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

No. 480

Sir: I have the honor to refer to the air mail letter of the Secretary of State dated July 2, 19481 enclosing a copy of the Department’s June 1948 Policy Statement on Panamá, and as requested to submit the following comment and recommendations. Before discussing details, however, I wish to say that this mission considers the statement excellent in organization, directness and practical helpfulness. It is a most valuable summary and directive, which cannot but contribute materially to the handling of questions of policy relating to Panama and the Canal.

Entire agreement is expressed with the importance attached to the need for winning the effective collaboration of the Republic of Panama as a corollary to our basic policy of respect for the juridical equality and sovereignty of this country and non-intervention in its internal affairs. The promptness and finality of our action after the National Assembly disapproved the proposed defense sites agreement achieved two important results: it supplied convincing evidence that we really mean to respect this country’s sovereignty, and it has tended to induce some feeling of responsibility on the part of those long accustomed to attack the United States for local political purposes.

An improvement in the general attitude toward the United States has been the net result. It is noteworthy that throughout the recent bitter political campaign2 no major party made its appeal on an anti-American platform; and while it is too much to say that no criticism has appeared in the press, none of the leading newspapers has had a consistently anti-American attitude and none has indulged in campaigns designed to inflame public opinion against the United States or its policies. Although the American action after December 22, 19473 was an important factor in bringing about this improvement, there is no doubt that the deterioration in the international situation in general and recent happenings in nearby countries4 in particular have had a sobering effect and have tended to discredit our political opponents. In fact one of our principal policy objectives, namely, the isolation of the Communists and other anti-American elements in Panamá has been achieved to a large degree; and while leftist groups unfriendly [Page 660] to the United States are still strong in University and labor circles and represent a potential danger, they are quiescent for the time being, sensing that the time is not opportune for them to gain public support for attacks against the policies of the United States.

High officials of the Government, newspaper editors and other prominent Panamanians have taken occasion to express the view publicly that cooperation with the United States is necessary and desirable, and that influences to the contrary are inimical to the best interests of both countries. There is also a quite general recognition among the leaders that the lack of realistic cooperation in the defense of the Canal might have most serious consequences. This view needs to be stressed further, however, in order to become a part of the thinking of the whole population, and so make more difficult future appeals to old fears and prejudices by the Communists.

Of less importance but still of some significance as indicative of better feeling, I might cite the evidences of public affection and esteem shown General Willis D. Crittenberger5 upon his departure from Panamá in June, and the extremely cordial welcome extended to me us the newly arrived American Ambassador. The reaction to the trip made to the Interior, at the Department’s suggestion, to visit the National Agricultural Institute was surprisingly favorable, resulting in much public notice, even the at times severely critical Panamá American of Harmodio Arias6 making the trip the subject of complimentary editorial comment. The stressing of the importance of agriculture to the basic economy of Panamá and our disposition to be helpful in the way of supplying technical advice struck a responsive cord and did much to divert public opinion from negative complaints to more constructive channels. The approval by the Export-Import Bank of the Panamanian application for credit for the hotel project7 was also timely and constructively helpful, and the beneficial effect was intensified by the manner in which it was announced. The Embassy was given the opportunity to inform the Foreign Minister and the President8 of this approval personally, and to make a public statement for the press.

The most important single problem of course concerns arrangements with Panama necessary for the protection of the Canal. In view of [Page 661] the critical international situation, it is considered advisable that the United States Government determine at an early date but without any public announcement whatsoever what facilities would be needed from the Republic of Panamá in the event an outbreak of hostilities should take place or become imminent. It would be desirable to have such a determination made at a high policy level, and it should be reasonable. It would be advantageous to have adequate preparation for negotiations in advance and to have ready for possible use statements for publication if needed. Instead of stressing the joint obligation of both Governments under Article II of the General Treaty of 1936, Panamá might prefer to place greater emphasis on its obligations as one of the signers of the Rio de Janeiro Treaty of Reciprocal Assistance.9 It might also prove quite helpful in this connection if nearby countries were to take a serious interest in the practical aspects of the defense of the Canal and the effect on them were the Canal to be damaged or destroyed. For example, it might be productive of good results if Colombia were to raise the question whether the defending forces would be able to detect the approach of a hostile force from the Pacific or oppose it in time with fighter planes without radar stations and landing strips at some distance from the Canal itself. In this connection reference is made to despatch No. 448 of July 16, 1948 to the Department from the American Embassy at Bogotá.10

Although public attention has been distracted to some degree from the question of labor relations, this still remains a most troublesome problem and one on which critics feel we are most vulnerable. It is believed that the problem should be reviewed in the light of recent developments with a view to determining precisely the degree to which present practices may be at variance with our announced policy in implementation of the General Treaty of 1936, and that the appropriate authorities should be afforded an early opportunity to state what steps have been and are being taken to carry out the letter and spirit of our commitments. At the same time the aggressive attitude by a section of the Panamanian press which places its own interpretation on the pertinent treaty provisions and accuses the United States of violating its commitments should be opposed by appropriate official statements. As to any respects in which there may be a clear failure to carry out our commitments, however, it is believed the Department should take the position either that they should be fully respected or that those responsible for any adverse decision should take the onus for initiating [Page 662] steps to have denounced the provisions with which the Government will not comply. A firm attitude should continue to be taken toward the recurrent attempts by pressure groups to secure passage of legislation inconsistent with and directly contrary to the provisions of existing treaties. As the Department knows these do great harm. Serious criticism of the American Government would have resulted had such legislation not been averted this year, and even as it was the attempt to enact it resulted in the most serious criticism that has taken place during the past six months.

As to the El Encanto and other claims, it was made clear to the Foreign Minister at the time he was informed of the approval of the hotel credit that we would wish Panamá at its own initiative to take favorable action on the claims of long standing not because of any pressure or representations but because it is just and in the best interests of both countries. On a later occasion the Foreign Minister indicated that he had been studying these claims with a view to making a recommendation to the incoming General Assembly that it approve the proposed claims convention and appropriate funds to settle the balance due from the Republic of Panamá. He indicated that because of the recent experience with the National Assembly as now constituted it would probably not be feasible for the President to call it into special session to act on this or any other matter. The Foreign Minister was given to understand that while anything the Administration might do in an attempt to bring about the early settlement of these claims would be appreciated, the United States Government did not wish to conclude an agreement that did not provide at the same time for funds to cover the entire claim.

As to an air agreement, the present Administration is especially anxious to see the Tocumen Airport in full operation before October 1948. I have proposed that a bilateral air agreement be concluded as soon as possible and that all pending matters in that connection, such as communications facilities between the Canal Zone and Tocumen Airport and the use of the latter port by American flag lines, be resolved at the same time. A proposed draft agreement has been cleared with representatives of the Armed Forces and the Panama Canal administration, and the approval by the Department of suggested changes is now being awaited. It is hoped a tentative draft may be submitted to the Panamanian authorities in the very near future.

It is possible that the Executive Order preventing the direct importation of alcoholic beverages into the Canal Zone went too far and perpetrated an injustice on the personnel of the Armed Forces and the Panama Canal administration. However that may be, the ill effects of withdrawing such a concession when once made should be carefully evaluated, and if a change is contemplated it should be preceded by [Page 663] appropriate discussions with the Panamanian authorities and the announcement of the change should be timed to reduce to a minimum the ill effects, which are inevitable.

The only part of the June policy statement with which this Embassy is inclined to disagree is the sentence on page 5 to the effect that the increased cordiality of Panamá toward Argentina has been inspired in part by a desire “of Panamá to develop a counter-balance to United States commercial influence”. The officers at this mission are unanimous in expressing confidence in the friendliness of the President and his present Cabinet, and in feeling that their attitude has been very correct as far as relations with both the United States and Argentina are concerned. The initiative in recent moves has been taken by Argentina, and the Panamanian officials have given the officers of this Embassy no reason to feel that they are seeking any counterbalance to American commercial influence. The Embassy has taken the attitude that good relations between all the American Republics are desirable and that there is no reason why the investment of Argentine funds in useful Panamanian enterprises should be regarded as contrary to the interests of either the United States or Panamá. There has been some stress laid on economic as well as political and cultural relations with the so-called Gran Colombia countries, but the Embassy has detected a quite definite realization on the part of the Panamanian Government that it would be impractical and undesirable for Panama to adopt the proposed economic program of this group, particularly in so far as the customs union and certain other economic projects are concerned.

In conclusion it is recommended that every effort be made to retain the gains since last December and consolidate official and public confidence in our policies and in the officials charged with their implementation. To this end it is proposed that a special effort be made to most [meet] issues promptly and adequately, that a frank and open policy with the press be followed, that acts or pronouncements inconsistent with our basic policy be avoided, that care be exercised to accord Panamanian officials the recognition due them because of their positions, that the United States Government continue to take a constructive interest in the basic economic problems of Panamá, supplying experts to assist in improving agricultural production, etc., and that advantage be taken of the present improved relations to dispose of as many as possible of the pending problems and points of potential future friction. The problems listed roughly in the order of the priority given them at this mission are as follows:

Aviation Agreement, establishment of communications between Canal Zone and Tocumen Airport, and arrangements for American flag lines to utilize latter.
Settlement of El Encanto and Malambo claims.
Disposal of remaining obligations under Twelve Points Agreement by negotiation of substitutes or by initiation of action to comply with the following undertakings:
Tunnel under or bridge over the Canal.
One-third maintenance cost for highways used habitually and frequently by Armed Forces.
Panamá Railway Station.
Petroleum pipe line right-of-way in Balboa.
Access to military installations on islands of Taboga and Taboguilla.
Ownership of certain buildings along the Rio Hato road.
Formalization of agreement to realign Colón Corridor.

As to internal problems, it is believed those representing the greatest danger from a long-range point of view are the generally unsatisfactory situation of the small farmers, and the emotional stress resulting from the race problem, particularly the antipathy between the West Indian Negro element and the remainder of the populace. The latter is especially explosive and there is always danger that political strain may provide Communists and other disruptive forces an opportunity to touch off disorders which might become extremely violent. As to the first, present measures to improve agricultural production as a whole should improve the lot of agricultural laborers. As to the latter problem, it is believed a feeling of responsibility on the part of the Government and people for the maintenance of order is being developed, and that fear of uncontrollable disorders has exercised a powerfully restraining influence on the political factions during the recent elections and post-election difficulties.

Respectfully yours,

Monnett B. Davis
  1. Not printed.
  2. See telegram 577, July 21, p. 657.
  3. The National Assembly unanimously rejected the defense sites agreement on December 22, 1947.
  4. For documentation on this subject, see pp. 153 ff.
  5. Commanding General, Caribbean Defense Command.
  6. Former President of Panama.
  7. In instruction 145, October 19, 1948, not printed, the Acting Secretary of State transmitted a copy of the agreement signed September 17, 1948 between Panama, Hoteles Interamericanos, S.A., and the Export-Import Bank of Washington establishing a line of credit of $2 million in favor of the Hotel Company to finance the purchase in the United States of materials, equipment and services required for the construction of a hotel in Panama (811.516 Export-Import Bank/10–1948).
  8. Ernesto Jaen Guardia, and Domingo Díaz Arosemena, respectively.
  9. For the Inter-American treaty of reciprocal assistance, signed at Rio de Janeiro, September 2, 1947, see Department of State Treaties and Other International Acts Series No. 1838, or 62 Stat. 1681.
  10. Not printed.