Memorandum of Conversation, by the Acting Officer in Charge of Financial and Development Affairs (Cady)


Subject: Eximbank: Relations of Hotel Financing to Closing of Panama Trust Company.

Participants: OSA—Ambassador Nufer,1 MID—Mr. Sowash,2 ED—Mr. Bauer,3 AR—Mr. Cady; Eximbank—Mr. Arey, Mr. Sauer and Mr. Redway.4

On Friday afternoon March 9, following an informal board meeting, Eximbank requested consultation with the Department concerning the possible repercussions on Eximbank financing of Hoteles Interamericanos arising from the closing of the Panama Trust Company and reported efforts on the part of high officials of the Panamanian Government to take over the hotel or acquire ownership interest in it.5 The bank is not concerned with repayment difficulties since the obligation [Page 1537] is unconditionally guaranteed by the Republic of Panama6 but would not be reluctant to use its good offices to help to prevent improper interference with the project.

The bank understood that FinMin Herbruger is coming to Washington and would call on the bank in connection with the hotel situation. It was not known by bank officials what proposals might be made but it was believed that a suggestion on the part of the Panamanians to set up a “watch-dog” committee might be anticipated. The bank feels that such action is uncalled for because the hotel corporation is under the management of a Board of Directors. Moreover, the corporation has contracted for operating management with an American firm. It is the intention of the bank to maintain a firm stand that the provisions of the loan contract should not be abrogated. One of the provisions stipulates that during the life of the loan the management must be satisfactory to the Eximbank. In this connection the bank understands the management company intends to stand by its contract. It is also the intention of the bank to discourage the formation of a “watchdog” committee should the Panamanians broach the proposition and seek Eximbank cooperation therein.

Department officials assured the bank officials that it was their intention to keep in close touch with the bank regarding the situation and that they would support the position of the bank in insisting that the provisions of the loan contract be scrupulously observed.

  1. Albert F. Nufer, Director, Office of Middle American Affairs.
  2. William B. Sowash, Office of Middle American Affairs.
  3. Walter Bauer, Investment and Economic Development Staff.
  4. The Export-Import Bank representatives are identified as follows: Hawthorne Arey, Vice-Chairman, Board of Directors; Walter C. Sauer, Vice President; and Albert J. Redway.
  5. On July 21, 1948, the Export-Import Bank had authorized a credit of $2,500,000 to finance the construction of the hotel, also known as the Hotel El Panamá. Subsequently, the hotel had become indebted also to the Panama Trust Company, a private commercial bank, in which the Panamanian Government sometimes deposited funds. Between December 1950 and early March 1951, the bank experienced a crisis, in part because of overextension and in part because of other financial problems, and it was closed by court order on March 7, not to reopen for the remainder of the year. Pertinent documents are in Department of State decimal file 819.14.
  6. On July 26, 1951, the Board of Directors of the Export-Import Bank authorized an additional loan of $1,500,000 to finance the unfunded obligations of the Hotel El Panamá. Pertinent documents are in decimal files 819.10 and 103–XMB. For further information on the loan, see Export-Import Bank of Washington, Thirteenth Semiannual Report to Congress for the Period July–December 1951 (Washington, 1952), pp. 16, 40.