61. Memorandum From Secretary of State Vance to President Carter 1

[Omitted here is information unrelated to Panama.]

6. Panama: Prospects for reaching early conceptual agreement on a treaty dimmed somewhat this week as Panama continued to insist on an unacceptable high level of economic payments from the United States and reopened, in some significant areas, the question of lands and waters involving the military sector. On payments, Panama, while showing some flexibility, continues to demand benefits substantially beyond the Canal’s revenue generating capacity.2 Panamanian and U.S. representatives have had useful talks and are continuing to explore various possibilities. Panama’s attempt to reopen several areas of the lands and waters issue stems from Panamanian National Guard efforts to assert a need for larger military areas to strengthen joint defense operations.3 Bunker and Linowitz are continuing their extensive consultations with Congress.

[Omitted here is information unrelated to Panama.]

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject Files, Box 18, Evening Reports (State), 7/77. Secret.
  2. Carter highlighted this sentence, underlined “beyond the Canal’s revenue generating capacity,” and wrote in the left margin: “We will break off talks if they insist on this. I would not try to sell it to American people.”
  3. In telegram 4930 from Panama City, July 8, Jorden reported that Contreras had entered the negotiations to ensure that defense-related issues were resolved to the satisfaction of Torrijos and the Guardia Nacional. (Department of State, American Embassy Panama, Panama Canal Treaty Negotiation Files, Lot 81F1, 1964–1977, Box 127, POL 33.3.2/Land and Water July 1977) On July 12, Contreras presented a new lands and waters position which contained far reaching changes to the current position. He requested to have a number of additional sites and areas be turned over to Panama as a result of the treaty. On July 15, the Americans responded to the new position by rejecting nearly all of the Panamanian requests, which displeased Contreras. The memoranda of conversation for the July 12 and 15 negotiations with Contreras are in the Department of State, American Embassy Panama, Panama Canal Treaty Negotiation Files, 1964–1977, Lot 81F1, Box 127, POL 33.3.2/Land and Water July 1977.