The Chief of the Division of the American Republics ( Bonsal ) to the Ambassador in Panama ( Wilson )

My Dear Mr. Ambassador: I refer to your letter of April 21, 1943 relative to the retention by the United States of control over the water and sewerage systems in New Cristóbal and particularly to that part of your discussion regarding the disposition of the net surplus of approximately $500,000 resulting from water revenue collections in the Republic of Panama. You state that this money is being held by the Canal Zone authorities in a separate fund. Upon the receipt of your letter I asked Mr. Wise32 to make a study of the question of the surplus revenues. Attached for your information is a copy of a memorandum dated May 1, 194333 prepared by him as a result of his investigation and discussion with the Legal Adviser’s office.

[Page 657]

It is my recollection that in choosing the phraseology for that part of the Department’s note of May 18, 1942 relating to the accounts for the water works, this Government intended to avoid the possibility of being called upon to make any cash refund whatever to Panama as well as to avoid any controversy with Panamá regarding our bookkeeping. You will recall from the minutes describing the meetings between the Under Secretary and the Panamanian Foreign Minister in Washington during the summer of 1941,34 the latter indicated that he had some misgivings about our system of accounts. We have of course no commitment whatever to Panama relative to the amount of the value of the unamortized balance of the water works.

It is my opinion that it would be a mistake to turn this $500,000 over to the Government of Panama even if it were legally possible to do so. Instead, since this sum was collected from users of water, I think it should be expended for their benefit. Perhaps the management contract now under consideration locally could include a provision regarding expenditures to be undertaken by us from the amount in question. I definitely feel that this sum should neither be devoted to the general purposes of the Government of the United States, nor to the general purposes of the Government of Panama, but should be spent in some way which would directly benefit the consumers of water in both Colon and the City of Panama.

I hope that the above will meet with your approval and that you will endeavor to bring the Panamanian authorities around to this point of view.

With best regards,

Sincerely yours,

P[hilip] W. B[onsal]
  1. Murray M. Wise, Division of the American Republics.
  2. Not printed; Mr. Wise concluded that the United States should not turn oyer the fund to Panama.
  3. For correspondence concerning these meetings, see Foreign Relations, 1941, vol. vii, pp. 442 ff.