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


No. 39

Sir: … The purpose of this report is to propose a constructive program designed to clear up current misunderstandings, dispose of pending problems, and effect an improvement in the present unsatisfactory relations between the United States and Panama.

The need for combating anti-American influences in Panama is acute because of the success of subversive elements in achieving a position of real power and because of the vital political and strategic interests of the United States in this country. The disapproval of the proposed Defense Sites Agreement in December 1947 was effected by a combination of local and foreign political factors, but it is doubted whether the defeat of American interests would have been so decisive without long preparation through (1) the infiltration of intellectual circles (especially the National University) and labor organizations by Communist-influenced subversive elements, and (2) the development of an aggressive, nationalistic philosophy under the leadership of Dr. Ricardo J. Alfaro,1 based on unilateral interpretations of treaty provisions and a policy of deliberate encroachment on the rights granted to the United States by existing treaties. The political enemies of the United States, particularly the Communists, now organized as the “Partido del Pueblo,” quickly adopted the program of protecting the territory and sovereignty of the fatherland as a popular means of assuming leadership and preventing normally good relations with the United States. The result has been a generation who consider that the original relationship with the United States was disgraceful, that Panamanian interests were betrayed, that the United States has been guilty of gross failure to keep its commitments, and that nothing short of a fundamental change in the treaty structure will satisfy Panamanian aspirations.

The Harmodio Arias2 press has harped on these themes, and the Spanish Republican and other Communist-influenced leadership in the National University have left no stone unturned to appeal to youthful national pride, encourage self-pity, inflame race and class hatred and focus all the resultant resentment on the United States and the Canal Zone relationship. The Department is already familiar with the successes of this opposition and appreciative of the danger it represents for the future. The Embassy has frequently expressed the view, which is now reiterated, that there is little chance despite the willingness [Page 707] of the present Government of restoring normally good relations and settling outstanding problems unless and until the misconceptions which unfortunately have been permitted to become a part of the thinking of the public here are corrected and the leadership referred to above is discredited in the eyes of the people.

Many Panamanians of various political affiliations agree with this view and have become active in an endeavor to counteract the harmful subversive forces. As already indicated, all too frequently the, cleavage comes along racial and class lines, a tendency that the subversive elements are at some pains to augment by constant propaganda designed not only to arouse race and class hatred, but also especially to associate in the minds of the people the United States Government with the now distrusted and hated upper, governing class in Panama.

Considerable progress has been made, however, by Panamanians of all classes who deplore the injury done to the relations with the United States to combat anti-American propaganda and stress their view that the United States is a nation they regard with friendliness as the most powerful representative of the American way of life and the best international friend of this Republic. The Embassy’s efforts to gain public confidence and isolate the purely communistic elements in their destructive opposition to the United States have been rewarded with some success, but it must be admitted nevertheless that comparatively little has been accomplished toward convincing the Government and the public that the Alfaro doctrines, on which the subversive propaganda is largely based, are fundamentally fallacious and instead of representing a means of improving the situation of Panama vis-à-vis its treaty structure are on the contrary seriously harmful to the best interests of both countries.

The Alfaro doctrines are based on the premise that Bunau-Varilla3 was a dishonest adventurer who made no effort to protect Panamanian interests and who negotiated a treaty, the Convention of November 18, 19034 which was grossly disadvantageous to Panama. According to his view, the relations with the United States have consisted largely of a succession of ungenerous and grasping actions on the part of the United States. With this background he has developed a series of strained treaty interpretations starting with the major premise that the grant in perpetuity of jurisdiction over the Canal Zone by Article II of the Convention of November 18, 1903, was not complete, but on the contrary strictly limited to “the construction, [Page 708] maintenance, operation, sanitation and protection of the Canal,” and that being sovereign Panama rightfully has jurisdiction in the Canal Zone in all other matters. Needless to say this doctrine ignores completely the clear language of Article III of the Convention.

In implementation of this system there have been other unilateral interpretations rendered and administrative measures based thereon without consultation with the American authorities affected. Repeated formal protests from the United States have been ignored, and the influence of Alfaro and his followers has been such that officials of the Government who do not agree with his policies have been prevented from taking action. As above indicated Alfaro’s doctrines have been popular with the strongly nationalistic youth, who have applied his line of reasoning with fanatical zeal and are ready to brand as “traitors” and “entraguistas” any who oppose them.

Hence it is believed that a coordinated, constructive plan to combat deliberate misrepresentation of the facts and encroachment on vital rights is needed to protect American interests and make possible a return to normal relations with this country. The first phase should be corrective, and as recommended in my telegram No. 61 of February 1, 1949,5 it should include a review and clarification of the defense sites negotiations in 1946 and 1947, followed by a discussion of the history of American relations with this country, the treaty structure, and particularly the significance of the concessions made by the United States in the General Treaty of March 2, 1936,6 which have been largely lost to view. It should be preceded by a general policy statement confirming the intention of the United States to carry out its several commitments following a constructive program to be worked out with the Government of Panama to clear up points in dispute including claims. It should be pointed out however that the commitments are those both governments agree were understood and intended by the signatories of the treaties and agreements concerned.

The second phase, which could be carried out concurrently with the first, should include a clear analysis of treaty provisions in dispute with a precise statement of what the United States considers it is committed to do, how it proposes to deal with the matter concerned, and when action should be initiated. The statements as to just what the commitments are according to the understanding of the United [Page 709] States Government are necessary because of the public confusion which has been created by exaggerated and at times completely false claims by agitators and other critics of the United States.

Points to be covered should include the following:

Conclusion of the Aviation Agreement and, after its ratification by Panama transfer of scheduled commercial aviation activities from Albrook Air Force Base to Tocumen Airport.
Negotiation of Convention to settle El Encanto, Soldiers’ and Malambo-Fire Claims.
Negotiation of Highway Convention to provide for long-term maintenance by U.S. of the Trans-Isthmian Highway, to dispose of our obligation under Article V of the “12-Points Agreement,”7 and to assure rights-of-way for our military establishment on Taboga Island.
Compliance with our obligation to afford equality of treatment and opportunity to Panamanians employed by the Panama Canal and the Panama Railroad on a realistic, sound and equitable basis.
Re-appraisal of conduct of commercial operations in the Canal Zone, including commissaries, post exchanges, club houses, sales stores, quartermaster stores, theaters and hospitals, in order to deal with Panamanian complaints of unfair competition with local commerce.
Fulfillment of our obligation to build a bridge or tunnel at Balboa, perhaps by substitution of road-construction acceptable to Panama (Article IV, “12-Points Agreement”); and abrogation of Article XII of same agreement (right-of-way for oil pipeline).
Removal of terminal facilities of the Panama Railroad, including the station in Panama City and disposition of the present station and lot (Article X, “12-Points Agreement”).
Formalization of the realignment of the Colón corridor and completion by U.S. of the remaining 1,000 yards of the Trans-Isthmian Highway.
Conclusion of a Radio Communications Agreement.
Rescind the Executive Order prohibiting the importation (except from Panama) of alcoholic liquors into the Canal Zone.
Seek Congressional action to remove present tax on passenger fares from U.S. to Panama.
Continue and possibly increase technical assistance to Panamanian agriculture, and if possible lower the existing price differential (now 25 per cent) applied by the Canal Zone administration to purchases of Panamanian products.

The Embassy will prepare special reports on such of the above points as necessary.

Respectfully yours,

Monnett B. Davis
  1. Former Minister for Foreign Affairs.
  2. Dr. Harmodio Arias Madrid, President of Panama from 1932 to 1936.
  3. Philippe Bunau-Varilla, a leader of the Panamanian revolution of 1903 and first Minister of Panama to the United States.
  4. For the Isthmian Canal Convention signed at Washington November 18, 1903, see TS No. 431, or 33 Stat. (pt. 2) 2234. For pertinent documentation, see Foreign Relations, 1903, pp. 132 ff.
  5. Not printed.
  6. For the General Treaty of Friendship and Cooperation, together with ancillary notes, see TS No. 945, or 53 Stat. (pt. 3) 1807. For pertinent documentation, see Foreign Relations, 1935, vol. iv, pp. 889 ff.
  7. Also known as the General Relations Agreement; see footnote 2 to the letter from Acting Secretary Lovett to Ambassador Davis, January 19, supra.