54. Memorandum for the Files1

These are some reflections on the present state of the negotiations for a new Panama Canal treaty and steps which might now be taken to move the negotiations forward.

The negotiations recessed on Friday, June 17th, and the Panamanian negotiators returned home in order to consult with their Governmental officials. Prior to the recess the chief of the delegation, Ambassador Romulo Escobar Betancourt, delivered an emotional, critical statement of over an hour expressing Panamanian concerns and levelling certain charges. Escobar was obviously making the exposition on the direct orders of General Torrijos and it is not without significance that during the entire delivery of his statement all four members of the Panamanian delegation kept their heads down and none was willing to look at any of us sitting on the United States side of the table. What made the presentation especially dramatic was that the day before we had concluded our negotiations and lunch on the warmest and most friendly note and the Panamanian negotiators had specifically asked that we be ready to continue negotiations on Friday until all the issues then on the table were disposed of leaving only the matter of financial arrangements for subsequent discussion and agreement.

In Escobar’s diatribe—which he delivered without notes yet in a brilliantly logical and effective fashion—he made the following charges: That the United States was responsible for launching an international campaign against Panama; that we were acting as though we were doing Panama a favor in the negotiations rather than dealing with them as equals; that a campaign was being conducted to denounce Panama as anti-Semitic because of some charges that had been made and which ignored Panama’s strong support for Israel and its fair treatment of its Jewish citizens; and that the recent shooting of a Panamanian guard by a soldier in the U.S. Army had led to the soldier’s confession that he was actually trying to assassinate General Torrijos.2 [Page 169] Escobar suggested that this was a course which had some kind of governmental support in the United States and he was especially impassioned on this theme.

After Escobar finished his statement, delivered with the forcefulness of the experienced criminal lawyer he is, the tone of the Panamanian negotiators changed and once again there was a suggestion of getting down to business. We were given certain papers with ideas for consideration regarding the appointment of members of the Entity Board, the designation of an Administrator and Deputy Administrator, the provision for rotation of employees and the rights of U.S. employees to PX and APO privileges.3 These papers presented positions not significantly different from those which Panama had previously put forward and, indeed, offered positions which can probably be—with some modifications here and there—made mutually agreeable.

On the issue of economic arrangements, which is still untouched in our formal discussions, it is quite clear that Panama remains convinced that it should have very large sums in down payment and for the annual use of the canal and the Zone territory. Panama continues to argue that it should be paid for the use of Panamanian territory for fourteen military bases on a scale comparable to what the United States pays to countries such as Spain and others for base rights. Our discussion with the negotiators at lunch on Thursday4 had been to suggest that the matter of the annual payment under the treaty be disassociated from the economic package which Panama might undertake to negotiate with the U.S. and the international agencies in order to be able to further its economic development program. The negotiators had told us that they would convey this word to Panama and said that they regarded our exchange at luncheon exceedingly helpful and constructive—an attitude wholly different from the one displayed when we met the following day.

Upon reflection it seems to me that several factors may have been involved in the change of tone and atmosphere and these have to be taken into account in determining how to get the negotiations moving again in the right direction.

1. Unbeknownst to us here in Washington, at the same time we were speaking candidly and with utter frankness to the Panamanian negotiators on the economic arrangements issue, Secretary of State Vance was apparently striking the same note with the Panamanian Foreign Minister in Grenada.5 To the Panamanians this very likely will [Page 170] have appeared to be an orchestrated effort on our part to lessen their financial expectations and to try to move them into a more reasonable and practical frame of mind. For both in Grenada and in Washington they were told that the Congress would never approve a treaty which called for very large payments which could not be met out of the tolls from the canal operation—and this position is one which the Panamanians have resisted and continue to resist, arguing that separate payments should indeed be made for military bases and other economic advantages to the U.S. during the treaty period. Conceivably this was the first time the Panamanians recognized that we were both serious and determined on this issue—or conceivably it might be the first time they really understood our position.

2. The issue of Panama’s right to appoint Panamanians to serve on the Board of Entity and also as Administrator and Deputy Administrator of the agency running the canal has become increasingly important in recent days, clearly because of political appearances. We have been trying to find formulae which will assure Panama’s agreement to any Panamanians appointed to these posts. At first that seemed to be an acceptable solution but now it is increasingly obvious that Panama wants to be in a position to indicate which Panamanians shall be appointed both to the Board and to the Administrator posts with the knowledge that the U.S. will have to accept Panama’s determination in this regard. Our failure to accede to this has led them to make frequent statements about our attempting to infringe on their sovereign rights in that respect.

3. The anti-Semitic issue arose when Panamanian newspapers learned that a Panamanian official who is a cousin of Torrijos had presented a statement which attested to the fact that a Yugoslav contractor doing work on a Panamanian dam had not employed or had any business dealings with Zionists or other Jews. This document was apparently for submission to Libya in order to elicit Libyan interest in Panamanian investment. The Jews in Panama did not express great concern, knowing of Panama’s consistently favorable relationship with Israel and the absence of anti-Semitic policies in the Panamanian Government itself. A Panamanian Jewish citizen named Mizrachi was, indeed, permitted to publish a letter denouncing the whole episode and the Council member involved.6 This information, however, was circulated in Washington and to members of the Congress including Representative Benjamin Rosenthal. On Friday—the day when the negotiators launched their tirade—Jack Anderson had a column which [Page 171] talked about the Libya-Panama deal and referred to the anti-Semitism hullabaloo quoting from the letter by Congressman Rosenthal to Secretary of State Vance expressing concern about these anti-Semitic implications.7

4. The United States soldier who shot the Panamanian guard apparently made a confession which became the cause for Torrijos’ concern that there was actually a plot under way to assassinate him. Torrijos is known to be fearful of such assassination attempts and has in the past reacted strongly when there has been word of any such effort. Since the U.S. had said that it would try the soldier itself and would not extradite him, this may have fed Torrijos’ suspicion that there was indeed some connection between the United States and the demented soldier’s statements.

5. Since he agreed to the terms of the Neutrality Treaty which go far beyond anything Torrijos said he would accept, it is known that Torrijos has been rather severely criticized by some of his own people and by officers of the National Guard who feel he has gone too far. Conceivably Torrijos’ concern has become intensified with the passage of time and he may be wondering whether he has indeed committed himself too far.

6. Hovering over all of this is the question which must be plaguing Torrijos as to whether he can indeed survive—either with a new treaty or without one. He recognizes that he needs a new treaty for the economic future of his country. He is also concerned, however, that a treaty which does not achieve all that he has said it would, will not be supported and may bring about his downfall. He is, therefore, constantly tantalized by the question whether it is better to have the Panama Canal as a cause rather than as an achievement. His wavering on this issue is reflected in his changes of temperament, tone and appraisal of the state of negotiations.8

In the light of these facts it would seem that the following course is the best one for us.

[Page 172]

1. We should continue our negotiations in a calm and fair spirit, rejecting, of course, any inference or innuendo that the United States is not acting in good faith with other than utter sincerity. Our aim should continue to be to find mutually agreeable solutions to the problems as they come up and to try to have Panama understand that we are sincerely seeking fair answers which will take into account their and our real needs. In that connection, Panama has to be aware of our political concerns and the problems of ratification. Secretary Vance did indicate during a press conference in Grenada that a real effort would have to be made in the Senate to get requisite support for such a treaty; and that if the treaty were presented for ratification today there might be a question as to its ratification.9 This may well have intensified Panamanian concerns but is fully consistent with what they have been told across the negotiating table consistently for weeks and indeed months.

2. On the issues (apart from the one of economic arrangements), it should be possible to arrive at a mutually agreeable solution in order to clear the decks for the economic discussions. At the moment, the only problems which still remain unresolved are

(a) appointment and removal of Panamanian Entity Board members,

(b) appointment and removal of the Panamanian Administrator and Deputy Administrator of the agency operating the canal,

(c) rotation policy affecting present employees of the Canal Company,

(d) APO and PX privileges for the United States canal employees.

There will obviously have to be some give and take on both sides but these issues are ones which can be resolved if there is a willingness to resolve them.

3. The problem of financial arrangements will remain a massive one because Panama’s demands are astronomical and the practical fact is that any treaty which calls for payments to Panama beyond those which can be obtained from the operation of the canal itself will risk and possibly invite rejection by the Senate. This means that there are really two sets of financial arrangements to be agreed upon. In the first place, terms have to be worked out for an annual payment under the treaty to be derived from tolls. In addition, an arrangement will have to be worked out for assuring Panama of the financial help it will require for its economic development programs. The latter will involve the cooperation and guidance of the United States and the international [Page 173] agencies, and the United States should indicate willingness to work with the Panamanian officials in putting together an acceptable package of appropriate size and content which might meet requisite criteria of AID, the international institutions, and in due course the private sector.

4. Because the financial demands and expectations of Panama seem to be so great, and because there seems to be an unwillingness to differentiate between economic arrangements which can be properly made part of the treaty and those which have to be dealt with separately, it may be desirable for President Carter to telephone General Torrijos after the Panamanian representatives have had the opportunity to state their case10 in order to assure General Torrijos that the United States is eager to be helpful to Panama in connection with its economic requirements. The President could state that there are limitations on what can be properly made part of the treaty as a financial arrangement, but that it should be possible to supplement this through discussions with the United States and the international agencies as well as with the private sector to endeavor to assure that Panama will have the funds it believes it needs in order to carry forward its economic development program.11

5. When Ambassador Bunker and I met with President Perez of Venezuela and President Lopez Michelsen of Colombia,12 they both indicated their awareness that General Torrijos had very large demands in mind in connection with economic arrangements and recognized that the problem was one which would have to be encountered head on. It may be that at a propitious moment we will want to involve President Perez, President Lopez Michelsen, and possibly also President Lopez Portillo of Mexico and President Oduber of Costa Rica to try to moderate Torrijos’ excessive expectations and to convey to him an understanding of why the United States position is reasonable.

6. Since virtually all the other terms of the treaty will have been agreed upon, it would be appropriate to indicate to Panama at an appropriate time that if a treaty does not eventuate because of disagreement on the financial arrangement issue, the United States would expect to make public the terms of the treaty offered by the United States to Panama to assure both the countries of Latin America and the world generally of the magnanimous spirit in which we have approached the negotiations and the fairness which we have displayed in trying to resolve all these issues. This should not, of course, be put [Page 174] as a threat but rather as an indication of our pride in our position and our readiness to present it to the world court of public opinion.13

  1. Source: Library of Congress, Manuscript Division, Linowitz Papers, Box 117, Panama Canal Treaties, General Correspondence, June-Aug 1977. No classification marking. Drafted by Linowitz. The memorandum was forwarded by Linowitz to Jordan under a June 27 covering letter. (Ibid.)
  2. In telegram 3887 from Panama City, May 31, the Embassy reported that on May 30 a U.S. Army deserter shot and wounded a Panamanian National Guardsman. (National Archives, RG 59, Central Foreign Policy File, D770193–9062) In telegram 4173 from Panama City, June 9, the Embassy reported that during interrogation, the U.S. soldier said at one point he wanted to kill Torrijos. (National Archives, RG 59, Central Foreign Policy File, D770206–0785)
  3. Not found.
  4. June 16.
  5. See Document 52.
  6. For discussion of this situation and the Mizrachi letter, see telegram 4158 from Panama City, June 9, in the National Archives, RG 59, Central Foreign Policy File, D770206–0165.
  7. See Jack Anderson and Les Whitten, “Panama-Libya Secret Deal Indicated,” Washington Post, June 16, 1977, p. VA-17.
  8. In a June 21 memorandum to Duncan, Dolvin submitted his final report of the May round of negotiations, in which he suggested that Escobar’s “long nationalistic harangue” on June 17 was a negotiating tactic: “Intelligence reports had previously indicated that Panama might resort to this negotiating ploy—a tactic used during a previous negotiating round. The reports also indicated that Torrijos was unhappy with our informal rejection of the Panamanian economic demands and felt the need to slow the negotiations in order to achieve maximum Panamanian gains.” Dolvin concluded: “It is clear that the recess and the sharp Panamanian harangue presented at the last session are Panamanian negotiating tactics designed to gain additional United States concessions.” (Washington National Records Center, OSD Files, FRC: 330–80–0017, Panama 821 (Mar–15 July 1977))
  9. For the text of the June 16 news conference, see the Department of State Bulletin, July 18, 1977, pp. 72–76.
  10. See footnote 2, Document 52.
  11. No record of the telephone conversation has been found.
  12. See Document 31.
  13. Vance relayed information very similar to that presented in this memorandum in a June 17 memorandum to Carter summarizing the state of the negotiations, which Carter initialed. (Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 18, Evening Reports (State), 6/77)