The Panamanian Legation to the Department of State
At a meeting held at the State Department on Friday, the 11th of January, the Minister of Panama brought up the question of the payment of the annuity stipulated in the treaty between Panama and the United States, of November 18, 1903.19
Dr. Alfaro adverted to the fact that difficulties had arisen which have prevented up to this time the payment of the annuity which fell due February 26, 1934, and stated that the difficulties will be increased by the fact that a new payment will fall due within some five weeks from now, that is to say, on February 26, 1935.
Dr. Alfaro stated that he believes the United States is in a position legally to make this payment as claimed by Panama, and in this connection he submitted the following considerations:
The treaty of November 18, 1903, stipulated the payment of the annuity in United States dollars because on that date the Republic of Panama had not yet adopted a Constitution, was not politically reorganized, and therefore did not have a currency system of its own. The currency then circulating in Panama was the unstable Colombian currency, which could be no sound basis for a perpetual agreement and which, of course, had to be replaced in time by the new Nation’s own currency.
Subsequently, on June 20, 1904, Panama and the United States entered into
a monetary agreement,20 which is still in force, articles I and II of
which read as follows:
The gold peso of Panama was called Balboa by the Currency Act of 1904. As may be seen, by reason of this convention the Dollar and the Balboa became one and the same thing and therefore it may be [Page 912] assumed that the payment of the annuity agreed upon in Dollars was for all practical purposes an obligation agreed upon in Panamanian Balboas.
It would be entirely within the reality of facts for the two countries to agree that after June 20, 1904, the obligation of the United States to pay the annuity in U. S. dollars became an obligation payable in Balboas of the weight and fineness defined by the Panama law and by the Monetary Agreement, inasmuch as their weight and fineness was equal to that of the contemporary United States dollar.
By such an agreement, which would make payment of the Canal annuity a payment in foreign currency, the difficulties encountered up to the present would be avoided by the application of the provision of the Budgetary Law of the United States relative to the payment of obligations contracted by international treaties or conventions, wherein it is provided that the corresponding appropriations are made
“together with such additional sums, due to increases in rates of exchange as may be necessary to pay in foreign currencies the quotas and contributions required by the several treaties, conventions, or laws establishing the amount of the obligation for the fiscal years 1934 and 1935”.