711.1928/367: Telegram
The Minister in Panama (Summerlin) to the Secretary of State
[Received 6:15 p.m.]
58. Reference Department’s telegram No. 20 April 29, 7 p.m. I saw President Arias yesterday morning and advised him of the Department’s telegram. The President who received me with the Minister for Foreign Affairs said he would send me a memorandum for transmission to the Department. The memorandum in Spanish arrived April 30, 7 p.m. It is transmitted herewith in its entirety:
“Translation.
Memorandum on the payment of the annuity.
Panama, April 30, 1935.
The Government of Panama is appreciative of the attitude of the Government of the United States in maintaining the firm intention [Page 926] and determination to accept the thesis of Panama regarding the payment in gold of the annuities of the Canal, but deplores the fact that the Government of the United States believes that the only legal and practical means of arriving at this end is that of incorporating in the projected treaty a clause providing that the payment shall be made substantially in the manner provided for by the Treaty of 1903.
The point of view of Panama is that this clause is foreign to the objects of the proposed treaty. In effect, the new treaty has the object of regulating certain questions which have arisen as a result of the construction of the Canal. The payment of the annuity is not a question of this nature. The question of the payment of the annuity in gold has come up because of measures of a monetary nature placed in effect by the Government of the United States, measures which cannot affect the stipulations of an international treaty.
In order to obtain the payment of the annuity, it is not necessary to negotiate, but simply to take a measure to effect compliance with what has been pacted. This logically is a matter outside the consideration leading to the celebration of a new treaty.
Furthermore, even though a new treaty is agreed upon, it would lack validity as long as it is not ratified in accordance with the constitutional requirements of the contracting parties. If one of the parties should delay ratification or should not ratify, the matter of the payment would be left pending with definite damage to Panama.
The Government of Panama understands the reasons of the Government of the United States in not wishing to submit to the consideration of Congress any project of law which specifically treats of this question. Taking into account these reasons and in its fervent wish to avoid difficulties to the Government of the United States, the Government of Panama has endeavored to cooperate in finding some practical means by which the points of view of the two Governments would not be affected. Having this in mind Panama has suggested various proposals, as follows:
- (a)
- That it be advanced a sum of money ($12,000,000) to redeem the bonds of its external debt. Through this plan there would be no need to indicate the value of the annuity, inasmuch as this would be determined after 28 years; that is to say, when Panama finishes paying through the annuity and through other payments on account, the advance of $12,000,000. This plan, however, was refused by the Government of the United States because it would be necessary to ask authorization from Congress to carry it out. We do not know if there is any agency of the Government of the United States, the Panama Railroad Company for example, which might effect the advance of the $12,000,000 and receive the annuity in payment. Perhaps by this method it would not be necessary to obtain the authorization of Congress.
- (b)
- That Panama be advanced only the sum of Balboas 4,000,000 in order to redeem the bonds of the 1923 loan. This plan would probably carry the same objection that it would require authorization from Congress, but as was explained in the previous case, perhaps some of the agencies of the Government of the United States, the Panama Railroad Company, for example, would be able to carry out the said plan.
- (c)
- That the Treasury of the United States or some agency of the Government of the United States turn over to Panama the value of the annuities in silver bars, in order not to state at this time the value of the $250,000 gold which the United States should pay to Panama.
The absence of payment by the United States of the annuities of the Canal is causing serious damages to the Government of the Republic, among others that of not properly attending to the service of its debt, and that it impedes Panama from carrying out a conversion or a consolidation of the external debt, something that could easily be done at this time as has been done by various countries, and thus obtaining a considerable reduction in interest. While there are doubts respecting the payment of the annuity, Panama cannot make a proposal to the bond holders, inasmuch as there would not be a certainty of paying the interest agreed upon in its entirety.
The Minister of Panama in Washington has no doubt amply explained to the Department of State the different reasons which cause Panama to state that the matter of the payment of the annuity of the Canal is not a question which should be incorporated in the proposed new treaty.
The Government of Panama maintains the hope that if some person in the Department of State or in the Department of the Treasury will carefully study the different proposals that Panama has made, and which is consistent with the object of eliminating the difficulties that might arise for both Governments, this matter could be satisfactorily arranged, and through it Panama would receive an appreciable advantage in being able to arrange the payment of its external debt with benefit to its fiscal interests.”