Memorandum by the Chief of the Division of Latin American Affairs (Wilson)

At my request, Dr. Alfaro came in this afternoon and I explained to him our way of looking at the question raised by Panama of the payment of the Canal annuity in gold, (as set out in the memorandum which the Secretary sent to President Roosevelt and which was approved by the latter).

Dr. Alfaro explained his views at some length. In brief, he disagreed on all points. As regards the conversation between the two Presidents, he stated that, according to what President Arias had informed him, the mention of the payment of the annuity in gold had come about as the result of a statement made in confidence by [Page 618] President Roosevelt to President Arias regarding his currency program involving the ultimate devaluation of the dollar; when this was mentioned, President Arias (this is the version given me by Dr. Alfaro) said that there was this annuity to be paid a few months hence, and he hoped very much it would be paid in gold; President Roosevelt (according to Dr. Alfaro) said that of course the United States would pay in gold, but that he did not want “the bankers” to get the benefit of such payment, but wanted it to accrue to Panama alone.

Leaving aside the question of the conversation between the two Presidents, Dr. Alfaro said that Panama’s contention was, in brief, that Panama had granted certain valuable rights in the 1903 treaty to the United States in return for a definite consideration, namely, the annual payment of a certain value as set out in the then existing gold dollar of the United States, to be made in perpetuity. Panama maintained that whatever the United States might do by exercise of its sovereign will in currency matters as regards its own citizens, the United States could not by unilateral act set aside the rights under an international compact accruing to another sovereign country. Panama’s rights in this matter would be judged under international law and not under the domestic law of the United States.

Dr. Alfaro asked me if this was the “final word” by the United States. I said that I had explained our way of looking at it, after rather thorough discussion with people in different Government departments competent in such matters. I said that if Panama felt there were any phases of the matter which we had not taken into consideration, we should always be glad to consider them and to discuss them with him at any time.

Dr. Alfaro said that he would appreciate very much an opportunity to explain the Panamanian point of view to whatever officials of this Government “had a say” in determining our position in the matter. He said that he would like “a day in court” in order that the Panamanian viewpoint might be thoroughly discussed.

I said that I would be glad, indeed, to arrange such a conference.

I told Dr. Alfaro that as the annuity was due today, February 26, we had transmitted today to the Fiscal Agent of Panama in New York, as we were requested to do under the irrevocable instructions of the Panamanian Government, the Treasury warrant in the amount of $250,000, as we had done in previous years. Dr. Alfaro said that he would communicate at once with his Government, and expected instructions would be sent to the Fiscal Representative either to decline to receive payment of this amount in legal tender money, or else, in receiving it to enter reservation as to Panama’s rights to further payment.