The Secretary of State to the Panaman Minister (Alfaro)

Sir: Referring to your conversation with Mr. White this morning regarding the proposed loan for $4,500,000 for which you said negotiations had been going on in New York for sometime, I beg to confirm Mr. White’s statement at that time that a draft contract and prospectus for the proposed loan have been submitted to the Department, and that it notes that the unpledged portion of the annual payments due to the Republic of Panama from the United States, under Article XIV of the Treaty of November 18, 1903, has been allotted as part security for the loan.

As your Government is aware, this Government has already requested that the unpledged portion of the canal annuity for this year be used in part settlement of the arrears in payment of the water rates in Panama City, and I have, therefore, the honor to inquire what arrangements the Panaman Government proposes to make for the liquidation of its indebtedness to the Canal, should this Government consent to the assignment for the proposed loan of the unpledged portion of the canal annuity.

In accordance with the Department’s traditional desire to be of as much help as possible to the Panaman Government, on account of its friendship for Panama and the interest it takes in Panaman affairs, I desire to repeat the inquiry made by Mr. White this morning as to whether the Panaman Government has considered the question of having the contracts for the road construction and the completed work passed on and accepted by the Central Road Commission before payment therefor is made, and that provision be made for such payments to be effected in the customary manner for disbursements from the Panaman Treasury. Your informal suggestion of this morning that this would be helpful and could perhaps be accomplished by a decree of the Panaman Government would appear to be a most satisfactory arrangement, and this Government ventured to hope that the Panaman Government will adopt the suggestion in this sense, which you expressed your readiness to make to it. This [Page 692] Government is also gratified to learn that negotiations for a Fiscal Agent are progressing, and it hopes that they may soon result in the appointment of a satisfactory person. This Government believes the Fiscal Agent can be of no little service to Panama in the many difficult financial matters with which it is concerned, and that his advice will doubtless be of great value in the carrying out of the work provided for in the law authorizing the loan now under consideration.

I have the honor, furthermore, to inquire whether your Government has considered the question of calling for public bids in the matter of the contemplated loan.

Accept [etc.]

Charles E. Hughes