Foreign Relations of the United States, 1950, The United Nations; The Western Hemisphere, Volume II

719.00/3–350: Telegram

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

confidential

Panama City, March 3, 1950—1 p. m.

147. Embassy appreciates comment Deptel 60² concerning measures designed retain recent gains Panama–US relations (Embtels 112, February 16 and 121, February 21).³

In utilizing his strong position to effect successful conclusion claims convention,⁴ President Arias was motivated, Embassy believes, by conviction best interests of self, his party, and country would be served. He was determined, as was Foreign Minister, demonstrate practical character of avowed policy to maintain cordial relations with US and encourage every form economic cooperation, including investments by foreign enterprise. Without doubt his long-range objective is to make Panama eligible for every form of economic cooperation US government may be able to give, and his immediate desire is to get timely help (preferably without increasing public debt) in relieving acute unemployment, which he feels must be done before October 1 when Assembly reconvenes if serious political crisis is to be avoided. He would prefer liquidation existing commitments rather than extension of credit, unless latter temporary and linked in some manner to commitment.

For us it is highly important keep initiative and prevent damaging counter-attack by Communist influenced groups. In view widespread publicity already given Point Four Program and likelihood that loans will be made for various projects in Latin America, it is obvious we would be in vulnerable position if nothing is done toward meeting remaining commitments under General Relations Agreement of May 18, 1942.⁵ Embassy recommends accordingly we lose no time in putting ourselves in less vulnerable position by initiating action to get these before Congress.

As to Department’s request for specific suggestions re means continue gains, Embassy is convinced any measure that will involve increase in employment will contribute to that purpose, but a most important factor is timing. Even a modest but popular project would be effective if undertaken early enough. The Frente Patriotico and other opposition elements are beginning to say that nothing effective is being done to relieve unemployment, and make sarcastic references to pro-US policy. Anything we can do now to increase employment in near future will be given maximum publicity by government and exploited to vindicate policy of rapprochement and favorable attitude toward foreign capital.

In addition to third point Embtel 112 re speed-up road maintenance which Department has approved, Embassy recommends following as helpful if action can be taken soon enough:

1. Reach early agreement with Panama Canal and Panamanian Government re station removal (numbered paragraph 10 of General Relations Agreement), in hope that work can be commenced soon on preparation of new site. This would have good political effect since great deal of attention by (Embtel 139, March 2)⁶ Panamanian Government might finance work by raising money on land received in exchange for new site. To be most effective this project would have to be announced within the next 60 days and work commenced well in advance of reconvening of the Assembly.⁷

2. If there is any chance of early action on Abaca program (Deptcirgram February 27, 8:50 a. m.),⁶ it might be very effective in meeting present acute situation. A separate report⁸ is being submitted on this subject.

3. President Arias and Foreign Minister are convinced that most effective issue politically and in fact key to insuring success of policy is road construction. Embassy believes that this estimate is correct and that we would not only conserve present gains but also deal Communist influenced groups crippling blow if we could find means inaugurate road construction in some form by October. The approval by Congress of the Inter-American Highway Project would, of course, accomplish this purpose but it would also give rise problem as to how Panama with its unemployment and fiscal stringency can take full advantage of opportunity.⁹

4. Panamanian Government modified under date of January 16, 1950 its request of July 11 that US substitute road construction for the tunnel or bridge at Balboa. New request is to effect that in exchange for the obligation under paragraph 4 of the General Relations Agreement funds to extent of cost of tunnel or bridge be made available for construction of highways or other public works, amount to be determined by mutual agreement on basis of estimates each government. The President attaches great importance to this matter as evidenced by fact it was only specific project he mentioned to Assistant Secretary Miller in their meeting on February 18.¹⁰ Foreign Minister explained orally apropos the request that Panamanian Government does not wish settlement in cash but prefers amount be applied approved project to be carried out by Public Roads Administration or other agency US Government. He repeated desire keep funds out of Panamanian politics when Assistant Secretary Miller was here, and both he and President expressed hope favorable action could be taken on this request so that some road construction work could take place irrespective of whether Inter-American Highway legislation is approved or not. In circumstances it would be very disappointing to Panamanian Government to be informed contents paragraphs 3 and 4 of Department instruction 17 of January 30,¹¹ particularly just after National Assembly has approved claims convention. In view renewal and modification of this request, which was discussed with Assistant Secretary Miller, Thomas Mann and Ivan White at Habana,¹² it is believed further consideration will have to be given Panamanian request. Mail report follows but in meantime Embassy recommends proposed legislation on bridge or tunnel commitment be prepared as soon as practicable and that in presenting it, Congress be informed of Panamanian request that this commitment be discharged by substituting road construction by US Government at a cost equivalent to that estimated for carrying out original commitment.¹³

Davis

2. Of February 21, not printed. In it the Department had in part asked for the Embassy’s suggestions concerning specific action to be taken with the intent of ensuring retention of what the Department considered to be recent gains in U.S.-Panama relations. (719.00/2–2150)
3. Neither printed.
4. On February 13 the Panamanian National Assembly had approved a Claims Convention signed January 26 in Panama City. On October 26, 1950, Panama ratified the Convention. Ratifications were exchanged and the Convention entered into force that same day. Claims settled by it included the El Encanto and Malambo cases. For text, see United States Treaties and Other International Agreements (UST), vol. 1, p. 685.
5. For text, see Department of State Executive Agreement Series (EAS) No. 452, or 59 Stat. (pt. 2) 1289. For pertinent documentation, see Foreign Relations, 1942, vol. vi, pp. 577 ff.
6. Not printed.
7. Documents in file 919.512 for 1950 indicate that Department of State officials had obtained approval in principle for this project from the Department of the Army by September. However, necessary draft enabling legislation, drawn up in the office of the Governor of the Panama Canal (General Francis Newcomer), had not cleared the Defense Department by the end of the year.
6. Not printed.
8. Documents concerning the abaca program are in files 813.2327 and 819.2327 for 1950.
9. Public Law 769, approved September 7, 1950, authorized $4 million for fiscal 1951 and an equal amount for fiscal 1952 towards completion of the Inter-American Highway. For text, see 64 Stat. 785. However, the first appropriation of $4 million under Public Law 911 was not approved until January 6, 1951; for text see 64 Stat. 1223. Allocations of the participating countries’ shares were made subsequent to approval of the appropriation.
10. Edward G. Miller, Jr., Assistant Secretary of State for Inter-American Affairs, was then in Panama.
11. Drafted January 23. In it the Department had indicated in part that it could not predict when or whether the Congress would authorize or appropriate Inter-American Highway funds which had been included in the President’s budget request. (See footnote 9 above.) In the mentioned paragraphs the Department had added that it had no proposals to offer regarding possible financial assistance for road construction in Panama, did not wish to substitute any new road-building commitment for any existing obligation under the General Relations Agreement of 1942, and did not wish to offer to the Panamanian Government at that time any encouragement that it might obtain concrete assistance from the United States for a large-scale road building program. (819.2612/1–3050)
12. Presumably during the Regional Conference of U.S. Chiefs of Mission in Central America and the Caribbean, held in Habana January 18–20, 1950.
13. In the course of a conversation held May 15 with Ambassador Rodolfo Herbruger of Panama, Mr. Miller indicated that Congressional authorization and appropriation would be necessary before the United States could meet its commitment under the General Relations Agreement to build a tunnel under or a bridge over the Panama Canal and that, in view of the heavy schedule before the Congress, the Department had decided to concentrate its efforts on securing approval of Inter-American Highway authorization and appropriations. “In response to a question (rather diffidently raised) by the Ambassador as to the possibility of road construction by the United States in lieu of the bridge commitment, Mr. Miller expressed the view that we should all keep in mind that the commitment involves a tunnel or a bridge and makes no mention of other projects. He said that there is no disposition on the part of this Government to avoid the commitment but that, unfortunately, we find ourselves in a position at the present time in which we are not able to implement it.” (memorandum by W. Tapley Bennett, Jr., Officer in Charge of Central America and Panama Affairs, 911F.5301/5–1550)