In case no objection is perceived by the Embassy or by the Governor of
the Panamá Canal, you are requested to deliver the annexed note to the
Panamanian Foreign Office and to notify the Department by air mail when
delivery has been made.72
[Enclosure]
The Secretary of
State to the Panamanian Minister for Foreign
Affairs (Garay)
Washington, May 15, 1940.
Excellency: I have the honor to acknowledge
the receipt of Your Excellency’s note DD No. 218 dated January 23,
1940, which notes the objections entertained by the Panamanian
Government to an order issued by the Commanding General, Panamá
Canal Department, United States Army, effective December 1, 1939,
prohibiting, with specified exceptions, the purchase of perishable
and semi-perishable foodstuffs by the United States Army through
other than United States Government agencies.
Your Excellency points to the economic loss which the operation of
this order has occasioned directly to commission merchants in the
Republic of Panamá who theretofore provided the United States Army
with some of these commodities, and indirectly to the Panamanian
Treasury which is now deprived of the taxes levied upon this
business. Your Excellency contends, moreover, that the order is
contrary to the spirit, if not the letter, of the General Treaty
between the United States of America and the Republic of Panamá
which became effective July 27, 1939.
Your Excellency’s communication has received the very careful
attention of my Government which is animated by a sincere desire to
ensure that the Republic of Panamá, its citizens and its residents
obtain every legitimate advantage from the operation of the Panamá
[Page 1121]
Canal, an enterprise
in which the two countries are so closely associated.
The inquiries which have been made establish the fact that the
perishable and semi-perishable foodstuffs to which Your Excellency’s
note relates are commodities of United States origin. The question
which is raised therefore is whether these foodstuffs of United
States origin should be purchased directly from American suppliers
through United States Government agencies or whether they should be
purchased indirectly through the intermediary of commission
merchants established in the Republic of Panamá.
Until recent years none of the perishable and semi-perishable
supplies of the United States Army on the Isthmus of Panamá were
purchased otherwise than through United States Government agencies.
From time to time during the past few years some purchases of these
products have been made experimentally from commission merchants in
the Republic of Panamá. It was hoped that savings to the United
States might thereby result since commission merchants, because of
fortunate speculation, are sometimes able to furnish products at
prices lower than those obtainable through non-speculative
Government agencies.
Experience has now proved without question that, generally speaking,
perishable and semi-perishable foodstuffs of United States origin
can be purchased by the United States Army at lower prices through
United States Government agencies than commission merchants in
Panamá. In special instances, however, the reverse might be the
case. In normal times the Army would wish to reserve its right to
purchase from the cheaper source.
In the present emergency it must be noted, however, that other
factors than that of price have become of paramount importance. It
is of course necessary to assure a certain supply of foodstuffs both
to the Army and the civilian population in the Canal Zone. Distance
from American continental markets complicates this problem. It has
become evident that commission merchants in the Republic of Panamá
cannot maintain stocks adequate for the purposes which the United
States Army has in view and the uncertain availability of
refrigerated shipping space places them at a considerable
disadvantage in guaranteeing the prompt and timely arrival of
supplies. These factors, rather than that of price, have accordingly
dictated the decision of the military authorities of my Government
to prohibit purchases of perishable and semi-perishable foodstuffs
through other than United States Government agencies for the
duration of the emergency.
While it regrets the losses which will be occasioned to the
commission merchants of Panamá, and the relatively small losses
which
[Page 1122]
will be suffered
by the Panamanian Treasury as a result of the enforcement of this
order, my Government confidently believes that the greatly increased
flow of money which has already resulted from the vast new
construction works undertaken in the Canal Zone will more than
compensate Your Excellency’s Government and the citizens and
residents of Panamá for these losses. It confidently believes,
moreover, that little if any unemployment from the operation of the
order will occur, in as much as available information indicates that
unemployment in Your Excellency’s country is almost nonexistent as a
result of the activities undertaken by the United States in the
Canal Zone.
Reference was made in Your Excellency’s note to the discussion which
took place at the 107th meeting of the treaty negotiators on
February 1, 1936 relating to the purchase by the United States
Government agencies on the Isthmus of Panamá of Panamanian products.
I need not here recall the attentive consideration which is given to
Panamanian bids on supplies whenever they are tendered other than to
allude to a recent contract by which 4,500 head of Panamanian beef
cattle are to be supplied to agencies of the United States in the
Canal Zone. It is appropriate to point out, however, that the
discussion in the 107th meeting did not relate to American
products.
While my Government, therefore, is as desirous as that of Your
Excellency that the Republic of Panamá shall receive every possible
commercial advantage from its geographical position in close
proximity to the Panamá Canal, it is constrained to point out that
it has undertaken no commitment to purchase American foodstuffs for
consumption by its own armed forces on the Isthmus of Panamá through
the intermediary of commission merchants established in the
Republic. The adequate rationing of the Panamá Canal is vital to its
operation and defense, particularly in this time of emergency, and I
am confident that the successful pursuit of these objectives at this
time is of equal concern to the Government of Panamá as to the
Government of the United States.
Accept [etc.]
