Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

158. Memorandum From the Acting Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Operations Coordinator (Richards)¹

Washington, September 19, 1956.

SUBJECT

• Nicaraguan Canal Survey

Mr. Holland has discussed the proposed Nicaraguan Canal Survey with the Secretary, who it is understood, has given preliminary approval of the general idea. It would be conducted by a small team headed by a United States Army engineer. The purpose would be to impress Panama with the possibility of our exercising our option to construct a canal in Nicaragua in order to discourage possible moves by Panama, inspired by developments at Suez, to challenge our Treaty rights in the Canal Zone, also to bring about a more reasonable attitude on the part of Panama on Canal Zone problems. Its effectiveness would depend upon the degree to which we could impress the Panamanians that we are in earnest. Miss Whiteman of the Legal Division is currently engaged in a study of the scope of our treaty rights in Nicaragua. If Mr. Hoover agrees, the next logical step would be for State to consult with Defense on the matter, as suggested at the OCB luncheon on September 12, 1956,² in order that the necessary arrangements can be made, if Defense agrees.

This plan should not be confused with the related proposal that we actually proceed with the construction of a canal in Nicaragua, even though this may some day be done. A decision to actually build such a canal will require detailed studies and consultation among the interested Government agencies. This decision does not lie with the Department of State, although State will of course have responsibility for the necessary international arrangements. Appropriate legislation and a further agreement with Nicaragua and possibly Costa Rica, and others would be necessary. In view of the limited purpose of the instant plan, care must be exercised to avoid giving rise to undue hopes on the part of Nicaragua and possible inflationary effects upon the Nicaraguan economy, particularly since we cannot at this time take the Government of Nicaragua into our confidence as to the immediate purpose of the present plan. The present Government of Nicaragua is expected to cooperate willingly with this government on both the proposed survey and the actual construction of a canal, if decided upon, although no approach has been made on either project by this Government.

There are attached for your information two memoranda on the construction of a Nicaraguan Canal.³

1. Source: Department of State, OCB Files: Lot 62 D 430, Luncheon Items. Secret.

2. According to the preliminary notes of that meeting, prepared by Arthur L. Richards, the discussion regarding the canal survey went as follows:

   “Mr. Gordon Gray mentioned that two weeks ago it had been suggested that the Army send a US Army Engineer to Nicaragua to start dusting off openly the old Nicaragua Canal Survey. The thought was that this might have a salutary effect on Panama. Mr. Gray asked how the Department of State viewed this proposal.

   “Mr. MacArthur said he was not familiar with it but would ask Mr. Henry Holland to communicate with Mr. Gray regarding it.

   “It was left that if State and Defense agreed on this proposition, the OCB need not be seized further with it.” (Ibid.)

3. Reference is to Holland’s memorandum to Dulles of August 31 regarding the Bryan–Chamorro Convention (see footnote 3, Document 156) and a memorandum by Robert T. Merrill, Director of the Shipping Division, September 12, discussing the practicability and cost of building a Nicaraguan interoceanic canal.