The Secretary of State2 to the Acting Secretary of State

My Dear Phillips: The enclosed memorandum was handed to me here by the Secretary of Foreign Affairs of Panama, who is a delegate to the Conference. I stated to him that I thought that our Government had under consideration, with the view to working out as favorably as the facts would at all permit, most of the proposals contained in his memorandum; that this action followed the visit of President Arias.

I stated to him, however, that I would send the enclosure back to the Department with a request that careful and sympathetic consideration be given to each of the topics listed. I assumed that the work of carrying out the understanding with President Arias is going steadily forward.

My best regards.

Cordell Hull

The Panamanian Minister for Foreign Affairs (Arosemena) to the Secretary of State


As a result of President Arias’ visit to President Roosevelt in the month of October 1933, certain pending questions between the United States and the Republic of Panama were mutually and satisfactorily settled. Other questions which were brought up were left open with the idea of settling them at the earliest opportunity. The spirit in [Page 582] which the different matters have been approached can best be rendered by referring to one of the general declarations, which recognized that the Republic of Panama as a sovereign nation had the right to benefit from the commercial advantages derived from its geographical situation to the extent that it does not interfere with the maintenance, functioning, sanitation and protection of the Canal by the United States, who desire ardently the prosperity of the Republic of Panama.

The pending questions and the aspirations of Panama are as follows:

Radio Communications.—The Navy Department of the United States has monopolized ship to shore communications so that no ship can enter into radio communication with the existing wireless stations in Panamanian territory.

The position of the Republic of Panama in the matter of wireless communications is therefore extremely awkward. The Republic is a signer of the Wireless Communications Agreement,3 of which the United States is also a signer and takes the position that it has the right to enter into communication by radio with all countries and all ships without any other limitation than that of not interfering with the maintenance, functioning, sanitation and protection of the Canal.

It would be illogical to expect a country to be deprived of the benefits of a modern invention by the mere fact that there is a Canal within its boundaries.

Highway Between Panama and Colón.—The Republic of Panama is extremely interested in there being highway communications between its two largest cities. With regard to this subject President Roosevelt told President Arias: “The United States will make every effort to expedite its reply to Panama on this question and to find a way to comply with Panama’s desire.”

It is hoped that the United States will find a satisfactory solution toward this end.

Panama Railroad Co.—Business Exploitation.—This company conducts certain lines of business in Panama having nothing to do with the maintenance, functioning, sanitation and protection of the Canal, such as the leasing of land, the running of a hotel etc., without paying a single cent of taxes to Panama in exchange for the services it receives as if it were a taxpayer. Public opinion in Panama cannot understand that for instance an itinerant fruit vendor must pay taxes to Panama for the protection of his business, while the Panama Railroad Co. which does business on a scale which offers no comparison with the above mentioned case is exempt from all taxation.

[Page 583]

On this point President Roosevelt indicated to President Arias his conformity with regard to the payment of taxes by the Railroad Company, particularly in the case of real estate which it owns and exploits in Panama.

Lands of the Panama Railroad Company in Colon.—These lands which the Railroad Company uses for purposes other than those having to do with the maintenance, functioning, sanitation and protection of the Canal should have been returned to the Republic of Panama in accordance with article 8 of the Canal Treaty,4 when the ratifications of this instrument were exchanged. Some are of the opinion that such lands should remain in the possession of the Railroad Company until the expiration of its contract, Panama thinks otherwise and the fact remains that a considerable portion of such lands did not exist in 1904 and accordingly could not have been in the possession of the Railroad Company on such date.

On this point which is of vital importance to Panama it would be highly desirable that a just and equitable decision be reached as soon as possible.

Sales to Ships Transiting the Canal.—The sale of tourist articles by the Commissaries to ships has been prohibited. Articles which may be bought by ships from the Commissaries have been limited to fuel, foodstuffs etc. “Sale of other articles to ships will be prohibited, or a reasonable surtax, such as say, 25%, will be placed on such sales.” What precedes is extracted from President Roosevelt’s memorandum to President Arias.5

It would be desirable that sales to ships transiting the Canal be limited to the fuel necessary to the continuation of the trip, but in case sales of other articles be permitted (this does not include tourist articles the sale of which is prohibited) such sales should take place in accordance with adequate regulations permitting the free competition of the trade of Panama and Colon, which would be in keeping with the spirit of the general declaration heading this memorandum.

Sales at Prices Below Normal.—The Commissaries and some agencies of the United States Army and Navy sell certain articles such as beer and cigarettes at prices below normal, which eliminates all competition and promotes smuggling of such articles, particularly cigarettes, into the Republic of Panama.

President Roosevelt offered President Arias to have the case “sympathetically studied in an effort to meet Panama’s views.”

It seems reasonable to expect that such articles should pay the excise taxes which they would ordinarily have to pay if sold in the United States.

[Page 584]

Panamanian Products.—The Appropriation Act for the fiscal year ending June 30, 19346 seems to have been interpreted in such a way as not to permit the purchase by the Canal and Army and Navy Departments of Panamanian products such as certain construction materials, which are abundant in the Isthmus, meat and other foodstuffs etc. If this interpretation should prevail the production of such articles will not fail to diminish appreciably.

As the result of President Arias’ visit to Washington this matter has been taken into consideration in an effort to determine whether enough latitude does not exist under the Act in question to permit of direct purchases by the United States, through administrative orders, of the products in question.

Luxury Articles in the Commissaries.—The American Government has already decided that such articles should not be sold to ships transiting the Canal, but the question of the sale of such articles to the employees of the Canal remains an open one. Presumably this matter will be resolved in accordance with the indications advanced by President Roosevelt and Under Secretary Caffery, namely, that the commissaries do not keep permanently in stock such articles but limit themselves to buying them after receiving special orders from the employees of the Canal.

Limitation of Commissary Sales to Employees.—President Roosevelt declared that it was not possible for the time being to establish equitable limitations owing to the complexity of the wage scale in the Canal but that he would give the necessary instructions so that the matter be studied and some ruling be given on this point.

It seems natural that in no case should the sales to an employee exceed the salary of the same.

  1. The Secretary was in Montevideo as Chairman of the American delegation to the Seventh International Conference of American States, held at Montevideo, December 3–26, 1933.
  2. Radiotelegraph Convention signed at Washington, November 25, 1927, Foreign Relations, 1927, vol. i, p. 288.
  3. Signed at Washington, November 18, 1903, Foreign Relations, 1904, p. 543.
  4. See memorandum of points agreed to by President Roosevelt and President Arias, ibid., 1933, vol. v, p. 866.
  5. 47 Stat. 1371.