819.20/2–1353

Memorandum by the Deputy Assistant Secretary of State for Inter-American Affairs (Mann) to the Under Secretary of State (Smith)

confidential

Subject:

  • Ambassador Wiley’s Proposal for a $50 million Agricultural Grant for Panama.

Our problems with Panama divide themselves into two categories.

[Page 1405]

The first is a problem common to all of Latin America. The people are demanding higher living standards and this demand translates itself into domestic political pressures on governments which, in turn, try to shift the onus to the United States by imputing to us responsibility for their difficulties. Nationalists and Communists exploit this “rising expectation” and point to the disparity in living standards between the area and this country. I therefore agree with Ambassador Wiley to this extent: One of our most important tasks is to help Latin America acquire the dollars they need to increase productivity—to expand their agriculture and industry. And I intend to recommend to Mr. Cabot that, to accomplish this, the lending policies of the World and Exim Banks should be liberalized and made more responsive to our foreign policy requirements in Latin America or, if this is not feasible, an economic grant program for the area comparable to that for the rest of the world.

The second category comprises numerous problems which arise out of the fact that the canal zone bisects the Republic of Panama.

I do not recommend a $50 million agricultural grant program for Panama at this time because:

1.
The economic problems of Panama should be treated as a part of the general problem; discrimination in favor of Panama will create trouble for us in Brazil and other countries essential to hemisphere solidarity.
2.
Panama is already receiving very substantial aid from us and has not requested the program.
3.
It would not satisfy the aspirations of the Panamanians concerning their relationship to the canal zone.