Foreign Relations of the United States, 1948, The Western Hemisphere, Volume IX

419.11 El Encanto Land Tract/5–1848

Memorandum by the Chief of the Division of Central America and Panama Affairs (Newbegin) to the Director of the Office of American Republic Affairs (Daniels)

[Washington,] May 18, 1948.

Subject: Panama—Settlement of El Encanto Claims

With reference to your memorandum of May 14¹ I submit the following summary of efforts which have been made in recent years to settle the El Encanto Claims with Panama.

In addition to the specific attempts which I set forth below I should like you to know that there have been innumerable informal conversations with Panamanians on this matter which I am not attempting to list.

The El Encanto Claims were originally filed with the General Claims Commission, United States and Panama, in 1932 in the sum of approximately $1,407,000. The claims were thrown out by the Commission on jurisdictional grounds.

In 1935 the Department reviewed the claims, and in a note of December 26, 1935 the Panamanian Government was requested to cooperate with the United States in the prompt settlement of these claims, which by then had been pending some 4 years. Subsequent notes were presented to the Panamanian Government as follows:

• January 24, 1936
• October 6, 1937
• April 4, 1938
• August 9, 1938
• March 21, 1940
• November 19, 1940
• May 5, 1941
• Sept. 19, 1941

These notes suggested settlement by arbitration. The Panamanian Government throughout followed the tactics of delay and opposition to any form of arbitration suggested by us.

In 1942 and 1943, during hearings at the Capitol on proposed legislation which later became effective and cancelled Panama’s $2,500,000 debt to the Export-Import Bank for the Rio Hato Highway, turned over extremely valuable Panama Railway lots to the Panamanian Government, and turned over the waterworks and sewerage systems owned by us to Panama, the question of the El Encanto Claims arose and the legislation was almost defeated by lawyers of the American claimants. The Department gave assurances to the Congress that immediately following enactment of the legislation all efforts would be made to secure an agreement with Panama for the settlement of these claims.

In a note of June 20, 1943 the Department again strongly urged Panama to arbitrate the claims and at the same time submitted an alternative solution by direct settlement through a reasonable lump sum payment by Panama. On October 15, 1943 the Department pressed for a reply from Panama.

In 1944 Panamanian Foreign Minister Samuel Lewis was in Washington and indicated his agreement that lump sum settlement would appear to be advisable, although he felt our asking of $470,000 was too much for “poor Panama” to pay.

In July 1945 Murray Wise² was in Panama and obtained informal promises from the President that he would instruct Foreign Minister Alfaro to dedicate himself first and foremost to the settlement of these claims. Shortly afterwards Ambassador Vallarino arrived in Washington and began talking claims, but on the basis of a $50,000 settlement, No progress was made.

In 1946, at the suggestion of Panama, an agenda of round table conferences on various pending matters between the two governments was drawn up and included settlement of the El Encanto Claims. During preliminary discussions Foreign Minister Alfaro showed no inclination to reach any agreement and spent all of his time criticizing the unfairness of the United States attitude toward the validity of the claims. He disagreed with the Department’s decision that the claims were prima facie valid and that there had been any denial of justice to American claimants by Panama. He was very bitter because he believed the United States had accused the Panamanian Government of “collusion” in denying justice to American claimants.

In December 1946 Alfaro was in Washington and was informed by the Department of this Government’s desire to settle the claims immediately by direct negotiation. He persisted in his belief that the Department’s attitude was unjust. He was then told of our willingness to arbitrate the claims and that if such procedure suited Alfaro better we were prepared to proceed at once toward this method of settlement. It became quite obvious that Alfaro did not wish to arbitrate.

On December 20, 1946 the United States Embassy at Panama presented the Panamanian Government with a proposed convention for the settlement of three pending claims, including the El Encanto group. A lump sum settlement for the latter was proposed in the sum of $400,000.

Murray Wise was in Panama again in February 1947 and upon instruction pressed the President for settlement. Wise learned that the President and his Cabinet, except Alfaro, were willing to settle on our terms and was told that in fact the Comptroller General had instructions to turn over a check for $100,000 representing first payment. However, Alfaro continued to oppose settlement and as a result Panama has been unable to take further steps toward signing the proposed convention. Panamanian Foreign Relations, even though Alfaro is out of office, continues to delay, proposing that while notes would acknowledge Panamanian obligation to pay full amount, rather than put up some $400,000 deposited, drafts would be drawn on Panama as each claim is adjudicated. This is unsatisfactory to the Department, as it shows complete lack of good faith in the United States Government. The United States Government has reduced its original request for $1,407,000 settlement to $400,000 cash settlement or less if payment to the claimant does not reach that amount. All the Department asks is a deposit in advance to show Panama’s good faith in our sincere desire to settle this long pending matter.³

1. Not printed.
2. Assistant Chief, Division of Central America and Panama Affairs.
3. In airgram A–444 of September 28 to the Embassy in Panama, Acting Secretary Lovett indicated that the Department of State expected Panama to proceed to carry out its frequently expressed intention to make settlement on the already agreed formula, and that agreement must be reached on settlement of the Encanto claim before serious consideration could be given other Panamanian requests (711.19/8–2848).