89. Telegram From the Embassy in Panama to the Department of State1

4306. Subj: Canal Treaty Negotiations: GOP Discussion of Options.

Summary: Embassy has been told in confidence that GOP officials are discussing three options concerning Canal issue. First would be to try to reach agreement with U.S. this year with understanding U.S. would not actively push ratification until 1977. Second would be to continue negotiations without significant Panamanian compromise while stepping up international pressures and in two years obtain better terms than are possible now. Third alternative would be confrontation. All of these alternatives entail problems and risks. It may be that political realities in Washington and Panama have pushed diplomacy and compromise aside. End summary.

1. Although GOP’s public stance has been that USG has a commitment with Panama to continue treaty negotiations until causes of conflict are resolved, events of last two weeks have cast layer after layer of pessimism on private attitudes of GOP treaty advisers and other [Page 240] Panamanians closely associated with issue. While some persons reportedly have concluded that current round of negotiations has run its course, others are still counseling that GOP should not yet act on that conclusion. Each passing day, however, gives the latter less basis for their arguments. Embassy has heard that alternative courses of action are being discussed while Torrijos, through meetings with students (July 9) and National Assembly of Community Representatives (July 18) and private discussions, is trying to gauge the mood of his constituents. Decisions will be based upon Torrijos’ conclusions concerning U.S. intentions and Panamanian political realities.

2. Archbishop McGrath (protect source) during visit to Embassy July 14 told EmbOffs that he was aware of three alternatives under discussion.

3. First alternative would be to negotiate and sign a treaty this year, although it would not be actively considered by the Senate until 1977. Advantages of this approach would be that Panama’s credit-worthiness would be enhanced. Loans would be more readily available and investors, foreseeing an amicable solution to Canal issue, would increase their stakes in Panama, thus alleviating economic problem. Negative aspects would be that Panama would have to compromise on some issues, and that Torrijos would have difficulty keeping lid on situation in interim.

4. Second alternative would be for Panama to draw out the negotiations until 1977 without reaching agreement. Concurrently, Panama’s international campaign to exert pressure on U.S. would be accelerated. Advocates of this approach argue that U.S. position is becoming increasingly vulnerable, and Panama could obtain more favorable terms in 1977 or later than it can now. Disadvantage of this approach is that tension will inhibit investment and economic growth.

5. Third option would be to admit negotiations have stalled and enter into symbolic and physical confrontation. Students would be allowed to make incursions into the Canal Zone and create disturbances, thus provoking a violent response from U.S. forces. The Canal issue would be forced into the United Nations, and worldwide condemnation of the U.S. would be generated. This would be an acceleration of the process described under option two except that the risks for Panama would be greater. Disorders would aggravate Panama’s economic difficulties, and Torrijos would risk losing control of situation.

6. Foreign Ministry source told EmbOff July 16 that Torrijos was trying to stave off the students, but that the ball was now in U.S. hands. Torrijos’ interpretation of U.S. actions in near future would influence decisions in Panama about what must be done in U.S.-Panamanian relations.

[Page 241]

7. Comment: In Panama, as well as in Washington, the time of analysis and decision may be passing and the force of domestic political realities may become dominant. Torrijos’ decision to discuss negotiations with students and NACR representatives is indicative of the political pressures on him. He is much more responsible to popular pressures and has less independence of action than is generally believed in some U.S. circles. In our view, a key factor which Torrijos must be weighing concerning alternative one (para 3 above) is whether he could keep the students and ultranationalists waiting until 1977 when U.S. would begin ratification of a treaty. Option two represents “pure” nationalist thinking on how to handle the Canal issue and has been consistently pushed by hardliners who oppose any significant compromise in the negotiation. It is based upon the belief that time and the thrust of history works to Panama’s favor (see Panama 3766).2

Gonzalez
  1. Source: Washington National Records Center, RG 330, OSD Files, FRC 330–80–0044, Box 13, NEG—Panama and Panama Canal Zone April 1975–Oct 1975. Confidential; Immediate. Sent for information to USCINCSO and PANCANAL.
  2. In telegram 3766 from Panama City, June 24, the Embassy provided a background paper on the “pure nationalist” position held by certain Panamanian officials, asserting that advocates of such a position believed that reason, time, and intransigence intelligently applied would benefit the Panamanians on the Canal issue. (National Archives, RG 84, American Embassy, Panama, Panama Canal Treaty Negotiation Files, Lot 81F1, Box 125, POL 33.3–2 Negotiations—1975—Local Politics and Reaction)