Foreign Relations of the United States, 1977–1980, Volume XXIX, Panama

52. Memorandum of Conversation¹

Grenada, June 15, 1977

Participants

• U.S.

  • Secretary Cyrus Vance
  • Under Secretary P. Habib
  • Assistant Secretary Todman
  • Ambassador McGee
  • Mr. Hodding Carter, III
  • Mr. Mark Dion (Notetaker)

• PANAMA

  • Foreign Minister Gonzalez-Revilla
  • Ambassador de la Rosa
  • Ambassador Nander Pitty

Panama Negotiations; OAS General Assembly—Joint Statement

Minister Gonzalez-Revilla began by expressing appreciation for President Carter’s personal interest in the negotiations. Its result is a nearly complete agreement on major issues. The type of entity and its components are under study, such as the manner of appointments of directors and Panama’s part in Canal operations. Panama has promised that the United States will have clear control of the entity through the last phase of the Treaty. It will not retreat from that compromise. But it wants a clear understanding about the increasing participation of Panama in the last stages. This is not a question of goodwill but of clear need for an agreement. The residents of the Canal Zone are involved. Panama has made a commitment about their future. At the table, the Panamanian negotiators are working to fulfill the promise regarding their jobs but Panama needs to have an undertaking about the training of its nationals.

Economic issues remain to be resolved. Panama has received messages from the United States and understands its political problems. Next week, in the meetings of the experts,² the economic question should be separated from the political process of ratification. Panama wants to discuss the economic issues on their merits and reach a meeting of minds on the subject which later can be made politically feasible.

Secretary Vance replied to the Foreign Minister’s opening remarks by saying that he thought most of the major problems could be resolved. The question of directors’ appointments, for instance, was not a serious longrun problem. On participation of Panamanians in the Canal operations, the Secretary said the United States Government understands the position stated by the Foreign Minister. But it recognizes language is required over and above a statement of goodwill. This too the Secretary thought could be worked out. He said the Foreign Minister showed sensitivity to the problem of Canal Zone citizens, a sensitivity to the problem of ratification. This too can be worked out, the Secretary felt. Economic issues now have been raised. This is a tariff problem. There can be no payment outside the Canal revenue. The Secretary had made this clear to the Panamanian Ambassador this week.³ Projects on their own, economically feasible projects, can be discussed by the experts next week but the distinction must be recognized. Financing of such projects would come from increased Canal tariffs. We assume that additional revenues will be available to Panama as a result of the Treaty.

Foreign Minister Revilla said he would speak very frankly. He had sat in on the discussions in Panama in preparation of the economic issues. He had his doubts about the level at which this problem could be settled. The point was to lay good groundwork now, to understand the rationale on both sides, to understand what is behind the U.S. point of view, and what is behind Panama’s point of view. This is a critical point. The economic help provided by the United States is related in a reverse way to the question of ratification in Panama. If it would be difficult for the U.S. to reach the high figure, it would be difficult for Panama to accept a small amount. Panama requires a political justification to be made. The Panamanian Government requires a political justification for the people of Panama, just as the United States needs a political justification for its ratification of the Treaty. Not too many preconditions should be set for these negotiations. There should be a broad look at the entire question.

Secretary Vance said it was important to understand specifics. The GOP’s expert is coming to Washington for a meeting on this question.⁴ The object is to get the facts, study them and understand the nature of the problem. If necessary we could consider the higher level but only if we had the details. We need the facts first. Ambassador Rosa said it was really not possible to separate economics from the political aspects of the negotiations. When the Canal tolls were fixed sixty years ago it was a political decision to favor U.S. transit to and from the west coast. The economic aspects on that occasion were secondary. Considering political over economic issues is not a promising approach. A fresh start is needed. Tolls cannot be the basic issue.

Secretary Vance said the raising of tolls substantially would obviously be of interest to the other OAS countries who are attending this meeting. An excessive increase would be of political concern to other users. This is a political fact of life.

Mr. Habib said the economics of running the Canal must be taken into account as well. This is one of the issues that the experts will discuss next week. Ambassador Rosa said if we deal only with tolls, we are lost. Secretary Vance said it would be necessary to take a fresh look at the whole question of economic cooperation. That is why the experts are meeting in Washington next week. Prime Minister Gonzalez-Revilla said he was encouraged that the Secretary was willing to take this broad look. Political aspects are important but it is necessary to begin with the economic rationale and then to go to the political aspects to reach a consensus. Ambassador Todman said a distinction had to be made between economic projects that can be fully justified and compensated from Canal revenues. For political reasons, it would be impossible for us to seem to be paying to give away the Panama Canal. Ambassador McGee noted that Foreign Minister Gonzalez-Revilla already understands the Washington climate. He has been here for a number of years. He recognizes that in the Senate giving the Canal back and paying too would be unacceptable.

Gonzalez-Revilla, in response to Secretary’s question, said the Minister of Planning for Panama, Mr. Barletta, will be coming to Washington next week. He is a moderate person. Gonzalez-Revilla sat in on preparatory talks on the economic issue. He knows a lot of work has gone into it and it is based for the first time on the Canal revenue figures which Panama has never seen before. He suggested that a formula would have to be found for Panama’s participation in the operation of the Canal.

Secretary Vance said that there are constraints on our ability to phase in Panamanian participation. Current employees of the Canal Company must be considered. Gonzalez-Revilla said that Panama accepts the fact that the new Panama Canal entity will be U.S. run. It will have seven directors, four U.S. citizens, three Panamanians. It is difficult for the United States to accept that Panama should appoint its own directors but the Secretary as a corporate lawyer must realize that majority rules in a corporation. The United States will still run the entity with four U.S. directors, but the Panamanian directors must be appointed by Panama.

Secretary Vance said he recognizes that difficult problems are ahead, but they can be resolved with good faith and flexibility. Gonzalez-Revilla said Panama would do its utmost to reach a treaty as soon as possible. He has been instructed to remain in Washington for these negotiations.

Secretary Vance said that time is indeed important but the ratification process is time consuming. We would like to see the Senate act this year before a new election campaign begins.

Ambassador Todman said we do not want to see a renegotiation. After an initial agreement is reached, when clauses have to be addressed for a second or third time, this would be a step backward the Secretary said. Ambassador Todman said that neutrality had been a problem that we thought had been solved and then suddenly we heard that there where more problems and now these have been worked out. Gonzalez-Revilla said that Panama had been at a disadvantage because the negotiations were in Washington. There were to be negotiations ad referendum. It was difficult to manage these from Panama. Neutrality is probably the highest price paid thus far in the transaction. It was clear that without it no treaty could be concluded. It was a hard decision to come to terms. Panama now expects the United States to make hard decisions.

OASGA Statement:

Foreign Minister Gonzalez-Revilla said that ratification would be a very difficult process on both sides. The grounds clearly would be opposite. Today Panama begins the process of ratification, the process of selling ratification to the people of Panama. It has adopted a cautious line. It is anxious not to blow things out of proportion. There will be a plebiscite in Panama. A vote for or against the treaty and its alternative. Today the Government of Panama has begun to present a case to the people to allow them to reflect on their responsibilities. The Government of Panama will try to separate the issue of the Canal Treaty from the internal political problems which Panama faces. An objective presentation, of course, is good but it would be difficult to sell the Canal Treaty to the people of Panama if they thought it was too favorable to the U.S.

Secretary Vance said that if the statement of Panama to the General Assembly was excessively negative it would give support to the enemies of the Treaty in our Congress. Last week in the House we faced an amendment aimed at hamstringing the negotiations.⁵ We marshalled forces to avert passage of this amendment and it was defeated. It is a difficult process but an excessively negative statement will have a bad effect in the United States. Ambassador Todman said that talk about a great victory raises doubts in both countries. The way to achieve the treaty is the way that the United States has attempted to approach this: on the grounds that both parties will benefit from the new treaty. It is bad to talk of victory and joint statements help to show common purpose.

Secretary Vance said we had made progress toward educating a large segment of the American people who have doubts about the Canal Treaty. Talk of a great victory for Panama could turn that educational process around. He asked Ambassador McGee to speak to this topic.

Ambassador McGee said that Foreign Minister Gonzalez-Revilla had much experience with the U.S. Senate. He knew that in the Senate there were a hundred Secretaries of State. Some combed the record to find statements made in Panama that would be embarrassing to the United States. They speak for people who favor reckless statements. We do not have a two-thirds majority for the treaty now. Ambassador Pitty and Ambassador McGee will not make speeches in the OAS, of course, but it is necessary to avoid speeches in both countries claiming victory for either side.

Ambassador Todman said that he had detected a great deal of optimism in Latin America over the progress made toward the treaty. This is not a US-Panama question alone. The Latin American countries are vitally interested and pleased at the reports of progress. Too negative a statement will affect international opinion and retard this process. Gonzalez-Revilla said his statement would not be extremely negative. It will give credit to the Carter Administration for its efforts to negotiate a treaty. More progress has been made in the last few months than in many years. But public opinion in Panama has suffered from many ups and downs. The only responsible way to make a joint statement is to sign the treaty jointly.

Secretary Vance said the United States was not anxious for a joint statement. Gonzalez-Revilla said he would send the Secretary a copy of his statement in advance for him to consider and prepare a similarly balanced statement for the U.S. side.⁶

When Kissinger signed the Eight Principles in Panama in 1974 there were very high hopes.⁷ These hopes were then frustrated and there was great disappointment. Secretary Vance said he understood the need to be cautious but that it was also necessary not to be negative. The general atmosphere is very important to the negotiations. He mentioned the incident of rioting last week.⁸ This has a negative impact on the climate. Both sides must be careful to prevent such incidents.

The Foreign Minister agreed, but said that the economic situation in Panama is not good. A joint statement would help Panama today because it would encourage economic conditions in the private sector, but later the credibility of the Government of Panama would suffer if the Treaty was not forthcoming. Panama does not want to risk its credibility on a joint statement. Secretary Vance said the United States was not interested in a joint statement, it was not pressing for a joint statement. Gonzalez-Revilla said the Government of Panama was running out of explanations. It has been given the run-around for eight years. The government of General Torrijos promised to carry the flag, to achieve a new Canal Treaty but last week the students were relatively restrained in their demonstrations. That surprised the Government of Panama as well. The problem is, frankly the students don’t believe in the Government anymore. The Government has asked the people to give it one more year; and is working hard to achieve the new Treaty. Secretary Vance said the US is working hard too.

1. Source: National Archives, RG 59, Central Foreign Policy File, P770115–2347. Confidential. Drafted by Mark Dion (USOAS) on June 16 and approved by Twaddell on June 29. The meeting took place during breakfast.
2. A reference to a series of meetings on financial aspects of the treaty held in Washington. After negotiations abruptly halted on June 17 in Washington, Panama’s negotiators returned to Panama for consultations with Torrijos. Negotiations resumed June 23 in Washington. On June 24, Barletta made Panama’s initial presentation on the issue of economic benefits. Panama presented a three-part proposal for economic arrangements covering the period of the treaty: (a) a one-time lump sum payment of $1.02 billion at the treaty’s start; (b) annual payments of $300 million for the life of the treaty to support Panama’s development; and (c) $50 million for military assistance of the life of the treaty to support Panama’s role in the canal’s defense. (Background Paper on Panama Canal Negotiations; Washington National Records Center, IA Region Files, 1974–1979, FRC: 330–87–0068, 1977 Dolvin-Alexander Panama Canal Treaty Negotiation)
3. See Document 49.
4. Presumably a reference to Barletta. See footnote 2 above.
5. See footnote 2, Document 49.
6. Panama delivered its statement at the OASGA in Grenada on June 15. For a translated text of the statement, see telegram 6013 from the Department, June 16, in the National Archives, RG 59, Official and Personal Files of Ambassador at Large Ellsworth Bunker, Lot 78D300, Box 6, Panama Panamanian Papers.
7. A reference to the Tack-Kissinger principles of February 7, 1974. See footnote 10, Document 3.
8. Presumably a reference to nonviolent student demonstrations against the U.S. presence in the Canal Zone held in Panama City and Colon on June 6. In telegram 4070 from Panama City, June 6, the Embassy summarized the events of the demonstration. (National Archives, RG 59, Central Foreign Policy File, D770201–0763)