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

No. 2289

Sir: Reference is made to the Department’s instruction no. 821 of May 25, 1942,16 regarding the preparation of a concise proposal for a management contract under the provisions of which The Panama Canal would continue to operate the water and sewerage systems in the cities of Panamá and Colón once the title to them has been transferred to the Panamanian Government.17 The Department informally has been advised both by the Governor18 and the Executive Secretary of The Panama Canal19 that some thought has been given [Page 649] to the drafting of such a proposal. Your report on any progress which has been made in this respect will be appreciated. It is requested that you urge the completion of a first draft and suggest that it be presented to the Embassy and the Department for examination from the political point of view.

In anticipation of the approval by the Congress of the pending legislation affecting Panama,20 and assuming that this will take place in the next few months, it would seem that immediate consideration should also be given to the form and phraseology of the documents that will be drawn up to affect the legal transfer to Panama of the water and sewerage systems and the railroad lots. Officers of the Department in a preliminary way discussed with Mr. S. W. Wang, the Executive Secretary of The Panama Canal, during his recent visit to Washington, some of the questions which undoubtedly will arise in the preparation of whatever instruments of conveyance are used. Mr. Wang was definitely of the opinion that the drafting of these documents should be initiated by Canal Zone authorities in Panama where easy consultation could be arranged with employees of your staff. He expressed his willingness to begin this draft immediately upon his return to the Canal Zone.

In the case of the transfer of the railroad lots,21 the instrument of conveyance presumably will be drawn up in conformity with the laws of Panama. Whether this conveyance is made by quitclaim deed or by warranty deed would seem to be important, inasmuch as there may arise out of the very nature and type of deed used to transfer the lots, the question of this Government’s title to those lands which are being retained as necessary for the operation of the railroad and the operation, maintenance, sanitation and protection of the Panama Canal. Since Panama has constantly maintained that the title to the railroad lots would revert to that Republic in 1966,22 it seems advisable, if possible, to draft the instrument of conveyance in such a way as to gain recognition (even if by implication) from the Panamanian authorities that this Government has full and legal title to the lots which are not being transferred at this time. Mr. Wang seemed to think that for the best interests of this Government a transfer by warranty deed would be preferable. As you are aware, there appears to be no question about the titles to the lots in Panama City since the land there was acquired by direct purchase.

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You are requested to discuss with the appropriate Canal Zone authorities the preparation of these documents referred to above and to keep the Department informed of the outcome of your conversations. In due course, the Department will expect you to submit for its examination copies of whatever draft documents are agreed upon.

Very truly yours,

For the Secretary of State:
Sumner Welles
  1. Foreign Relations, 1942, vol. vi, p. 609.
  2. According to Point 1 of the Twelve Point Agreement of May 18, 1942 (Department of State Executive Agreement Series No. 452; 59 Stat. (pt. 2) 1289), the United States transferred to Panama, free of cost, the sewer and waterworks systems of the cities of Colon and Panama. Those cities were permitted, however, to continue to receive water supplies and use the sewer system of the Canal Zone. For correspondence on this agreement, see Foreign Relations, 1942, vol. vi, pp. 577 ff.
  3. Maj. Gen. Glenn E. Edgerton.
  4. S. W. Wang.
  5. Certain parts of the Twelve Point Agreement which involved the transfer of property were subjected to Congressional approval.
  6. Point 2 of the Twelve Point Agreement provided for the transfer to Panama, without cost, lands of the Panama Railroad Company not needed for operating the canal, its auxiliary works, or the railroad.
  7. This claim was based on the contention that Panama succeeded to the rights of Colombia and New Granada with respect to the 99-year lease granted to the Panama Railroad Company in 1867 by New Granada.