147. Telegram From the Department of State to the Embassy in Panama1
41065. Subject: Security of Outstanding Panamanian Bonds. Ref: Panama 00995.2
1. The approach suggested in para. 2 reftel may be as effective in a legal sense as that initially proposed, but, in Department’s view, would not provide sufficient reassurance domestically to alleviate the present political problem.3 A one sentence acknowledgement by Panama of a proposed U.S. modification of Panama’s prior payment instructions would appear to be a very minimal commitment by Panama. Adoption of this approach would also be viewed as a retreat [Page 382] from earlier position endorsed by Barletta 4 and communicated to U.S. Senators and may be read as indicative of an unwillingness by Panama to make a strong commitment. Finally, reversal of the order of exchange would not seem to offer any advantage to Panama, since it would put Panama in the position of responding to a U.S. initiative rather than acting affirmatively.
2. Department continues to prefer approach initially suggested.5 If reversal of the order of exchange is necessary in order to break the current impasse, the U.S. note should be in terms of confirming the understanding reached in our discussions with Barletta, and the Panamanian reply should incorporate the full text of the U.S. note so as to give some substance to Panama’s commitment.
3. We consider it essential that, at a minimum, the U.S. note refer to our earlier conversations in order to avoid the implication that the problem is a U.S. concern to which Panama is responding. Rather, the problem is between Panama and the holders of its bonds, and we are merely attempting to facilitate a mutually satisfactory resolution as between those parties.
- Source: Department of State, American Embassy Panama, Panama Canal Treaty Negotiation Files, Classified and Unclassified Political and Economic Files 1976–1978, Lot 80F162, Box 3, E–4.1, Panamanian Bonds, 1978. Limited Official Use.↩
- In telegram 995 from Panama City, February 14, the Embassy explained that the Panamanian government expressed reluctance to give written assurance regarding bond payments under a new treaty arrangement until the treaty was ratified. The Embassy suggested initiating an exchange with the Panamanians outlining a proposed U.S. modification of Panama’s payment instructions and asking them to respond positively with a one sentence response. (Department of State, American Embassy Panama, Panama Canal Treaty Negotiation Files, Classified and Unclassified Political and Economic Files 1976–1978, Lot 80F162, Box 3, E—4.1, Panamanian Bonds, 1978)↩
- A reference to concerns held by members of Congress and holders of Panamanian bonds that outstanding bonds from funds due to Panama under the 1977 treaties be secured. In telegram 30946 to Panama City, February 6, the Department informed the Embassy that Panama’s continued failure to execute a written assurance regarding bond payments created a “serious political problem” for the Department regarding ongoing debates over the treaties and called “into question credibility of Department and GOP.” (Department of State, American Embassy Panama, Panama Canal Treaty Negotiation Files, Classified and Unclassified Political and Economic Files 1976–1978, Lot 80F162, Box 3, E—4.1, Panamanian Bonds, 1978)↩
- In telegram 22934 to Panama City, January 28, the Department informed the Embassy in Panama that Department representatives had met with Barletta and “arrived at an agreement in principle which would continue the existing security on these bonds.” The proposed solution involved an exchange of notes between Panama and the U.S. Barletta tentatively accepted the drafts of these notes, which were relayed in the telegram. (Department of State, American Embassy Panama, Panama Canal Treaty Negotiation Files, Classified and Unclassified Political and Economic Files 1976–1978, Lot 80F162, Box 3, E–4.1, Panamanian Bonds, 1978)↩
- See footnote 4 above.↩