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

SUBJECT

  • Panamanian Developments

Encouraging Economic Outlook

A year ago we were concerned about public unrest in Panama arising from sluggish economic conditions. You will recall that you authorized a high impact economic assistance program.

We are a long way from solving Panama’s basic problems of unemployment and maldistribution of income, but the short term gains are encouraging. Our Embassy reports that Panama has achieved a remarkable annual growth rate of 8%, which is expected to continue. Business is booming. Growth in the manufacturing sector is higher than the overall average. Exports are up, but so are imports. The deficit is made manageable by higher earnings from the Zone. The Embassy says that much of the growth stems from confidence by the business community that satisfactory treaties will be negotiated which will bring larger income to Panama.

Further Slippage on the Treaties

With respect to the treaties, we have more slippage in the Panamanian timetable. Robles is still consulting key persons on the drafts. This process will not be completed until the end of October. During November, Robles and Eleta expect to consolidate all the changes recommended by the Council, Cabinet and ex-Presidents. The Panamanian negotiating team would return to Washington around mid-November. Talks on the changes they want—Eleta says about 70—are expected to last until the end of January. According to their schedule, signature would take place in late January or February, with ratification to follow in a special session of the National Assembly after their May Presidential elections.

All of this hinges, in the first place, on the nature of the treaty changes they propose. Eleta says most of them are “drafting” changes. Assuming this hurdle is passed, there remains the question of who the Presidential candidates will be and who wins the elections. Beyond [Page 939]that arises the question of whether we want to seek ratification in the middle of our presidential campaign. The prospects for the treaties continue to be “iffy”.

Walt
  1. Source: Johnson Library, National Security File, Country File, Panama, Vol. IX, June 1967–April 1968. Confidential. A handwritten L on the memorandum indicates the President saw it.