The Embassy has now received from the Foreign Office a lengthy formal
note (D. D. No. 218, January 23, 1940) regarding the matter. I enclose
copies of the Spanish text and an English translation of the note as
well as copies (and, where pertinent, translations) of the several
enclosures67 which
accompany it.
In conclusion, Dr. Garay requests me to lay the matter before the
Secretary of State and in the name of the Panamanian Government to urge
him to use his good offices with the War Department with a view to
obtaining the abrogation of the order in question.
In acknowledging receipt of the note, I have advised Dr. Garay that it
has been referred to the Department.
For full information regarding General Stone’s order, the circumstances
which led up to it, and its effects in so far as Panamanian merchants
are concerned, reference is made to my despatches No. 167 of November 7,
and No. 172 of November 13, 1939.70
[Enclosure—Translation]
The Panamanian Minister for Foreign Affairs
(Garay)
to the American Ambassador (Dawson)
D. D. No. 218
Panamá, January 23, 1940.
Mr. Ambassador: As of the first of last
December, as Your Excellency well knows, the Military Department of
the Panamá Canal suspended the purchases of articles of the classes
called “perishable” and “semi-perishable” which it previously made
of merchants of the Republic, and decided to confine its orders to
the Commissaries of the Panamá Railroad Company, that is, to the
Government of the United States of America, owner of all the shares
of that Company. The value of these purchases amounted to an average
of $180,000.00 monthly, or more than two millions annually, of which
a part fell to the Government of Panamá on account of fiscal taxes,
and another considerable part entered into circulation in the
Republic in the form of wages, commissions, and other services,
exception being made of that part of the sum which was exported to
the United States for
[Page 1116]
supplies which could not be produced in Panamá. The matter is,
consequently, one in which the Panamanian Treasury, Panamanian
commerce, the Panamanian people and the Government and people of the
United States of America are jointly interested if they view the
problem with a criterion superior to that of dollars and cents.
Until now the Secretary of Labor, Commerce and Industry of Panamá has
been having interviews with the military chiefs of the Panamá Canal
Department and endeavoring to have them reconsider their resolution
and to induce them to revoke the order suspending purchases from
merchants of the Republic, even though the measure taken by them is,
according to the statements of the said chiefs, of a temporary
character and will not outlive the existing emergency situation
created by the present European war. But in view of the fact that
the result of these conversations has been negative, I have received
instructions from the Executive Power to address Your Excellency
setting forth this Government’s points of view regarding the subject
motivating this note and in the light of the international
obligations stipulated in the pacts and documents which govern our
reciprocal relations.
In the enclosures to this note there appear true copies of the
letters exchanged between Secretary Méndez and General Stone, until
yesterday Commanding General of the Panamá Canal Military
Department; of the report from Secretary Méndez to this Office; of
the order suspending purchases from Panamanian merchants published
in the local newspapers; and of an interview granted by the same
Secretary to local newspapermen and published by them in past
months. These enclosures speak for themselves and do not require any
comment on my part. The reflections which I take the liberty of
advancing in the body of this note are of another kind, although
they are in perfect harmony of purpose with the above-mentioned
action of my Cabinet colleague.
There is a series of declarations and stipulations in the last pacts
agreed upon by our two Governments which translate into positive
obligations the intentions of the parties in their desire to give
concrete form to the policy of the good neighbor proclaimed by
President F. D. Roosevelt, of the United States of America, and to
the policy of loyal and friendly cooperation proclaimed unceasingly
by the Chiefs of State of the Republic of Panamá. At the risk of
repeating well known truths, I reproduce below the pertinent
texts.
- Article I of the American-Panamanian General Treaty of March
2, 1936 already speaks of the common purpose of “insuring the
full and perpetual enjoyment of the benefits of all kinds which
the Canal should afford the two nations that made possible its
construction”.
- Article II of the same Treaty ends by mentioning the Canal “in
which—it adds—the two countries are jointly and vitally
interested”,
[Page 1117]
that is
to say, that the Canal is not only the lifeline of the United
States but also that of Panamá.
In accordance with this conception of the situation of both countries
in the Isthmus of Panamá, Article III stipulates various clauses
agreed upon by them “in order to enable the Republic of Panamá to
take advantage of the commercial opportunities inherent in its
geographical situation”.
Among these advantages are the restriction of sales by the
Commissaries of the Canal, limiting them to employees, and their
dependents, of that enterprise and of the Panamá Railroad (Sections
1 and 2 of Article III); the prohibition against leasing and
subleasing houses in the Zone to persons other than employees, and
their dependents, of the two said enterprises (Section 3); the
cooperation of the Government of the United States in order to
prevent the violation of the Panamanian immigration and customs laws
(Section 4); the prohibition against admitting new private
commercial enterprises in the Zone other than those existing there
when the Treaty was signed (Section 5); the opportunities offered to
the merchants of Panamá to do business with the ships which transit
the Canal which were in previous years obliged to make their
purchases in the Canal Commissaries exclusively (Section 7).
Along with these fundamental declarations there exist certain
exchanges of notes signed on the date of the General Treaty by the
same’ negotiators and incorporated into the Treaty as an integral
part thereof. In these notes there is applied and developed what
could be called the philosophy of the Treaty, principally in the
notes which refer to the gradual suppression of the agricultural
licenses granted to private persons in the the Canal Zone; to the
abandonment of the hotel business on the part of the Canal in favor
of the Panamanian industry as soon as the latter is capable of
adequately satisfying the necessities of the clientele; to the
voluntary withdrawal from the business of storage warehouses in the
Zone on the part of the Government of the United States just as soon
as there are a sufficient number of storage warehouses in
satisfactory conditions and at reasonable prices in Panamá; to the
suppression of the competition which the hospitals, dispensaries,
restaurants, lunch rooms, army dining rooms, clubs, moving picture
houses, laundries, cleaning and pressing establishments of the Canal
Zone formerly carried on to the detriment of establishments of the
same kind under the jurisdiction of the Republic; to the
constitution of a mixed board to prevent and suppress smuggling into
Panamá of articles imported free of duty into the Canal Zone; to the
prohibition against selling luxury or tourist articles to ships
transiting the Canal, this business to be reserved for the merchants
of Panamá; to the obligation undertaken to increase the
[Page 1118]
prices of other classes
of articles which are sold to ships transiting the Canal in order
not to offer unfair competition to Panamanian merchants; to the
promise that when Panamanian merchants can supply these articles at
all times in satisfactory quantities and quality, and at reasonable
prices, the Canal commissaries shall refrain from selling them to
ships; to the constitution of a mixed board charged with arranging
the details of the system of cooperation instituted with regard to
sales to ships; to the revision of the contracts in force concerning
water works and sewers in Panamá and Colón; to the principle of
equality of treatment of Panamanians and Americans employed by the
Canal or the Panamá Railroad, etc.
In addition, the Government of the United States, through the Under
Secretary of State, the Honorable Sumner Welles, made a written
declaration at the 107th session held by the negotiators of the
Treaty on February 1, 1936, reaffirming therein its declared policy
of giving preference in purchases for the consumption of the Canal
to the native products, agricultural and industrial, of Panamá which
may be satisfactory as to price and quality. The minutes of the
respective session carry the complete text of that very important
declaration.
Reading all these texts, it is impossible to avoid the conclusion
that the deliberate purpose of protecting the Republic of Panamá
economically as a nation closely associated with the United States
in the protection of the security of the Canal and in the
maintenance of its neutrality, inspired the elaboration of the
General Treaty, the exchanges of additional notes, and the
Washington Agreements of March 2, 1936. It is impossible, on the
other hand, to deny that the recent gesture of the military
authorities charged with the protection of the Panamá Canal in
entirely eliminating the participation of Panamanian merchants in
supplying the United States military forces stationed in the Zone
not only does not harmonize with the policy of the good neighbor and
with the measures agreed upon by the two Governments in the
application of that principle, but is fundamentally incompatible
therewith.
I do not wish to say here that the concessions made to Panamá by the
United States of America in the last General Relations Treaty were
made gratuitously as a simple favor. On the contrary, the Treaty is
perfectly bilateral and the concessions which it contains in favor
of Panamá are compensated by other very important ones which Panamá,
in turn, makes to the United States. To justify my assertion it
would be sufficient, if that were necessary, to refer to the very
numerous clauses regulating situations created between Panamá and
the United States which, although there might be disagreement
between the two Governments about classifying them as illegal (para
[Page 1119]
calificar de
ilegales), there would be none in declaring that they were the
source of vexatious controversies for the two Governments in the
light of the 1903 Treaty71 and,
consequently, of constant friction between them.
The emergency situation recently declared in the Panamá Canal Zone in
no way affects the obligation of our contractual stipulations or the
economic structure of the Treaty, since this was entered into for
time of peace as well as for time of war, without any distinction in
this respect.
To persist in the measures taken by the military authorities of the
Panamá Canal dislodging Panamanian merchants from the Zone and
taking out of their hands a business whose annual value exceeds two
million dollars, in order to turn it over to the Canal Commissaries
less than a year after the ratification of the 1936 Treaty by the
United States Senate, would be a very marked recession toward the
epoch when the neighborly relations between the Panamanian and
American communities on the Isthmus were regulated by means of
unilateral measures of disagreeable memory, an epoch and methods
which, according to the statement of the Under Secretary of State,
the Honorable Sumner Welles, recorded in the minutes of the sessions
of the Negotiating Commissions, the new Treaty and its additional
Conventions were intended to replace and to cause to be
forgotten.
Please, Your Excellency, bring to the attention of His Excellency the
Secretary of State of the United States of America the foregoing
considerations and urge him in the name of this Government to use
his good offices and his high influence with the War Department of
that Government to obtain from the military authorities charged with
the command of the forces which protect the Panamá Canal the
abrogation of the measures adopted by them ignoring the spirit of
our new bilateral pacts and of the “good neighbor” policy with which
the Administration of President F. D. Roosevelt has known how to win
the good-will and sympathies of the Spanish-American nations.
Accept [etc.]
