8. Letter From the Ambassador to Panama (Sayre) to the Deputy Secretary of State (Rush)1

Dear Mr. Secretary:

I have studied Ambassador Anderson’s letter of March 12 to the President in which he provides a status report on the canal treaty negotiations with Panama.2 I understand that it will be the subject of a meeting of the Under Secretaries Committee. My recommendations are contained in the FY 1975 CASP3 and Panama’s 1894.4

My role, so far as canal negotiations are concerned, has been to keep the Department informed of relevant developments in Panama and provide such analysis of Panamanian attitudes and positions as might be useful to the U.S. negotiators.

In keeping with this role, I thought it might be useful to you to have my personal views as to why the negotiations have not progressed, why the Panamanian position paper of December 1972 wiped out almost all the progress of 1971, and why we now seem to have a larger gap than ever.

First, we are dealing with a new Panamanian political situation. The nationalistic Torrijos regime represents a change not only of degree but of kind. Nationalistic sloganeering about the canal and our presence here is nothing new in Panama. What is new is a regime that is determined to make good on its sloganeering both domestically and in its canal treaty relations with us. Having put its domestic political house more or less in order, it has now made the readjustment of its relationship with the U.S. its highest priority.

Our canal presence, of course, rests ultimately on Panamanian consent. That consent has diminished over time. But our presence and [Page 23] style here have remained almost unchanged while the world’s views on the practice of extraterritoriality have changed radically and our policy elsewhere has been adjusted accordingly. Despite this erosion, a minimum of Panamanian consent has endured because successive Panamanian Governments have not pressed for fundamental changes; they have judged the economic importance of the canal to Panama to be paramount and they did not want to risk disturbing it. The fact is, however, that the continuing growth of the Panamanian economy has meant that the importance of our canal presence has steadily declined. The tremendous increase in public sector spending in the last four years has meant that since 1970 the Panamanian national budget has exceeded the budget of the Panama Canal Company. Torrijos has completely removed from power the Panamanian political leaders who had always run both the private sector and the Government. This group not only had a variety of economic and political ties to the U.S. but had also been the prime beneficiaries of our canal presence. In addition to replacing them politically, Torrijos has silenced them publicly by branding them as our instruments and allies in thwarting Panamanian independence. There is then a Panamanian Government firmly in power which, as part of its broad nationalistic course, is deliberately undermining Panamanian consent to our presence on anything like existing treaty terms.

Although there is this growing unity and purpose in Panama, the Panamanians involved in the negotiation are emotional, cautious and indecisive in dealing with us, and afraid to appear to make any concessions to us. Several have political ambitions which they do not want to jeopardize by agreeing to anything that could be criticized by their opponents. The position handed to us on Dec. 4, 1972, was a “least common denominator.” It was something all Panamanian negotiators and advisers could accept because it asked for almost everything in the lifetime of those who wrote it. The Panamanians with whom the negotiations were conducted in 1971 were patriotic, but realistic Panamanians. Those who took over in early 1972 and shunted aside the designated Panamanian negotiators are strongly nationalistic with little disposition to work out what we would consider practical. Torrijos draws a parallel with the Vietnam negotiations and holds the view that if only he could sit down with a Presidential envoy fully empowered to reach agreement one could be achieved. Given the present negotiating positions and attitudes on both sides, [illegible text—I agree?] with Ambassador Anderson that it is not likely that an overall mutually acceptable treaty can be negotiated. The possibility is greater but not certain that a succession of agreements on specific points could be reached which could over time result in a new relationship. The prospects are much better for achieving a new relationship by phasing out [Page 24] many of our nonessential functions and then signing a new treaty on what is essential to us than through the procedure we are now following of obtaining a treaty and then phasing out these nonessential functions.

Second, there is considerable disagreement on the U.S. side as to what we acquired under the Convention of 1903, as amended. As early as 1904, Secretary of War Taft said, “the very form in which these attributes are conferred . . . seems to preserve the titular sovereignty . . . in the Republic of Panama” and that Article III “is peculiar in not conferring sovereignty directly upon the United States.” Nevertheless, it is a commonly held view especially in Congress that we are sovereign. We emphasize that view on the ground by flying the U.S. flag in the Canal Zone in the position of the sovereign and not as administrator of the area. It is similarly a widely held view in Congress, the Executive Branch and in the Canal Zone that the Zone is territory of the United States. The view has been carried to the extreme that when the U.S. Ambassador to Panama goes into the Canal Zone he is held to have departed his post and to have entered U.S. territory and therefore no longer entitled to be accorded the status of personal representative of the President. On August 4, 1970 the Chief of Protocol confirmed this interpretation to Assistant Secretary Meyer in stating that the “Canal Zone is territory ceded to the United States by the Republic of Panama.” Accordingly, it was concluded that “it would be highly improper . . . to accord any American official precedence over the Governor.” The month before the Acting Secretary had written the Foreign Minister of Panama “that the Canal Zone is not a state, but rather . . . is a territory of the Republic of Panama subject to the legal system established by the treaties and agreements in force . . .”

On defense, as another example, we have a regional military headquarters in Panama, and are negotiating to keep it. Panama seriously contests our right under the existing Convention to have such a headquarters. Panama argues that our right under the 1903 Convention to station land and naval forces in Panama for canal protection is an exception in keeping with the exception to the neutrality of the Isthmus provided for in the 1901 Treaty between the U.S. and Great Britain. Thus, Panama regards the decision in 1963 to establish a regional strategic headquarters as a violation of the neutrality provisions of the 1903 Convention. Panama also holds that the 1903 Convention mentions only land and naval forces and the stationing of air forces in the Zone is illegal. The Executive Branch has not addressed this issue and only last week the Secretary of the Army told me that he had not been aware there was a serious question about the legality of SOUTHCOM.

Whether we are sovereign and the Zone is U.S. territory or whether the 1903 Convention granted to the United States rights in Panamanian territory is fundamental. If the 1903 Convention granted rights, and [Page 25] not territory, then it is in principle simply an operational rights agreement. It is, of course, unusual in the degree to which it grants rights and also in the way it permits us to exercise those rights. The U.S. approach has been to negotiate about which of our sovereign rights and what parts of our territory we would grant to Panama in the Canal Zone. Panama considers that the Zone is its territory to which it retained sovereignty and it is negotiating about the rights and privileges which the U.S. would continue to have in Panama. Until we resolve this fundamental conceptual problem we are not likely to make much progress in resolving subsidiary issues.

Third, there is no firm understanding within the U.S. Government of the importance of the canal either to our economy or for strategic/military purposes. It is taken for granted that the canal is very important to the U.S. economy. One of the major reasons for building the canal was to have a waterway for coastwise shipping and at the beginning about 50% of the traffic was of this type. Today it is about 3%. Another economic justification is that 70% of the ships going through the canal originate in or are destined for a U.S. port. But that is a statement of how important the U.S. is to the canal—not how important the canal is to the U.S. In fact only 16% of U.S. exports and imports pass through the canal, i.e. 16% of 200%. I recommended that a study be made to determine the savings to the U.S. economy of the canal. I hold no brief for the Embassy’s rough estimate that it is about $100 million a year. [illegible text] if so, the cost to the taxpayers of our economic assistance to Panama in all forms and of the military protection of the canal is over twice this economic benefit. The figures available to me suggest that the canal is of only marginal value to our economy. I know of no study giving a solid strategic/military justification. Our carriers and their accompanying task forces cannot use the canal. I understand that naval planning is based on the assumption of non-availability in wartime. There is, of course, much more to our military/strategic interest than this but I am not aware that it has been clearly defined in any study.

Finally, we have a serious problem of attitude and confidence. Despite the President’s policy that we should seek a new partnership based on respect for national identity and national dignity in which rights and responsibilities are shared, Panama does not believe that we are prepared to treat her as an equal. Part of the problem is, as President Nixon said, that “our power overshadows the formal relationship of equality.” But it goes beyond that. In 1960 when President Eisenhower decided to fly the Panamanian flag in the Canal Zone in recognition of Panama’s titular sovereignty, it was decided that the Panamanian flag should always fly in an inferior position. In the negotiations and consistent with our traditional policy, we have told the Panamanians we could [Page 26] not agree to consult them on defense matters. Nor do we consult on the administration of the canal itself even though we recognize that it profoundly affects Panama. Panama’s response has been to refuse to recognize officially that the Panama Canal Company even exists.

It is a fact that there is a wide gap between the respective positions of Panama and the U.S. in the canal treaty negotiations. It is also unfortunately true that there is a very wide gap between our stated policy and our practice in Panama. These two facts are intimately related and until we deal with the latter we will not be able to do much about the former.

With warmest regards,


Robert M. Sayre5
  1. Source: National Archives, RG 59, Central Files 1970–73, POL PAN–US. Secret; Exdis.
  2. See Document 5.
  3. The CASP was sent as airgram A–45 from Panama City, February 26. (National Archives, RG 59, Central Files 1970–73, POL PAN–US)
  4. Telegram 1894 from Panama City, April 5, is ibid.
  5. Sayre signed “Bob” above this typed signature.