Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

169. Despatch From the Ambassador in Panama (Harrington) to the Department of State¹

No. 317

Panama City, February 14, 1957.

REFERENCE

• Letter from the Counselor of the Department of State dated December 20, 1956²

SUBJECT

• U.S. Bases and Operating Facilities, Panama

The following analysis and assessment of the situation in Panama has been prepared by the Embassy and embodies certain suggestions and changes proposed by the Governor of the Canal Zone and Headquarters, Caribbean Command. It has been concurred in generally by both the Governor and Caribbean Command.

1. Local acceptance of and feeling of participation in U.S. operations.

a. Since its independence in 1903, Panama has generally followed a policy of cooperation with the United States and support of U.S. collective security policies. The matter has, of course, involved principally our operations in the defense of the Panama Canal.

In Article II of the 1903 Treaty, Panama granted the United States in perpetuity the use, occupation and control of the Canal Zone and any other lands and waters that might be necessary for canal purposes, with specific mention of the protection of the canal as one of the functions involved. Our right to maintain armed forces and military installations in the Canal Zone under this Article has never been questioned, and these operations have always been fully accepted by Panama. In subsequent disagreements with Panama about the scope of our jurisdiction in the Canal Zone, Panama has frequently reiterated that the defense of the Canal is one of the functions which the United States may properly carry on in the Canal Zone under the terms of the 1903 Treaty.

The inhabitants of this area have, ever since the days of the Spanish settlers, considered its principal asset to be its geographical location on this isthmus, and its economy is largely based upon the exploitation of this geographical position. The presence of military forces in the Zone is an important source of profit to the economy of Panama and one which Panama is glad not only to retain but to expand.

Panama also depends almost entirely upon the U.S. forces in the Canal Zone for its defense, and has no regular armed forces of its own aside from the Guardia Nacional police force. This effects a very substantial saving in the cost of defense, and, although the existence of Panamanian armed forces would undoubtedly be welcome in support of the national pride, there is no real pressure for the formation of such forces.

In the field of international relations, Panama has on the whole given valuable support to our foreign policy objectives. In the United Nations, Panama has usually gone along with the West in opposition to the communist bloc, and in connection with East-West trade has been cooperative in following the lead of the United States. This cooperation has been especially valuable in the field of shipping, where the Panamanian Government, by Decree No. 631 of August 18, 1951, has forbidden ships of the large Panamanian flag merchant fleet to enter ports of Communist China and other communist ports in Asia.

During the Second World War, the United States developed a plan of defense entailing the occupation of many points in Panamanian territory for airfields, gun emplacements, searchlight locations and the like. This plan was submitted to the Panamanian Government and was accepted in a formal agreement signed on May 18, 1942, which made available to the United States the needed defense sites until “one year after the date on which the definitive treaty of peace which brings about the end of the present war shall have entered into effect.”³ By a special informal arrangement, U.S. troops had already been in occupation of many of the bases for more than a year when the agreement was signed. Although this agreement, at the time of its termination, led to an acrimonious dispute between Panama and the United States, as will be discussed below, the granting of the bases contributed greatly to the strengthening of the defenses of the Canal and materially assisted the U.S. war effort. Panama also declared war on the Axis Powers with all possible speed and took immediate action to round up and immobilize Axis nationals who might become involved in sabotage of the Canal. In discussing this matter, Senator Mansfield⁴ said in his sub-committee report, “The value of this help in support of the joint war effort can hardly be exaggerated.”

In discussing above the favorable attitude of Panama toward U.S. armed forces, reference has deliberately been limited to troops and installations located within the Canal Zone. While Panama has never been inclined to question our military activities in the Zone, the question of our troops and bases outside the Zone has evoked an entirely different attitude, one of bitter opposition except in cases of the most extreme emergency.

By Article II of the 1903 Treaty, Panama granted the United States, in addition to the Canal Zone proper, “any other lands and waters outside of the Zone above described which may be necessary and convenient for the construction, maintenance, operation, sanitation and protection of the said Canal or of any auxiliary canals or other works necessary and convenient for the construction, maintenance, operation, sanitation and protection of the said enterprise.” This concession came to be considered by the Panamanians as particularly onerous, and in Article II of the 1936 Treaty the United States renounced the right to take lands and waters in addition to those already held under the 1903 Treaty. A provision was added, however, in the second paragraph of Article II of the 1936 Treaty (copy attached), by which it was agreed that in the event of an “unforeseen contingency”, which required the use of additional lands or waters, the two governments would agree on such measures as might be necessary “in order to insure the maintenance, sanitation, efficient operation and effective protection of the Canal”.

It has become apparent since the 1936 Treaty was signed that this provision is interpreted by Panama in a way quite different from what we understand the words to mean. It is significant that although the preamble to the 1942 Bases Agreement mentioned “the provisions of the General Treaty of Friendship and Cooperation, concluded March 2, 1936, to take all measures required for the effective protection of the Panama Canal”, no specific reference was made to Article II of that Treaty as the basis of the agreement. We understand that this omission stemmed from the refusal of the Panamanians to recognize the conditions prevailing in 1942 as constituting an “unforeseen contingency” as provided for in Article II of the 1936 Treaty.

The attitude of the Panamanian Government was further demonstrated in the dispute over the date of termination of the 1942 Bases Agreement and in the negotiations in 1947 by which we sought a more permanent arrangement. The question arose after the cessation of hostilities as to the meaning of the provision of the 1942 Agreement regarding the time of expiration of the leasing of the bases outside the Canal Zone; whether, as the Panamanians contended, the agreement should expire one year after Japan surrendered, or whether the United States could remain on any of the 134 wartime bases until a year after the final peace treaty should be signed. An Agreement was eventually signed on December 10, 1947, which would have granted the United States the right to remain in 13 of the wartime bases for five years and in the important Rio Hato air base for ten years with an option of renewal for an additional ten years. Unfortunately, popular opposition influenced the National Assembly of Panama unanimously to reject this proposed agreement on December 22, 1947, on the ground that “it was not inspired by the principle of juridical equality of the contracting states and does not follow the principles of international law and the spirit of the inter-American defense system”.

In negotiating the 1955 Treaty, a lease of the Rio Hato area for 15 years as a training and maneuver area was included, and this valuable site is now available to our military forces. The agreement specifically states that Panamanian sovereignty is not affected, and as the agreement as a whole is highly favorable to Panama there was little opposition to it in the Assembly.

During the period since November, 1955, the Embassy has been endeavoring to obtain from Panama, under the terms of Article II of the 1936 Treaty, the use of two hilltops in Panama near the borders of the Canal Zone as sites for radar installations to be used in connection with Nike equipment for the protection of the Canal. In this case, the Panamanian Government has again demonstrated its refusal to accept a reasonable interpretation of Article II of the 1936 Treaty. In response to our request, in which it was pointed out that the development of long-range, high-speed aircraft and guided missiles is an “unforeseen contingency” which clearly requires the use of sites at some distance from the Canal, the Panamanian Foreign Office replied that Article II of the 1936 Treaty was intended to provide for “only an extreme situation caused by a geographical phenomenon such as an earthquake or something similar” and that Panama could never agree that “an encumbrance could continue to hang over its territorial integrity”. There appears to be no likelihood that Panama will change this basic interpretation of Article II of the 1936 Treaty.

b. As it was pointed out above, Panama does not question our treaty right to maintain defense forces and installations in the Canal Zone, and these are recognized as sources of economic and security benefit to Panama. The reaction to a reduction in our forces in the Zone would undoubtedly be unfavorable. Such a reaction has been demonstrated in the past when it was occasionally necessary to declare Panama off limits for troops. On the other hand, any curtailment of our operations outside the Zone would no doubt be looked upon with approval by Panama, but since these operations have now been reduced to very small proportions, there is very little pressure for their further reduction. Our present holdings outside the Zone, such as the Cape Mala lighthouse, radar station on Taboga island, and the Rio Hato training and maneuver area are generally accepted by the Panamanians.

c. While the Panamanians and their Government recognize that an atomic attack on the Canal would probably destroy Panama City and Colon, their two principal cities, this recognition is not real and vital enough to influence seriously their attitude toward the extension of our activities outside the Zone. Although in our negotiations regarding Nike radar sites we have repeatedly pointed out this danger and the great security advantages that would accrue to Panama from these installations, we have not observed any appreciable change in their adamant opposition to the granting of the sites under the 1936 Treaty.

2. Points of friction with local population.

a. With such a large number of military personnel passing freely across the border from the Canal Zone into Panama and depending upon facilities in Panama for the types of amusement not offered by the Canal Zone, it is inevitable that there be frequent violations of Panamanian law and disciplinary action involved. In general these are limited to traffic offenses, drunkenness, brawling, “disrespect for Panamanian police officers” and the like. They are usually accepted as normal, and their impact upon our relations with Panama is not disturbing. Occasionally, however, a case arises which involves the rape, serious injury or even death of a Panamanian, and such cases are generally played up by the local press and arouse a strong emotional reaction. They are not frequent, however, and their total impact is not sufficient to reduce the welcome that American troops with their ready cash enjoy in the terminal cities.

The impact of the presence of our armed forces in the Canal Zone is limited by the fact that they reside in a separate jurisdiction, where they are housed, fed and generally provided for, and are thereby insulated to a great extent from direct contact with Panamanians and their economy. Their presence in this area is not ordinarily separated in the Panamanian mind from the more general question of the presence of the United States in jurisdictional control of the Canal Zone, and Panamanian efforts are directed principally toward gaining more material benefits from our presence in the Zone. The standard of living of most of our personnel in the Zone is well below that of the Panamanian elite who control this country, so there is little incentive to exploit this as an emotional issue.

b. The United States has maintained armed forces in the Canal Zone since 1903, and the local economy is therefore completely adjusted to their presence. Most of their housing and other requirements are supplied directly in the Canal Zone, quite independently of the Panamanian economy or through long-established channels to which the economy is fully adjusted. The dislocations usually associated with the sudden appearance of large numbers of our troops in foreign countries are therefore lacking in this case.

The principal complaints of an economic nature advanced by Panama concern the Panamanian desire to gain additional economic benefits from the Canal; a larger share of the Canal Zone market and higher wages for Panamanian employees of the United States Government. Several such matters were dealt with in the 1955 Treaty and are now awaiting legislation by the United States Congress for their implementation. They involve not only the armed forces but the Panama Canal Company and other civilian agencies as well.

c. Occupation of agricultural land by United States armed forces is a very minor problem in Panama. At Rio Hato, some farmers were displaced, but this had no serious repercussions and will soon be forgotten.

d. The question of criminal juridiction over members of the U.S. armed forces while they are in the Republic of Panama involves principally the types of case mentioned in a. above. Under the terms of an informal arrangement between the U.S. Provost Marshall and the Panamanian Commandant of the National Police, arrived at in 1942, provision is made for joint patrols of Panamanian guardsmen and U.S. military police to patrol certain areas frequented by our troops, for the delivery of arrested personnel to the U.S. Provost Marshall under certain conditions, for the presence of U.S. observers at trials and for various other arrangements intended to minimize the friction involved in such matters and to provide maximum protection to U.S. personnel. Although this arrangement has provided the basis for some cooperation between the two countries with respect to criminal jurisdiction, the military authorities in the Zone are not entirely satisfied with the results and have proposed that a new official agreement be negotiated with Panama on this subject. The matter is under consideration by the Department of Defense, and we assume that instructions will eventually be received to negotiate the desired agreement. The willingness of Panama to negotiate a formal agreement in this case is open to doubt because of the fact that in our administration of the Canal Zone our police and judicial authorities freely arrest, try and imprison or impose other punishment upon Panamanian citizens who commit crimes or misdemeanors in the Canal Zone, without any reference to the Panamanian Government.

Difficulties frequently arise in connection with the trial and conviction of U.S. military personnel by Panamanian courts, under conditions which do not provide all the legal safeguards to which Americans are usually accustomed. Reports on all such cases are submitted to the Department of Defense and to the Embassy, and any necessary official action is taken. Cases of this kind have not been the cause of serious trouble between the two governments, and they are usually of minor importance.

In view of the existence of a separate jurisdiction in the Canal Zone, disputes involving the question of civil jurisdiction over United States armed forces in Panama are neither serious nor frequent.

e. There are no other important local issues involving the armed forces which cause serious difficulties in our relations with Panama.

3. Impact on political situation.

a. While the United States retains control of the Panama Canal, which is the principal economic asset of Panama, our presence will inevitably be a matter of the utmost political importance in this country. It is exploited in varying degrees for political purposes by most of the local politicians, and the argument that Panama is not receiving a just share of the benefits of the Canal has popular appeal in Panama. There appears to be no doubt that the ultimate objective of Panama is to obtain joint or complete control and ownership of the Canal, although there is no expectation on their part of attaining this objective in the foreseeable future. The immediate and continuing objective is the gaining of increased annuities, once stated as a minimum of $5,000,000, preferably based on a percentage of tolls.

At times in the past, notably in the first administration of Dr. Arnulfo Arias (1940–1941), highly nationalistic policies, designed to take advantage of the latent chauvinism of the people, complicated our relations with Panama. Likewise, in 1947 when the question of continuing the agreement pertaining to the granting of certain bases to the United States was under consideration, there is no doubt that student demonstrations encouraged by communist elements were an important factor in the rejection of the proposed agreement by the National Assembly.

Since that time, the Panamanian administrations in power have followed more moderate policies in relation to the United States and more firmness in dealing with communist elements within the country. This has reduced the political exploitation of anti-Americanism to a point where it seems unlikely to lead to serious violence or irresistible political pressure on the Government.

b. Certainly for the present, the Panamanian Government favors the continued operation and defense of the Panama Canal by the United States. As far as our operations within the Canal Zone are concerned, there is no pressure for the reduction of our military activities, and the problems involved are not of such a serious nature as to suggest any such possibility. In connection with our defense requirements outside the Zone, however, we are faced with the firm refusal of the Panamanian Government to grant the necessary additional land under Article II of the 1936 Treaty, which we believe provides for just the kind of a situation that now exists. We nevertheless hope that it will be possible to overcome this difficulty by a new approach, which is suggested in a later section of this report.

This Panamanian attitude can probably be explained by one or both of the following conditions: (1) Panama does not wish to be under the continuing general requirement of furnishing additional land for defense purposes without a more definite control over the determination of the need for such land and over its administration. (2) Panama wishes to retain the bargaining power incidental to the granting of additional defense sites as the need for them arises.

4. Issues between United States and local government not arising under (2).

There are no other important issues of a military nature that have not been discussed in earlier sections of this report.

5. General estimate of future trends of local sentiment and government attitude toward maintenance of United States operations.

We can foresee in the near future no probable change in the attitude of the Panamanian Government or people toward the maintenance of our defense operations in this area. The long-range Panamanian objective of undermining our sole control of the Canal and substituting some form of joint operation from which they would obtain greater benefits will no doubt continue to be pursued. Our position is so strong, however, that this attitude is not a serious threat under present conditions.

6. Particular measures which have been or could be of assistance in allaying local resentments and governmental objections.

No action on our part short of the abandonment of our position in complete control of the Canal would fully remove the Panamanian pressure for further concessions. We have, however, through a long series of treaty revisions since 1903, notably the 1936 and 1955 treaties, given up many of the special privileges granted to us in the 1903 Treaty. In this process, we have returned or agreed to return to Panama a number of pieces of land not actually needed for canal purposes, we have enlarged the opportunities of Panama to obtain economic benefits from the Canal, we have greatly increased our annuity payments to Panama, and in numerous other ways have maintained an enlightened attitude toward Panama with the objective of keeping our relations with this country as a showcase of our relations with Latin America in general. The concessions granted to Panama in these treaties have, however, limited our freedom of action to such an extent that it would not be possible to go much further in this direction without adversely affecting our ability to operate and defend the Canal efficiently.

7. Particular measures to heighten sense of participation in an identification with defense efforts of which United States operations are a part.

As pointed out above, the most serious defense problem with which we are faced in our relations with Panama is the question of sites outside the Canal Zone for radar and other installations made necessary by the danger of unexpected attack by modern weapons. Although Article II of the 1936 Treaty should provide for such sites, the interpretation placed on this Article by the Panamanian Government renders it useless for this purpose, and there seems to be no possibility that the Panamanian attitude can be changed. Although Panama has, in the course of negotiations for Nike radar sites, indicated a willingness to negotiate a new agreement, entirely independent of the 1936 Treaty, to cover the granting of these sites, we have not followed up this offer because of our insistence that the 1936 Treaty is sufficient and our fear that the cost of this and future agreements, in terms of concessions to Panama, would be too great.

The seriousness of the problem is such, however, that the United States may be forced to abandon this position. We in the Embassy have reluctantly come to the conclusion that if we are to obtain the necessary sites at all we must be prepared to negotiate without reference to the 1936 Treaty. Therefore, if the need for the sites is deemed to be of vital military importance, we recommend that negotiations be undertaken for a new agreement to deal with this question alone. We propose that an effort be made to induce the Panamanian Government to grant the two sites in question on terms similar to those governing the lease of the Rio Hato area in the 1955 Treaty, without specific reference to the 1936 Treaty.

We believe that the chances of a successful and satisfactory outcome would be increased if we were in a position to present the matter as a joint venture for the protection of both the Canal and nearby areas in Panama and if we were able to make various other references to the joint nature of the undertaking and to the flying of both flags over the sites concerned. It should be kept in mind, however, that political expediency at the time of any negotiations could well cause the Panamanians to make unacceptable demands upon us in this respect. It is not recommended that actual control of the sites and equipment be shared with the Panamanians.

In the meantime, every effort should be made to induce Congress to pass the necessary legislation and provide the required appropriations to carry out the commitments made by the United States in the 1955 Treaty. This would not only provide a favorable atmosphere for the negotiations but would also remove important causes of dissatisfaction that might be exploited by unfriendly elements in opposing the proposed agreement.

Although beyond the scope of the present study, we wish to point out that if, in connection with the consideration of the problem of enlarging the facilities of the Panama Canal, the possibility of building an additional canal in Nicaragua or elsewhere were considered as a possible alternative, the latter consideration would have a most beneficial effect upon the attitude of Panama toward the defense of the Panama Canal, at least until a definite commitment had been made. If the Panamanian Government were led to believe that its monopoly position were threatened or that the expenditure of vast sums of money for enlargement of the present Canal depended to some extent on Panamanian willingness to cooperate fully in defending it, Panama might be prepared, during that period of uncertainty, to make considerable concessions as an added inducement.⁵

Julian F. Harrington

1. Source: Department of State, Central Files, 711.56319/2–1457. Secret; Limited Distribution; No Distribution Outside Department.
2. In this letter, Douglas MacArthur II informed the Embassy that, pursuant to an upcoming study by Frank C. Nash of U.S. overseas bases and operating facilities, it would be expected to prepare a report on U.S. bases and operating facilities in Panama. A questionnaire and proposed outline were enclosed, which formed the basis for despatch 317. (Ibid., 711.56319/12–2056) Nash formerly served as Assistant Secretary of Defense for International Security Affairs.
3. For text, see 57 Stat. 1232.
4. Michael J. Mansfield (D.–Mont).
5. In despatch 344 from Panama City, March 8, the Embassy pointed out that as a result of recent consultations in Washington between Ambassador Harrington and Department officials and in Panama City between Embassy and Caribbean Command officials there was general agreement that Panama would not agree to grant the desired radar sites to the United States under the terms of Article II of the 1936 Treaty. Accordingly, the Embassy proposed that the negotiations be “wound up” with a note from the Embassy to the Panamanian Foreign Office, stating for the record the U.S. position and reserving this position for any future negotiations under Article II. (Department of State, Central Files, 611.1913/3–857)