File No. 819.77/158.

The Secretary of War to the Secretary of State.

I have received your letters of the 11th and 12th instant,1requesting the opinion of this Department upon the proposed Duncan concession for a railroad in the Republic of Panama.

I enclose memorandum from the Chief of Staff upon the subject, which is self-explanatory.

This contract would not only seriously interfere with the military problems involved in the defense of the Canal Zone, but it is believed would interfere with the rights which the Panama Railroad enjoys under its concession.

It is therefore requested that steps be taken by the State Department to prevent its consummation.

Henry L. Stimson.

The Chief of Staff to the Secretary of War.

the duncan concession for a railroad in the republic of panama.

On December 30, 1912, a contract was signed by Mr. Basil Barnes [Burns] Duncan, an American citizen residing on the Isthmus of Panama, with the Panaman Minister of Public Works for the construction of a railroad, 50 kilometers long, starting from the west side of the Chagres River, near its mouth, and running in a generally southwest direction parallel to the Canal across the continental divide and as far as the lower lock at Miraflores. In addition, such branch lines were to be allowed as might meet the approval of the Government of Panama. This measure was signed on the same date by President Porras and sent to the Assembly with a recommendation for favorable consideration. Action in the Assembly has been suspended at the request of the American Minister pending receipt of the State Department’s views in regard to the matter.

A Board was appointed by the Secretaries of State and War to consider the contract, consisting of the following members: Hon. Percival Dodge, American Minister, Chairman; Lieutenant-Colonel D. D. Gaillard, Corps of Engineers, U. S. A.; and Lieutenant Frederick Mears, U. S. A., Chief Engineer of the Panama Railroad.

The Secretary of State refers all papers in the case for the comment of the War Department. In addition to the report of the Board, there is a letter and cablegram, under date of February 8th, from the Chairman and Chief Engineer of the Isthmian Canal Commission.

The Board found that it was impracticable to discuss properly the technical merits of the proposed contract for the reason that neither the exact location of the main line nor that of any of its branches is shown either in the text of the contract or in the maps accompanying same. Such indefinite description as is given is further modified by the statement that the general direction may be changed by the topographic conditions. There are no definite stipulations as to the number of tracks, or limiting grade or degree of curvature. The method of construction is not mentioned, nor is any definite terminal point given at the southwest extremity of the line. The contract contains no stipulations as to the quantity or character of the rolling stock, the station buildings, or the water tanks, etc., nor does it provide for the submission to the Panaman Government of any maps, profiles or plans until eighteen months after the approval [Page 1093] of the contract by the National Assembly. It is the opinion of the Board that there would be little or no business for such a railroad at present, and it is therefore presumed that the sole purpose of the project is the exploitation and development of the Government lands as the various sections of the railroad are completed. The Board furthermore believes that the sums to be deposited by the contractor are inadequate to properly protect the Panaman Government in a contract of this nature. It further asserts that there are no assurances that the contractor possesses the financial backing requisite for the proper prosecution of the work. It bases this opinion to a large extent upon the fact that he took a contract in December, 1910, for excavation of certain material in the Canal prison which he was unable to complete for lack of financial resources. As the total amount involved was less than $25,000, and as monthly payments were made for a period stretching over 16 months, the amount of capital required was not large.

The contract provides for the improvement of the mouth of the Chagres River but contains no description of the character of the work proposed. Colonel Goethals in regard to this feature states that a “deepwater port at the mouth of the Chagres, or anywhere on the line of such a railroad, would threaten the safety of the Canal and would require a modification of the plan of defense and an increased armament.” He further believes that the main railroad line would interfere with the rights which the Panama Railroad enjoys under its concession, and that the branch lines stipulated are objectionable from, a military standpoint.

Under date of January 27th, Mr. Duncan submitted a letter to the Board in which he offers to alter or suppress any clause in the contract which might be found to conflict with the interests of the United States.

The Board recommends that the contract be not approved. In this opinion Colonel Goethals evidently agrees.

In view of the above facts, it is recommended that the Secretary of State be advised that this contract would seriously interfere with the military problems involved in the defense of the Canal Zone, and that he be requested that steps be taken by the State Department to prevent its consummation.

L[eonard] W[ood].
  1. See footnotes to Mr. Dodge’s despatches 302 and 309 of January 27 and January 30.