438. Memorandum From the President’s Special Assistant (Rostow) to President Johnson 1

Mr. President:

Bob Anderson called in to report the present state of the Panama negotiations. He will be meeting again on Monday2 afternoon. He will use his own judgment in dealing with the two positions set out below unless you wish to give him instructions which he would, of course, welcome.

I. Our position

We have offered:

  • —17¢ per ton for the Panamanians; we would keep 8¢;
  • —the lock canal treaty ends in the year 2000, but will continue to 2010 if construction on the sea level canal is under way;
  • —the sea level canal treaty would run 60 years from the time it became operational;
  • —we would maintain the right to defend the lock canal for 10 years past the expiration of the treaty (the Panamanians argued for 5 years);
  • —payments under the sea canal would be negotiated at the time that financing was arranged; but guidelines are written into the present treaty.

II. Panamanian position

They ask:

  • —20¢ per ton for Panama in the first year; 5¢ for the U.S.;
  • —an increase of 1¢ up to 25¢ per year in the subsequent five years (at this time that would absorb the calculated amount available after costs without raising tolls; but in the future, that may not be the case since other aspects of the treaty are likely to reduce canal costs.);
  • —a guarantee for the value of the dollar over the whole period of the life of the lock canal in terms of the purchasing power of the dollar in 1967;
  • —a guarantee of $1.9 million a year (the present annuity) in addition to the sums to be derived from the new split of profits from tolls;
  • —a 60–40 division in favor of Panama if tolls should increase (we are calling for a 50–50 split);
  • —an exchange of letters in which we agree to look into their request for preference in U.S. markets for Panamanian goods;
  • —a U.S. commitment to build a 4-lane highway 10–12 miles in length from our military base in Rio Hato to La Chorreda;
  • —the U.S. should build an underpass between the beach and Rio Hato to avoid our military vehicles from crossing the highways;
  • —that we build an all-weather road from Vera Cruz to Arrajan— about 8–10 miles.

III. Bob Anderson’s thinking

Up to this point he has made no concessions to the Panamanian position. His thought is that he move his offer up from 17¢ a ton to 20¢, leaving us 5¢. As an alternative he is considering letting 20¢ be the base, letting the Panamanian take rise 1¢ a year for 5 years, but reserving 10¢ for ourselves (this reservation would not be real unless tolls were raised over this period or operating costs declined).

Without any commitment he would be prepared to give a letter indicating our willingness to consider the problem of Panamanian preference in the U.S. market.

He is hesitant about the roads, underpass, etc., because he doesn’t know the price tag and they would be subject to Congressional appropriation.

The atmosphere has gotten increasingly emotional as the climax of the negotiation comes near. De La Rosa has stated that he would probably have to resign if the Panamanian proposal is not accepted. They have almost certainly been in informal communication with their President. They have suggested Presidential communications. Bob Anderson has tried to discourage this by saying that’s not the way we operate.

As he approaches this final stage, having narrowed the issues, his general attitude is to be mildly generous about the financial terms— and prepared to take the heat in the Congress for that—rather than to risk for the President and the country a Panamanian explosion.

He concluded, as I indicated, by saying that he didn’t wish to burden you at this time. He wished you to know how things were proceeding and that he would welcome any guidance you might wish to give him before his meeting on Monday afternoon.3

  1. Source: Johnson Library, National Security File, Country File, Panama, Vol. IX, Memoranda and Miscellaneous. Confidential.
  2. June 19.
  3. In a June 17 note to Rostow, the President wrote: “Walt, call and thank him very much and tell him we follow his general judgment.” Rostow annotated this note: “done.” (Johnson Library, National Security File, Country File, Panama, Vol. IX, Memoranda and Miscellaneous)