711F.1914/11–546

Memorandum by the Second Secretary of Embassy and Consul in Panama (Collins)43 to the Assistant Chief of the Division of Central America and Panama Affairs (Wise)

secret

Attached is a very rough draft of a possible new defense sites agreement between Panama and the United States.44 An attempt has been made to incorporate in the new agreement the recommendations of the SWNCC, especially as regards the establishment of two different kinds of leases, long-term leases and short-term leases. In as much as the Army and Navy have indicated that the general terms of the present Defense Sites Agreement are entirely satisfactory to them, there has been no effort to change the operative features of the agreement. In the memorandum from SWNCC, it was suggested that the clauses relating to payment for the leases and for the maintenance of Panamanian highways be re-examined with a view to effecting further economies. I do not think there is any possibility whatsoever of obtaining these leases more economically than at present and have therefore not made any changes in that regard. On the other hand, I feel that the special provisions which have heretofore effected the defense site at Rio Hato will have to be cancelled and accordingly I have eliminated them from the new agreement. It will be recalled that a total rental of only $10,000 is paid for the entire Rio Hato parcel under the present agreement.

When the Defense Sites Agreement of May 18, 1942 was signed the following in effect was the compensation which the United States agreed to pay to Panama:

(a)
Rental for the lands at $50.00 per hectare for private lands and $1 per parcel for public lands. This has averaged $400,000 a year since May 18, 1942.
(b)
Payment of one-third of maintenance charges on Panama roads used by the Army. This has averaged $300,000 a year since May 18, 1942.
(c)
The agreement to finish certain roads in the Republic of Panama and to cancel an obligation of the Government of Panama to the Export-Import [Page 1131]Bank in the sum of $2,500,000. I don’t know how much it cost to build the two highways which we undertook to build but I imagine they cost several millions.
(d)
Agreement to return to Panama the waterworks and sewers of Colón and Panama.
(e)
Agreement to return to Panama all property owned by the Panama Railroad Company in the cities of Panama and Colón which was not needed for the operations of the railroad itself. This was assessed at several millions of dollars.
(f)
A statement in the 12-point agreement of May 18, 1942 that “the United States is willing to agree to the construction of a tunnel under or a bridge over” the Canal at Balboa “when the present emergency has ended.” Although it is not expressly stated that the United States will pay for this tunnel or bridge, I have never heard this point questioned and I presume that it was understood that we would pay for it. Today a tunnel would cost probably $25,000,000, while a bridge, if the Navy would agree to the construction of a bridge, might be build for between $8,000,000 and $10,000,000.
(g)
The agreement by the Government of the United States to move the railroad station from Panama City to a new site to be provided by the Republic of Panama. Although the language of the 12-point agreement does not specifically state who is to pay for the moving, there seems little doubt but that the United States would have to bear the cost. On the other hand, we can claim that we will own the land and the buildings where the station now is and possibly we could sell them for part of the cost of moving and building a new station. This provision, therefore, may not cost us more than $1,000,000 or $2,000,000.
(h)
The 12-point agreement of May 18, 1942 also mentions the question of commissaries, post exchanges, a provision for the making available to Panama of electric current for the Madden Dam station, the desire of the Government of Panama for indemnity when traffic on the major highways is interrupted by United States troop movements, and lastly, the desire of the Government of Panama of three gasoline and oil tanks at Balboa.

From the above it may be seen that the consideration paid by the United States for the Defense Sites Agreement of May 18, 1942 was not limited to rent but may be estimated in the tens of millions.

Therefore any attempt to negotiate a new defense sites agreement with the Republic of Panama at the present time must be predicated upon the willingness on our part to pay again heavily for the concessions which we want. While any agreement covering consideration other than rent and road maintenance should be entirely separate and apart from the new defense sites agreement, the following are some of the things which we might be able to offer:

(a)
We are committed to the tunnel or bridge and sooner or later will have to do something about it.
(b)
We are committed to moving the railroad station and sooner or later will have to do something about it.
(c)
The Panama Railroad Company has agreed to give up the 25% preferential freight rate which Canal Zone cargoes enjoy between the Isthmus and the United States and this concession can be used as a bargaining point as the merchants of Panama have for many years complained that this preferential freight rate caused unfair competition.
(d)
Panama wants a dock built at the penal colony of Coiba. The Marine Division of the Panama Canal could build this dock for them.
(e)
Panama wants to obtain the full control and use of a number of telegraph and telephone wires which connect Panama and the interior which were constructed by the Army. Possibly some of these trunk lines could be turned over to Panama.
(f)
The military reservation at Paitilla Point which the United States obtained under the provisions of the 1903 Convention but which is no longer needed from a military point of view, could be returned to Panama. Pending the necessary congressional action, the area could be leased to Panama for $1.00 a year.
(g)
Panama wants, as the Department is aware, to obtain a $25,000,000 loan from the United States and while there seems to be considerable question whether or not Panama is entitled to such a loan and lastly, whether or not the Export-Import Bank can make a loan of this nature and/or has the funds available, we might make some kind of a commitment for a $5 or $10 million loan. If Panama insists on the larger amount, we could offer as a consideration to build the Inter-American Highway in cement from Rio Hato to the city of David as a military measure. The part of the Inter-American Highway from Panama to Rio Hato is already cement and was built by the United States as a military road. Since Panama proposes to spend nearly all the $25,000,000 which they want to borrow on this project, possibly we could use the PRA45 or the Military Engineers to build the road for them as consideration for the new defense sites agreement.

In the opening memorandum establishing the round table conferences, Panama asked to settle a number of other questions with the United States but I think I have listed all of the ones which are susceptible of quick settlement by us and which could serve as consideration. One other point which might serve as consideration is Panama’s desire that the Monetary Conference of 1904 be liberalized, especially as regards the coinage limitation. The prohibition of the sale in the Panama Canal Zone commissaries, the post exchanges of the Army or the Navy sales stores of “luxury and tourist articles” is a point desired by Panama, but I don’t see how this definition ever could be made to hold water and I feel this point should be avoided.

Respectfully submitted,

V. Lansing Collins, Jr.
  1. Mr. Collins was temporarily in Washington.
  2. Not printed.
  3. Public Roads Administration. A marginal note at this point reads: “Comment: When the US Govt agrees to use PRA—black is white; red is blue; and we’re all completely crazy!”