Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

PM–26. Memorandum of Conversation, by the Deputy Under Secretary of State for Political Affairs (Merchant)¹

Washington, November 27, 1959

SUBJECT

• Situation in Panama

PARTICIPANTS

• The President
• Mr. Livingston Merchant, Deputy Under Secretary

At the request of the President I reported briefly on my trip to Panama November 20–24. I said at the outset that the risk of serious trouble tomorrow exists and I felt that the Ambassador, Governor Potter and General Gaither were prepared to deal with it firmly and wisely. To send an emissary from Washington I said I thought had been well worth while. It had provided a cooling off period of a few days and had left them, I believed, with a clear impression of three points: first, that the Panamanian government had a responsibility and a duty to protect American lives and property; second, that the United States government would not negotiate under the threat of disorder and violence; and, third, that with the restoration of calm there were certain measures which could come into effect which would be beneficial to the Panamanians and which had been already decided upon prior to November 3. This together with the statement on titular sovereignty provided the Panamanian government with something which they could use if they were disposed to take a firm line on the maintenance of order. The government, however, is weak and there is some doubt as to the reliability of the National Guard. Under the circumstances President de la Guardia’s radio address last night,² I thought, had been quite good and it seemed clear that an effort was being made through the press, radio, the faculty at Panama University and in the provinces to hold demonstrations on Saturday³ to a peaceful purpose and character. If we got by Saturday without real trouble when I said I thought we should be looking ahead with a view to correcting any justifiable sources of complaint and grievance.

The President said that three years ago after the trouble at Suez⁴ he and Secretary Dulles had talked about the situation of the Panama Canal many times and had sought to ensure that steps would be taken which would head off any developments in the Canal Zone comparable to what had occurred in Egypt. He spoke of the discrepancy in wage rates and said that he had not felt that we had done all that we should have in this regard under the agreements of 1955. The question of third country purchases also had needed fixing and he had been anxious to see a training and apprentice program put into effect. Considerable progress had been made on these last month but then the inability to get his letter to the Panamanian government before trouble clearly threatened had resulted in the Panamanians not being aware of these corrective actions already decided upon.

The President asked me to follow the situation closely with the Department of Defense and make sure that with a return to more normal relations and a better atmosphere that there was no foot-dragging anywhere and that we consider constructively and sympathetically Panamanian requests. The President then volunteered that he thought we should have the Panamanian flag flying not all over the Zone, as some letter he had received had suggested, but at least in some ceremonial spot along with the American flag. He thought that particularly since we recognized Panama had residual sovereignty this would be a natural gesture and he remarked on the fact that at our bases in Spain only the Spanish flag is flown; the American flag is not flown at all. He then said that if it was not illegal (and he asked that the Departments of State and Defense study the matter) and if there were no mob action or violence on Saturday, he would even like to see a statement made on Sunday⁵ that henceforward the Panamanian flag would fly at some appropriate place in the Zone.⁶

In leaving I said that we all had our fingers crossed on what would happen tomorrow and that if there was no serious trouble we should certainly be thinking of measures which could be taken to improve our position in Panama since there was no doubt that it was a serious and long-term problem.

In conclusion I suggested and the President agreed that at his regular news conference this morning Jim Hagerty should say something to the effect that in reflection of the President’s interest and close following of the situation in Panama he had asked me to give him a personal report on my recent trip.

1. Source: Department of State, Central Files, 719.00/11–2759. Secret. Merchant’s conversation with the President occurred at 10 a.m.
2. The Embassy at Panama City transmitted the text of President de la Guardia’s radio address to the Department of State under cover of despatch 337, November 27, not printed. (719.11/11–2759)
3. November 28.
4. For documentation on United States policy with respect to the Arab-Israeli Dispute and the Suez Canal Crisis, see Foreign Relations, 1955–1957, vol. XVI, Suez Crisis, July 26–December 31, 1956..
5. November 29.
6. On November 28, Major John S. D. Eisenhower, the President’s Assistant Staff Secretary, telephoned Deputy Under Secretary of State Merchant and inquired about the question of flying the Panamanian flag in the Canal Zone on Sunday, November 29. Merchant reported that he had asked the Legal Adviser to study the legality of such an act; that he had raised this question with Secretary of the Army Brucker and with Governor Potter while he had been in Panama; and that Brucker and Potter had objected to this measure. In view of Brucker’s and Potter’s opposition and the fact that there would undoubtedly be a demonstration in Panama on November 28, Merchant informed Eisenhower that, in his opinion, immediate action on the flag was out of the question. Eisenhower agreed with Merchant’s assessment and said he would report Merchant’s recommendation to the President and also inform the President that he also supported Merchant’s conclusions. (Memorandum of Telephone Conversation, by Merchant, November 28; 719.00/11–2859)