123. Telegram From the Ambassador in Panama (Chapin) to the Department of State1

388. Re Embtels 3862 and 3873 April 5. Since financial situation as depicted by Fabrega seemed disquieting Embassy conducted further check on technical level and discovers that he apparently is either ignorant of real situation or purposely desires exaggerated difficulties perhaps with hope of obtaining vigorous action by Department in pressing for Senate ratification of treaty before paying of water bill in full. [Garble] call Panama has been consistently reluctant in treating these arrears as genuine obligation and even after the agreement between governor and comptroller Obarrio last fall when funds were in fact available delayed several months before beginning installment liquidation of arrears.

Quarterly figures Panamanian cash position reveal actual receipts by Government 1955 at $9,700,000 or less than 1/2 percent below receipts for first 3 months 1954. This slight drop in receipts explainable by 1 month delay granted for real estate tax payments by action Panamanian Government.

Due to normal seasonal development receipts during first 5 months are low and below 1/12 annual figures and government expenses are abnormally high hence making for actual real deficit. However anticipated revenues for month of June 1955 alone with 2 large payments mentioned Embtel 387 are $8 million which should permit payment in full by Panama of water bill and Claims Commission debt.

Recommend insistence on payment water bill before end of June. I am becoming more and more convinced that present government feels that early ratification of treaty is almost a psychological necessity to counteract bad odor of Guizado trial and to establish another “victory” for the Remon legacy.4

  1. Source: Department of State, Central Files, 611.1913/4–655. Secret.
  2. Supra.
  3. In telegram 387 Ambassador Chapin reported further on his conversation with Foreign Minister Fábrega on April 5. Fábrega had explained that Panama’s delay in paying the water bill was due to the fact that tax collections had dropped off substantially in the last 3 months. (Department of State, Central Files, 611.1913/4–558)
  4. Despatch 498 from Panama City reported that Panama had paid all its outstanding bills to the United States. (Ibid., 611.1913/4–2055)