Papers Relating to the Foreign Relations of the United States, 1926, Volume II

711.192/253

The Panaman Legation to the Department of State

[Translation¹⁰]

Memorandum

Article II of the Treaty signed between Panama and the United States on July 28, 1926, in its two final paragraphs provides the following:

“The United States will undertake the construction of a paved highway, from Paraiso (in the Canal Zone), by way of Summit, Alhajuela, and Cativá, to a connection with the Canal Zone highway between Colon and Fort Randolph; and a paved highway from a point on the above described road south of Las Minas Bay to the town of Porto Bello, completing all necessary grading for roadbeds twenty-six (26) feet wide, with a concrete pavement not less than six (6) inches thick and eighteen (18) feet wide in the center, together with all necessary culverts, and single track bridges capable of carrying a fifteen-ton road roller.

“It is agreed that the United States will enter on the construction of the highways described in this Article after the Republic of Panama shall have made provision satisfactory to the United States to reimburse the United States for all costs of construction of all said highways north of Alhajuela, excepting $1,250,000, which it is agreed will be the total expense to the United States of this portion of the highway system. It is also agreed that the total expense of the section of the highways described in this Article and lying between Paraiso and Alhajuela shall be borne by the United States.”

According to data furnished by the Department to this Legation, the cost of the highway from Alhajuela to Colon is estimated in the sum of $2,148,00 [0] and the cost of such part of the road as is situated in territory subject to the jurisdiction of Panamá is estimated in the sum of	$2,037,000.00
The cost of the road from Colon to Portobelo is estimated in the sum of	1,855,000.00
The total estimate of highways north of Alhajuela thus reaches the amount of	$3,892,000.00
Of this amount it is considered to be covered in advance by the Republic of Panama the amount offered as compensation for the transfer made to the United States of the jurisdiction over the northern area of the City of Colon, which the Republic of Panama has at present, as per the express exception made in the Treaty of 1903.11 Said amount is	1,250,000.00

Consequently there is a balance that the Republic of Panama would be bound to reimburse the United States amounting to $2,672,000.00

In conformity with the estimates that have been made and with the terms of the above-quoted provision, the United States will undertake the work of the Alhajuela–Colon–Portobelo road “after the Republic of Panama shall have made provision satisfactory to the United States” to reimburse the above-stated balance of $2,672,000.

It follows from this that the United States will not undertake the building of the above-mentioned highways until the Republic has taken the necessary steps to make the reimbursement or payment in reference. It also follows that the United States might not find satisfactory the measures that the Government of Panama should adopt in order to provide for payment of the amount referred to, and in this case they would also be exempt from beginning the work agreed upon. It might also happen that the Republic of Panama would encounter difficulties in raising the funds or in floating the loan that will be necessary in order to give the Government of the United States a security of payment that said Government would find and declare satisfactory. Such difficulties might perhaps exist for a considerable length of time and in such a situation the result would be that while Panamá complies at once and unconditionally with the obligation imposed upon her by Article II of the Treaty, which is extremely painful to national sentiment, the United States would remain for an indefinite length of time without fulfilling their obligation, which is eventual and conditional, in so far as it concerns the main compensation agreed upon for that concession.

In these circumstances a clear understanding is required on the following questions: What provision does the United States Government consider satisfactory to be made by the Government of Panama in order to reimburse the sum of $2,672,000 that the Republic must contribute to the cost of construction of the roads north of Alhajuela?

The importance of a previous understanding on this point is easy to see. One of the strongest objections advanced by the adversaries of the new treaty between Panama and the United States is that against the transfer of jurisdiction over the northern area of the City of Colon. The Department knows also with what earnestness and tenacity the Panaman Government, represented by the negotiating Commission, opposed that demand, and it also knows that Panamá agreed to it only because the American Commissioners emphatically stated that without such a stipulation the United States would not enter into any Treaty. The attitude of the Government of Panama was not inspired by a utilitarian criterion. The Government did not consider the fact that no material profit is received by its Treasury from the jurisdiction over the area of Colon where the Canal buildings are situated, neither did it take into consideration the serious responsibilities and expenses imposed by the exercise of such jurisdiction. The action of the Government of Panama was animated only by a sentiment of nationalism, to which the new extension of jurisdiction demanded by the United States was averse, and it was also animated by an earnest desire to see untouched the principle established by the Treaty of 1903 when the two cities of Panama and Colon were excluded from the concession of the Zone.

Therefore, when Panama agreed to such a transfer of jurisdiction she was moved by considerations of a higher order, and had to subdue the nationalistic sentiment in the present [presence] of the higher necessity of obtaining for the Nation the securities afforded to her economic life by the new Treaty.

Panama having resigned herself to this sacrifice, it was the desire of the Government that the province of Colon should receive a direct benefit from the provision agreed upon, and with that end in view she proposed that the compensation of $1,250,000 offered for the transfer by the Government of the United States, should be given in behalf of a road communicating the Cities of Panama, Colon and Portobelo. The Executive Power had not carried out any formal study of the possible layout of these roads and taking as a basis the average cost of other roads and the appropriations made on previous occasions by the National Assembly for such construction, it was approximately calculated that the sum of $1,250,000 would be sufficient to cover at least the greater part of the cost of construction. The estimate of the Canal authorities shows an average cost per mile of road very much higher than the calculations of Panama, probably due to serious engineering difficulties encountered, which are the cause of a considerable increase in the building costs.

The Government of Panama has a strong majority in the National Assembly which supports its political and administrative labor and the Government, loyal to its pledges, will do whatever is possible in order to insure the ratification of the Treaty by the Assembly. It happens, nevertheless, that a considerable number of Deputies who are supporters of the Administration have shown themselves adversaries of the Treaty in a frank and earnest manner, especially the majority of the deputies from the Province of Colon. The adverse elements within the Assembly and those outside of it would be considerably reinforced in their allegations if it should happen that the Republic of Panama should not receive the main direct and material compensation agreed upon for the transfer of jurisdiction in Colon.

From the view point of the interests of Panama, the highway connecting the Capital of the Republic with the Cities of Colon and Portobelo will develop regions that at present are uncultivated and uninhabited and will give a new impetus to the prosperity of the province of Colon and to the Republic in general. But from the view point of American interests it is evident that such a highway has also an inestimable strategic value, and in the event, God forbid that it should ever occur, but which unfortunately is possible, of a War it will be a great advantage not to be dependent upon the railroad only for land communication across the Isthmus, and to have available a good highway, which not only could replace the railroad in case of an interruption that might be due to several causes, but also could serve as well as an auxiliary of the Railroad in the traffic congestions that military exigencies are always apt to cause.

For the Republic of Panama with her scarce population, her industries in their infancy and her very limited resources, it will be an exhausting economic effort to appropriate for these roads an amount of over two and one half million balboas. As the State Department knows Panama has already made a formidable effort for the construction of highways in the Western region of the Republic, in which she has pledged for 25 and 30 years the interest of the Constitutional fund, the annuity from the United States as per the Treaty of 1903, and some other National revenues. Nevertheless, the funds that Panama has been able to raise have not been sufficient to undertake the continuation of the highways to Chiriqui in order to connect that very important province with the Capital by land, a necessity which day by day becomes more pressing. Those funds were even insufficient for the carrying out of the road program of 1923.

On the other hand, for the United States, possessor of the greatest resources and wealth known among the Nations of the world, an expenditure of a little over two and a half millions which would be justified as a military measure of undeniable value for the efficient protection of the work that constitutes the heart of her Naval defense, would mean nothing, or very little.

The Government of Panama, therefore, does not consider it improper to make the suggestion that the roads north of Alhajuela instead of being built in their totality by the Republic of Panama, be jointly built by Panama and the United States, Panama contributing the one and a quarter millions due her as compensation for the transfer of jurisdiction in Colon, and the United States covering the resulting balance.

The Minister of Panama takes the liberty of stating that cooperation in this form for the construction of the highway in reference would substantially conform with decisions already made by the Government of the United States. In a memorandum dated June 30, 1917, the State Department said:¹²

“The fact that more adequate means of communication for transportation are necessary at this time in Panama, and also that the military value of such means of communication, as so clearly shown by the Commission’s memoranda and the careful exposition of the needs of Panama by the members of the Commission during several conferences which they have had with officials of the Government of the United States, has induced the Government of the United States to decide to build certain roads entirely at its own expense. These roads will have the double value of aiding the development of the country and giving means of communication and transportation to the City of Panama from the interior, and also will serve a great military purpose. As these roads will lend themselves to the development of the interior of the Republic of Panama, the Government of the United States hopes that some arrangement may be made with the Government of Panama in the future, whereby, on account of the free use of these roads which will be offered to the people of Panama, the expense of the upkeep of such roads will be borne, in part, by the Government of Panama. It is desired to inform the Commissioners that the Government of the United States wishes to defer the consideration of the cooperation which they now so generously offer, until such time in the future as the road construction has commenced, when this question may be made the proper subject for consideration.

“For the information of the Commission it is desired to quote herewith the program for the building of these roads which has been approved by the Government of the United States:

“Southeast Area: Radial road from Sabanas Police Station into the Chagres Valley and up to San Juan on the Pequeni—25 miles. Road parallel to and in rear of the position Old Panama-Cerro Pinon, 12 miles. The Panamanian Government should surface the stretch of road from the Tapia River to Pacora, built by the Military, and extend same to Chepo.

“Southwest Area: Radial road from Corozal via La Boca-Farfan Beach permanent ferry (to be installed as a part of the Communication system recommended) to Chorrera, via Cabra Mountain–Calera Mountain Saddle; with branch to Arraijan; thence to Campana, terminating in rear of the position Cermeno-Compaña—36 miles. Lateral road from Capira to Protero—2 miles.

“Northeast Area: Radial road from the present Mount Hope—Fort Randolph Road, near Majagual, to Porta Real—8 miles. Lateral and intercommunicating roads along and in rear of the Santa Rosa position—6 miles.

“Northwest Area: Radial road from Gatun Dam to Cano Saddle—8 miles. Roads paralleling the Lagarto and Indio Positions—12 miles.”

It may be observed that part of the program outlined in 1917 has been covered by the provisions of Article III of the Treaty of the 28th of July, but if it is taken into consideration that Panama has already expended five or six million balboas from her own Treasury, in the construction of roads and that part of those that have already been built are comprised in the program outlined by said Article III; and if a cursory calculation is made of what the United States bound themselves to expend by the agreement of 1917 and what they will disburse by the Treaty of 1926, it may be seen that the United States will be exonerated from their engagement of 1917 in a considerable amount, which would justify, besides the reasons above stated, the decision which has been suggested in respect to the highways north of Alhajuela.

The Government of Panama hopes that the Government of the United States will give sympathetic consideration to the contents of this memorandum, and awaits their answer with deep interest.

R. J. Alfaro

Washington , October 14, 1926.

10. Translation supplied by the Panaman Minister October 18, 1926.
11. Foreign Relations, 1904, p. 543.
12. Memorandum not printed; but see Foreign Relations, 1917, pp. 1194–1204.