Memorandum of Conversation, by Mr. William B. Sowash of the Office of Middle American Affairs


Subject: Matters of current importance in United States-Panama relations

Participants: Dr. Carlos N. Brin, Foreign Minister, Panama
Mr. Rodolfo Herbruger, Minister of Finance, Panama
Mr. Guillermo Endara, Panamanian Chargé d’Affaires
MID—Ambassador Nufer
MID—Mr. Sowash

Foreign Minister Brin, accompanied by Messrs. Herbruger and Endara, called at the State Department today by appointment to discuss nine matters of current interest in United States-Panama relations which Dr. Brin had indicated a desire to review while in Washington in an earlier conversation1 with Assistant Secretary Miller.2 In the course of the conversation, he stated that the discussion of these topics with Departmental officials has been one of the main purposes of his trip to Washington and that for this reason he [Page 1542] had brought two other cabinet ministers with him. The following subjects were discussed:

1. Inter-American Highway 3

Dr. Brin again stressed the current serious economic situation in Panama, importance of the highway to Panama, and the concern of his Government over the amount allocated to Panama from the current appropriation for the highway. These allocations and the reasons therefor were once again explained to the Foreign Minister. He was told that the allocation for Panama this year would probably be $600,000, that Panama and Costa Rica would receive the largest portion of the second $4,000,000 appropriation, when made, and that the Department is currently endeavoring to secure a much larger amount for the highway in Fiscal Year 1952. Our present goal in Panama was stated to be an all-weather road from Chiriqui to the Canal Zone and Dr. Brin emphasized such a road was a prerequisite if the Chiriqui area is to help supply the Canal Zone in times of emergency.

2. Bridge or Tunnel at Pacific End of Panama Canal

Dr. Brin remarked that this treaty commitment4 on the part of the United States has existed since 1942 and that no steps were taken by the United States toward its fulfillment in the five year period between the end of World War II and the outbreak of the Korean crisis. Dr. Brin was informed, as he had been on several previous occasions, that while the Department recognizes this commitment it is, nevertheless, not in a position to carry it out at the present time. It was pointed out that fulfillment of this obligation will cost the United States millions of dollars and that the Department had purposely not submitted enabling legislation to the proceeding session of Congress in order not to jeopardize Congressional action on appropriations for the Inter-American highway, which is deemed to be paramount in importance. With the outbreak of the Korean crisis a new emergency has been created which precludes any possibility of Congressional action on this commitment at this time. Moreover, Congressional appropriation of funds for this project is extremely unlikely until a decision has been made regarding future plans for the Panama Canal. Dr. Brin seemed resigned to the impossibility of obtaining United States action on this commitment at this time but remarked that, in his opinion, the uncertainty of future plans for the Canal ought not to constitute an obstacle since the proposed bridge or tunnel would be at Balboa and [Page 1543] therefore presumably would not be effected by construction work on the canal further inland.

3. Loan to the Banco Agropecuario for Agricultural Development

The Department’s willingness to support a Panamanian loan application for any economically sound project was again indicated to the Panamanians. Dr. Brin stated that Panama has requested the International Bank to make a general economic survey and would probably call upon the Bank’s technicians to assist in drawing up development plans and a loan application. He indicated that as an alternative, Panama may decide to request assistance under the Point IV program in drawing up the loan application. He was told that this Government would sympathetically consider such a request and it was agreed that a general economic survey would be helpful in planning future Point IV projects in Panama.

4. Market in Canal Zone for Panamanian Products and Elimination of the 25 Percent Differential

The Embassy’s and Department’s lively interest in this matter and their continuing efforts to expand Canal Zone purchases of Panamanian products were detailed to the Panamanians. It was explained that the requested elimination of the 25 percent differential would necessitate an approach to Congress, which is not deemed feasible in view of the domestic interests involved. Instead, the Department seeks exemptions for specific Panamanian products by Department heads under the “national interest” clause of the “Buy American Act”. The Panamanians seemed somewhat surprised to learn that Canal Zone purchases from Panama now total about $2,000,000 a year. Further increases are expected in view of a recent report from the Embassy to the effect that the Armed Forces and the Panama Canal and Railroad now are anxious to expand their purchases of Panamanian products in order to develop a local source of supply. They were pleased to learn that the Caribbean Command has recently requested that chilled meats and clay products, among others, be placed on the exempt list. Dr. Brin argued strongly that cement also should be exempted and stressed the importance of this new industry to Panama and the current difficulties under which it labors. He was told that the Department would look into the possibility of doing this. Occasion was taken to point out that Panama itself could do a great deal toward increasing the sale of Panamanian products by organizing marketing cooperatives and by taking other steps to facilitate and ensure the delivery of Panamanian products in adequate quantities and quality on specified contract dates.

5. Permission for Panamanian Trucking Interests to Pick up Cargo on the Wharves at Balboa and Cristobal

It was explained to Dr. Brin that this matter has been referred to the Embassy in Panama for investigation and comment and that the [Page 1544] Embassy’s report has not yet been received. The Foreign Minister was told that the Department would cable the Embassy today to expedite its report in order that this matter may be discussed with Dr. Brin before his departure from Washington.5

6. Equality of Treatment for Panamanian Employees in the Canal Zone

The Department’s continuing efforts to ensure that Canal Zone labor practices accord with this Government’s treaty commitments were outlined to the Panamanians. In view of the broad nature of this subject, Dr. Brin was asked to specify what practices he considers inconsistent with our treaty obligations. He referred to only two: the failure of United States agencies to give equal pay for equal work and the present inadequate retirement payments to Canal and Railroad employees. With regard to the first point, Dr. Brin was informed that the Canal and Railroad periodically review their job descriptions with a view to transferring to United States rate lists those local rate employees whose positions demand a degree of skill equal to that exercised by United States rate employees in similar positions and that a number of positions already have been so reclassified. It was explained that the nature of the problem makes progress necessarily slow but that the Department continues to support moves in this direction. With regard to retirement provisions, Dr. Brin was informed that this Government now has under consideration two plans for increasing retirement payments to employees of the Panama Railroad and Canal, and that both plans are generous and represent a very great improvement over the present admittedly inadequate payments. Early action on a retirement plan is expected. Dr. Brin pointed out that, despite rumors to the contrary, his Government not only does not oppose but actively favors payment of higher wages in the Canal Zone.

7. Importation of Alcoholic Beverages into the Canal Zone

Dr. Brin was informed that the Executive Order of 19356 on this subject is still in effect and that it would be helpful to the Department in preventing the infractions of which he complains if he could supply the Department with specific information regarding these infractions. Dr. Brin said that he did not wish to register a formal complaint but that he has been informed that sizable quantities of liquor are being flown into Panama on military planes in direct contravention of the terms of the Executive Order. He was told that the Department would bring this matter to the attention of the appropriate Canal Zone authorities.

[Page 1545]

8. Removal of the Railroad Station in Panama City

Dr. Brin inquired regarding the present status of this matter. He was informed that the Department of Defense plans to submit enabling legislation on this project to the Budget Bureau this week for transmission to the Congress and that it was hoped, therefore, that this Government would very soon find itself in a position to proceed with the fulfillment of this commitment.7 It was pointed out, however, that the commitment of the United States is conditioned by the stipulation that the Government of Panama shall provide free of cost a new site deemed suitable for terminal purposes by both Governments. In view of the cost to both Governments involved in preparing the proposed Curundu site, Dr. Brin continued to urge consideration of the use of the Balboa Station, the railroad withdrawing completely from Panama City. He pointed out that the Curundu site is very close to the Balboa station and that use of the Balboa station should not therefore appreciably reduce the revenues of the railroad. Furthermore, he argued, the hundred-year concession of the railroad will expire in 1965 or 1966 and he questioned the prudence of the United States spending $4,000,000 to build a new terminal in Panama City which might have to be abandoned in another 15 years. He was told that the Department would ascertain the feasibility of using the Balboa station and the hope was expressed that a site could soon be agreed upon since early and favorable action by the Congress is expected.

9. Equality of Treatment for Panama and the Canal Zone in Regard to Allocations and Quotas of Scarce Commodities and Products

Dr. Brin explained that Panama hopes that future allocations and quotas, imposed on Panama in the exportation of scarce items and commodities will take into consideration purchases in Panama by Canal Zone residents. Dr. Brin was told that the Department recognizes the problems posed for Panama in this regard by unrestricted purchases of scarce items in Panama by residents of the Canal Zone and he was assured that the Department would bring this problem to the attention of the appropriate authorities. He was warned, however, that the Department had been unable to do much in this regard during the last war.

At the close of the discussion of these nine points, Dr. Brin was asked how the affairs of the Panama Trust Company and the new hotel are progressing. Dr. Brin said that he had had no report since arriving in Washington but that he hoped a satisfactory solution could be arrived at. It was suggested that Mr. Herbruger might wish to discuss this matter with the Export-Import Bank officials while he was in Washington. The hope was expressed that the solution to this problem [Page 1546] would be such as would permit the continued fruitful development of the bank and hotel in order that the loan to the hotel might be merely the first of a series for developmental projects in Panama.

The exchange of views on these several problems is considered to have been very beneficial and the conversation was at all times cordial. The Panamanians left in what appeared to be a satisfied mood.

  1. Summarized in a memorandum of conversation, by Mr. Ernest V. Siracusa, of the Office of Middle American Affairs, dated March 22, 1951, not printed (819.2612/3–2251).
  2. Edward G. Miller, Jr., Assistant Secretary of State for Inter-American Affairs.
  3. Documentation on this subject may be found on pp. 1038 ff.
  4. Reference is to the so-called Twelve Point Agreement effected by an exchange of notes signed at Washington, May 18, 1942. For text, see Department of State Executive Agreement Series (EAS) No. 452, or 59 Stat. (pt. 2) 1289. Under point four of the agreement, the United States was committed to the construction of a tunnel under or a bridge over the Canal at Balboa in order to improve transportation across the Canal.
  5. Further discussion of this matter took place at a meeting at the Department of State on April 6, 1951; the meeting was summarized in a memorandum of conversation of the same date, by Mr. Sowash, not printed (611.19/4–651).
  6. Executive Order No. 6997, March 25, 1935, prohibited the direct importation of hard liquor into the Canal Zone; for text, see Executive Orders Relating to the Canal Zone (Canal Zone, 1922), Supplement No. 28, p. 477.
  7. Under point ten of the Twelve Point Agreement, the United States had committed itself to the removal of the terminal facilities of the Panama Railroad from their present site.