Memorandum of Conversation, by the Assistant Secretary of State for Inter-American Affairs ( Miller )


Subject: Alleged Discriminatory Employment Practices in the Canal Zone.

Participants: Mr. Karl R. Bendetsen, Assistant Secretary of the Army
Mr. Donald Dawson,1 White House
Col. Beasley
Mr. Edward G. Miller, Jr.

On Thursday, December 20, I had a meeting at the White House with Mr. Donald Dawson, Assistant Secretary of the Army Bendetsen and Col. Beasley, of Mr. Bendetsen’s office. The meeting was called by Mr. Dawson to discuss allegations made to Mr. Dawson by representatives of the CIO with regard to discriminatory practices in the Canal Zone to the disadvantage of citizens of Panama.

Mr. Dawson said that according to his understanding wages paid to “local rate” employees of the Canal Zone were substantially lower than those paid to Americans and also that promotion opportunities for “local rate” employees were less than those for Americans.

Mr. Bendetsen made a long review of the employment practices in the Canal Zone and of the very serious fiscal problems that the Canal [Page 1561] Zone administration has had to deal with since Congress placed the Canal Zone on a pay-as-you-go basis.

Mr. Bendetsen and Mr. Dawson reviewed in some detail the composition of the Panama Canal Company. While this review disproved the information which Mr. Dawson had received that the Board of Directors was composed of representatives of private business, it was the consensus that the Board should be gradually reconstituted primarily from the point of view of having representation on the Board which would take into account the interests of Panama.

I set forth at some length the political problems with the Republic of Panama resulting from the Canal Zone. I pointed out that our relations with Panama were in a sense an index of our relations with Latin America as a whole and that Latin Americans tended to judge our attitude to small countries by our treatment of Panama. I also said that we had a particular responsibility toward Panama since we were, in a sense, responsible for its status as an independent country and that Panama seemed to be becoming a second focus (after Guatemala) of communist activity and that this activity was made easier for the communists by any discrimination against the Panamanians. I said that when I visited successively Panama and Venezuela a few months ago I was struck by the parallel between the situations of our oil companies in Venezuela and the Panama Canal on the one hand and those of Anglo-Iranian and the Suez Canal on the other. I said that I felt that as between the oil companies in Venezuela and the Canal Zone administration the oil companies were doing a far better job of public relations with regard to the local population. I expressed agreement with Mr. Bendetsen to the effect that it was not necessarily an objective of our policy to equalize wage scales between Americans and “local rate” employees. However, I felt that we should work in this direction; that we should reduce recruitment of personnel in this country; and that we should give greater opportunities for promotion to Panamanians. I also said that we should immediately improve the situation of “local rate” employees in regard to retirement compensation. Finally I expressed the view that we should completely overhaul the relations between the Canal Zone administration and the Republic of Panama.

Mr. Bendetsen expressed general agreement with my point of view and said that he had become so concerned about the whole problem of the relations between Panama and the Canal that he had taken on Colonel Beasley as a full time consultant on Canal affairs. He also said that Colonel Beasley was leaving for Panama on December 26 and that Mr. Bendetsen himself would go to Panama about January 7. Mr. Bendetsen asked that I accompany him to Panama and also that I send an officer familiar with Panamanian matters to consult with [Page 1562] Col. Beasley during the latter’s visit. I agreed to do that and subsequently asked that Mr. Sowash be in Panama by January 2 although I told him that I could not go. Mr. Bendetsen also said that he would begin immediately a reconstitution of the Board of the Company and that as a first step he would like to see me become a member of the Board and I agreed that I would serve if requested. Mr. Bendetsen also suggested the creation of an inter-departmental advisory group to the Secretary of the Army2 in regard to Canal Zone matters not falling within the competence of the Board of the Company. I supported this proposal and I suggested as a basis for the proposed group’s work, the McSherry Report of 1947.3

  1. Administrative Assistant to the President, and Liaison Officer, Liaison Office for Personnel Management.
  2. Frank Pace, Jr.
  3. In January 1947, Brigadier General Frank J. McSherry (ret.) was appointed Special Advisor on labor relations to the Governor of the Canal Zone, in part for the purpose of conducting an investigation of labor conditions and practices in the Canal Zone; for documentation relating to the investigation and the subsequent report (known as the McSherry Report), see Foreign Relations, 1947, vol. viii, pp. 948 ff.