Memorandum by the Assistant Chief of the Division of Central America and Panama Affairs (Wise)9
Before the National Assembly of Panama adjourned several weeks ago it authorized the President to negotiate a loan of $25,000,000. In a subsequent press statement the President said the authorization did not necessarily apply to an external loan, however, he had previously sent his Comptroller General to the United States to see what the possibilities might be here. The Comptroller General was pretty much discouraged, as a result of his interviews in Washington.
The attached recent newspaper clippings indicate that Panama still has hopes of getting a $25,000,000 loan from the United States, but feels that because of the issue which has arisen over our continued occupation of defense sites in Panama10 under the 1942 Agreement, the moment is not opportune to apply for the loan.
Ambassador Hines, following his visit to Washington in September, I believe, encouraged the President of Panama to presume that a loan could probably be obtained from the United States provided the El Encanto claim11 were settled and provided the loan could be distributed over a period of years and made available in payments not to [Page 1174] exceed $8,000,000 or $10,000,000 at any one time. If a loan is obtained, I understand it would be used primarily in the construction of roads and school buildings. It is natural that the Export-Import Bank cannot give serious consideration to Panamanian desires in the above respect until it has received formal application which specifies the conditions under which Panama wishes to obtain the money. Furthermore, Panama is making no move at present to pay the El Encanto claim.