811.20 Defense (M)/8377: Telegram

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

741. Your Airgram 131, August 14, and 433, August 15, and letter August 15 to Feis.98

[Page 641]
At time of drafting Department’s 694 of July 2199 it was assumed by Department that Panama had abandoned its plan to employ a double price basis with compensation derived from sale of rubber products. Your 800 of July 2399 did make clear that it had not been abandoned but message received from Apodaca on August 4 from Costa Rica created new misunderstanding on our part because it appeared to indicate that the difference between the 33 cent price and the 40 cent price would be taken care of not through the employment of a double price system but through expenditures from the Development Fund. This is recounted to you just by way of explanation.
All agencies here are of the opinion that we should, if possible, seek better means of dealing with difficulty than the double price system proposed which appears susceptible of great misunderstanding. We have carefully reviewed the alternatives. First, we might agree to a higher price for Panamanian crude rubber on the basis of facts outlined in your letter to Feis. This of course might have repercussions in other producing countries which we desire to avoid if possible. Second, we might be able to compensate for the higher Panamanian costs through use of the Development Fund. The Fund might, for instance, be used to pay unusually high transportation costs, to make supplies needed in production available at low prices, as well as food and medical supplies. This seems to us the most satisfactory alternative and it is suggested that you, with the assistance of Apodaca should see whether a solution along this line, is not satisfactory to the Panamanian Government possibly providing for the payment of 33 cents f.o.b. dock as well as expenditures from the Fund. We recognize the special cost situation in Panama and are ready to consider any satisfactory immediate solution. We greatly appreciate the personal attention you have given to the matter.
  1. Letter of August 15 not printed; Herbert Feis was Adviser on International Economic Affairs.
  2. Not printed.
  3. Not printed.