819.51/980: Telegram

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

130. Referring to the Legation’s despatch No. 564, November 1225 the Royal Bank of Canada is paying off its depositors and preparing to withdraw from the Republic of Panama. The British Minister states that the withdrawal is definite and followed disregard of his instructed representations objecting to provisions of the so-called guarantee bond law.

A representative of one of the principal shipping companies has informed me that merchants have canceled many orders and that after goods which are already enroute have entered the country a serious curtailment of government revenues from import duties may be anticipated. The curtailment of credit by the two American banks which now furnish the bulk of the credit necessary for conduct of the mercantile operations from which the government derives a substantial portion of its revenues is already a fact. A prominent merchant and building contractor told me yesterday that merchants are considering closing their establishments for two days as a gesture of disapproval of the government’s stand on the banking law. The resources of the Banco Nacional are completely inadequate to meet the situation.

I consider the situation very serious, and conversations with high government officials leave me with the impression that they have no very clear conception of the situation or of the condition in which the government is likely to find itself within the next few months. With reference to the government’s last compromise proposal (rejected by the banks), that emission of guarantee bonds might be foregone if banks would make $2,000,000 short-term loan, there is an unconfirmed rumor in limited circulation that Italian bank is interested.

Whatever financial difficulties the Panamanian Government encounters, it may be expected that the failure of the United States to pay the canal annuities will be given as the cause. In view of the fact that the treaty upon the ratification of which the payment of the annuities depends cannot be acted upon before the new congress convenes and even then may encounter delay, it seems to me vital that some way be sought to make available to the Panamanian Government the amount of its accumulated credit in order that the responsibility for the economic and political consequences of the ill-advised Panamanian legislation may not continue to be laid upon the United States.

Corrigan
  1. Not printed.