Memorandum by the Acting Chief of the Division of the American Republics (Bonsal)

A meeting took place on April 3, 1941 at which the following were present:

  • The Ambassador of Panama
  • Mr. Welles
  • Mr. Duggan27
  • Mr. Bonsal

The purpose of this meeting was to examine the twelve requests which were presented by the Ambassador of Panama to President Roosevelt about a month ago.28 Mr. Welles stated that this was to be the first of a series of meetings at which the Ambassador and himself might arrive at a satisfactory basis of agreement which would then be submitted for approval to their respective Governments. The Panamanian Ambassador agreed to this procedure.

1. The Waterworks at Colón and Panamá.

Mr. Welles stated that he was in principle willing to turn over to Panama the waterworks in question so far as they are located on Panamanian soil, provided the following conditions are made:

Pending the development of [by?] Panama of sources of supply on Panamanian soil, an arrangement will be reached between the Government of Panama and the Canal Zone to continue the present supply of water from the Canal Zone for use in Panama and [Page 443] Colón subject to payment of reasonable compensation by the Government of Panama.
The Panamanian Government will recognize its obligation to continue to pay to the Canal Zone the interest and amortization payments as provided in the Treaty of 1903.

The Panamanian Ambassador appeared to feel that this offer was a satisfactory one. He said, however, that he would like to examine a detailed accounting of the revenues and expenses of these waterworks with a view to finding out whether or not the revenues, which he states have shown considerable increases in recent years, have not been sufficient to take care of the unamortized balances (it will be necessary to look into this question; it is believed that a very careful accounting has been kept and that such excess revenues as have been available over and above operation costs and fixed charges have been expended for different civic improvements in these cities).

2. The Colón Lots.

Mr. Welles stated that an arrangement could be worked out providing for the transfer of the Colón lots to the Panamanian Government on the basis that the latter would agree to consider such a transaction as full compensation for the fulfilment of the obligation of that Government to make available promptly the necessary defense sites for the adequate defense of the Canal. It was agreed that at the next meeting the Ambassador would be presented with a formula in writing designed to cover this point. The Ambassador said that in as much as the Panamanian Government only recognizes our title to the lots as valid until 1967, the proposed arrangement might be inequitable from the Panamanian point of view if we were to retain the defense sites beyond 1967. Mr. Welles pointed out briefly the fact that the lots are worth many times the value of the defense sites. The Ambassador seemed to feel that in addition to the lots the United States should be willing to undertake the completion of the Panamanian section of the Inter-American Highway to the Costa Rican border.

3. The Commissaries and Post Exchanges.

The Ambassador was told that nothing could be done under this heading in the absence of the presentation by him of a specific statement of the complaints of his Government. The Ambassador referred to an order of the United States Military authorities in the Zone in February 1940 prohibiting the sale of vegetables by Panamanian merchants to our military establishment.29 This order was the subject of a protest by the Panamanian Government dated February 27, [Page 444] 1940, which was handed to President Roosevelt on the occasion of his visit to Panama. It was agreed that an investigation would be made of this question and that it would be taken up at the next meeting.

4. The Construction of a Tunnel or Bridge to Allow Transit Under or Over the Canal at Balboa.

The Ambassador was told that the President has decided to defer any action on this matter for the present in view of many urgent projects requiring attention. Mr. Welles stated that this was merely a postponement since there is agreement in principle that this work should be done. Meanwhile, it is hoped to improve the ferry facilities.

5. The Use of Access Roads to Defense Sites by the Panamanians.

The wording of this point in the original Panamanian memorandum is obscure; the above represents the Ambassador’s idea of what it means. The War Department is to be consulted regarding the desirability of allowing the Panamanians to use the access roads which are to be built to the different defense sites.

6. Importation of Labor.

Mr. Welles agreed that he would take up further with the authorities of the Canal and with the War Department the question of bringing in Puerto Rican or other labor satisfactory to the Panamanian Government. Mr. Welles desires to be furnished with a full statement of the present position so that he may take this up with General Marshall30 at the next meeting of the Liaison Committee.

7. Desire of the Panamanian Government that our Military and Naval Police be Armed Only with Billies While in the Territory of the Republic.

The Panamanian Ambassador was told that the War and Navy Departments will be requested to comply with the desires of the Panamanian Government on this point.

8. Provision of Electrical Current from the Alhajuela Dam for Use in the Republic.

Mr. Welles stated that in principle he was most anxious to accede to the desire of the Panamanian Government and to make available at a reasonable price (the Panamanians’ suggestion is one cent per kilowatt) such excess current as may be available. However, the question is one of fact as to whether there is any excess. This is to be checked with the Canal authorities.

[Page 445]

9. The Assumption by the United States of the Entire Cost of Construction of Rio Hato Highway.

The Panamanian Ambassador agreed that for the present no change need be made in the administrative procedure for the construction of this highway, but that it would be desirable for the United States Government to consider the possibility of extending the road from Rio Hato north to the Costa Rican border. He said that this extension would be highly desirable from the point of view of the defense of the Canal and of providing adequate food supplies to the Zone. Mr. Welles told him that the War Department would be asked to express a definitive opinion as to the necessity of this construction from the defense point of view.

10. The Moving of the Railroad Station at Panama.

Mr. Welles stated that he was in full agreement with the position of the Panamanian Government on this point. It will, therefore, be necessary to make a corresponding request of the Panama Railroad.

11. The Desire of the Panamanian Government for an Indemnity in case Traffic is Interrupted on account of Our Troop Movements.

Mr. Welles and the Ambassador agreed to drop this point from further discussions.

12. The Desire of the Panamanian Government for Three Gasoline or Oil Tanks at Balboa.

Mr. Welles stated that this request was reasonable in principle, but that it would be necessary to obtain further information as to the practicable possibility of complying with it.

Philip W. Bonsal
  1. Laurence Duggan, Adviser on Political Relations.
  2. See memorandum of February 18, p. 430.
  3. For correspondence on this subject, see Foreign Relations, 1940, Vol. v, pp. 1114 ff.
  4. Gen. George C. Marshall, Chief of Staff, United States Army.