Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

611.1913/8–1254: Telegram

The Ambassador in Panama (Chapin) to the Department of State

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Panama City, August 12, 1954—2 p.m.

40. Embassy wishes make following comments on Deptel 35 August 11¹ and Holland–Muccio memo August 7² received today.

1. In view our inability grant Panama prestige demands re sovereignty and uniform single wage scale throughout zone,³ believe mature reflection that annuity of only one million dollars plus one million annually for US administered economic development program is not sufficient to compensate for dropping overboard these demands and will prove bitterly disappointing to Remon Government and Panamanian people. It may well create serious political opposition to Remon personally and may force him into role of rabid nationalism if he is to stay in power.

2. Earnestly recommend Department (which I understand was prepared to raise economic development program to two million per year) reconsider position and add this sum to present annuity rounding out proposed figure to two and half million dollars per annum. Believe that even at this figure, we may have difficulty in concluding negotiations satisfactorily in aura of good will. I suggest this cheap price for insuring stable and friendly government here and affording example of just and generous dealings by US with its friends in Latin America.⁴

3. Have no other observations to make on other points of memo except note with some disappointment that no mention is made of low cost housing project suggested by Embassy.

4. If suggested prohibition of Panamanian commercial traffic on proposed Trans-Isthmian highway has not already been mentioned to Panamanian delegation, see little use in risking possibility of riling Panamanian feelings over management of project not even in survey stage. Incidentally CARIBCOMMAND advises that funds for survey will presumably not be available before fiscal 1956.

Would greatly appreciate telegraphic summary when final decision has been reached as to labor, commissaries, et cetera, but Embassy in full agreement that these are best handled by unilateral declaration.

Chapin

1. Not printed (611.1913/8–1054).
2. In the memorandum of conversation of Aug. 7, 1954, Mr. Holland directed that Panama be granted a $1 million annuity and a $1 million yearly grant for a development program (Holland files, lot 57 D 295, “Panama, 1954”).
3. The Embassy in Panama City had evidently not been informed of the Department of Defense’s willingness to institute a single wage scale in the armed forces (memorandum of conversation, dated July 30, 1954, supra).
4. The Department responded in telegram 40 to Panama City, dated Aug. 13, 1954, that subject to the final clearance of the Secretary of State it was prepared to increase the annuity by $1 million (to $1.43 million) in addition to an annual $1 million grant to Panama for 10 years to be spent on economic development projects. (611.1931/8–1254)