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

611.19/7–750

Department of State Policy Statement

secret

[Washington,] July 7, 1950.

Panama

a. objectives

The major objective of United States policy toward the Republic of Panama is to foster and maintain on the part of the Panamanian Government and people an attitude of friendship and cooperation with the United States, based upon mutual understanding and respect, in order to obtain Panamanian support for United States regional and world policies, to ensure maximum Panamanian collaboration in peace and war in matters pertaining to the operation and defense of the Panama Canal, and to encourage prompt and realistic settlement of disputes and problems arising between United States and Panamanian interests. Since stable political institutions and a sound national economy make for more effective contribution to these goals, the United States has the additional objective of encouraging the development and maintenance of democratic political institutions and a prosperous economy in Panama.

b. policies

US objectives toward Panama are complicated by qualities of ambivalence in the Panamanian character. On the one hand, Panamanians are historically disposed toward friendship and cooperation with the United States as a result of such important considerations as the prompt US recognition and protection of Panamanian independence and the great impetus given to Panamanian economic life through four and a half decades by Canal construction and operation and by US expenditures in the Canal Zone for defense purposes. On the other hand, the virtual dependence of Panamanian economic life on US activities in the Canal Zone and the inferiority complex inherently felt by a small, undeveloped country having close relations with a large and powerful state have developed in many Panamanians a highly nationalistic sensitivity and resentment toward the United States. Although the growth of nationalism is a world-wide phenomenon, and while Panamanians believe they have legitimate cause for complaint over certain aspects of Canal Zone labor policy, much of the Panamanian resentment against the US has been deliberately and artificially fostered in recent years by certain cynical elements in Panama for political advantage. These elements have often cooperated with and attempted to make use of communist and subversive elements, which, while not important numerically, have at times exercised an undue influence in Panamanian political life.

Actual People’s Party (Communist) membership amounts to only seven or eight hundred persons in Panama. The Party, for instance, has never been able to collect enough signatures to register itself as a political entity to participate in national elections, although it has on occasion taken part in municipal elections in Panama City. Communist influence in Panama has resulted from their ability to play on the extreme nationalism of certain Panamanian groups such as the university students and an organization known as the Patriotic Youth Front. The Communists have on occasion, as at the time of the rejection by the Panamanian National Assembly in 1947 of the United States–Panama Defense Sites Agreement, served their own ends through manipulation of this nationalistic spirit. They have also on occasion been able to work very effectively with political opposition leaders and groups whose overriding aim was the downfall of the Panamanian administration in power, regardless of the cost to the real interests to the country. In recent months, however, there has been a growing realization among Panamanians of the true nature of communism, and the present administration has outlawed its activities as an organized group.¹

The United States seeks to strengthen the pro-US elements in Panama as opposed to those who seek to discredit this Government. We try to win Panamanian friendship and cooperation on the broadest possible base. To this end we endeavor to reduce the causes of friction through such policies as strict respect for the juridical equality of Panama with the US, non-intervention in the internal affairs of that Republic, alertness to Panama’s legitimate interests in our day-to-day relations, improvement of labor practices in the Canal Zone and the extension of technical and economic assistance with the aim of helping Panamanian political and economic development. We lend our support to all those influences which have worked toward convincing Panamanians of the identity of their interests and those of the United States and of the potential danger from lack of practical cooperation in defense preparations. Our policy is to cooperate with the administration of President Arnulfo Arias on a practical basis for the mutual benefit of our two countries but to maintain an attitude of caution in the light of Arias’ fascist proclivities in the pre-war period, the manner of his return to power by a police coup, and his known personal instability. At the present he seems firmly on our side; although some of the less savory aspects of his domestic administration of 1941 are reappearing, Arias has sought to leave no doubt that internationally Panama is a convinced ally of the US in the world struggle.

Cooperation of the Defense Departent is especially important in our policies toward Panama, since the practical action in many situations must be taken by US officials in the Canal Zone. Greater Congressional cooperation and understanding of the unique relationship we have with Panama is also a goal of our policy.

Since the rejection of the Defense Sites Agreement by the National Assembly of Panama in 1947 and the withdrawal of US troops from all bases in Panama outside the Canal Zone,² this Government has relied on the provisions of Articles II and X of the 1936 General Treaty with Panama to meet defense needs which might arise from a sudden emergency. The Department of Defense has requested the Department to take no affirmative action on negotiations with Panama for defense sites without further indications as to need from that Department.

Those groups in Panama opposed to cooperation and friendship with the United States assert, in contravention of clearly stated treaty provisions, that the 1908 grant to the US of jurisdiction over the Canal Zone is limited to matters pertaining directly to the operation and defense of the Canal and that Panama retains jurisdiction in all other matters respecting the Zone. As a result of the repetition of these assertions and their wide influence on Panamanian thinking, the Government of Panama has repeatedly attempted encroachments on US treaty and concessionary rights. Some of the more recent of these include demands for Panamanian consular documentation for foreign flag ships clearing for Canal Zone ports, claims of jurisdictional right to try persons accused of crimes committed in the Canal Zone and assertions of jurisdiction over Zone labor and to the airspace over the Zone.

To counter these pretensions, the United States has a well-developed policy. One phase of the policy consists of rejecting, by means of official communications to the Panamanian Government, Panamanian claims to jurisdiction in the Zone. At the same time we engage in direct efforts to inspire greater popular confidence in the United States on the part of Panamanians and a broader understanding by them of our aims and objectives. In line with these efforts we encourage frank, friendly and cooperative discussions of mutual problems; we have launched a vigorous speaking and information program designed to win over Panamanian public opinion; and we are now reviewing all pending commitments of this Government to Panama involving economic assistance with a view to their fulfillment as soon as possible and their removal as sources of contention.

An official US survey of labor conditions in the Canal Zone made in 1947 through inter-Departmental agreement resulted in findings that US employment practices in the Canal Zone not only admitted racial discrimination but were in certain instances at variance with announced US policy to maintain equality of opportunity and treatment in employment of Panamanians in the Zone. These labor practices have not only been detrimental to our relations with Panama; they have embarrassed us at various international conferences and in our broader relations with Latin American labor. Improvements have been made in the situation since 1947, but progress is admittedly, and perhaps necessarily, slow. Our policy is to urge and support policies in the Canal Zone in accord with the letter and the spirit of our treaty obligations.

The economy of Panama is closely geared to that of the Canal Zone and to world trade. Its economic cycles are at present the result of outside forces largely beyond its control. This inherent weakness in the national economy can only be corrected through the development of Panama’s own resources and the diversification of its economy, with major emphasis on its agricultural potential in the interior provinces. In the belief that the strengthening of Panama’s economy will contribute to political stability our policy is to aid Panamanian agricultural development. In this connection, we are extending technical and monetary assistance in the fields of agriculture, animal husbandry, education, transportation, highway construction, and aviation.³ In addition, we endeavor to avoid unfair competition with Panamanian commerce by Canal Zone commissaries and post exchanges, and we seek to enlarge Zone purchases of Panamanian products.

We favor strongly the participation by American private capital in the development of the resources and economy of Panama. The Panamanian attitude toward US investment is in general friendly, and by the Constitution of 1946 American businessmen are in a position of economic equality with Panamanians. However, we seek to discourage private restrictive business practices by merchants combining to maintain high prices at the expense of the public in Panama and the Canal Zone. This is in line with commitments undertaken by Panama in Chapter V of the Habana charter of the ITO.

Public safety and the security of the Canal prompt us to close cooperation with Panama in the field of civil and military aviation. As a result of a civilian aviation agreement in 1949,⁴ US-certificated carriers serve the Canal Zone through Panama’s new Tocumen airport. In accord with the terms of that agreement, we assist Panama by supplying Tocumen with a communications cable essential to operations and with the services of a technical mission. At the request of the Government of Panama, air traffic control in the entire Panama area continues in the hands of the United States until Panama has the facilities and trained personnel for assuring this control.

With over 800 vessels now registered under the Panamanian flag, Panama has the fourth largest merchant marine in the world. Most of it is foreign-owned, much of it by United States citizens. We do not oppose additional transfers of US-owned vessels to Panama registry, but stress that vessels thus transferred cannot be accorded the protection given to US flag vessels. The International Transport Workers Federation, alleging substandard labor and safety conditions on many Panamanian ships, recently launched a “world-wide” boycott of Panamanian flag vessels. We regard this as a dispute between the unions and Panamanian flag shipping interests in which this Government should not become involved.

c. relations with other states

Panama attaches great importance to the United Nations and was an original signatory of the Charter. Panama plays a full role in the Inter-American system and has signed and ratified more Inter-American treaties and conventions than any other Latin American country. Although pursuing a more independent course than some of the other small Latin American states, Panama recognizes the identity of its world interests with ours and usually collaborates closely with us in international organizations.

Panama enjoys normal diplomatic relations with the other American republics and with most of the major western powers. Some special emphasis has been placed by the Panamanian Government on relations with Ecuador, Colombia, and Venezuela, on the basis of the original participation of all four in the former state of “Gran Colombia”. These relationships, however, as well as other Panamanian international relationships, are subordinated to the close relationship with the US.

Panama in early 1950 withdrew its recognition of the Spanish Republican “government in exile” but has not recognized the Franco regime. The Panamanian Government does not have diplomatic relations with the USSR, and there is no USSR trade group or other satellite representation in Panama.

d. policy evaluation

Despite some instances of uncooperativeness based on nationalism and resentment in Panama, the close historical relationship with Panama and our deliberate policies can be fairly stated to have brought about fundamental cooperation. This was demonstrated during two world wars and is being demonstrated today by the Panamanian Government’s support for the world policies of the US, by the generally fair treatment being accorded American interests in Panama, and by the cooperation shown by Panama in most matters pertaining to the Canal.

A number of concrete actions in the past year testify to the extent to which our policies have been successful in restoring relations with Panama to a plane of friendly cooperation since the low point at the time of Panama’s rejection of the Defense Sites Agreement in December 1947. In March 1949, a bilateral air transport agreement was signed with Panama, which brought about the transfer in September 1949 of commercial aviation activities from Albrook Field in the Canal Zone to Panama’s Tocumen Airport. The Canal Zone is thus now served through Panama. This arrangement has proved satisfactory to all concerned. In January 1950, Panama signed a claims convention with the United States in settlement of a number of long-pending claims between the two countries, some of which dated from 1906. A third convention, effecting certain boundary readjustments between Panama and the Canal Zone, was signed in May 1950.⁵ In the same month, an exchange of notes between the two governments amended the 1904 Monetary Agreement to permit Panama to pay her contribution to the International Monetary Fund out of the parity fund maintained in the United States under the 1904 Agreement. We have indicated to Panama that if the latter desired to refund its foreign debt the US would have no objection to the pledging of the Canal annuity as security for a new loan provided that the refunding plan assures full protection to the holders of the present external debt of Panama to which the annuity is presently pledged.

These actions represent tangible achievements in our relations with Panama and attest the spirit of cooperation now existing between our two countries. The Embassy’s intensive speaking and information program has contributed materially to this improvement in relations. Our technical and other economic assistance has resulted in significant progress in certain phases of the national economy toward increased development and consequently greater stability. This progress is particularly apparent in the field of agriculture and animal husbandry.

Despite the generally satisfactory state of our relations with Panama, certain causes of friction continue to exist. In particular, problems relating to jurisdiction take various forms. Labor problems in the Canal Zone and others specifically mentioned above remain only partially solved.

1. In despatch No. 441 from Panama, May 18, 1950, Ambassador Davis had stated in part: “It is believed that President Arias proclaimed this ban against Communist activity with a three-fold purpose in mind: To have at hand a weapon with which to suppress rumored strikes and demonstrations against the Government by the Communists, students or other groups: to regain the good graces of the Church which he has recently antagonized to the detriment of his standing with the people; and to impress the United States with his good intentions.” (819.06/5–1850)
2. For documentation, see Foreign Relations, 1946, vol. xi, pp. 1095 ff., ibid., 1947, vol. viii, pp. 881 ff., and ibid., 1948, vol. ix, pp. 664 ff. For later discussion of the issue, see ibid., 1949, vol. ii, pp. 701 ff.
3. For the Point Four General Agreement between the United States and Panama, signed at Panama City, December 30, 1950, see 1 UST 899.
4. For text of the Air Transport Agreement signed at Panama, March 31, 1949, and texts of additional agreements effected that same day by an exchange of notes, see TIAS No. 1932, or 63 Stat (pt. 3) 2450 (for the Air Transport Agreement), 63 Stat. (pt. 3) 2471 (for the Agreement Relating to a Communications Cable), and 63 Stat. (pt. 3) 2478 (for the Agreement Relating to a Civil Air Mission).
5. For the Colón Corridor Convention signed at Panama, May 24, 1950, see TIAS No. 3180, or 6 UST 461.