Foreign Relations of the United States, 1961–1963, Volume XII, American Republics

410. Memorandum of Conversation¹

Washington, May 7, 1963, 10:30 a.m.

SUBJECT

• Panama

PARTICIPANTS

• The President
• Mr. Ralph Dungan, Special Assistant to the President
• The Honorable Joseph S. Farland, United States Ambassador to Panama
• Mr. V. Lansing Collins, Director, Office of Central American and Panamanian Affairs

Ambassador Farland opened the conversation by informing the President that Foreign Minister Solis had visited Washington April 23² and that the most important result of his visit was his declaration that President Chiari wanted to stop the United States-Panamanian Commission on July 31 because of the Panamanian political campaign and because Chiari believed it had not accomplished as much as he had hoped. Foreign Minister Solis also said that no Panamanian Government could obtain public support for the building of a sea level canal in the Darien region because of the effect on real estate and other values in Panama and Colón. Ambassador Farland went on to say that through diplomatic negotiations during the past week the Panamanian position on both of these two points has been considerably softened. The President asked whether the Panamanian desire to end the work of the Commission was due to dissatisfaction and he was told that this was partly correct. The President indicated that the key question seemed to be the studies on whether the present canal would handle the traffic in the future. He indicated he wanted to know who was going to do the study and was told that the Panama Canal Company would undertake to have the study made but we do not know what specific action is planned by the Company. The President asked whether we had any information on the limitations on leasing piers in Cristobal to Panama based on a proposed bill by Mrs. Leonor Sullivan, Chairman of the House Subcommittee on the Panama Canal of the House Committee on Merchant Marine and Fisheries. Ambassador Farland explained that this had been the sense of the Subcommittee when he testified at the hearings, but that we did not have the details of the most recent amendment which was apparently made yesterday. [It has since developed that no new amendment was entered.]³ Discussing the question of leasing piers Ambassador Farland pointed out that in the 1936 treaty we agreed to go out of the bonded warehouse business as soon as Panama had facilities of its own and that in the 1955 treaty we agreed to turn Panamanian traffic through the piers over to them when they had their own piers in Colon. These treaty obligations mean that if Panama builds a pier of its own we will, under item 10 of the Memorandum of the 1955 treaty, have to give “prompt consideration to withdrawing from” handling cargo for transhipment. We will be left in the Canal Zone with lots of unused pier facilities. Therefore, the leasing of the piers to Panama is a feasibly sound idea. The President indicated that we should find out what Mrs. Sullivan was objecting to and if we could not get her agreement to go ahead. Ambassador Farland noted that the Directors of the Panama Canal Company at their most recent meeting had decided they could not go along with the leasing of the piers to Panama unless they received a Presidential directive to do so.

The President indicated that in his opinion the annuity of $1.93 million we paid Panama every year for the Canal was not enough. Ambassador Farland expressed his agreement with this and stated that the amount of annuity (a treaty provision) had been a major source of conflict over the years; it had been discussed in all previous treaty renegotiations. He went on to state that in lieu of a treaty modification we have perhaps three alternative methods which could be used in adjusting our relationship with Panama: a) a very active AID program; b) funds obtained by a special Congressional appropriation; or c) funds from the contingency fund. The discussion then centered on the possible renegotiation of the treaty when a decision by the United States had been reached on the question whether or not to build a sea-level canal. The Ambassador reported that the Review Group had met on April 23 and that the consensus is that we should be ready to begin discussions leading to a renegotiation of the treaty to cover present operations in the Canal Zone by late 1964 or early 1965. At this juncture the President indicated his interest in ascertaining what form the Ambassador thought such a treaty might take. The Ambassador stated that the basic aspirations of Panama over the years had been to acquire for Panama a treaty comparable in its provisions to that which the United States had offered Colombia, i.e. the Hay-Herran Treaty.⁴ The Ambassador stated that there was good reason to believe that the Panamanian position continues to reflect that view even today. The Ambassador then briefly discussed the points of difference between the Hay-Herran Treaty and the Hay-Bunau Varilla, i.e. 1) a 100-year term; 2) Colombia would retain sovereign rights; 3) zone only six (not ten) miles wide; 4) court system in zone would provide for U.S., Colombian, and mixed courts.

The President then indicated that there was some feeling that Congress might balk at raising the annuity in a special appropriation and asked the Ambassador what had been his observations following his discussion with members of Congress. Ambassador Farland replied that these explorations had convinced him that provided the executive branch kept Congressional leaders completely informed of policy objectives there was good reason to believe there would not be as much opposition as had been previously suspected.

The President then noted that if we are going to have to renegotiate in a couple of years there is not much point in raising the annuity now or trying to get anything like that through Congress now and he asked Ambassador Farland what the Ambassador recommended. The Ambassador said that we should move ahead rapidly on the things under discussion by the Commission that do not cost any money and consider using the mentioned alternative sources of funds for development of, for example, a feeder road program and/or building of a port at Aguadulce and Panama City. Returning to the things that do not cost any money the Ambassador noted that the question of a corridor should be settled soon; that the lease of piers could move ahead once Mrs. Sullivan’s objections were met; that we had gone as far as we could in offering to use Panamanian stamps in the Canal Zone and the problem was up to the Panamanians to solve now; that we could look into the question of excess lands in the Canal Zone and we could do something about commercial activities in the Canal Zone. The President noted⁵ all of these. The discussion moved on to commercial activities in the Canal Zone. The President noted that the Governor should look into the possibility of having the prices of cigarettes and liquor which he understood were the items the Panamanians complained most about sold in the Canal Zone at prices comparable to those in the United States. There followed some further discussion of the possibility of financing a port at Aguadulce, using either contingency funds or funds especially appropriated by Congress or AID funds. The President felt that this could be done in a way to connect it vaguely to the Canal and make it very clear that this was in effect compensation for the Canal. He directed that this question be looked into. He said that we do not want an explosion in Panama, we must keep the lid on the next couple of years the best way we can. He requested that the possibility of some kind of a Panamanian retail outlet in the Canal Zone such as a store or a cooperative be looked into.

1. Source: Kennedy Library, National Security Files, Countries Series, Panama, General. Confidential. Drafted by Collins.
2. A memorandum of an April 23 luncheon conversation between Rusk and Solís is in Department of State, Central Files, POL PAN-US.
3. Brackets in the source text.
4. Reference is to a convention between the United States and Colombia, signed at Washington on January 22, 1903, but never ratified by Colombia. The text is printed in Christian L. Wiktor, ed., Unperfected Treaties of the United States of America (Dobbs Ferry, NY: Oceana Publications, Inc., 1977), vol. 3, p. 449.
5. The sentence originally read, “The President agreed to all of these.” On the source text, the words “agreed to” are crossed out and the word “noted” is handwritten, apparently by Dungan, who initialed his approval on the memorandum of conversation.