711.1928/206 5/6
Memorandum by the Chief of the Division of Latin American Affairs (Wilson)
In accordance with the request of Dr. Alfaro, the conference was held in my office today, attended by Dr. Alfaro, Mr. MacLean, Assistant Solicitor General, Mr. Laylin, of the Treasury Department (in place of Mr. Opper who was unable to attend), Mr. Hackworth,37 Mr. Merrell,38 and myself.
Dr. Alfaro set out with considerable force and at some length Panama’s contentions, as he had stated them to me on February 26.
The suggestion was made to him that Panama was in no sense suffering any prejudice, since the annuity payment had been assigned by Panama to the bondholders and that at least until the bonds had been retired, Panama would gain no benefit from the payment in gold, since this would automatically accrue to the bondholders. It was suggested that in view of this situation, Panama might desire to allow the situation to rest for the time being until such time as Panama might actually suffer some prejudice, when we could reexamine the matter.
Dr. Alfaro declined flatly to consider this suggestion. He felt, on the contrary, that Panama might well derive benefit from payment on the gold basis since Panama’s obligations to the bondholders, such being payable in New York, were subject to the legislation of this country and hence, in his view, could be paid only on a legal tender basis, whereas Panama, being entitled to payment in gold from the United States Government, should profit by the additional amount involved in such form of payment. His contention was that the United States Government should make payment in gold or on a gold basis to the Fiscal Agent and that the question of what ultimately became of this payment should not be determined by the United States Government, but should be left for determination by the Fiscal Agent, the bondholders, and presumably the courts of this country.
Mr. MacLean expressed the opinion that the arrangements made by Panama, under which the treaty payment was assigned to its bondholders in this country, might well be a controlling factor in the situation, and said that he would like time to study the provisions of the loan contracts and other related documents. It was agreed that such study would be made.
At the close of the conference, Dr. Alfaro stated that the Fiscal Agent of Panama in New York had been instructed to decline to receive the payment made on February 26, and that we could expect to have [Page 620] such payment returned to us. It was suggested to Dr. Alfaro that Panama might permit the Fiscal Agent to receive this payment, reserving her rights in the matter. Dr. Alfaro said, however, that this would merely result in having the matter drag along, and that Panama desired to bring the issue to a head at this time and to have it settled.