811.20 Defense (M)/8377: Airgram

The Ambassador in Panama (Wilson) to the Secretary of State

A–131. My 800, July 23, 4 p.m.91 A last minute hitch has arisen in connection with negotiations for rubber agreement which is most unfortunate. Apodaca has been here twice on this matter, seeking to find a compromise on the question of price to be paid by Reserve. Two feasible formulas were submitted by him to Reserve for clearance both of which we had reason to believe would be acceptable to Panama. This presumably had settled the last remaining point of difference and we were hoping to arrange this afternoon for signature of agreement. In telephone conversation however which Apodaca has just had with Bicknell latter insisted that the bank must not pay a higher price than 33 cents internally for rubber purchased within the Republic of Panama. This is a complete surprise to us, since our telegram no. 707, June 27, 11 a.m.91 stated specifically that the plan of the bank was to pay rubber producers a price sufficiently attractive to stimulate production, the bank paying difference between 33 cents received from Rubber Reserve and any higher price paid producers by bank, this difference to be absorbed by Government and recovered from price paid by purchaser for rubber tires and products. The Embassy’s telegram No. 756, July 6, 8 p.m. referred specifically to No. 707, June 27 and in answer thereto the Department in its telegram No. 694, July 21, 10 p.m. stated that draft was satisfactory subject to two points which made no reference to question of internal price.92 Furthermore, Apodaca wrote Bicknell from Panamá on July 30 explaining in detail the plan of the bank to pay to producers an initial price of 40 cents per pound and to make up the difference by charging higher prices on finished rubber goods. Rubber Reserve presumably after receiving foregoing letter replied to Apodaca at San José in Department’s No. 334, August 10, 11 p.m.91 raising no question regarding this matter of differential as regards internal price.

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In telephone conversation today Bicknell stated that bank’s counterproposal submitted in Embassy despatch No. 253193 was acceptable provided price paid to producers in Panama by bank would be no higher than 33 cents. He stated, furthermore, that Reserve and Board of Economic Warfare did not favor the charging of higher prices for manufactured rubber goods since an effort was made to supply goods to all Latin American countries and every attempt is made to see that ultimate consumers in Latin America do not pay exorbitant prices for goods supplied by United States.

It seems to me that if the United States Government is really interested in the one essential aspect of this matter, namely that of getting rubber for the war effort, it is no concern of ours what Panama pays internally to the producers of rubber or what price Panama sets for finished rubber goods, provided we get the crude rubber at a price satisfactory to us. In order to speed up action on this rubber agreement I have recently spoken with the President and members of the Cabinet, and as a result the negotiations on the agreement from Panama’s side have been placed in the hands of the Minister of Agriculture,94 who is doing everything possible to conclude the negotiations without further loss of time. It is, however, utterly useless for us to go back to Panama and attempt to dictate to them what they are to pay producers in the country or what price they are to set on finished goods. The responsible officials of the Government of Panama are convinced that in order to get rubber out of the interior they will have to pay producers 40 cents or more a pound. It is a matter of common knowledge that wage scales are considerably higher in Panama, due to the Canal Zone and demand for labor there, than they are in any of the neighboring countries. The only way that Panama can accept our price of 33 cents is to pay producers the price which will bring the rubber out.

I recommend strongly that Apodaca be authorized to sign the agreement on the basis of the draft already submitted to the Department as amended in two particulars, first, paragraph 6 to be so worded as to permit the bank to pay producers a higher price than the fixed price; and second, the fixed price to be 33 cents on dock Panama ocean ports.

  1. Not printed.
  2. Not printed.
  3. Telegram No. 694 not printed; the Rubber Reserve Company wanted to institute controls over rubber export and to absorb loading charges and export taxes (811.20 Defense (M)/7651).
  4. Not printed.
  5. Not printed; in this counterproposal Panama indicated its wish that the Banco Agropecuario act for it, that rubber products up to 240 tons be supplied, and that warehouse price be used as the standard (811.20 Defense (M)/7651).
  6. Ernesto Fbrega.