711F.1914/432
The Ambassador in Panama (Wilson) to the Secretary of State
[Received March 12.]
Sir: I have the honor to refer to my despatch No. 804 of February 27, 1942,18a regarding the draft Agreement for the defense sites and to report as follows:
The President19 asked me to call on him on March 5, and when I arrived I found the Foreign Minister there. We had a conversation that lasted two hours concerning the negotiations for the defense sites, the gist of which was as follows:
The President stated that he had been considerably disturbed by our insistence on our formula for Article I. He raised much the same arguments and expressed the same points of view as Dr. Fábrega had done in our conversation on this matter on February 26, as reported in my despatch No. 804. The President said flat-footedly that he would never accept Article I of our draft, and that he would prefer to have no Agreement and have the negotiations break down rather than accept such a formula. I went over the same ground with him as I had done previously with Dr. Fábrega, pointing out that the Government of Panamá had never made an issue of Article I heretofore, that the main point had been the elimination of any reference to Article II of the 1936 Treaty, and this we had accepted. The President said that the elimination of reference to not only Article II but also to Article X of the 1936 Treaty made the phraseology of Article I of the draft Agreement even more unacceptable to Panamá, because it left the whole question of evacuation of the lands to future agreement between the two Governments.
The President then said that he had a new formula to propose, to the effect that the lands would be evacuated and revert to Panamá one year after the signature of the Treaty of Peace, except that if during this one year period both Governments were in agreement that danger still existed, then consultation would take place for a new agreement for the continued temporary occupation of the defense sites, or of some of them. I asked if he could give me his proposal in writing and he said that the Minister for Foreign Affairs would hand it to me within a day or so. The President said that these alternative proposals, the one made in Foreign Office Note No. 3177 of February 25,20 transmitted by my despatch No. 804 of February 27, and the one which the Foreign Minister would hand me shortly, were his last words on the matter. He said that his own preference was for the new formula which he had just outlined and which would [Page 585] be given me by the Foreign Minister. It was agreed that I would await the text of this formula and then report it to Washington for consideration.
A note from the Foreign Minister, No. 3239 of March 6, has now been received, which, among other matters, contains this formula. A single copy of the note in Spanish, and office translation, are attached hereto. The formula for Article I in English translation reads as follows:
“The Republic of Panamá grants to the United States the temporary use for defense purposes of the lands referred to in the Memorandum attached to this Agreement and forming an integral part thereof. These lands shall be evacuated and the use thereof by the United States of America shall cease one year after the date on which the Treaty of Peace which brings about the cessation of the present war shall have entered into effect. If within that period the two Governments believe that, in spite of the cessation of hostilities, a state of emergency continues to exist which makes vitally necessary the continuation of any of the said defense bases or areas, the two Governments shall again enter into mutual consultation and shall conclude the new agreement which the circumstances require.
“The national authorities of the Republic of Panamá shall have access at all times to the defense sites mentioned herein.”
As regards this matter, my opinion is the following: As reported in my despatch No. 804, I believe that the earlier proposal, that the lands would be evacuated and revert to Panamá “upon the beginning of the demobilization of the forces called to arms by the United States because of the present war”, should be satisfactory to us. Under this formula the whole matter is left in our hands, we cannot be called upon to evacuate the sites until after we have begun demobilization, and it is inconceivable that we should in fact demobilize until all danger has ceased to exist. I prefer this formula to the new one giving a year’s grace after the signature of a Treaty of Peace, because it is not impossible that an inconclusive Treaty of Peace might be patched up merely to give both sides time to prepare for the continuance of the war a little later. On the other hand, the proposal provides for consultation and negotiation in the event of continuing danger after a Treaty of Peace. We should probably be reasonably safe in accepting either formula.
To revert to my conversation with the President: After the discussion of Article I we had considerable discussion of Article XII, concerning the amount to be paid for the use of the defense sites. It came out in this discussion that the President probably would be willing to accept an annual rental of $1 for all public lands, provided $100 annual rental per hectare was paid for the privately owned lands. At this point, however, a new and rather disturbing factor arose. I said that on the foregoing basis of $100 per hectare annual rental for the private lands, it was of course my understanding that [Page 586] the large Rio Hato site would, for reasons which were obvious, not be included in this treatment but be handled as a separate case. At this point Dr. Fábrega interjected with considerable vehemence that this was not at all his understanding and that on the contrary he had understood that all privately-owned lands used by the United States would be treated on the same basis and that whatever rental was paid for other privately-owned sites would be paid for Rio Hato. I pointed out that in my discussions with Dr. de Roux, before the present Government came into office, it had been the point of view of the Panamanian Government that Rio Hato should not be included with the other defense sites but should be treated on a different basis. I further pointed out that the United States Army had been renting Rio Hato since January 21, 1935, paying $2400 annually for the 7676 hectares with an option of purchase at $18 per hectare. I said that these figures which had been agreed upon in the contract between the Army and Mr. Kierulff, the owner of the land, had been accepted by Mr. Kierulff as fully satisfactory and represented an idea of what the owner considered a fair value. I also pointed out that I had been advised by the State Department (instruction No. 523 of February 18, 194221), that the Panamanian proposal that public and private lands be paid for at a rental rate of $100 annually per hectare, involving the payment of approximately $700,000 a year (exclusive of Rio Hato), was regarded as excessive. Furthermore, that it was felt in the United States that in view of the many millions of dollars of benefits which would accrue to Panamá from our favorable action on the Railroad lots, liquidation of the Rio Hato credit, etc., the United States Congress would be reluctant to pass this legislation approving the transfer of the Railroad lots, etc., if at the same time it had before it a defense site agreement under which Panamá was to be paid an exorbitant sum for the sites themselves. I said that on the basis of the Panamanian proposals, the Government of Panamá was asking the United States, in addition to all the benefits which Panamá would derive from the 12 points, to pay an annual rental for the defense sites of approximately $700,000 for the sites exclusive of Rio Hato, and $767,600 for Rio Hato, making a total of $1,467,600 annual rental. I said that I could not believe that the Panamanian Government meant this seriously. Dr. Fábrega said that the rental for public lands could be omitted. I said that we, of course, had no figures on the break-down between public and privately owned lands and were still awaiting this information from the Panamanian authorities. Assuming, however,—and the assumption might be wide of the mark—that on this basis we would be called upon to pay, say, $300,000 annual rental for the privately owned lands, this added to what they were now asking for Rio Hato [Page 587] would mean an annual payment of over $1,000,000. I also pointed out that it seemed most exaggerated to request the United States to pay $767,600 annual rental for an area for which we were at present paying only $2400 annual rental, with an option of purchase at only $18 a hectare, all this to the entire satisfaction of the owner. Dr. Fábrega said that so far as he was concerned Rio Hato would have to be treated on the same basis as the other privately owned lands.
At this point the President intervened to say that he recalled distinctly that under the previous Government consideration had been given to treating Rio Hato as a separate case, apart from the other defense sites. He asked how I thought the matter might be handled. I said that my personal suggestion would be the following: Either that a separate agreement be made for Rio Hato in which we would continue to pay for the duration of the emergency a reduced rental, approximately that which we are now paying, or else that the Rio Hato site would be thrown in with the other defense sites, but that the rental for Rio Hato be figured at the lower amount, approximately that which we are now paying. The President said that he would give further consideration to this matter and would see that I was advised later concerning it.
. . . . . . . . . . . . . .
I then said to the President that I would be less than frank if I failed to make clear to him that a somewhat painful impression had been produced in Washington by the claim of the Panamanian Government to receive large sums of money for the use of these defense sites. I said that it had been the understanding in Washington, after the request for the use of the defense sites had been made by the United States, that when the former Panamanian administration presented its 12 points, favorable action on the part of the United States concerning these requests would be regarded as full and ample compensation for the use of the defense sites, I said that a good deal of surprise had therefore been caused by, first, the utterly fantastic request of the Arnulfo Arias administration for a rental of $4,000 per hectare, and then later by the maintenance by the present Panamanian administration of a request for a considerable annual rental.
The President spoke at some length of the other factors involved in the matter besides the commercial one, of the virtually complete occupation of the Republic of Panamá by the armed forces of the United States, and the additional expenses involved for Panamá in increasing its police force and taking on other employees to assist in maintaining order throughout these areas, etc., etc.
The new proposal made for rental in Panamanian note No. 3239 of March 6, is, in brief, that the United States should pay rental of [Page 588] $100 per hectare annually for the privately-owned lands, and $1 per hectare annually for the Government-owned lands. An exception would be made for Rio Hato, the rental for this area to be fixed by two experts, one appointed by each Government, and in case of disagreement an arbitrator to be named whose decision would be final. The experts, in fixing the amount of rental for Rio Hato, would take into account not only the intrinsic value of the land but also “the injuries, burdens and consequences of every kind which may befall the Republic of Panamá through the use of these lands by the military forces of the United States”.
The annual rental for all the defense sites would be paid as from the date on which the United States began to enjoy the temporary use of the lands, except that in the case of Rio Hato the United States would be permitted to deduct from the rental fixed for this area, the sums which have been paid annually to date to the owner of the land.
The Panamanian proposal for Article XII maintains the provision in the earlier Panamanian draft that payment will be by the United States for all buildings, cultivations, improvements, etc., existing on the defense sites, the value of such buildings, etc., to be fixed by experts appointed by both Governments, and in event of disagreement between the experts then an arbitrator to make the final decision.
My recommendations on this point of rental are as follows: That we should indicate to the Panamanian Government willingness in principle to consider the proposal that privately-owned lands be paid at the rate of $100 per hectare annually, and public lands at $1 per hectare annually, subject to examination of information to be received from the Panamanian Government as to the approximate amount of these lands which are in fact privately-owned and the approximate amount which are public lands.
As regards Rio Hato, it will be noted that the Panamanian proposal is in effect that the new rental basis for this area should be applied retroactively to the time when the United States first began renting Rio Hato, January 21, 1935. I believe that we should propose that the new rental basis for Rio Hato should commence either on January 1, 1943, at the expiration of the existing contract between the Army and the owner of this land, or else at some more recent date, for instance, the date on which the first of the defense sites proper was formally occupied by the United States. As to the amount of rental to be paid for Rio Hato, I believe it preferable to fix this amount in the Agreement rather than leave it to later negotiation and probable arbitration. If the Department is prepared to consider the Panamanian proposal of $100 annual rental per hectare for the privately-owned lands exclusive of Rio Hato, then I suggest [Page 589] that I be authorized so to inform the Panamanian Government, but on condition that the rental fixed for Rio Hato be only slightly higher than that now being paid under the Army’s lease. We might offer, instead of the present rental of $2400 per annum, $12,000 or $15,000 per annum. If the Panamanian Government insists upon a higher rental, then we should state that we will be unable to consider $100 per hectare for the private lands but would have to scale this figure down so that the total amount we should be paying for all private lands, including Rio Hato, would not amount to more than $100 per hectare for the privately-owned lands exclusive of Rio Hato, plus $12,000 to $15,000 for Rio Hato.
Before reaching a final agreement regarding the rental for these defense sites, we should have a definite understanding with the Government of Panamá regarding the two areas for Combat Teams near Chorrera and Pacora (despatches No. 527 of January 17, 1942, and No. 568 of January 24, 1942,22 page 9). The Chorrera area comprises 530 hectares and Pacora 1010 hectares. I recently discussed this matter with Dr. Fábrega, and in view of the uncertainty as to whether these areas will be used throughout the period of the emergency, I agreed, at his suggestion, to continue their present status, which rests upon the basis that these forces are carrying out maneuvers, for the next few months. Permission on a three months’ basis was originally accorded by the Panamanian Government for maneuvers by these forces in both areas, and Dr. Fábrega proposes to extend this permission for two or three further periods of three months each. As there is, however, likelihood that these areas may in fact be utilized by our forces throughout the emergency, I believe we should have an understanding that if this takes place, then whatever rental or charge might be made by Panamá for the use of these areas, should be at a lower figure than that paid for defense sites as such.
It will be observed that Panamanian Note No. 3239 of March 6 covers several other points besides Article I and Article XII. These points, with my comments concerning them based upon necessarily hasty consideration today, are as follows:
- (1).
- The final paragraph of the Panamanian proposal for Article I provides that the national authorities of the Republic of Panamá shall have access at all times to the defense sites. Our draft provided that such access should be subject to arrangement with the military authorities of the United States. I believe that the Panamanian proposal is made more from a sense of maintaining prestige than from airything else, and that if we should accept it there would in fact be little tendency on their part to exercise the right. On the other hand, it is clear that these areas are military reservations, and no one outside of our armed forces can expect to appear at the areas at any time and be admitted to them. I would suggest, therefore, that we might accept [Page 590] their proposal but upon condition of an exchange of letters providing that in order to insure the access of the Panamanian national authorities to these sites and to prevent misunderstandings, such authorities should communicate sufficiently in advance with the military authorities of the United States in order that appropriate arrangements might be made for them to visit the sites.
- (2).
- The Panamanian proposal for a minor change in the second line of Article IV seems satisfactory.
- (3).
- The proposal for a change in the tenth line of Article IV is to make this section of Article IV agree with the second paragraph of Article I as proposed of Panamá (see above). If we accept the Panamanian proposal on the second paragraph of Article I, then this change in Article IV can also be accepted.
- (4).
- The proposal for redrafting Article V is to bring it into line with Article I as now proposed by Panama; whichever of the two formulas proposed by Panamá for Article I may prove acceptable to the United States, could then be repeated in Article V.
- (5).
- The change proposed by Panamá in Article VI would seem acceptable by adding the words “or used by” after the words “which may have been constructed”.
- (6).
- The modification proposed by Panamá in the last three lines of Article VI seems acceptable.
- (7).
- With reference to the third paragraph of Article VIII, regarding repair of damage to roads, Panamá proposes that instead of consultation between the appropriate authorities of the two Governments to fix the share of the United States, there be agreement now on a fixed annual sum to be paid by the United States. The Panamanian note refers to conversations which the Ambassador of Panamá has had in Washington on this subject, conversations concerning which I have no information. It strikes me, however, that it would be preferable in fact to agree now upon a fixed sum rather than to have consultations and probably disputes in the future regarding the respective shares of the two Governments in the damage caused to Panamanian roads. One possible way of arriving at a fixed amount would be to agree that the United States would pay, say half the amount actually expended in the previous year by Panamá for the repair of Panamanian highways. According to information furnished the Embassy by Mr. Humbard, of the Public Roads Administration, Panamá spent during the period 1931–1941 an average of $280,000 annually for road maintenance; in 1941 $318,000 was spent.
- (8).
- The Panamanian proposal for modification of Article XIII seems satisfactory.
I should appreciate the Department’s instructions on the foregoing points. I suggest that this time, instead of sending a new counter-draft, the Department give me instructions to be followed in conversations on the points raised, affording me some latitude in these matters.
To revert to the question of rental for the defense sites, Article XII, it occurs to me on further consideration that the best arrangement from our point of view would be to offer a fixed sum as rental, say, $300,000 or $400,000 annually to cover all the lands, including Rio [Page 591] Hato, leaving to the Government of Panamá to pay costs of expropriation, indemnities for improvements, and such further payments to the private owners as it might judge desirable. This would avoid bickerings and disputes, and possible arbitrations, over questions of valuation and indemnities. In my judgment, the Government of Panamá would not accept anything less than $300,000 a year.
Respectfully yours,