161. Telegram From the Department of State to the Embassy in Panama1

76845. Subject: Security of Outstanding Panamanian Bonds.

1. Continued failure of Panama to provide for future security of bonds presently secured by payments under 1955 treaty creates a serious political liability for Department in ongoing treaty debates. Although the issue has not surfaced recently, it is unlikely to remain dormant. If unresolved, this issue could jeopardize the vote of Senator Huddleston and eliminate any chance of converting Senator Ford. Aside from the specific interest of these Senators, Panama’s unwillingness to commit itself on this question weakens the credibility of both the Department and Panama in view of our January 30 letter to Senator Sparkman2 announcing that an agreement in principle had been reached and would be formalized within the near future. This point, if raised during debate, could erode support for treaty.

2. Department appreciates that Embassy has made determined and repeated efforts to resolve this matter and that delay is due to dissension within GOP.3 Embassy is requested to continue these efforts and to consider whether contacts at a higher level might be productive. Embassy’s views are also requested on whether delivery by Ambassador of a formal note from Department expressing concern over failure of GOP to implement agreement in principle reached January 26 would facilitate resolution.4

  1. 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. Confidential; Immediate.
  2. Not found.
  3. See Document 147.
  4. See footnote 4, Document 147. In telegram 2229 from Panama City, April 4, the Embassy reported it had raised the issue of security for Panamanian bonds to Gonzalez-Revilla and that a letter from Adames to Gonzalez-Revilla was authorized to be delivered to State by Lewis. This letter cited Cabinet Council Resolution No. 14 which authorized the Panamanian Ministry of Finance, under the 1977 Treaty, to “maintain without interruption” guarantees extended by Panama in the bond sales contracts of 1950, 1958, and 1962. Jorden informed Gonzalez-Revilla he “did not know if this would meet our requirements in reassuring the bondholders or their agents,” but he thought it might be inadequate. (National Archives, RG 59, Central Foreign Policy File, D780145–1104)