819.154/236a: Telegram

The Secretary of State to the Minister in Panama (South)

3. The Panaman Government appears to be dissatisfied with the assurance that the United States Government will undertake, as soon as possible after the ratification of the treaty by both parties, the construction of the road from Colon to Puerto Bello or from Colon to Alhajuela, whichever the Government of Panama may prefer, expending thereon the sum of $1,250,000., and that from the point thus reached the United States Government will continue the construction of the road as soon as funds are deposited by the Republic of Panama [Page 485]to the credit of the Panama Canal, using these funds as they accrue until the road program is completed.

The Panaman Government considers this to be an advance of funds by the Panaman Government rather than a reimbursement of expenditure. Article II of the treaty provided that provisions shall be made for reimbursement by Panama for all costs of construction over $1,250,000. and that when such provision is made the United States will enter on the construction of the highways. Panama has never been willing to indicate what provision she was prepared to make for this reimbursement but has stated that the Panaman Government cannot see its way to raise the amount which will probably be necessary to pay Panama’s share of the road construction. The proposal of the United States Government, described above, was intended to assist Panama by providing for the immediate construction of a part of the road which it was hoped would enable Panama to obtain the trans-Isthmian highway at an early date with only a moderate amount of expense to Panama. Of course the Panama Canal cannot advance funds for the completion of this road until (1) provision has been made for reimbursement, and this must be arranged by the Government of Panama, or (2) funds are advanced to cover the outlay made by the Panama Canal.

The Panaman Government has now proposed to the United States that the following arrangement be agreed upon:

“Within ninety days following the exchange of ratifications of the treaty the Government of the United States will deposit to the order of the Government of Panama the sum of $1,250,000., the latter undertaking on its own account the construction of the said roads with the maximum breadth of fifteen feet and it remains with the National Government to choose the type of roads most suitable for each section of the work.”

The War Department has forwarded the text of this proposal to Governor Walker and he has been requested to state his views.

[Paraphrase.] Although the Department would be loath to conclude any agreement like the above altering the specifications of the road and providing that Panama rather than the United States undertake the construction, nevertheless the Department of State would be prepared, if the War Department offers no objection, to make this concession rather than jeopardize the ratification of the treaty by Panama. The Department learns from the Panaman Legation in Washington that it can expect no action by the Congress of Panama until a reply is received to this last proposal. Kindly take up this matter with Governor Walker and wire your carefully considered views as to whether the Panaman Assembly would fail to ratify the treaty if the United States should decline to make this further concession. [End paraphrase.]

Kellogg