Office of the Historian

File No. 819.77/251

The Secretary of State to the Minister of Panama

No. 7
Department of State,
Washington, December 22, 1916.

Sir: I have the honor to acknowledge the receipt of your Legation’s note of July 28, 1916, in which reference is made to verbal conversations which were held by Minister Morales with Mr. J. Butler Wright, then Acting Chief of the Latin-American Division of the Department of State, in reference to the construction of an extension of the Chiriqui Railroad for a distance of eighteen miles from the town of David in the direction of Charco Azul.

The Department has noted the statement that the cost of the construction of this line will be between $400,000 and $450,000 and that your Government desires to know the position of the Government of the United States as to the setting aside of a part of the annuity to be necessary to pay the interest and amortization of the new emission of bonds the proceeds of which would be used for the construction of the extension of the railroad.

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After careful consideration of the question the Department is of the opinion that an extension, such as outlined, would be of great benefit to the Republic of Panama and is disposed to approve an issue by your Government of 5% bonds to the amount of $400,000, provided that adequate provision be made for the retirement of these bonds within thirty years of the date of their issue and provided that $200,000 of that amount shall be delivered at the present time at a price not less than 97% par value, and that the delivery of the remainder of the issue shall be made with the approval of the Government of the United States when the money is required. The Department will approve the hypothecation of a sufficient amount of the income of the six million dollars belonging to the Government of Panama, permanently invested in New York, in order to secure the payment of the interest and amortization of this bond issue upon the condition that your Government will assure this Government that the sum realized will be expended only upon the eighteen miles of Chiriqui Railroad extension.

Accept [etc.]

Robert Lansing