611.19/11–2552
Memorandum by Edward W. Clark of the Office of Middle American Affairs to the Deputy Assistant Secretary of State for Inter-American Affairs (Mann)
Subject:
- United States–Panama Relations
The following developments in Panama have given rise to serious concern within the Department.
1. Treatment of the American-Owned Fuerza y Luz Utility Company
[Page 1401]The Supreme Court on October 20 invalidated the municipal tax exemption provision of the company’s 35 year old contract. On October 30 the Court dismissed the rehearing petition of the company. The company also faces a tax suit for alleged non-payment of taxes of $320,000 on profits and a fine of $254,000 for alleged late payment of income tax on dividends.
2. Political Interference with the Point IV Program
While there appears to have been some justification for the Panamanian Government’s position in insisting upon full administrative control of programs not supported by joint funds, there now appears to be some question as to whether the Panamanian Government will not attempt to take a similar position with respect to the jointly supported Point IV Servicios.
3. Assembly Resolution Critical to the United States and Growing Clamor for United States Treaty Revision
The Assembly Resolution charges the United States with non-fulfillment of its treaty obligations and calls for a larger annuity payment. Administration officials, including Remón,1 appear to be inspiring the popular clamor for treaty revision. By espousing such demands, without determining the attitude of the U.S., Remón puts himself out on a limb.
4. Possible Cancellation of Contracts Negotiated Under Decree Law 12 of 1950
There are indications that the Government may not continue to recognize the validity of contracts involving exemptions from import taxes negotiated under this law, originally designed to attract foreign capital. Some American companies are involved.
5. Possible Break Down of Negotiations with World Bank
The Panamanian auditing firm which has assumed the job of reorganizing Panama’s internal revenue department has withdrawn from the project because of the Administration’s failure to abide by its promise to protect the firm from political pressures in matters of personnel. The World Bank is concerned over this development and is sending a mission to Panama at the end of this month.
Some of the above developments are not matters on which the United States can properly protest formally. What concerns MID is the trend in the thinking and attitude of the Remón Administration which these developments would seem to indicate; that is, looking to the United States for Panama’s economic salvation, regardless of the means which may be resorted to in extorting such aid. They indicate also an apparent belief that the way to obtain concessions and help [Page 1402] from the United States is through a “get tough” policy. This course is taken as the easy way out instead of adopting the basic administrative and fiscal reforms advocated by the World Bank.
If you concur, would you be so good as to discuss with Mr. Miller the advisability of the latter’s calling in Ambassador Heurtematte for a frank expression of our concern over these developments.
- Colonel José Antonio Remón won the national elections held on May 11, 1952, defeating Roberto Chiari by 133,208 votes to 78,094. In spite of predictions that the elections would be accompanied by widespread violence (see SE–21, Jan. 24, 1952, p. 1392), only scattered incidents marred election day. Remón was inaugurated as President of Panama on Oct. 1, 1952. A more detailed analysis of the Presidential elections is contained in despatch 1019 from Panama City, dated June 16, 1952 (719.00/6–1952).↩