75. Memorandum From Ambassador at Large (Bunker) and Panama Canal Treaty Co-Negotiator (Linowitz) to President Carter1


  • Panama Canal Treaty Negotiations

Based on a message this morning from General Torrijos,2 we believe it is entirely possible that agreement on a new treaty may be reached next week when we will be in Panama.

On the economic issue, the Panamanians have abandoned their excessive demands and are close to accepting our offer in the memorandum which you approved.3 Two elements of our economic arrangements offer were:

—an annuity of 30 cents per Panama Canal ton, to be paid from toll revenues.

—use of the U.S. interest payment ($20 million per annum) as an additional payment to Panama either:

a) $10 million per year fixed; or

b) $20 million per year as Canal revenues permit, with shortfalls in payment to Panama to be made up in surplus years.

They have asked for modifications to our offer in order to reach agreement. We recommend that you approve two changes which in our opinion are justified and which we would be in a position to offer provided that the Panamanians indicate prior acceptance of our positions on all the other outstanding issues (expansion, lands and waters, etc.).

We believe that with the following modifications in our proposal, we may be able to reach agreement:

a) adjustment of the 30 cents per ton annuity to reflect inflation over the years, based upon a U.S. index or any other index which the U.S. selects, and

b) with regard to the use of the interest payment:

(i) a commitment to Panama of $10 million per annum, plus

(ii) an additional $10 million only if Canal revenues permit (again, shortfalls in this payment would be made up in surplus years).

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1980: Assuming after payment of the obligated $10 million to Panama there is a surplus of $5 million (revenues over expenses), Panama would receive a total of $15 million.

1981: Assuming after payment to Panama of the obligated $10 million there is a surplus (revenues over expenses) of $30 million, Panama would receive no more than $20 million for the year but we may choose to make up the shortfall for the previous year by paying an additional $5 million this year.


That you approve the modifications as outlined above.4

Approve _______ Disapprove _______
  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 61, Panama: Canal Treaty of 1977, 8/77. Secret.
  2. Not found.
  3. See Document 69.
  4. Carter checked the approve option and wrote: “J.C.” beneath the recommendation.