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

SUBJECT

  • Panama Canal Treaty Negotiations: Proposed Letter to General Torrijos and Preliminary Meeting with Panamanian Representatives

Background:

As you know, in the present negotiations with Panama we find ourselves confronted with the major issues of economic arrangements and lands and waters.

Economic Issues

Ambassador Bunker and Linowitz have put forward an annual payment proposal to the Panamanians, first of 25 cents per ton and later 30 cents per ton over the life of the treaty. At the same time Under Secretary Cooper and Treasury Under Secretary Solomon have been discussing with Panamanian representatives an economic package dealing with Panama’s economic development program.2

[Page 220]

The Panamanians originally sought an annuity payment of $300 million per year and have now reduced it to $150 million per year. In addition they originally asked for a $1 billion “down payment” which they have now reduced to $460 million. The economic package which Cooper and Solomon are trying to put together would result in no grants but over $400 million in economic loans and guarantees.

Panama has been adamant in insisting on economic payments and arrangements in the range of its own proposals and has asserted disappointment in the amounts we have discussed preliminarily. We have made no proposals on economic assistance.3

Lands and Waters

Recently, Panama tabled a number of additional demands for military areas generated by its National Guard, which did not become directly involved in the negotiations until early July.4 These demands were primarily concerned with (a) sites near the Canal for use by Panamanian units; (b) changes to the proposed rules governing use of the major training areas in the present Canal Zone; and (c) changes in the status of selected U.S. defense sites.

Our Deputy Negotiator for Defense has indicated that most of these new Panamanian demands are unacceptable because they would prevent the United States from adequately fulfilling its responsibilities for Canal defense.

Current Status:

On July 20 our Ambassador to Panama spoke with Panama’s Ambassador Lewis and indicated clearly and firmly that the Panamanian economic aspirations were “outside the real world” and that at the next meeting with Cooper and Solomon the United States would be as forthcoming as it could be.5 Ambassador Lewis responded that he thought that the Panamanians would be most surprised and disappointed. He said it was imperative that General Torrijos be personally informed of the United States position in an authoritative fashion and suggested that this could only be done by a direct message from you. He further said that he thought that unless such an approach were taken it was “not only possible but almost inevitable that there would be a rupture in the talks and that this might lead to confusion, disruption and violence.” On the other hand, he thought that the course he [Page 221] recommended had a good chance of defusing the situation and keeping the negotiations on track.

By Wednesday,6 you will receive an analysis of the options which PRC has prepared for your decision on U.S. economic assistance to be put to the Panamanians.7

We believe that you should meet with Ambassador Lewis and Panama’s two chief negotiators within the next few days and indicate to them that you have a message for General Torrijos which you would like them to deliver. You might then say:

—that you would like to impress upon General Torrijos your strong advocacy of a new and fair treaty between the two countries and your deep hope that such a treaty and the sense of partnership that would follow could set an example for the world;

—that you believe8 major progress has been achieved in treaty talks in the past few months and intend to give the treaty your strongest personal support and to mobilize Congressional and public opinion behind it;

—that you understand the matter of economic payments is the most important unresolved issue and that the United States is making and will continue to make every reasonable effort to deal with the matter fairly and sympathetically but within the very powerful restraints under which the whole treaty problem has to be approached in the United States.

—that you ask the Panamanian representatives to deliver the message to General Torrijos that the offer which we will make will be the most that we can undertake.

Recommendations:

1. That you agree to send a message to General Torrijos as suggested in the attached draft.9

2. That you agree to see Panama’s Ambassador Lewis and the two chief Panamanian negotiators to ask them to deliver the message to General Torrijos.10

  1. Source: National Archives, RG 59, Official and Personal Files of Ambassador at Large Ellsworth Bunker, Lot 78D300, Box 4, Panama Key Documents, 1977. Secret.
  2. Vance derived much of the information in this memorandum from a July 20 memorandum sent from Bunker and Linowitz. (National Archives, RG 59, Official and Personal Files of Ambassador at Large Ellsworth Bunker, Lot 78D300, Box 4, Panama Key Documents, 1977)
  3. An unknown hand underlined this sentence and wrote “added” after it.
  4. See footnote 3, Document 61.
  5. The July 20 memorandum from Jorden to Linowitz and Bunker documenting this meeting is in the National Archives, RG 59, Official and Personal Files of Ambassador at Large Ellsworth Bunker, Lot 78D300, Box 4, Panama Key Documents, 1977.
  6. July 27.
  7. An unknown hand underlined this sentence, bracketed the paragraph, and wrote “added” in the left margin. See Document 69.
  8. An unknown hand underlined “believe” and wrote: “[illegible] ‘you are satisfied’” above the sentence.
  9. Attached but not printed. The final version of the letter was sent on July 29. See Document 72.
  10. See Document 71.