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


Subject: Findings of IBRD Mission to Panama

Participants: Mr. Aldewereld, IBRD
MID—Ambassador Nufer
MID—Mr. Siracusa
MID—Mr. Sowash

Mr. Aldewereld having recently returned from his mission to Panama, Messrs. Nufer, Siracusa, and Sowash called on him today for an informal résumé of his findings.

Mr. Aldewereld began his summary by stating that Panama today, just as it has for centuries, depends for its livelihood upon transients and upon the inflow of money from abroad. He found that Panama’s sole development plans consist of four projects: the recently built El Panama Hotel, the new racetrack now abuilding, the Colón Free Trade Zone, and the extension of the water supply and sewerage systems to the suburbs of Panama City. Of these four projects, the first three are based upon the traditional dependence upon transients and income from abroad. The result of this way of thinking has been a needless and costly neglect of Panama’s own resources, particularly in the field of agriculture. Further, Panamanian capital is chiefly interested in the quick turnover that commerce provides and there is very little investment in the development of Panama’s resources. Mr. Aldewereld asserted that Panama’s greatest need is a change in this mentality.

Concomitantly, Panama needs a thorough cleansing of its present “rotten” political life and the institution of a civil service system in government employment. He described the amount of graft and corruption in the government as incredible. Panama’s virtually complete lack of credit worthiness was stressed and the alarming rate of increase in the national debt, chiefly internal, was noted. An important contributing cause is the non-payment of income taxes by virtually everybody except employees of the government and foreign companies, whose taxes are withheld at the source.

Mr. Aldewereld believes the expansion and development of agriculture to be Panama’s principal hope for economic salvation. This [Page 1560] program can best be directed by a development (Fomento) company. In many respects, the present Banco Agropecuario is suitable for this purpose. However, the Banco will continue to be ineffectual until it is taken completely out of politics. He opines that a broad economic survey would be helpful but unrealistic at this time in view of its probable cost and the probability that it would be shelved without action by the government.

The importance of improved transportation in Panama also was emphasized. Mr. Aldewereld believes that this must precede agricultural development.

Saying that Panama has great need of experts in many fields, Mr. Aldewereld concluded that, despite his discouraging findings, the Bank probably would send experts to Panama. He emphasized, however, that such aid should be contingent upon Panama’s taking certain steps to help itself, including certain long needed internal reforms. Otherwise, the money expended to assist Panama will effect no lasting improvement, as Panama’s past has proven.