The Secretary of State to the Ambassador in Panama ( Wilson )
A–1527. Reference your despatch no. 4570 of September 1, 1943.48 The Department’s note of May 18, 1942, to the Panamanian Government stated that in transferring the water works and sewerage systems it was to be understood that there would be “no refund to Panama [Page 667] of amortization and interest payments or charges of any kind based on the Convention of 1903 and on the Contracts of September 30, 1910.” (Underlining supplied)
The Department believes that the underlined phraseology has only one legal interpretation; namely, that this Government is in no way committed to return to Panama the surplus water rates collected and now being held by The Panama Canal. Furthermore, the Department agrees with Governor Edgerton that The Panama Canal will need statutory authority to expend the surplus funds on repairs or necessary extensions of the water and sewerage systems in the cities of Panamá and Colón. Accordingly, the Department believes that the Panamanian contention, as set forth in the memorandum forwarded with the despatch referred to above, should not be accepted, but that you and Governor Edgerton should definitely maintain the position which you have already taken before the Panamanian authorities.
In connection with other points raised by Dr. Fábrega in the memorandum, the Department is interested in knowing whether a draft management contract has been prepared (your telegram 411 of August 3) and whether it is contemplated that the management contract will be signed simultaneously with the signing of the instrument of transfer.
- Not printed.↩