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

PM–3. Memorandum Prepared in the Bureau of Inter-American Affairs¹

Undated

SUMMARY OF DISCUSSIONS IN PANAMA DURING DR. EISENHOWER’S VISIT²

July 12–16, 1958

In Panama contacts between Dr. Eisenhower’s Mission and the Panamanians were limited to Government officials and labor unions. Principal discussions took place in a meeting with President Guardia, members of the Cabinet and Ambassador Arias in the Presidential Suite at the El Panama Hotel. The Panamanians made a series of requests for financial assistance and appeared to be just a little confused as to which credit agency they should apply to for the various loans they were hoping to obtain. President Guardia and some of the other ministers who spoke apparently attempted to secure a special position for Panama, saying that the other Latin American countries realized that a special relationship existed and that anything done for Panama would have favorable repercussions throughout the Continent.

Reference was made to the fact that in Panama the rate of population growth was higher than the growth of national income, thus a climbing index of productivity was coupled with a drop in real per capita income and this was resulting in a deterioration of the standard of living. Similarly, the Panamanians pointed up the fact that the proximity of the Canal Zone should be an additional stimulus for the United States to render special assistance to Panama. President Guardia made passing reference to the internal political situation by saying that 60% of the population were under 25 years of age and with the impatience of youth coupled with the drop in per capital income to which he had previously referred, this created an atmosphere propitious to fanning anti-U.S. sentiments.

The Panamanians broadly indicated there were two classes of things the U.S. should do, some in the political field and some in the economic field. In the political field were some matters which really belonged in the economic field. Among these were the matters relating to making the Canal Zone market available exclusively to Panama and the United States. They mentioned the discontent created in Panama by the purchase of Australian and New Zealand meat and felt that the wording of the 1955 agreement should limit the Canal Zone market to the United States and Panama. When it was pointed out that the amount of meat purchased from abroad was extremely small, the Panamanians indicated that it was not the quantity but the fact of purchase from abroad that aroused resentment.

In the political field, the President mentioned two further items which he brought up with some embarrassment. They related to the flying of the Panamanian flag in the Canal Zone and the use of Spanish as an official language in the Canal Zone. The President emphasized that if the U.S. would offer to do this spontaneously, the overall effect would be far more beneficial than if it were done grudgingly at a later date. The President then made a statement that if the U.S. might have to do more than Panama, Panamanians would nevertheless try to reciprocate as they felt a moral obligation on their part to assist in preserving the free way of life.

Passing to the economic area, the President said that he felt there were no real problems in the economic field if time were not a factor. However, the young people who make up such a large part of the national population, particularly the University youth were impatient for speedy solutions.

Education—In the field of education, which was an extremely important area in Panama, they would like to secure a loan for $12 million to push through a school development program. The rent now being paid-on leased schools could service the amortization of such a loan. Such a gesture on the part of the United States would have great psychological impact throughout the area.

Agriculture—The Panamanians expressed a desire for a $7 million loan to make available additional loan capital to the Institute for Agricultural Development. Because of the shortage of such capital, the Institute had had to curtail its credit.

Sewage and Water—Panamanians expressed a hope that a loan could be obtained to improve the water system and extend sewage construction. The Smathers loan³ had been helpful and they would like to handle this on the same basis.

Electric Power—In this field, it was stated that Panama was stagnating. Power available was greatly below that required. A hydroelectric project to supply Panama and Colon was badly needed. The Panamanians made it quite plain they would be perfectly happy either to do this themselves or to have American and Foreign Power do it, or a combination of both. This willingness was cited by the President as an indication that the Panamanians were receptive to private enterprise and capital investment.

Roads—Panama was expending a great deal of money to complete the Inter-American highway but a great many feeder roads were necessary and further credit facilities would be required. In the meantime, they were anxious to obtain training of engineering units and operators of road building equipment. They had requested such assistance through the International Cooperation Administration and hoped that this matter could be expedited.

Housing—The Panamanians indicated that this was a very serious problem considering the fact that, on the average, in Panama City, 5 people live in a 9 x 9 room. It was the intention of the government to create a housing institute and initiate a low-cost housing program. Initially this would be done with government funds but as the program gathers momentum, the government will welcome credit from any source to go ahead with this program.

Development of the Bay of Panama—It was pointed out that there were no pier facilities except through the Canal Zone and the number of shrimp and fishing boats as well as pleasure craft was increasing constantly. The construction of the new bridge will further emphasize this problem. Land reclamation will make available land which could be sold for some $10 million and credits to finance this operation would be a sound investment.

Extension of Tocumen Runway—The Panamanians had been notified by the Civil Aeronautics Authority and a number of U.S. airlines that Tocumen airport would soon begin to be used by jet transports. This would require an extension of the present runways there and the cost of this extension will approximate $530 thousand. They felt that as the U.S. Armed forces would have the free use of this airfield in time of war, that it was only fair that some share of the cost of construction be borne by the United States.

Point 4—The President expressed a desire for a broadening and enlarging of the Point 4 program. The Panamanians recognized that Point 4 has made a great contribution to the economic progress of the country and are anxious that this program be broadened in scope. There were many fields of endeavor where prospective profits were too small or too insecure to justify investment, nevertheless, many of these activities were vital to the further economic development of Panama and they would hope that an institution such as Point 4 would be available, capable both of assuming risks and making grants.

Quotas and Preferential Tariffs—Panamanians felt that with a limited economy of their type it was not unreasonable to hope they would be given a larger sugar quota then they had at present (3,000 tons). Similarly, they hoped that they might be made the beneficiaries of any preferential tariffs permitted by the laws of the United States.

Telecommunications—It was indicated that as a result of a study⁴ conducted by Col. Grey, it appeared that the telecommunications network of the Republic of Panama was nearing a total breakdown. The study recommended the construction of an open wire network at a cost of some $2 1/2 million.

The Government expressed strong support for the position assumed by the United States in the international arena, particularly insofar as the action in Lebanon⁵ was concerned.

CONCLUSIONS: In Panama broad requests were made for further financial assistance from the United States. Willingness was expressed to seek such assistance not only from Government credit organizations but also from private investors. Not only was no hostility expressed towards private foreign investment, but it was stated that this would be welcomed. Requests for loans for which specific amounts were mentioned were as follows: schools $12-1/2 million, agriculture $7 million, sewers $13-1/2 million, telecommunications $2-1/2 million, Tocumen Runway extension, half a million dollars, and an unspecified amount was hinted at for the Panama Bay development program and additional highway projects.

The various projects appear to have been prepared in the various ministries concerned without an overall coordinated effort at establishing a national plan. If Panama is to achieve a viable economy as a basis for political stability, there must be an accelerated development of the production resources. This is a broad task. Under the political system in Panama, the primary burden for economic development rests with private enterprise. The three main pillars of the economy are agriculture, industry, and trade. The Government, however, must support, encourage, serve, and regulate private enterprise in the public interest to achieve national goals. The Government has undertaken to do this in various fields but so far, despite the mounting costs to the people, increased national production has fallen far short of expectations. This seems partially due to poor planning and inadequate personnel and organization to make available technical knowledge and get decisions in dealing with these problems. In order to plan effectively, the following would seem to be needed:

1. An inventory of the nation’s assets, both human and natural.

2. A study to determine the viability of new industrial enterprises.

3. A study of domestic requirements and possible sales on foreign markets, including tourism.

4. Establishment of standards and levels for essential government services in developing, supporting, and regulating private activities.

5. Formulating the necessary finance, tax, and trade policies to serve the economic development programs and a study of the organization and functions of Government agencies working in this field.

The President of Panama has taken an interest in this matter and arrangements have been made for a Mr. Alvin Mayne of the Puerto Rico Planning Board to advise and assist the Panamanians in these matters. Pro-Communist and anti-U.S. activities appear in Panama as in other countries in the area to be centered in the University.

1. Source: Department of State, ARA Special Assistant’s Files, Lot 66 D 513, “Eisenhower, Milton Nicaragua 1958.” Neither the drafter nor the date is indicated on the source text, which is a carbon copy.
2. For additional documentation concerning Dr. Milton Eisenhower’s trip to Central America, July 12-August 1, 1958, see Document NI–4, footnote 4..
3. The amendment to the Mutual Security Act of 1956, which was named after its sponsor, Sen. George A. Smathers (D-Fla.), provided for the use of a portion of the defense support funds authorized in the Act for health, education, and sanitation projects, and for land resettlement programs in Latin America. For the text of the Mutual Security Act of 1956 (Public Law 84–726), enacted on July 18, 1956, see 70 State 555.
4. Not found in Department of State files.
5. For documentation on U.S. policy with respect to the crises in Lebanon and Iraq in 1958 including the rebellion in Lebanon in May, the revolution in Iraq in July, the dispatch of American troops to Lebanon, and the role of the United Nations, see Foreign Relations, 1958–1960, vol. XI, Lebanon and Jordan, and Foreign Relations, 1958–1960, vol. XII, Near East Region; Iraq; Iran; Arabian Peninsula, Chapter 4.