819.52G31/21: Telegram

The Secretary of State to the Chargé in Panama ( Flexer )36

28. Your 56, June 30, 4 p.m. If there is a possibility that the sale of the property to Germans could be prevented by purchase or expropriation by the Panamanian Government, such a solution would be entirely satisfactory to this Government. The War Department has no desire to lease or purchase the property except as a necessary means to prevent its acquisition by the German or Japanese Government. This is the type of case envisaged in the new treaty between Panama and the United States which is of concern to both governments and in which this Government was confident when it signed the new treaty it could count upon the cooperation of the Panamanian Government. It is a case where the control of these lands by the German [Page 828] Government under the screen of purchase by private interests would have elements of danger. If it becomes necessary for the lands to pass to control by a foreign government the Department of course has no doubt as to the preference of the Panamanian Government. You may discuss the matter further with the Minister for Foreign Affairs along these lines, and point out to him that as a practical matter the time element is most important in the present case. If the Panamanian Government can work out a satisfactory solution before Elliott’s departure from New York or can give assurance that a solution will be worked out before the expiration of the 3-week period granted for decision by our Government, such a disposal of the case would be eminently satisfactory to the Department.

However, if it is necessary to proceed with the proposal for lease and purchase by the War Department, the Department considers it preferable for the proposal to be presented to the company’s representatives in Panama in accordance with the Department’s telegram 26, June 24, 6 p.m. The company representatives should be requested to transmit the proposal to Elliott by telegram in New York prior to his departure on July 6 and to request his instruction. The War Department is telegraphing similar instructions to General Stone.

Please inform the Department by tomorrow, if possible, if it will be necessary to proceed with the lease proposal. In that event, the Department will communicate with Elliott in the sense that a proposal will be made to the company’s representatives in Panama and that representatives of the State and War Departments will be glad to discuss the matter with him if he cares to come to Washington. The Department agrees with the War Department’s decision that it would be undesirable to have negotiations conducted by the Commanding General of the Second Corps Area in New York.

  1. Notation on margin: “This procedure discussed with and has approval of the War Department.”