telegram saying that these could not yet be sent because Mr. Dziuk had gone to New York, the remark was made that if necessary the syndicate would obligate itself to buy railway materials in the United States.
With the same dispatch the Legation transmitted an article from the Panama Journal of April 18, 1911, calmly assuming that these great extensions should be granted; advocating the introduction of European capital; commenting upon the interest said to be taken by a certain European country in everything relating to the interests of Panama; referring, in illustration of the same thought, to an alleged extensive German agricultural undertaking near by in Colombia, with harbor projects on the coast; and, in conclusion, admitting the power of the United States to refuse the right of way through the Zone and advocating the removal, through diplomacy, of this obstacle.
On May 2, 1911, the Department called upon the Legation for a report as to surveys, physical features, and commercial purposes, directing the Legation to consult Colonel Goethals, and intimating that the President of Panama would be expected to defer granting this application pending full consideration by the Government of the United States. Copies of the Legation’s despatch of April 19, 1911, and of the Department’s reply of May 2, 1911, were transmitted to the War Department May 8, 1911, together with telegraphic information sent by the Legation May 5, 1911, to the effect that the President of Panama had agreed to defer granting permission for the Chepo-Panama extension.
In a despatch of May 9, 1911, the Legation reported that the President of Panama, in spite of the syndicate’s insistence, was taking the sufficiently obvious ground that the Chepo-Panama line could not be termed a “branch” at all. Upon being consulted by the Legation, Colonel Goethals had expressed the opinion that if the United States did not object to the construction of the Panamá-David Railroad by foreign capital he saw no objection to the construction of the Chepo-Panama Railroad by foreign capital, inasmuch as the relations of both roads to the Canal Zone were identical. As to this whole question of policy, Colonel Goethals naturally left it to the consideration of his Government. This despatch was copied to the War Department on May 25, 1911.
From a letter of May 11, 1911, from the War Department it appeared that that Department had failed to receive copies of the [Page 1175] Legation’s despatch of November 4, 1910, and of the second draft contract therein referred to. Such copies were thereupon sent, May 19, 1911, and on May 23, 1911, the War Department informed the Department of State that this last-mentioned letter, with its inclosures, had been copied to the chairman and chief engineer of the Isthmian Canal Commission on the Isthmus for his information in connection with previous correspondence already forwarded to him.
On June 1, 1911, the War Department was good enough to furnish the Department of State with extracts from a communication from Colonel Goethals, dated May 24, 1911. It appeared therefrom that the then Chargé d’Affaires at Panama, while viewing the proposed project as prejudicial, was of the opinion that no such railroad would be built without the access to the city of Panama, which was precluded by necessity in such case to cross the Zone. Colonel Goethals also referred to the President’s visit to the Isthmus and to the discussion at the time with the Secretary for Foreign Relations of the question of readjusting the boundary between the city of Panama and the Canal Zone, and also to a discussion of the question of use by the Zone authorities of certain waters at present reserved to the harbor of Colon. In remarking that the adjustment of the boundaries of the capital would make geographically possible a route to the city through Panaman jurisdiction, Colonel Goethals reported that he had indicated to the Legation that since the matter of the Dziuk concession concerned policy rather than the canal construction it was not one upon which he then felt called upon to make any expression. It thus appears that the Legation deemed the acquiring of exclusive railway rights by foreign capital in Panama detrimental to American interests, and further believed that the railroad in question would not be built unless the company could gain access to the city of Panama, and that Colonel Goethals naturally enough regarded this question as one of broad policy. It further appears that when the President visited the Isthmus of Panama in November, 1910, he had a certain tentative discussion with the Secretary for Foreign Affairs with a view to the possible exchange of a portion of the Zone for certain water rights—such exchange to be effective if and when reduced to writing and approved by the Presidents of the United States and of Panama, and to have, incidentally, the effect of leaving no Zone territory between the city of Panama and the road which the railroad from Chepo would take, if authorized, in entering the capital.
On June 2, 1911, Mr. Carlos C. Arosemena, the Panaman Minister of Public Works, informed Mr. Dodge, Resident Diplomatic Officer of the Department of State, that the Panaman Government had refused to grant to the Balboa and Pacific Estates, Limited, their request to construct a “branch “to Panama City on the ground that this could not properly be considered as a branch within the meaning of the company’s concession. Mr. Arosemena, apparently with an unconscious indifference to the interests or the attitude of the United States, remarked at the same time that the Panaman Government would, however, be ready to consider the question of granting a new concession under proper conditions to this company for building a railway to Panama City.
On the same day Mr. Arosemena informed Mr. Dodge that he had heard unofficially that the Balboa and Pacific Estates, Limited, to whom a concession to build a railway in the Darien Province had been [Page 1176] granted, were considering another branch line, which Mr. Arosemena said they were entitled to under their contract, to run from the main line near the Chucunaque River to the Colombian frontier, thence joining a concession which they either had obtained or expected to obtain for a railroad from the Colombian frontier to the Gulf of Darien. Mr. Arosemena added that such an arrangement would give the company a railroad across the Isthmus, which, if true, would, of course, be of great interest to the United States, and would be immediately brought by him to the attention of the Department. Mr. Dodge intimated that the permission of Panama would be necessary to such a branch; that the Department would, of course, be greatly interested; and that, therefore, the Government of Panama would naturally afford the Department every opportunity to consider the question. To this Mr. Arosemena replied that he recognized the Department’s interest, but thought that under the contract the Panaman Government would be obliged to grant any request for such a branch.
By a despatch of June 3, 1911, the Legation informed the Department that Mr. Agusto Dziuk was reported to have deposited with the national treasury of Panama the $10,000 gold required by the contract to be deposited as a pledge that the company would proceed in good faith.
The newspaper article relied upon by the Legation for the information further stated that the Government of Panama had thus far only consented to permit the company to run the railroad up to Chucunaque, about 25 kilometers from the Atlantic coast.
The Department’s conversations with Mr. Arosemena were communicated to the Legation in its instructions of June 17 and June 30, 1911, and the Legation at Bogotá was, on the latter date, informed of the rumors regarding the supplementary project in the Republic of Colombia.
From the beginning of July there has been a correspondence between the White House, the Department of State, and the War Department, and a Mr. William Albert Nicholls, who was introduced to the Department by Senator Brandegee, of Connecticut, and who caused it to be understood that he wrote only as a patriotic American citizen and as a friend of Mr. Egon Schaar. This correspondence may be summarized in this way: Mr. Schaar tells Mr. Nicholls that he has been approached by Japanese and others to buy lands about Piñas Bay, a prospective important harbor; that he is not looking for a purchaser, but would prefer to sell, if at all, to the United States. In the course of the correspondence $2,500,000 was mentioned as the price of the lands in question.
It is interesting to note in this connection that Mr. Laughlin, Secretary of the Embassy at Berlin, sent the Department the following telegram, dated August 24, 1911, 12 noon:
Count Oppersdorff, Member of Reichstag, informs me our Government is interested in the transfer of an estate in Panama, and asks me to transmit through you the following power of attorney for Egon Schaar, Ritz Carlton, New York City:
“The undersigned five directors and seven associates of the Balboa and Pacific Estates Limited, representing nine-tenths majority, grant you unlimited power of attorney for the sale and realization of all rights of the company. Papers duly executed, follow by mail. Count Oppersdorff, Schmid, Begas, Dziuk, Hoffman, von Bethmann Hollweg, Tiktin.”
The correspondence with the War and Navy Departments shows that neither of those Departments deemed it advisable that the United States should acquire the lands about Piñas Bay, and accordingly the following reply, dated August 29, 1911, 4 p.m., was sent to Mr. Laughlin:
The Department had already informed Schaar’s associate, William Nicholls, that the Government of the United States has no present interest in the acquisition of Piñas Bay lands in Panama. The power of attorney would, therefore, seem unnecessary, so far as this Government is concerned.
As Mr. Nicholls was anxious for a fuller reply than previously given him, the Department advised him by telegraph on September 2, 1911, as follows:
In compliance with the request to hear from the Department to-day, contained in your letter of August 30, which crossed the Department’s communication of August 29, I desire to express regret at the apparent misunderstanding of the correspondence in question. It should be remembered that the overtures made the Department were unsolicited and you will of course realize that any government requires considerable time to consider a matter bearing upon such important subjects.
The specific question you asked was whether this Government now cared to purchase certain lands on the Pacific coast of Panama. While the ultimate relation of the Government of the United States to all such questions is sufficiently clear through, public treaties, I can only at the present time again transmit to you the information that this Government is not disposed to consider at this time the suggested transaction.
In the same connection it is interesting that on August 4, 1911, Mr. Galindo, representing the German interests, addressed from Berlin a letter to the President containing many protestations of his devotion to American interests and quite strongly insinuating that it would be a menace to the United States to permit the lands about Piñas Bay to pass into any foreign hands. This letter was duly transmitted to the War and Navy Departments.
As showing a certain amount of energy and assurance on the part of the promoters of the Dziuk railroad concession, it is worth while, perhaps, to note the following very misleading despatch to the London Times of July 29, 1911:
railways in panama.
[From our correspondent.]
Panama, July 27.
The Washington Government has withdrawn its objection to the extension of the German-English railroad from Darien to the city of Panama. The line will be 300 kilometers long, of which 80 kilometers are to be built at once. It is made a condition that the railway shall not go within 10 miles of the Atlantic side of the Isthmus and shall keep southwest of the Cordillera.
(The above telegram refers to a railway syndicate which has recently obtained; permission from the United States Government to build a railway from Puerto Piñas, on the Panama Gulf, to La Palma, on the same gulf, at the entrance of the Tuira River. The concession, according to the telegram, has been extended.)
The Legation’s despatch of July 10, 1911, stating that the Panaman Minister for Foreign Affairs had given assurances that no branch railroad to the Colombian frontier was under contemplation, and that in the event that permission to build such a road should be requested the interests of the United States would be carefully guarded, was transmitted to the War Department on July 26, 1911.
[Page 1178]On August 19, 1911, the Secretary of War discussed with the Assistant Secretary of State the general subject of the present instruction, and particularly the Dziuk railroad concession, the matter having come concretely before the War Department through the following telegram that it received from Colonel Goethals:
Panaman authorities desire extend Dziuk railroad concession from headwaters of Chucunaque via Chepo to Juan Diaz River, stipulating that road shall not be nearer than 10 miles to Caribbean Sea or Colombian frontier, and request the consent of the United States.
On the same date, and confirming this conversation, the Secretary of War informed the Department that shortly before he started for Panama Mr. C. C. Arosemena came to Washington and was received by the President, the Secretary of War being present. Mr. Arosemena mentioned that the Government of Panama had granted Dziuk a railroad from Piñas Bay to the River Tuira, possibly to be extended thence to some point toward the headwaters of the Chucunaque River with the privilege of constructing other branches also with the further consent of the Executive of Panama. Mr. Arosemena said to the President that Mr. Dziuk desired permission to extend the proposed railroad to some point on the Colombian frontier whence it could be easily extended through Colombia to the Gulf of Darien, making a transcontinental railroad which, in his opinion, might interfere with the interests of the United States on the Isthmus of Panama. As to Mr. Arosemena’s remarks on this occasion, it will be recalled that the Government of Panama has officially disclaimed to our Legation any intention to make this particular extension of the concession. In the despatch of August 19, the Secretary of War was good enough further to inform the Department that during his visit to Panama in July he found this situation: Mr. Dziuk was pressing for an extension of his concession to involve a railroad from the headwaters of the Chucunaque via Chepo into the city of Panama. The President, when previously in Panama, in the desire to contribute in all proper ways to the legitimate aims of the Republic, had acquiesced in an informal but tentative way in a modification of the boundaries of the city of Panama in such manner as to bring those boundaries to the eastern edge of the Canal Zone and thus into juxtaposition with the rest of the Republic on the east. The question of such modification by Executive order was to be taken under consideration with reference to its technical, strategic, political, and legal bearings with the competent departments of the Government.
It became apparent to the Secretary of War that such modification of the boundaries of the city of Panama, and therefore of the territory of the Canal Zone, would demolish the power of the United States to prevent, so far as this one ground is concerned, the entrance into Panama of such a railroad as that under consideration. Accordingly, the Secretary of War, at a conference with the President of Panama, at which Mr. Boyd (the Secretary of State), Colonel Goethals and Judge Fouille were present, made it clear to the President of Panama that when the President had intimated a willingness to acquiesce in the desired modification of the boundaries of Panama City the question of the railroad concession—which naturally could hardly be dissociated from it—had not been submitted to his consideration. The Secretary of War further pointed out that the building by foreign capital of a railroad to the neighborhood of the [Page 1179] city of Panama might, owing to its propinquity, be a serious embarrassment to the United States and that for such reasons the United States would not consent to such a modification of the boundaries unless upon a distinct understanding that no such concessions for railroads would be granted except under such safeguards as would enable the United States to control absolutely the railroad in case of war or other disturbance. Naturally acceding to the reasonableness of this position, President Arosemena asked as to the nature of the conditions the United States would be likely to impose for the protection of its interests. While informing the President of Panama that this matter must be passed upon by the Department of State, to which he would communicate the substance of his conversation, and through which the Government of Panama would doubtless hear in due course, the Secretary of War made it plain that, from the point of view of military policy, it was felt that the Government of the United States could be satisfied with no arrangement not including the right to occupy and take possession of the railroad whenever it thought its interests required it to do so, Mr. Boyd, the Secretary of State, spoke of the pressure being brought to bear by Mr. Dziuk and his associates and expressed the hope for a prompt answer as to the conditions the United States would impose upon the railroad extension and also as to the modification of the area of the city of Panama which had been requested.
In his letter of August 19 the Secretary of War also points out that inasmuch as the Juan Diaz River is only about 10 miles from the city of Panama and the Canal Zone a railroad built there would be practically as objectionable to the interests of the United States from a strategic point of view as would an extension frankly to the city of Panama itself. The Secretary of War informed the Department of State that he was on the same date sending Colonel Goethals the following telegram:
Have reported to State Department fully matter of Dziuk railroad concession and they will communicate with Panaman authorities. From standpoint of military policy of United States, I deem extension to Juan Diaz River to be equally objectionable with extension to Panama.
The Secretary of War adds that President Arosemena acquiesced in the reasonableness of the position of the United States as expressed during the conversation at Panama. In closing he points out that even if the confines of the city of Panama were not enlarged the military exigencies of the case should be most carefully scrutinized even in the case of a railway going at all into the neighborhood of the Canal Zone and that there should be safeguarded not only the possibility of war between the United States and another nation but also that the possibility of trouble between Panama and another nation should receive thorough consideration, since in any event the United States should be in a position not only to prevent occupation of the railroad by a foreign power, but itself to occupy it whenever its interests required.
From an informal communication to the Department of July 21, it appears that the War Department took the view that the original concession from the mouth of the Piñas River to the valley of El Real de Santa Maria on the Tuira River and thence northwesterly toward the headwaters of the Chucunaque, a distance of about 100 [Page 1180] miles, and at no point approaching within 100 miles of the Canal Zone, from which it would be separated by difficult and mountainous country with only a sparse Indian population, would in no wise affect the canal or its construction or the government of the Canal Zone. Even such a railroad, however, would be a worthy subject of study from the point of view of general policy. As to any extension of a foreign railroad nearer the Canal Zone the Department understands that such an extension would be regarded by the War Department as more or less contrary to the interests of the United States from the point of view of military policy and as absolutely contrary to such interests if such extension reached within striking distance of the Canal Zone.
The Secretary of War desired the Department to give the Legation instructions which would preclude any misunderstanding as to the safeguarding of the vital strategic and other interests of the United States in Panama against any ill-considered action on the part of the Republic of Panama which might in the future cause embarrassment.
To do this is the object of this instruction.
Pending the result of the careful deliberation now going forward between the Department of State and the War Department, and to preclude the possibility of any such ill-considered action, the Department of State on September 2 despatched to the Legation at Panama the following telegraphic instruction:
About August 18 Goethals telegraphed the Secretary of War as follows: “Panaman authorities desire extend Dziuk railroad concession from headwaters of Chucunaque via Chepo to Juan Diaz River, stipulating that road shall not be nearer than 10 miles to Caribbean Sea or Colombian frontier, and request the consent of the United States.” The Department of State and the War Department will require considerable time for consultation and study of the whole subject of which that telegram raises one phase. Confer with Colonel Goethals and thereupon formally notify the Government of Panama that this whole subject is receiving the study which is required by the fact that it is involved in the fundamentals of American-Panaman relations. Point out in the same communication that the new ramifications of the railway schemes under consideration introduce many new and important elements creating a situation materially different from that of last year (see Department’s telegram November 7, 2 p.m., and subsequent correspondence). In closing make quite clear that it is essential that the Government of Panama studiously refrain meanwhile from any further commitments.
It is believed that the foregoing will serve as a resume to the present date of the various phases of the subject of the Dziuk concession project.
Distortion of the policy of the United States, the cry of American aggression, the appeal to national pride in Panama, scheming for this or that private interest, coquetting with foreign enterprises as a barrier against American preponderance, and depending upon American protection and disinterestedness as a cloak for all sorts of irresponsible activities—such, unfortunately, have sometimes been pawns in Panama’s domestic politics. That the above-indicated dispositions have existed in certain quarters there have unfortunately been only too many illustrations. Indeed, it may be remarked that it was at one time represented to the Department that certain prominent Panamans, official and otherwise, had been conspicuous in such activities. For example, a person, the authority of whose position made him supposedly influential, was represented as habitually [Page 1181] disseminating the idea that, owing to domestic politics in the United States and still more to our general Latin-American policy, the United States would be very reluctant to exercise any discipline upon Panama or other small countries, and that any severity that might ever be threatened would not be seriously meant. Thus this gentleman was represented as encouraging the sentiment that Panama could, with safety, act with entire disregard of the relations so essential to both countries.
Another faction was represented as impatient at the uniform unwillingness of the Government of the United States to enter upon any undue interference in internal political affairs as to which it at present deems its duty discharged in maintaining Panama as a Republic able to respond to its various obligations.
The fact that the policy of the United States has to be carried out at every step in such a milieu, and the fact that the policy of the United States is one of justice and right, as well as one of due regard for Panama’s real and legitimate interests, should make it as easy as it is important that this policy should be as well defined and frankly accepted as it is fundamental and permanent.
In the Clayton-Bulwer Treaty of 1850 the obligation to protect was recognized as alone bestowing the most favorable rights to use an interoceanic canal.
Not only has the United States exclusively assumed the great obligation to protect the canal and the Canal Zone, but by its treaty of November 18, 1903, with Panama the United States has become responsible for the very existence of the Republic of Panama. By Article I “The United States guarantees and will maintain the independence of the Republic of Panama.”
Indeed, without entering upon any extended analysis of the treaty relations of the two Republics or assuming to define their full effect, some of the more palpable elements in the situation will at once be apparent from a mere perusal of the treaty of November 18, 1903. Merely by way of illustration, there may be cited the following provisions which, among others, are typical of the gist of that instrument. In Article II there occurs the following language:
* * * The Republic of Panama further grants to the United States in perpetuity the use, occupation, and control of any other lands and waters outside of the zone above described which may be necessary and convenient for the construction, maintenance, operation, sanitation, and protection of the said canal or of any auxiliary canals or other works necessary and convenient for the construction, maintenance, operation, sanitation, and protection of the said enterprise.
Article IV states:
As rights subsidiary to the above grants the Republic of Panama grants in perpetuity to the United States the right to use the rivers, streams, lakes, and other bodies of water within its limits for navigation, the supply of water or water power or other purposes, so far as the use of said rivers, streams, lakes, and bodies of water and the waters thereof may be necessary and convenient for the construction, maintenance, operation, sanitation, and protection of the said canal.
By Article V—
The Republic of Panama grants to the United States in perpetuity a monopoly for the construction, maintenance, and operation of any system of communication by means of canal or railroad across its territory between the Caribbean Sea and the Pacific Ocean.
Article VI, in reference to such grants as it may be “necessary and convenient for the construction, maintenance, operation, sanitation, and protection” of the said canal, states that—
* * * All damages caused to the owners of private lands or private property of any kind by reason of the grants contained in this treaty or by reason of the operations of the United States, its agents or employees, or by reason of the construction, maintenance, operation, sanitation, and protection of the said canal or of the works of sanitation and protection herein provided for, shall be appraised and settled by a joint Commission appointed by the Governments of the United States and the Republic of Panama, whose decisions as to such damages shall be final and whose awards as to such damages shall be paid solely by the United States. * * * The appraisal of said private lands and private property and the assessment of damages to them shall be based upon their value before the date of this convention.
Article XVII says:
The Republic of Panama grants to the United States the use of all the ports of the Republic open to commerce as places of refuge for any vessels employed in the canal enterprise, and for all vessels passing or bound to pass through the canal which may be in distress and be driven to seek refuge in said ports. Such vessels shall be exempt from anchorage and tonnage dues on the part of the Republic of Panama.
Article XX says:
If by virtue of any existing treaty in relation to the territory of the Isthmus of Panama, whereof the obligations shall descend or be assumed by the Republic of Panama, there may be any privilege or concession in favor of the Government or the citizens and subjects of a third power relative to an inter-oceanic means of communication which in any of its terms may be incompatible with the terms of the present convention, the Republic of Panama agrees to cancel or modify such treaty in due form, for which purpose it shall give to the said third power the requisite notification within the term of four months from the date of the present convention, and in case the existing treaty contains no clause permitting its modification or annulment, the Republic of Panama agrees to procure its modification or annulment in such form that there shall not exist any conflict with the stipulations of the present convention.
Article XXI says:
The rights and privileges granted by the Republic of Panama to the United States in the preceding Articles are understood to be free of all anterior debts, liens, trusts, or liabilities, or concessions or privileges to other Governments, corporations, syndicates, or individuals, and consequently, if there should arise any claims on account of the present concessions and privileges or otherwise, the claimants shall resort to the Government of the Republic of Panama and not to the United States for any indemnity or compromise which may be required.
Article XXIII says:
If it should become necessary at any time to employ armed forces for the safety or protection of the canal, or of the ships that make use of the same, or the railways and auxiliary works, the United States shall have the right, at all times and in its discretion, to use its police and its land and naval forces or to establish fortifications for these purposes.
Article XXIV says:
No change either in the Government or in the laws and treaties of the Republic of Panama shall, without the consent of the United States, affect any right of the United States under the present convention, or under any treaty stipulation between the two countries that now exists or may hereafter exist touching the subject matter of this convention.
Article XXV says:
For the better performance of the engagements of this convention and to the end of the efficient protection of the canal and the preservation of its neutrality, the Government of the Republic of Panama will sell or lease to the United States [Page 1183] lands adequate and necessary for naval or coaling stations on the Pacific coast and on the western Caribbean coast of the Republic at certain points to be agreed upon with the President of the United States.
The obligation to protect and to maintain the Republic of Panama would carry with it then, the right to do the things necessary to such protection, even if not only the spirit but the language of the whole treaty did not make the rights of the United States and the obligations of Panama in the premises particularly clear. Thus, the United States may at any time, in responding to the duties of its treaty obligations to protect Panama and the Canal Zone, be compelled to take control of any harbor or railroad line as “necessary and convenient “for the protection of the canal. It would appear that if rights or properties so needed for the protection of both countries and the control of which was at any time desired by the United States for these broad purposes should have been meanwhile made the subject of concessions by Panama to foreign capitalists, then, in the expropriation and adjustment which it would fall to Panama to carry out the Government of Panama might find itself under serious foreign embarrassment and subject to large international reclamations.
As to any question of Panama’s being a party to any concession for a transcontinental railroad, this would be in point-blank violation of the treaty.
All waters “necessary and convenient” for the canal are given in advance to the United States by Article IV, and in giving them the Government of Panama is in no position to bargain for an extension of the confines of Panama City.
Article XXIII would seem sufficiently to recognize the paramountcy of the United States in case of the necessity of protecting and so controlling the railways, certainly if such railways were susceptible of affecting the Canal Zone.
Since by Article XXIV the Republic of Panama agrees not to make, without the consent of the United States, any law or treaty affecting any right of the United States under the present convention, the Republic would seem the more plainly estopped from effecting similar results through contracts or concessions to private parties.
The construction of the Panama Canal is the greatest and most costly governmental work ever undertaken in history. The future and the prosperity of Panama depend upon the canal as completely as the permanent existence of that Republic depends upon the protection of the United States. It is high time that the officials and people of Panama should realize this, should respond to their char obligations in the premises, and should at all times heartily cooperate with this Government, Such cooperation is the indispensable consideration for the protection of the Republic This protection is synonymous with the protection of the interests of the United States in the zone of the Caribbean, which not only the Panama Canal but the logic of geographical and political relations has made a keynote in the policy of this Government.
Instead of such an attitude it has seemed that ill-considered projects of most problematical practicability or advantage are light-heartedly undertaken not only without the prior deliberation of the United States but without any scientific or thorough consideration by the Government of Panama. Such a tendency can only bring disaster [Page 1184] upon Panama and tend to create a situation where the United States would in the end be obliged to take such direct measures as might be suggested by its recognized interests.
From an economic point of view it is easy to see that the construction of the Panaman section of the Pan-American Railway, as well as such lesser railway construction as may advantage the development of the Republic, will not be easy undertakings to carry through to real success. This is true because of topographical difficulties, sparsity of population, and present backwardness of exploitation. Ultimately to induce responsible and serious investment to build the needed railways Panama possesses rich virgin lands and undeveloped resources. If these assets be frittered away in unsound or ill-considered schemes, then means which wisely used would conduce to substantial prosperity may be found to have been lost with no real return to the people of the Republic.
The Legation will take suitable opportunities to cause this conception of the relations of the two countries and the community of their interests to become, gradually known to the officials and people of Panama.
As to the Dziuk railroad concession, the Department does not believe that it wall ever come to anything without a branch beyond the Chucunaque River or a transcontinental connection, and the Government of the United States is entirely unable, for fundamental strategic and political reasons in which the interests of the Government of Panama are equally involved, to acquiesce, under any circumstances, in further railway extension as a foreign enterprise beyond the limits herein indicated. If the Government of Panama sincerely desires to construct railways for beneficial and economically sound exploitation of the Republic’s resources, the Government of the United States will be glad to cause engineers to join in examining airy proposed projects, and will be glad, also, to endeavor to enlist the cooperation of American capital in the construction of any projects approved by both Governments.
In general, as to foreign railway or other concessions having a possible bearing upon the strategic and political interests of the two countries, while very sensible of every legitimate interest of Panama and very desirous of fostering in every way the growth and prosperity of the Republic, the Government of the United States feels that it will be more regardful of the interests of Panama to examine in advance and express itself after ample deliberation upon any such project than it would be to keep silent and then perhaps be obliged at a later date to assert its treaty rights in a manner which might involve the Republic of Panama in serious financial losses.
In giving to the Government of Panama the reply of the Government of the United States that it can not acquiesce in the extension of the proposed railway concession, or any other foreign railway project involving an important extension up the River Chucunaque, or in any other such manner as either to approach in effect a transcontinental line or to approach at all within the vicinity of the Canal Zone, you will add that any question of railway lines deemed to be really necessary would receive the earnest study of this Government, and that the separate question of a desired extension of the area of the city of Panama will continue to receive due consideration.
[Page 1185]Adverting once more to the sincere interest of the Government of the United States in a wise and prosperous development of the Republic of Panama, it will be recalled that under instructions from this Government the engineers of the Panama Railroad Company have completed, under the direction of Colonel Goethals, a survey of the route of the proposed Panamá-David railroad, the work having been accomplished, it is understood, with great economy as well as efficiency. As to the Panamá-David project, for the construction of which it is understood bids are being received from contractors in this country, the Legation will bear in mind that the Government of the United States feels, in the ultimate carrying out of that or a similar project, a special interest because of the importance of any route adapted to form a link in a future Pan-American railroad system. It goes without saying that in matters of the nationality of the enterprise, the route, and other pertinent considerations, the principles embodied in the present instruction are equally applicable to all such undertakings upon the Isthmus.
The Government of the United States would have no disposition to question the intention of the Government of Panama to make its fundamental policy one of frank, considerate, and sympathetic cooperation with the United States, even if such attitude were not dictated alike by moral obligation and by intelligent self-interest. If there have, from time to time, been appearances of any tendency toward lack of coordination of effort in what may have seemed restively unimportant matters, the President would be inclined to ascribe the fact to misleading inferences as to the true bearings of the matters concerned. Impressed with the great desirability of clear understanding upon matters affecting these large subjects naturally calling for joint consideration, the President has directed that the most painstaking and sympathetic attention to all matters in which this Government may be helpful to the Government of Panama be accorded by the competent Departments, which matters, excepting as to such technical details connected with the canal and the administration of the Canal Zone as may be conveniently dealt with by the local authorities of the United States, will naturally be dealt with through the diplomatic channel through which the views of the United States may at all times be learned with authenticity.
You will read this instruction to the Minister for Foreign Affairs with a view to acquainting him frankly with the sentments and policy of the Government of the United States in these matters, and should he so desire you will leave with him a copy.
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