611.19/2–1353
Memorandum by the Ambassador in Panama (Wiley), Temporarily in Washington, to the Under Secretary of State (Smith)1
Panama
For the United States the importance of the Republic of Panama derives from its unique geographical situation and our special treaty rights having to do with the Panama Canal Zone, which strategically, politically and economically is the most important installation possessed by the United States anywhere. The Canal Zone, a foreign corridor bisecting Panama, a sovereign nation, presents a continuing problem of great delicacy to the United States. The security of the Canal is linked with the stability of the Republic. The daily functioning of the Canal depends to an important extent on friendly collaboration with the Panamanian authorities. It is in the interest of this Government to ensure, insofar as possible, that the Government of Panama at all times be well disposed toward the United States.
It is most desirable that American policy towards Panama be reviewed from time to time with a view to meeting the exigencies of the moment and the developments of the future. The nature of the relationship between the United States and Panama is such that periodic readjustment will always be necessary by force of circumstance. In recent years such readjustments took place in 1936 and again in 1942. Extensive and perhaps excessively generous concessions were made at that time by the United States to Panama. Now a moment of readjustment seems again at hand. The advent of a new administration in Panama has given impetus to a growing and insistent clamor for new concessions, including inter alia a higher annuity payment on the part of the United States. President Remón and his government, responsive to local pressures, seem to be embarked on an undisguised policy of extracting as much as possible from the United States. Their attitude seems to be that only in a forthright way will anything substantial be obtained from the American Government and that they are in a position to exact demands without concern or [Page 1403] preoccupation since Panama, which in international affairs is friendly to the United States, is too valuable to the United States for relations between the two countries to be disturbed by their exigencies.
The question of yielding periodically to Panamanian demands involves great danger of encroachment upon the treaty rights enjoyed by the United States in the Canal Zone since concessions could, in the course of years, have dangerous cumulative effects. It would seem desirable, in view of the very extensive concessions made to Panama in the past, that the United States avoid at this time a repetition of the procedures followed in 1936 and 1942. If there are any inequities in the Canal Zone to be remedied, measures for their correction should be limited to unilateral administrative action. No “commercial treaty” or other formal engagement should be entered into with the Government of Panama at this time whereby action by the United States would take the form of a binding international engagement.
But an alternative course must be found, since our relationship with Panama should not be based on a negative attitude alone. It might, therefore, be opportune for the American Government to consider collaboration with the Government of Panama in the economic field. Such a procedure at this time would seem particularly desirable since the economy of Panama has been based almost entirely on the Canal, a static installation which no longer suffices to support the expanding population of the Republic. Economic conditions are illustrated by the fact that there are at present 24 thousand Panamanians unemployed in the terminal cities of Panama and Colón. This unemployment of a quarter of the working population of the two cities is not due to economic depression—it is due quite simply to the fact that the necessary jobs do not exist in the present stage of economic development of the Republic. So neglected and undeveloped are Panama’s own resources that Panama today imports over 60% of its foodstuffs at a cost of about $11,000,000 annually, as compared to a total annual government budget of about $40,000,000. This economic underdevelopment in turn begets and aggravates political instability, which has resulted in Panama’s having had six presidents since 1948. It bears heavily upon the masses in Panama and is dangerously exploitable by leftists, communists and demagogues who find it expedient to ascribe Panama’s many ills to the Canal Zone and United States policies therein. It is, therefore, desirable and timely to do everything possible to establish the economy of the Republic on a viable basis, in order to take the Panamanian mind off the Canal Zone and to contribute constructively to political and social evolution and progress. The logical point of departure for this step lies in the field of agriculture.
The annual income of the nation could be very substantially increased through an intelligent and serious approach to the reorganization [Page 1404] and development of agriculture. The fact that Panama is a dollar country within the American economic orbit would save such an appropriation from being a mere grant. Indeed, it would have in this respect more the character of a domestic operation, since the benefits to the American economy would be immediate and real. Another most important advantage of such a program would be the development for the first time in the history of Panama of a substantial hard core of trained Panamanians which would in time permit a wholesome and much needed reorganization of the public services of the country.
It is suggested that the Department consider the possibility of seeking appropriations from Congress whereby $5,000,000 a year could be expended in Panama for, say, a period of ten years. The purpose of this grant should be specifically to develop, in the interests of agriculture, access roads, warehousing and market facilities for agricultural produce, agricultural equipment pools, land settlement, irrigation and small industry related to the processing of foodstuffs, as well as intensified technical collaboration. Whatever financial aid may be decided upon should be expended in the Republic for specific purposes under the sole and continuing control of the United States, and such funds as might not be disbursed would revert to the Treasury of the United States. The program should be entirely unilateral and without negotiated commitment on the part of the United States.
In furtherance of this program, an expression of the strategic interest of this nation in the development of political and economic stability in Panama might be sought from the Joint Chiefs of Staff. The development of agriculture in Panama would provide a local source of food supply for the garrisons and population of the Canal Zone, thus eliminating the present necessity in time of emergency of diverting sufficient foodstuffs from the United States to feed the populations of both Panama and the Canal Zone as well as to supply the necessary shipping for the purpose. Recognition of this Government’s special interest in Panama would provide ample justification for special programs in Panama without creating a basis for claims by other Latin American Governments for similar treatment.
- Ambassador Wiley was in the United States from late January until the end of February and returned to Panama on Mar. 4, 1953.↩