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 You are in: Under Secretary for Public Diplomacy and Public Affairs > Bureau of Public Affairs > Bureau of Public Affairs: Office of the Historian > Foreign Relations of the United States > Johnson Administration > Volume XXXI
Foreign Relations, 1964-1968, Volume XXXI, South and Central America; Mexico
Released by the Office of the Historian
Documents 423-458

423. National Security Action Memorandum No. 323/1/

Washington, January 8, 1965.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. VI, Memoranda, September 1964-January 1964. Secret.

Policy toward the present and future of the Panama Canal

The Secretary of State
The Secretary of Defense
The Director, Central Intelligence Agency
The Chairman, Atomic Energy Commission
The Director, Bureau of the Budget
The Director, U.S. Information Agency

1. Basic policy toward the present and future of the Panama Canal has been set forth by the President in a statement on December 18, 1964, of which an authentic copy is attached./2/ This statement makes it U.S. policy to work toward a new sea level canal and to propose renegotiation with Panama of the existing Panama Canal Treaties.

/2/ Attached but not printed; see footnote 3, Document 421.

2. The Secretary of State is requested to begin discussions as appropriate with the Governments of Panama, Colombia, Nicaragua, and Costa Rica, with respect to the possibilities of a sea level canal. The Secretary is requested to determine which of these governments would be interested in the possible construction of a sea level canal through its territory. The United States is prepared to begin negotiations with interested governments on the terms and conditions for the construction and operation of a sea level canal. Depending on the results of these negotiations, it is expected that we would proceed with selected site surveys.

3. We have in mind a treaty for a sea level canal in which sovereignty over the canal area would remain in the country or countries through which the canal would pass. The United States would be authorized, at its option, alone or with others, to undertake construction. Financing would be the primary responsibility of the United States Government, but the door could be left open for it to accept contributions from other sources, both public and private.

4. The United States Government has no final position on the exact form by which interested governments might join in operation of a sea level canal. There are advantages and disadvantages in an international commission which might include representatives of users or of financing groups or of the Organization of American States. There are equally advantages and disadvantages in bilateral operation by the United States and the country through which the canal might run. Moreover, it is possible to think in terms of two layers of responsibility, one bilateral and the other broadly international. Final decisions on these matters will be made by the President in the light of further advice and recommendations from the Secretary of State and the Secretary of Defense.

5. It is expected that the defense of the new canal would be the responsibility of the United States and the country or countries through which the canal runs. We should seek treaty terms which give to the United States the necessary rights and freedom of action to ensure the effective security of the canal regardless of the actions of the other country or countries.

6. The tolls for a sea level canal would be fixed in such a way as to put the canal on a self-sustaining basis, to pay an annuity to the host government, to amortize this investment and to serve the interests of world commerce. Like the present canal, the new interoceanic canal would be open to the vessels of all countries on the basis of equality.

7. Whatever treaties are agreed upon would, of course, be subject to approval and ratification in accordance with the constitutional procedures of the United States and the other country or countries


8. With respect to the negotiation with Panama, the following principles will guide our negotiators:

(1) We are glad to join with the Government of Panama in searching for solutions which are compatible with the dignity, responsibility and sovereignty of both nations. It is clear that we must make provision for the continued protection and operation of the existing canal by the United States until it is replaced.

(2) We are prepared to negotiate a new treaty with Panama governing the present lock canal, based on the retention by the United States of all rights necessary to the effective operation and protection of the canal, including administration of the areas required for these purposes. This treaty would replace the 1903 Treaty and its amendments. It should recognize Panamaís sovereignty. It should provide for a termination date for rights retained by the United States based on the operational date of a sea level canal wherever it might be constructed. It should provide for the effective discharge by the United States of its responsibilities for hemispheric defense. The present treaties would, of course, remain in effect until a new agreement is reached.

(3) The new treaty for the existing canal should include adequate provisions to ensure continuation of our military bases and activities in the Canal Zone until the closing of the existing canal, without loss of necessary rights or freedom of action. The treaty should make no distinction between the use of bases for purposes of protection of the canal or for hemispheric security. The agreement should contain appropriate acknowledgment of Panamaís contribution to hemispheric security under these arrangements. In addition, arrangements should be included to continue existing U.S. military base rights in the Republic of Panama outside the Canal Zone and to create appropriate status of forces provisions for U.S. servicemen when outside the Zone.

(4) Upon the closing of the existing canal, our military rights under the new treaty as discussed in the preceding paragraph will terminate. Therefore, negotiations should also be started for a base rights and status of forces agreement with Panama, related to hemispheric security, to come into effect upon the closing of the present canal. This new agreement should provide for continuation of U.S. military bases and facilities in the present Zone and outside the Zone in the Republic of Panama, with such changes as are needed. The agreement should also cover whatever new arrangements are needed in connection with the security and defense of the new canal wherever it is located.

(5) Wherever the new canal is built it will create new opportunities. To be sure, closing of the present canal would cause economic problems for Panama, but these would be offset to a great extent by those new opportunities which would be created if the sea level canal were built there. Panama would benefit not only from the actual construction of such a canal, but would also continue to enjoy the benefits of the present canal until the new one were completed. We are prepared to consider now with Panama a program of how best to take advantage of these opportunities and to meet these problems. The efficient employment of Panamanian workers employed in the present canal whose services would not be needed in the operation and maintenance of the sea level canal will form a major topic of our discussions with Panama.

(6) We will also take every possible step to protect the employment rights and economic security during the transition period of United States citizens now employed in connection with the operation, maintenance, and defense of the present canal. We shall do what is necessary to find them employment fitting their skills and experience and by providing retraining where this is called for.

9. In summary, the Presidentís new policy sets three principal tasks before the United States Government, in order to satisfy the requirements of the present and the future:

(1) Working out satisfactory arrangements for the construction and operation of a new sea level canal;

(2) Providing a new treaty framework for the interim period to govern the operation and administration of the present lock canal; and

(3) Agreement on the terms of arrangements for facilities for defense of the existing and sea level canals and for the security of the Hemisphere.

These three problems are intimately interrelated and, to the maximum degree practicable, should be addressed simultaneously.

10. NSAM 152 dated April 30, 1962, and NSAM 164 dated June 15, 1962,/3/ are rescinded; except paragraph 6 b and c (2) of NSAM 152.

/3/ For texts, see Foreign Relations, 1961-1963, vol. XII, Documents 402 and 406.

McGeorge Bundy


424. Information Memorandum From the Assistant Secretary of State for Inter-American Affairs (Mann) to Acting Secretary of State Ball/1/

Washington, February 1965.

/1/ Source: National Archives and Records Administration, RG 59, ARA Assistant Secretary Files: Lot 70 D 295, Panama. Confidential. The date is stamped on the memorandum but is too faint to determine a day; Rusk was not in the Department February 1-14. (Johnson Library, Rusk Appointment Book) The memorandum indicates that the Acting Secretary saw it.

Sea-Level Canal Discussions with Central American Countries

Secretary Ailes and I visited Panama and Colombia on February 1 and 2. Secretary Ailes was unable to accompany me on visits to Nicaragua and Costa Rica (January 28 and 29) because of other commitments. Attached is the list of persons who accompanied us./2/

/2/ Attached but not printed.

In Nicaragua and Costa Rica, I met with the Presidents and Foreign Ministers, as well as members of the Administration and opposition parties. In Costa Rica, I also talked to all of the former Presidents since 1944.

In Panama, Secretary Ailes and I talked only to the Foreign Minister. Although we met with President Robles and other Panamanian officials, we did not engage in any extensive discussions with him on a sea-level canal, or other matters, because it was clear Robles wanted his Foreign Minister to handle the discussions.

In Colombia, we talked to the President, the Foreign Minister, and the Cabinet in separate meetings. Because Colombia has a National Front Government, this included the countryís important leaders, but it did not include as broad a spectrum of the opposition as we talked to in Costa Rica.

The atmosphere was favorable in Nicaragua, Costa Rica and Colombia-especially in Colombia. We found a general willingness to authorize preliminary reconnaissance of proposed routes and to enter into negotiations looking toward the construction of a sea-level canal. We found a general concern about the future of Panama, if the canal were constructed other than in Panama. Especially in Costa Rica and Colombia, Government leaders offered to be of assistance in bringing Panama around to a favorable attitude. In all three countries we heard suggestions of a multi-lateral arrangement designed to be most helpful to Panama in making the transition from the present lock canal to a sea-level canal.

We found a general misunderstanding in all of the countries about the earnings from the canal; the role which the canal plays in the Panamanian economy; the economic benefits of the canal to the US; the fact that the present canal had not been amortized; and the difference between the rights needed for the present canal and those that might be required for a sea-level canal. I believe we cleared up much of this misunderstanding, but much more needs to be done.

In Panama, we found the Foreign Minister very unhappy that we were discussing a sea-level canal with other countries. He regarded it as blackmail. He insisted that we have a legal and moral obligation to operate the present canal until Panama agrees that we might cease operation. I told him that we would be as helpful as we could to Panama, but we did not consider that existing treaties imposed such a legal or moral obligation. Panama believes that further violence in the Canal Zone would be detrimental to the world position of the US, and it therefore regards violence as a bargaining weapon. It also considers that it has a trump card, with respect to US military bases in the Canal Zone.

Panama regards a canal as its primary natural resource, and gives little evidence of a willingness to consider seriously an economic development program in which a canal is only one industry. The Foreign Minister expressed willingness to consider international control of a sea level canal during the period of amortization. But afterwards, he said the canal would be under the exclusive control of Panama. Panama would be willing to consider some restrictions on its authority to set tolls, but it was clear that Panama regarded itself as one of the worldís main toll roads, and that its present intention is to exact a tribute as high as the traffic will bear. The Foreign Minister seemed unwilling to accept our view that a canal should be thought of as a service to world commerce, with the primary benefits for Panama to be derived from secondary developments, such as new ports, industries, and other economic activity.

I will be talking to Robert Anderson in the next few days about additional personnel he may need to continue the necessary negotiations. I believe we should now move forward as rapidly as possible with the objective of concluding the necessary treaties with the interested countries by the end of this year.


425. Memorandum From the Presidentís Special Assistant for National Security Affairs (Bundy) to President Johnson/1/

Washington, May 10, 1965.

/1/ Source: Johnson Library, National Security File, Bundy Files, Memos to the President, Vol. X. No classification marking.

Panama Canal Treaty Negotiations

Agreement has been reached by Tom Mann, Jack Vaughn, Steve Ailes and Bob Anderson on a new and forthcoming approach to the Panama Canal treaty negotiations. On the basis of the new instructions, Anderson hopes to be able to hold rapid and fruitful discussions with the Panamanians.

The core of the new approach is to tell the Panamanians that:

(1) Our aim is to negotiate with them promptly a sea level canal treaty acceptable to both countries;

(2) U.S. base rights and a status of forces agreement will be negotiated along with but separate from the canal treaty;

(3) if agreement on a sea level canal is reached and U.S. base rights are obtained, we will alter our existing rights under the 1903 treaty and work out an interim treaty or a transitional agreement covering the period from the present to the coming into effect of the sea level canal treaty; and

(4) we will attempt to finish our negotiations with the Panamanians before talking further about site surveys or a sea level canal with Colombia, Costa Rica or Nicaragua.

Bob Anderson will be talking with Congressmen tomorrow about the new approach in keeping with our commitment to tell certain Congressmen informally about any new proposals before informing the Panamanians./2/

/2/ In a May 7 memorandum to Bundy, Mann emphasized the need to keep Congress informed: "We should be very sure that Congress is going along with us at all stages of the negotiations." (Ibid., NSC Histories, Panama Crisis, 1964)

If all goes well, the new approach will be explained to the Panamanians at a meeting in the State Department this Wednesday./3/

/3/ May 12.

McG. B.

Speak to me

/4/ This option is checked. In a telephone conversation with Anderson on May 17, the President told him: "God almighty, you watch Panama any way you can." Johnson continued, "Where you can really talk to íem and-gonna work out all right-do it so they canít say that we messed around for a year and wouldnít talk to íem." (Recording of telephone conversation between President Johnson and Robert Anderson, May 17, 9:07 a.m.; Johnson Library, Recordings and Transcripts, Tape F 65.29, Side A, PNO 1 and 2)


426. Memorandum From Secretary of State Rusk to President Johnson/1/

Washington, June 22, 1965.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Inter-Oceanic/Panama Canal Negotiations, Vol. I. Confidential.

Panama-Canal Negotiations

Secretary McNamara, Ambassador Anderson and I are scheduled to meet with you at twelve noon Wednesday June 23 to discuss the status of Canal negotiations with Panama./2/ The principal subject for discussion and decision will be a proposed new arrangement for joint United States-Panamanian operation of the present Canal.

/2/ According to the Presidentís Daily Diary, the meeting with the President was held between 12:30 and 1 p.m. on June 23. (Johnson Library) William Jordan briefly covers this meeting in Panama Odyssey. (p. 109)


Agreement has now been reached by the United States and Panamanian Special Representatives to negotiate, separately but concurrently, (1) base rights and status of forces agreements, (2) a new treaty to replace the 1903 Treaty and (3) a sea level canal treaty and to submit them as a package to the legislative authorities of both countries. I am informed that the Panamanian negotiators accept willingly that the United States should have responsibility for protection of the Canal and the ultimate say in the operation and maintenance of the Canal; they have, however, taken a firm position that Panama should share in the activities of the Canal Zone Government as well as the Panama Canal Company. A decision is therefore required whether the United States can agree to joint management and, if so, what form such an arrangement should take.

State and Army have studied this question and believe that a formula for joint management which will protect the United States objective of retaining ultimate, unimpaired control can be devised. There is enclosed a paper entitled "Possible Elements of a Joint Panama Canal Authority" drawn up by State, Army and Ambassador John N. Irwin II, which sets forth the outlines of such a formula./3/ This paper is limited to the concept for a joint authority. It is also contemplated that the treaty will contain a separate provision empowering the President of the United States to take such action as he deems necessary to assure continued effective operation of the Canal under adverse conditions.

/3/ Attached but not printed.

Consideration has been given to providing for participation by Panama on the Board of Directors of the present Panama Canal Company. This course, which also accepts the concept of joint administration, would be difficult to negotiate, would probably never be entirely acceptable to Panama, and would not offer the political advantages of a clean break with the past and a fresh new start with Panama. I believe an entirely new approach might also be easier to take to Congress.


That decision in this matter be deferred pending full discussion with Ambassador Anderson on Wednesday.

Dean Rusk


427. Memorandum From the Presidentís Special Assistant for National Security Affairs (Bundy) to President Johnson/1/

Washington, August 30, 1965, 1:30 p.m.

/1/ Source: Johnson Library, National Security File, Memos to the President, McGeorge Bundy, Vol. 13. Confidential.

The Panama Canal Negotiations

1. I have just talked at length with Bob Anderson and he tells me that the political problems of the Panama negotiations are now getting ripe for a brief report to you. I agree with him. There are decisions in the offing which only you can make and which I think you will want to make directly with Bob.

2. The essence of the situation is that Anderson and his team are very clear now on the need for a Joint US-Panama Authority to run the present Canal under the new treaties with Panama. You have approved this idea in principle, and for discussion, but there is no final Presidential decision, and still less any public White House position.

3. In discussing this idea on the Hill, in a preliminary way, Andersonís colleagues, Jack Irwin and Bob Woodward, have found substantial preliminary resistance from the House Subcommittee led by Mrs. Sullivan, and also from Senator Hickenlooper.

4. Anderson himself has stayed away from the House Subcommittee so far. He does not want to be in the position of giving them a fat target before there is a definite US Government position. He fears that if he were to advocate the Joint US-Panama Authority before you have made your own decision, he would be inviting public and definite opposition from Mrs. Sullivan and others.

5. Anderson is convinced that the Joint Authority will be indispensable to a successful negotiation. He is also convinced that real US interests can be protected, essentially by giving both Presidents a veto of changes in the existing code which covers the existing Canal. Anderson & Company therefore plan to make a flat recommendation to you in favor of a Joint Authority.

6. The next question is that Bob needs to know whether you want him to be the spokesman or whether you wish to announce your decision yourself, perhaps to an appropriate group of bipartisan leaders. He and I are inclined to think that if the President and Commander-in-Chief were spokesman on an issue of this sort, the chances of effective support would be greatly increased. This is, of course, what happened when you announced that you planned to negotiate these new treaties last December.

7. Anderson is now preparing a definite and clear recommendation on the Joint Authority for submission to you./2/ He can come in and get your decision either in the latter part of this week or after Labor Day. We think our tactics should be decided fairly soon because the Panamanian Congress is in October, and our own Congress should know our position before it goes home. On this basis, may I make an appointment through Marvin Watson for Anderson:

/2/ Document 428.

Later this week/3/
Early next week
Speak to me

/3/ None of the options is checked, but Bundy wrote at the top of this memorandum: "Hold for Panama meeting Thurs." The President met with Anderson and Irwin in the Oval Office at 1:55 p.m. on September 2. (Johnson Library, Presidentís Daily Diary) No other record of this meeting has been found, although a September 14 memorandum from Assistant Secretary for Inter-American Affairs Jack Vaughn to Rusk indicated that "The President approved" the Anderson and Irwin recommendations "and directed Ambassador Anderson to canvass the Congress to ensure that there would be sufficient Congressional support." (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 33-3 PAN)

8. I have talked to Larry OíBrien about the problem of Mrs. Sullivan-and probably Dan Flood-and he thinks we have a lot of ways of handling this sort of opposition, and that on the Hill in general it is well understood that it is time for change in US-Panama relations. I will plan to ask him to join in the Anderson meeting (if he hasnít gone off to deliver the mail).

McG. B.


428. Memorandum From the Presidentís Special Representatives (Anderson and Irwin) to President Johnson/1/

Washington, September 2, 1965.

/1/ Source: Johnson Library, National Security File, NSC Histories, Panama. Confidential. The memorandum was unsigned, but a handwritten line at the top of the first page indicates it was from Anderson and Irwin.

Panama Canal Treaty Negotiations

Since May, the United States negotiators have been discussing with the Panamanians three treaties, an Interim Treaty (regarding the existing Canal), a Sea Level Canal Treaty and a Base Rights and Status of Forces Agreement. All aspects of the discussions have been carefully coordinated with the Departments of State and Defense on a continuing basis. We have reached a point in the negotiations at which we wish to bring to your attention the far-reaching nature of the proposals which have been discussed, and alternatives, and to recommend courses of action for your decision.

We have informed key Senators and Representatives about the general progress of the negotiations and are meeting with varying degrees of concern, in some cases deep concern, because of the prospect that the United States may actually relinquish practical aspects of sovereignty, and because there might be delegated to a new Joint Authority the important functions which the Congress has heretofore controlled directly, such as: formulation of new laws for the Canal Areas, approval of the budget and expenditures, and decisions with respect to tolls, commercial enterprises and employment conditions.

Based upon your decisions resulting from this meeting, we recommend that you advise the leaders of Congress (including the majority and minority leaders of the Foreign Relations, Armed Services, Appropriations and Commerce Committees of both Houses and the House Merchant Marine and Fisheries Committee and its Panama Canal Subcommittee) of your policy goals with respect to the Panama Canal and of the guidelines you have given to the United States negotiators. In view of the extent to which the suggested new participation by Panama in the practical application of sovereignty will depart from tradition, it is doubtful that anyone but you can persuade the leaders of Congress to accept these changes.

I. Interim Treaty

1. Form of Administration of Existing Canal

Following the guidance of your December 18, 1964, statement,/2/ we have sought a treaty which will recognize the sovereignty of Panama while retaining such rights as are necessary to provide effective operation and defense of the Canal and to enable us to treat fairly and helpfully the Canal employees, both United States and non-United States. We are seeking a treaty which will be recognized as a sincere and generous effort on the part of the United States to meet Panamaís aspirations; so that, if it should be rejected by Panama or if accepted and later events require the use of military force to ensure the operation or defense of the Canal against hostile Panamanians, the United States will be in a more favorable position, and especially in Latin America, than under the 1903 Treaty or a new treaty in which Panama does not participate as a real partner.

/2/ See footnote 3, Document 421.

We have been discussing with the Panamanians two formulas for Panamanian participation in the administration and operation of the Canal:

(1) a proposal (suggested by us) that Panama be given a minority participation on the Board of Directors of the existing Panama Canal Company, the authority and responsibility of the Board to be expanded to include functions now exercised by the Governor, and

(2) a proposal (suggested by Panama but also considered independently by us to be a possible solution) to create by the Interim Treaty a Joint Authority in which the United States and Panama would share as partners full authority and responsibility to operate the Canal and administer the Canal Areas.

We recommend proposal (2), the Joint Authority, because:

(a) While meeting the principal aspirations of Panama, we believe we can retain for the United States (i) the ultimate control of the administration and operation of the Canal through majority control of the Board of Members or by having a "casting vote," and (ii) the unilateral right for the President of the United States to defend and secure the Canal under any circumstances in which he believes such action necessary.

(b) It is an overt expression of Panamanian sovereignty and will be a major step in eliminating the "foreign colony" stigma with which Panamanians view the Canal Zone.

(c) It seems to offer the best hope of concluding a mutually satisfactory bilateral arrangement with Panama which will both ensure the continued effective operation and defense of the Canal and reduce the likelihood of violent United States-Panamanian confrontations.

(d) It is doubtful that we could negotiate successfully Panamanian membership on the Board of Directors of the existing Panama Canal Company. The Panamanian negotiators state that the Panamanian Government has never officially recognized the Panama Canal Company, that its existence has been a continued source of irritation to Panama, and that it is not compatible with a recognition of Panamaís sovereignty.

(e) United States agreement to participation by Panama on the Canal Companyís Board of Directors would, in effect, be accepting the idea of joint administration without receiving the political benefit which would flow from an offer of a new and real form of partnership with Panama, as under the Joint Authority proposal.

(f) The United States can include in the Treaty provisions which will ensure fair treatment to the employees (both United States and non-United States) in the light of the changed circumstances, and the United States Government can take action independent of the Treaty to provide for the United States employees.

The principal disadvantages of the proposed Joint Authority are:

(a) It removes the United States, and particularly the United States Congress, from direct control over the Canal. Ultimate control would be exercised through a Board of Members the majority of whom would be appointed by the President of the United States.

(b) A significant number of Senators and Representatives will oppose strongly a real partnership with Panama. They will consider it a "giveaway" and a weakening of our historic position of strength in Central America, a position they believe is needed to ensure the defense of the Western Hemisphere and to retain reasonable tolls for the benefit of both world commerce and United States shipping and those who ship the cargoes, particularly those ships and cargoes involved in trade between the east and west coasts of the United States. Their principal concern, however, might be said to be the instability of Panama and its Government, the seeming lack of capacity of its people, the lack of concern of the controlling "oligarchy" for the masses, and the activity of Communist elements.

In addition to the above two proposals, Panamanian representation on the Board of the Canal Company and creation of a Joint Authority, there are several possible alternate concepts of administration. Among these are:

(a) Maintain the existing Panama Canal Company and Canal Zone Government while granting significant concessions to Panama.

(b) Abolish the Panama Canal Company/Canal Zone Government and reestablish an independent United States Government agency

similar to that existing before the establishment in 1950 of the Panama Canal Company; grant significant concessions to Panama, perhaps including some form of Panamanian participation in the functions of the United States Government agency.

(c) Create by treaty a multinational agency composed of representatives of the United States, Panama and the principal users of the Canal, or perhaps others selected by any variety of ways.

(d) A plan, known as the Machado Plan, under which the World Bank would be authorized to organize an international corporation to purchase the interests of the United States in the Panama Canal Company and the Canal Zone Government and obtain from Panama a long-term franchise to operate the Canal as an international waterway on a self-sustaining and self-liquidation basis. This plan might provide a quick and practical business solution of the problem and avoid many of the political differences which have arisen in the past.

Alternatives (a) and (b), maintenance of the existing organization or establishment of a new independent Government agency, would be much more acceptable to Congress than the proposed Joint Authority, but neither would meet the Panamanian aspiration for sovereignty. We believe Panama would refuse Alternative (a) but might be induced to accept Alternative (b) for a specified and fairly short term of years if convinced there was no hope for some form of real participation.

Alternatives (c) and (d), multinational operation and the Machado Plan, would be difficult to sell both to Panama and to Congress, but we believe it possible to do so to the Panamanians if they are convinced they cannot negotiate a satisfactory bilateral arrangement.

2. Tolls and Unamortized United States Investment

These two subjects present primarily internal United States political problems.

(a) Tolls

One of the traditional purposes of the Canal has been its contribution to world commerce. The United States never raised tolls since the Canal was opened, and inflation has had the effect of reducing tolls to approximately one-third of the 1914 toll. Strong voices in Congress have opposed any increase in tolls, even though many Canal Governors have recommended increasing them.

It would probably be possible to establish a new tolls system, based party on value of cargo, which would be more equitable while more profitable. We recommand that the Joint Authority be empowered to hold toll hearings and fix tolls, possibly subject to the Presidents of the United States and Panama each having a unilateral power to veto


(b) Unrecovered United States Investment

The unrecovered United States investment in the existing Canal enterprise is fixed variously at from $329,000,000 (net direct investment) to $463,000,000 (equity of the United States Government). There are two schools of thought: (i) those who believe that the United States has been more than repaid through the use of the Canal for commercial and defense purposes for a period of over 60 years, including two world wars, the Korean war and the current world situation, and (ii) those, including many in Congress, who believe the unrecovered investment should be recovered.

The Panamanians dispute the amount of our unrecovered investment and argue that the United States has adopted intentionally the policy that has resulted in no amortization. They point out that the United States can afford to subsidize world commerce but that Panama cannot, so either the tolls should be raised to bring an optimum income to Panama or the United States should pay Panama an equivalent sum.

A related factor is that the Panama Canal Company now pays interest to the United States Treasury (approximately $11,000,000 in 1964) on the interest bearing investment of $329,000,000 computed on the basis of statutory criteria established by Congress. After payment of the interest, the Panama Canal Company now is not able to establish adequate reserves for capital improvements.

If you approve the Joint Authority proposal, we shall try to achieve some formula which will permit recovery of the unrecovered investment in the 1903 Canal, either by agreeing on a figure to be amortized under the new arrangement or by obtaining a new equity when the sea level canal financing is arranged. Acceptance of the Joint Authority proposal would have the effect of discontinuing present interest payments to the United States Treasury.

Other Issues

Among other difficult and sensitive issues in the negotiations of the Interim Treaty are the law to be applied in the new "Canal Areas," the system of courts, the financial solvency of an independent Joint Authority, the commercial enterprises of the Panama Canal Company, the welfare of the employees, and the question of defense and security of the existing Canal. We believe that reasonable solutions can be achieved under the Joint Authority proposal.

With respect to the duration of the Interim Treaty, Panama opposes strongly tying the duration to the effective date of a sea level canal because of the United States position that we may build the sea level canal in Colombia or elsewhere. However, we believe we can obtain an Interim Treaty with a duration of between 35 to 60 years.

Public Announcement of Progress in Negotiations

The President of Panama wishes to make a public announcement of progress in the negotiations before the opening of the Panamanian National Assembly on October 1. It may be advisable to have a joint announcement of the President of the United States and the President of Panama in order to assist the President of Panama and to have more control over the exact wording. What can be said will depend on the progress made not only on the Interim Treaty but also on the Sea Level Canal Treaty and the Base Rights and Status of Forces Agreement. The primary interest of the Panamanians is the Interim Treaty.

II. Sea Level Canal Treaty

1. Option

In the Sea Level Canal Treaty we are seeking essentially an option to construct a sea level canal in Panama at a time and place and by a means of our own choosing. Panama wishes to have a sea level canal if one is constructed, but the concept of the option causes difficulty to Panama because of our announced intention to seek similar options from Colombia and from Nicaragua and Costa Rica. If we are successful in signing three satisfactory treaties with Panama it may be advisable to reconsider present plans to proceed with site surveys in Colombia, Costa Rica and Nicaragua.

We anticipate difficulty, particularly in obtaining an open-ended option to construct a sea level canal by nuclear methods. Consequently, it may be necessary to agree to share with the host countries the decision with respect to construction of a canal by nuclear means.

2. Form of Control

No decision has yet been made with respect to the agency to control a sea level canal. Should it be multinational, binational, or possibly a combination of the two?

We recommend that the treaty provide for a multinational agency composed of representatives of the United States, the host country, the financiers and the principal users of the Canal but include a provision to permit the United States and the host country to decide on a bilateral agency rather than a multinational agency if the United States and the host country, before the financing arrangements are made, each determines that it prefers a bilateral arrangement.

3. Other Issues

Although there are numerous other complicated problems, such as the method of financing, defense of the canal, tolls, compensation of the host country, question of provision for repayment to the United States of the unrecovered investment in the 1903 Canal, and the duration of the controlling agency and of the treaty (including Panamaís desire to own the sea level canal outright after the cost has been amortized), we refer to these only for your general information and do not seek decisions at this time.

4. Congress

Congressional criticism is most likely to be reflected in concern over multinational control of a sea level canal, and over control of tolls. Some have expressed the view that a new canal should be built outside of Panama.

III. Base Rights and Status of Forces Agreement

The Base Rights and Status of Forces Agreement has been prepared by the Department of Defense and is based on similar agreements with other countries. The present draft provides that the bases will be made available by Panama free of charge, in keeping with a worldwide Department of Defense policy. The Panamanians may expect payment.

The prosposed Base Rights and Status of Forces Agreement will be opposed by some in Congress on the grounds that we are giving up areas in which we are now "sovereign," turning them over to Panamanian sovereignty, and taking them back under a treaty which gives us less control than we now possess.

IV. General

1. Compensation to Panama

In the Sea Level Canal Treaty draft, we have provided for an annual payment of a fair and reasonable return to Panama, without specifying the amount. In the Interim Treaty we provide for a payment to Panama in the proportion of Panamaís interest in the Joint Authority. There is no provision in the Base Rights and Status of Forces Agreement for any payment to Panama. We have included in the Sea Level Canal Treaty draft a general undertaking to assist Panama in meeting the adverse economic impact of a sea level canal which will be caused by a sharp decrease in employment and similar changes in the existing economy.

The Panamanians have indicated that they will put a price on the use of their land and water areas (their "greatest natural resouce") and either expect to receive it from the canal revenues, or for the United States to pay the difference. As stated earlier, there is a possibility Panama may demand rent for use of the military bases. They will ask United States assistance in meeting their economic problems when the sea level canal is opened.

2. Possible Special Trade Relationship with Panama

The Panamanian President, Foreign Minister and special negotiators have expressed, at various times, a pointed hope that the United States might be willing, because of the unique relationship with Panama, to grant Panama trade preferences or even a complete exemption from customs duties in the United States market. The most active negotiator, Ambassador Aleman, has said that this would result in new investments in small industries in Panama-on the order of those that have been developed in Puerto Rico-which would have markets in the United States, and that this business would become so important to Panama eventually that Panama would beseech the United States to remain in partnership in canal operations in order to retain the trade preference that would be made dependent upon the Canal partnership. Such a trade relationship would be logical, would cost the United States virtually nothing (since there are now few Panamanian products that would compete more effectively in a duty-free United States market), and would assure the United States an increasing reciprocal market in Panama while promoting a longer Canal partnership.

We have been told informally in the State Department that special legislation for this purpose possibly could be justified upon the basis of the unique Canal relationship, and we recommend that you direct the Executive Branch to seek to devise a plan for such a special trade relationship and, if found feasible in the light of all other United States trade relationships, to formulate such legislative proposals as it may be desirable to submit to the Congress./3/

/3/ Attached but not printed is Annex A, a list of 31 members of Congress briefed by Irwin and Woodward.


429. Memorandum From the Presidentís Special Assistant for National Security Affairs (Bundy) to President Johnson/1/

Washington, September 11, 1965, 11 a.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Inter-Oceanic/Panama Canal Negotiations. No classification marking. A note on the memorandum indicates the President saw it.


Bob Anderson spent this last week working on the Hill for the Panama proposals that you approved in principle, subject to such consultation. Yesterday he gave us a report which is generally encouraging. A detailed write-up is being prepared and should be available to you before Monday./2/ In essence, Anderson reports understanding and support from about 9/10ths of the 36 Senators and Representatives he saw, running the spectrum from Mansfield to Mendel Rivers. The only negative notes of significance were struck by Hickenlooper, Russell and Mrs. Sullivan.

/2/ September 13. The "write-up" has not been found.

Hickenlooper said that while he would have done it differently, he would not actively oppose your judgment. Russell said he was against the proposals and would vote against them, and would make a brief statement for history against them, but he knew that if you were for them, they would carry, and he wanted you to know specifically that he was not going to make a general fight against you on this issue. He disagreed, and he wanted history to know of his disagreement, but that was all.

Mrs. Sullivan was the one person who gave indications that she might wish to make a fight on the issue. She couched her argument in terms of the failure of American policy to meet the needs of the simple people of Panama. She claimed that we were merely giving further aid and comfort to the "oligarchy." Henry Wilson and others who know her think this is merely a screen for her real concern, which is with the Americans in the Zone and the powers of her committee. Tom Mann and Henry Wilson are going to try to find ways of talking further with her.

Bob Anderson presented his report with his usual modest precision, but those who heard him were enormously impressed by the job he has done. He himself is wholly confident that there is now a solid basis for a firm approach to the Panamanians, and precise language is being drafted for his use in this approach next week. If all goes well, there should be enough of an understanding with the Panamanians for an important joint statement by the two Governments safely ahead of the October 1 meeting of the Legislature in Panama. Our assumption is that this statement should be made by the two Presidents together, and the papers are being prepared with this object./3/

/3/ On September 24 President Johnson read an approved joint statement on areas of agreement on a potential treaty that was simulataneously released in Panama by President Robles. The statement and Johnsonís prefatory remarks are printed in Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1965, Book II, pp. 1020-1021.

I have the impression that Bob Anderson has been determined to show that anything Goldberg can do, he can do better.

McG. B.


430. Special National Intelligence Estimate/1/

SNIE 84-66

Washington, July 14, 1966.

/1/ Source: Central Intelligence Agency, Job 79-R01012A, O/DDI Registry. Secret; Controlled Dissem. According to a note on the cover sheet this estimate was prepared in the Central Intelligence Agency with the participation of the intelligence organizations of the Departments of State and Defense and the National Security Agency. The United States Intelligence Board concurred in this estimate on July 14.


The Problem

To estimate the situation in Panama and the prospects for stability over the next six to twelve months.


A. Discontent with social and economic conditions, particularly with the high level of unemployment and the poor and inadequate housing in the cities, is continuing to grow among the Panamanian population. Criticism of the Robles governmentís handling of the Canal negotiations will probably become more intense after the National Assembly reconvenes on 1 October. Students and urban slum dwellers will probably be in the forefront of any violent manifestations against the Panamanian elite or against the US.

B. New civil disturbances are probable over the next six to twelve months; more likely than not they will be precipitated by sudden, unpredictable incidents. We believe that the Communists in Panama have the capability to intensify and broaden such disturbances to some extent, but that the Robles government and the Guardia Nacional would still be able to restore control. Even if no disorder or upheaval takes place during the period of this estimate, the Panamanian political situation is likely to become somewhat more fragile than it is at present.

C. Arnulfo Arias and his Panamenista party have the strength-which the Communists lack-to transform a civil disturbance into a popular rising against the Robles government. In the event of prolonged and widespread disturbances, the Guardia probably could not maintain control without outside assistance-presumably from US forces in the Canal Zone. However, Arnulfo seems inclined to bide his time, hoping that rising discontent over the Canal issue will bring him to power in the presidential elections of May 1968, if not sooner. In the event that both the Panamenistas and the Communists should take part in a successful effort to overthrow Robles, we think that Arnulfo would dominate the successor regime without allowing the Communists to gain major influence.

[Omitted here is the 5-page Discussion section of the estimate.]


431. Memorandum From Secretary of State Rusk to President Johnson/1/

Washington, July 25, 1966.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL PAN-US. Secret. Drafted by Clark and cleared by Gordon.


You are scheduled to meet on Tuesday, July 26, 1966 at 6:00 p.m. with the principal officials concerned to discuss Panama./2/

/2/ The meeting was held in the Cabinet Room at the White House. Johnson participated in the meeting between 6:43 and 7:35 p.m. (Johnson Library, Presidentís Daily Diary)


The IRG/ARA met on July 21, 1966 to review United States policy toward Panama in the light of the status of the treaty negotiations and the current political situation in Panama./3/ The Special National Intelligence Estimate (Enclosure 5) was also considered. Specific subjects discussed were: (1) prospects for the successful conclusion of new treaties with Panama (Enclosure 1), (2) the possible need for a contingency plan for use if the treaty negotiations reach an impasse, (3) short-range actions in the economic and social field which might be taken by the United States to improve the atmosphere in Panama for the treaty negotiations (Enclosure 2), (4) actions which might be taken to assist Panama to develop and carry out a program of long-range economic and social development (Enclosure 3), and (5) Panamaís request for expanded United States direct assistance to its National Guard to improve its capability to maintain internal order (Enclosure 4)./4/

/3/ A summary record of the IRG/ARA meeting is in the National Archives and Records Administration, RG 59, ARA/IG Files: Lot 70 D 122, IRG/ARA Action Memos, 1968.

/4/ Enclosure 1, Status of Treaty Negotiations; enclosure 2, Urban Impact and Development Loan Program for Panama, FY 1967; enclosure 3, New Development Authority for Panama; and enclosure 4, Grant Aid for National Guard, are attached but not printed. Enclosure 5, SNIE 84-66, is Document 430.

IRG/ARA Conclusions

The following conclusions were reached by the IRG/ARA:

1. That we continue our present policy of endeavoring to negotiate expeditiously new canal treaties with the Robles Government.

2. That a special Inter-Departmental Working Group be formed to develop by September 6, 1966 a contingency plan for use should treaty negotiations reach an impasse within the next six months.

3. That we press forward with the GOP to develop and carry out an urban impact program.

4. That we impress upon the GOP the urgent need to draw up a long-term economic development plan to fit into the anticipated new treaty arrangements; that we seek the establishment by Panama of a Development Authority for this purpose; and that we offer our assistance and cooperation in this undertaking.

5. That we meet the GOPís request for grant aid to expand the National Guard.

Issues for Decision

1. Urban Impact Program

A decision is needed regarding the priority this program should receive, considering the FY 1967 AID funds available and the competing demands of other areas.

2. Long-Range Economic Development Plan

Assuming that the GOP will be receptive to United States proposals for formulating a long-range economic development plan and establishing a Development Authority, a decision is needed on whether specific assurances can be given to the GOP that expanded financial and technical resources will be made available to the Development Authority to implement the plan.

3. Darien Gap

The proposal to complete the Darien portion of the Pan American Highway which you mentioned in your April 15, 1966 speech in Mexico has relevance to Panamaís long-range development. A decision on this matter which is being requested separately would assist in formulating a long-range development plan for Panama.

4. Assistance to National Guard

The IRG/ARA has agreed that in spite of the political risks involved the United States should finance the new 500 man addition to the Guard and the salaries of the 500 men added in 1965. This assistance would be made through a general budgetary support grant which would be made in such a way as to involve the least possible political risk. Your approval is requested of the course of action agreed upon by the IRG/ARA.

Dean Rusk


432. Memorandum From the Presidentís Special Assistant (Rostow)/1/

Washington, July 27, 1966.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL PAN-US. Secret; Sensitive.

The Secretary of State
Administrator Gaud
Director Helms
Secretary Resor
Assistant Secretary Gordon
Ambassador Anderson

Presidential Directives on Panama

In order that we all have a clear understanding of the directives given by the President at the conclusion of our Panama review meeting on Tuesday, July 26, I thought it useful to recapitulate them as follows:

1. Director Helms is to review the [less than 1 line of source text not declassified] to assure that it is in a position to furnish ample and timely intelligence on developments./2/

/2/ In a July 27 memorandum to the CIAís Deputy Director for Plans setting forth the Presidentís directive for the Agency, Helms noted that "the President wants us to watch the situation in Panama most closely and to do everything we can to guard against being caught by surprise in terms of riots, attempts to overthrow the government, and other possible troubles in the area." (Central Intelligence Agency, Job 80-B01285A, DCI (Helms) Chronological Files, July 1, 1966-December 31, 1966)

2. Assistant Secretary Gordon is to establish a Contingency Planning Group and immediately to proceed to develop alternative courses of action should the treaty negotiations reach an impasse./3/ Ambassador Irwin will give special attention to determining maximum concessions which we might make to the Panamanians, taking into consideration the requirements to retain United States control of operation and defense of the Canal and what the Congress is likely to accept. Assistant Secretary Gordon and Ambassador Irwin will work closely together in carrying out their respective assignments and both keep Ambassador Anderson fully informed.

/3/ A draft of a Department of State contingency study on Panama, based on the Presidentís directive, was prepared on September 16. (Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 15)

3. Assistant Secretary Gordon, in consultation with Administrator Gaud, is to:

a. establish a group to review actual and planned assistance to Panama with a view to developing and putting into effect as rapidly as feasible sound projects for economic and social development, with special emphasis on those having more immediate human impact./4/

/4/ Department of State and AID proposals for dealing with economic and political issues in Panama were presented to the President under cover of a July 25 memorandum from Rusk to Johnson. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL PAN-US)

b. develop a plan for a Panama Development Authority, which Mr. Gordon will try to persuade the Panamanians to accept.

c. assist United States businessmen interested in private investment in Panama.

4. Secretary Gordon is to proceed with arrangements for further grant assistance to strengthen the National Guard.

5. In order to assure full coordination within the government, Secretary Gordon is to pass on all public statements and new initiatives relating to Panama. He is to coordinate these closely with Ambassador Anderson for their possible effect on the canal negotiations.

W. W. Rostow


433. Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, September 22, 1966.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. VIII (part 2 of 2), September 1966-May 1967. Secret. A note on the memorandum indicates that the President saw it. Copies were sent to Moyers and Henry Rowen of the Bureau of the Budget.

Status of Panama Account

This is where we stand on implementation of the directives which you gave at the Panama Review Meeting on July 26.

1. Review of [less than 1 line of source text not declassified]

Dick Helms has completed the review. As a result, changes in [less than 1 line of source text not declassified] have been made. [1-1⁄2 lines of source text not declassified]

2. Contingency Plans Against Negotiation Impasse

Linc Gordon has prepared a paper (Tab A)./2/ It is being reviewed by the Country Team, our negotiators and the Latin American IRG. The deadline for completion is September 27.

/2/ See footnote 3, Document 432.

Jack Irwin was not able to make an estimate of the prospects for successful negotiations by our target date of September 15 for the reasons discussed in the last paragraph of this memorandum.

3. List of Possible Concessions

Jack Irwin was charged with determining maximum concessions which we might make to the Panamanians, taking into consideration our requirements for control and defense of the Canal and what Congress is likely to accept. A paper listing possible concessions (Tab B)/3/ is being reviewed in State and DOD. Ambassador Anderson, who is in town today, will also be going over it.

/3/ Tab B, attached but not printed, is a draft report, "Possible Unilateral United States Activities," September 8.

4. Economic Study Group

A team under the leadership of Philip Klutznick recently completed a survey of Panamaís short-term and longer-term needs. A summary of the contents of the report is at Tab C./4/

/4/ Tab C, attached but not printed, is an undated report prepared by Klutznick on Panama aid program.

The short term recommendations call for an immediate impact program of $16 million covering urban renewal and rehabilitation projects. As indicated in George Ballís memo at Tab D,/5/ these recommendations have been accepted and Ambassador Adair instructed to begin negotiations immediately.

/5/ Tab D, attached but not printed, is a September 9 memorandum from Ball to President Johnson.

5. Plan for a Panama Development Authority

Ambassador Adair has discussed the desirability of setting up an Authority with President Robles and Foreign Minister Eleta. He got a non-committal, lukewarm response.

The Klutznick team looked into the matter and concluded that the better part of wisdom was to work through the existing Planning Board and try to strengthen it. They found that the Board as an institution is equipped to handle budget, economic and social planning as well as physical planning and evaluation. The main problem is an incompetent Director. State/AID are trying to get him replaced and the staff augmented with capable people.

6. Stimulate Private Investment in Panama

We are not doing well on this. Bill Gaud is making a survey of investment guarantee applications which AID has received. Beyond that State and AID have done nothing. I will have another go at Linc and Bill. I recommend the next time you talk to them, you press hard for immediate action. Our private sector can play an important role in Panamanian development and we must take advantage of this asset./6/

/6/ A handwritten note by Rostow next to this paragraph reads: "Iím going to dig into this personally."

7. Assistance to the National Guard

We have told the Panamanians that we are willing to subsidize (indirectly) an increment of 500 men for the balance of this fiscal year if they will put the increase in their budget. (We are already paying for 500 men added to the force last year.) They want us to pay for 1000 men without it showing in the budget in the mistaken idea that this is the best way to hide our subsidy.

A 500 increment is as much as they can successfully handle. President Roblesí opposition is already starting to make political hay of the fact that the government is carrying 500 more men on the force than appears in the current budget and that the U.S. is footing the bill.

8. Status of the Negotiations

Negotiations advanced at a steady clip during July and August. The first round on the draft treaties served to identify areas of difference. The second round focused on analysis of the differences and means for resolving them.

Half way through this round (September 1) the Panamanians asked for suspension of talks while they returned to Panama to help work out their governmentís position on economic compensation. This has caused a delay in our timetable of September 15 for Jack Irwinís estimate of the prospects for reaching a settlement.

Negotiations are tentatively scheduled to be resumed on September 27. Jack expects that it will be several more weeks before he can give you a valid judgment on the prospects. Jack is understandably cautious. But the record of the negotiating sessions show a good spirit and flexibility on the part of the Panamanians. At this point, there is more reason for optimism than pessimism.

9. Congressional Consultations

On August 24 Jack Irwin briefed the Senate Foreign Relations Committee on the status of the negotiations. Fulbright, Hickenlooper, Gore, Lausche, Carlson and McGee were present. The Senators were interested, full of questions and appreciative. There were no surprises beyond Fulbrightís comment that he would vote against a sea-level canal treaty that did not provide for multilateral operation.



434. Memorandum From the Representative to the Organization of American States (Linowitz) to President Johnson/1/

Washington, March 14, 1967.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. VIII, September 1966-May 1967. Confidential. A notation on the memorandum indicates Johnson saw it.

Panama Canal Negotiations

Bob Anderson called me today from New York in order to pass on this word:

At the Summit Meeting in Punta del Este, President Robles of Panama plans to talk to you about the progress in negotiations with reference to the Panama Canal matter. Bob Anderson feels that Robles will want to put pressure on you to speed up the discussions and negotiations./2/ He suggests that you might want to take the play away from Robles by telling him at once that you have been pushing for carrying on the negotiations as speedily as possible and that your understanding is that good progress is being made./3/

/2/ Panamanian Foreign Minister Eleta made a similar request to Rusk when he visited Washington in January. (Memorandum of conversation between Rusk and Eleta, January 18; National Archives and Records Administration, RG 59, Central Files 1967-69, POL 33-3 PAN-US)

/3/ According to a memorandum of conversation of a meeting between Gordon and Panamanian Ambassador Ricardo Arias, April 2, the Ambassador told President Johnson that President Robles hoped that all outstanding questions concerning the treaty negotiations "might be settled through direct presidential discussions" at the upcoming meeting in Punta del Este. Johnson replied that "both sides had good negotiating teams and there was no reason to Ďpass the buckí to the Presidents at this time. He understood the importance of the time element, but thought that the negotiations could be pushed ahead rapidly by the negotiating teams themselves." (Ibid., POL 33-3 CZ)

Bob says that three points still remain unsettled in connection with the negotiations: (1) compensation, (2) how long the treaty should last, and (3) jurisdiction over personnel. He proposes that when Robles raises the question of compensation with you, you might want to point out to him that it would be difficult to have Congress accept a guaranteed revenue figure substantially in excess of the present $2 million per year, and that therefore it would be mutually advantageous to explore other ways of providing added revenue to Panama. (Bob proposed, for example, some tariff arrangements which might be favorable to Panama.)

The Panamanian Foreign Minister, Fernando Eleta, spoke to me about this situation a couple of times in Buenos Aires. I am not, however, close enough to the negotiations to comment on Bob Andersonís suggestions, but I know he would be pleased to discuss them with you personally if you had a few minutes to do so before the Summit.

Sol M. Linowitz


435. Memorandum of Conversation/1/


Punta del Este, April 13, 1967, 8:45 a.m.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 IA-SUMMIT. Confidential. Drafted by Neil A. Seidenman (OPR/LS) and approved in the White House on April 28. The discussion was held during a "working breakfast."

U.S. Panamanian Canal Treaty Negotiation


United States


President Johnson

President Marco A. Robles

Secretary Rusk

Foreign Minister Fernando Eleta

Mr. Rostow

Ambassador Ricardo Arias

Secretary Gordon

Ambassador Diogenes de la Rosa

Ambassador Irwin

Mr. Hernan Porras, Special Advisor

Mr. Neil Seidenman, Interpreter


President Robles said he wished to take up two points in particular with President Johnson, and in the matter of "one farmer to another." The first was the matter of arrangements under the new treaty governing the administration of justice in the Canal Area Panama wishes to uphold its sovereignty over the Area, but considers that such sovereignty cannot be successfully exercised without the ability to administer justice in the criminal, civil and administrative fields. Panama recognizes that the effective functioning of the Joint Authority will require certain preconditions. Panama considers joint administration of justice acceptable, however, with reference only to cases directly related to the operation of the Canal. He appealed to President Johnson to help to bring about agreement between the two countries on this score. He stated that from the Panamanian standpoint, criminal acts not related to the operation of the Canal should not be prosecuted by any but Panamanian authorities, as provided by the Constitution and laws of Panama.

The second point President Robles wished to bring up concerned revenue to Panama accruing from the Canal. Every country receives benefit from the utilization of its own natural resources. Panamaís principal resource is its geographic position and the interoceanic canal made possible by that position. President Robles stated that Panama has never received fair compensation for its contribution and role making possible the building and operation of the canal. The rate survey carried out by the American firm, Arthur D. Little,/2/ indicates that Panama could be receiving much more from the Canal than its present revenue. Panama is working to enhance the social and economic development of its country, consistent with the goals of hemispheric growth and progress adopted at Punta del Este in 1961. By now Panama has contracted foreign loans to the extent that it is approaching the saturation point in its external credit position. A continuation of present policies in this area could lead to "asphyxiation".

/2/ Arthur D. Little Company studied the issue of tolls and concluded that they could be raised 125 percent without affecting Canal traffic.

President Robles went on to say that Panama wants no more than a fair return from the Canal, so as to be able to secure the financial resources needed for economic and social development programs. Those programs are now proceeding well, but they would stand to suffer in the absence of sufficient funds to feed them. An important source of such funds should be Panamaís share in Canal revenues, by virtue of its geographic and human contribution to the Canal.

President Robles said the negotiation of these problems can proceed in the climate of tranquility that his administration has maintained. It is of great political importance for President Robles to be able to sign the treaty as soon as possible, so as to eliminate the nationalistic passions and emotional effects surrounding this issue, which otherwise could give rise to agitation and set up a prolonged chain of disturbances in Panama.

President Robles said that the key elements of timing include the fact that the ordinary session of the Panamanian Legislative Assembly begins in October 1. During that session, according to the rules of procedure, a whole range of issues may be taken up, with all the attend-

ant opportunities for prolonged and politically biased debate. If the agreement can be concluded well before the ordinary session, President Robles would be able to call a special session, in which debate would be limited exclusively to the Treaty.

President Robles said that the other key date is that of forthcoming elections in Panama. He has been able to create a climate of tranquility for the signing and ratification of the Treaty. However, if the process drags on too long, he would hardly be able to contain the situation throughout the weeks and months of political campaigning, which is already in its initial stages. The presidential elections are to take place on May 1, 1968.

President Johnson expressed understanding of the wishes of President Robles, and said that we, too, want to conclude the agreements at the earliest possible date. We share Panamaís sense of urgency, and are anxious to do all possible to speed up the negotiations. He will speak with Ambassador Anderson promptly on his return and issue appropriate instructions to our negotiators to this effect. The President told Robles that he would personally follow the progress of the negotiations. He agreed with him in his desire to avoid dragging on too long, which could make trouble for both countries, and he would be prepared to meet again with Robles if this should be useful.

With regard to Panamaís share of benefits from the Canal, President Johnson stated that he assumed the amounts to be received by Panama would be determined, based on the revenue sharing concept, upon traffic volume through the Canal and Canal earnings derived from the volume. The President assured Robles of his awareness of Panamaís needs for development programs. There are problems of mutual concern in all our countries, and we appreciate their importance to Panama.

With reference to the issue of justice, President Johnson said the United States would be happy to review the question of civil justice. There are some problems involved, but he would ask that the civil issue be reviewed again, in order to discover some solution that would be mutually satisfactory.

The President agreed with President Robles on the importance of the earliest possible conclusion of the agreement. He reiterated that the Canal earnings would rise according to the volume of the traffic. Also, we would ask our negotiators to give sympathetic review to the matter of justice. The President went on to say that he had spoken with Ambassador Anderson on several occasions in the past about the negotiations. The latter has been out of the country for several weeks, and there has been no recent opportunity to discuss these matters further with him. The President told Robles that as a result of this meeting he would again take these things up with him so that he (Ambassador Anderson) and Ambassador Irwin could bring about a speed-up in our work./3/ The President expressed the hope that this approach would meet with the satisfaction of President Robles, and assumed that Roblesí people would be available for rapid pursuit of the negotiations. He praised President Robles for the wisdom of his view that he should get these matters behind him well before the elections.

/3/ On April 22 Rostow reported to President Johnson that "all concerned are operating with the sense of urgency you promised Robles." He outlined progress in the areas discussed between the Presidents at Punta del Este, indicating that "Anderson and the Panama Review Group will want to discuss the deal with you prior to sounding out key Senators and presentation to the Panamanians." (Memorandum from Rostow to President Johnson, April 22; Johnson Library, National Security File, Country File, Panama, Vol. VIII (part 1 of 2), September 1966-May 1967)

President Robles brought up the subject of land return to Panama. He explained that as things now stand, Panama City and Colon, at their present stage of growth, are hemmed in, with no further space available in which to expand. He stated that these lands are not needed for the operation or defense of the Canal. If they could be returned to Panama, this would provide for further development of these two cities. He noted that this matter is also politically sensitive, and could lead to irritations and resentment. Secretary Rusk commented that he had spoken recently to Secretary McNamara on the subject of return of land areas to Panama and that Secretary McNamara said he would review sympathetically Panamaís requests. President Johnson said he, too, would review this issue.

The interview closed with a discussion of the statements/4/ to be made to the press, which have been separately reported.

/4/ Johnsonís statements at Punte del Este are in Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1967, Book I, pp. 444-451.


436. Special National Intelligence Estimate/1/

SNIE 84-67

Washington, May 4, 1967.

/1/ Source: Central Intelligence Agency, Job 79-R01012A, O/DDI Registry. Secret; Controlled Dissem. According to a note on the cover sheet this estimate was prepared in the Central Intelligence Agency with the participation of the intelligence organizations of the Departments of State and Defense and the National Security Agency. The United States Intelligence Board concurred in this estimate on May 4.


The Problem

To consider the prospect for political stability and for the Canal treaties between now and the scheduled inauguration of a new president in October 1968.


A. Increased tension and political turbulence are likely as the presidential campaign and the issue of new Canal treaties impinge on a situation none too stable in the first place.

B. The small number of elite families, long in political and economic control, may be hard pressed in the elections of May 1968 to keep one of their own in the presidency and to retain dominance of the National Assembly. The challenge will come from Arnulfo Arias, whose anti-elite PanameŮista Party is the countryís only mass movement. The danger of serious disorders will probably become somewhat greater than at present, and could become much greater.

C. Although there are a great many important political variables in Panama, the timing of the completion of the treaty negotiations will be a crucial factor in determining the extent of political unrest as well as the chances for ratification and implementation of the treaties.

D. In view of such uncertainties on the political scene, there will clearly be major problems in getting the Canal treaties completed, ratified, and then held to by the government succeeding that of President Robles. Unless the treaties are ratified before October 1967, there is small chance of getting satisfactory treaties completed until after a new administration takes office in October 1968.

[Here follows the 8-page Discussion section of the estimate.]


437. Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, June 9, 1967, 8:25 p.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. IX, Memoranda and Miscellaneous. No classification marking. There is an indication on the memorandum that Johnson saw it.

Mr. President:

Bob Anderson called me this afternoon to tell me the following:

-The negotiation is now at the wire./2/ He hopes to wind it up at a meeting starting at 10:00 a.m. tomorrow with Panamanian negotiators.

/2/ On May 31 Rusk sent the President a memorandum on the status of the negotiations. Rostow transmitted it to the President with the observation: "The remaining hurdle is the price tag-but thatís not exactly trivial!" (Both ibid.)

-On the gut issue of financing, they will keep the 90Ę toll, which leaves 25Ę left over above costs. He would first propose a division of 17Ę for Panama; 8Ę for the U.S. His fallback is 20Ę for Panama, 5Ę for the U.S. This means that Panamanians might fetch up with between $15 and $20 million a year, depending on traffic. This compares with the $80 million a year they sought.

-We would permit Panamanian jurisdiction over certain criminal cases in the Zone for personnel not associated with the Canal; tourists, etc.

-The lock canal treaty would terminate in the year 2000 except if we were actually in the process of building a new sea-level canal at that time, in which case the treaty would run on to the year 2010.

-The treaty governing the sea-level canal would run 60 years from the time it became operational.

-Compensation to be paid Panama under a sea-level canal treaty would be decided at the time of the financing and in the light of the financing method. (Bob Anderson cleared this position, which varied from his initial instructions, with Bob McNamara and Covey Oliver.)

-We will give up to the Panamanians certain territories which we have agreed with the JCS; but two antenna fields would have to be moved at some future time, involving an estimated cost of $6 million.

-We would also surrender an area in which we have military quarters, which are desirable but not necessary to the defense arrangements.

-We would surrender some piers for which they would be able to earn some money.

-We would surrender one area containing houses now occupied by Panamanians, on the stipulation that the occupants would keep their present houses.

-The Panamanians will accept without change a standard status forces agreement, approved by the JCS.

As noted, the only variation from instructions which have been cleared with you and on the Hill, is the question of a compensation formula for the sea-level canal. Although Bob McNamara gave his assent, there appears to be some concern among the military that ambiguity about the compensation formula will weaken our option on the sea-level canal and might leave us at the turn of the century without military base rights./3/ I am now checking into the seriousness of this point. You may wish to talk directly tonight with Bob Anderson about it.

/3/ A June 10 memorandum from Sayre to Rusk reported on this problem: "Anderson talked twice to General Wheeler and with Secretary Resor on the JCS and Army problems on the sea level canal compensation provisions. Wheelerís preoccupations relate to the period after the lock canal terminates. They are (1) continued neutrality of the canal, (2) access and transit for U.S. warships, etc., and (3) defense of the canal." (National Archives and Records Administration, RG 59, ARA Files: Lot File 72 D 33, Entry 5396, Panama)

Finally, Bob Anderson notes that we have come to a strategic psychological moment. He thinks he can clinch the deal tomorrow; and that the deal is viable on the Hill. He cannot vouch for its viability in Panamanian politics.

If he gets your go ahead, they will make a firm decision tomorrow morning that they have a treaty and then take a few days getting the details on paper.

I recommend that you talk to Bob Anderson this evening, directly./4/

/4/ The Presidentís Daily Diary indicates that Johnson commented on Rostowís recommendation that the President speak to Anderson: "Iíll have to do that tonight-which Iíll do." There is no indication in the Daily Diary that the President spoke to Anderson, nor has any other record of such a conversation been found. (Johnson Library)



438. Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, June 16, 1967, 7 p.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. IX, Memoranda and Miscellaneous. Confidential.

Mr. President:

Bob Anderson called in to report the present state of the Panama negotiations. He will be meeting again on Monday/2/ afternoon. He will use his own judgment in dealing with the two positions set out below unless you wish to give him instructions which he would, of course, welcome.

/2/ June 19.

I. Our position

We have offered:

-17Ę per ton for the Panamanians; we would keep 8Ę;

-the lock canal treaty ends in the year 2000, but will continue to 2010 if construction on the sea level canal is under way;

-the sea level canal treaty would run 60 years from the time it became operational;

-we would maintain the right to defend the lock canal for 10 years past the expiration of the treaty (the Panamanians argued for 5 years);

-payments under the sea canal would be negotiated at the time that financing was arranged; but guidelines are written into the present treaty.

II. Panamanian position

They ask:

-20Ę per ton for Panama in the first year; 5Ę for the U.S.;

-an increase of 1Ę up to 25Ę per year in the subsequent five years (at this time that would absorb the calculated amount available after costs without raising tolls; but in the future, that may not be the case since other aspects of the treaty are likely to reduce canal costs.);

-a guarantee for the value of the dollar over the whole period of the life of the lock canal in terms of the purchasing power of the dollar in 1967;

-a guarantee of $1.9 million a year (the present annuity) in addition to the sums to be derived from the new split of profits from tolls;

-a 60-40 division in favor of Panama if tolls should increase (we are calling for a 50-50 split);

-an exchange of letters in which we agree to look into their request for preference in U.S. markets for Panamanian goods;

-a U.S. commitment to build a 4-lane highway 10-12 miles in length from our military base in Rio Hato to La Chorreda;

-the U.S. should build an underpass between the beach and Rio Hato to avoid our military vehicles from crossing the highways;

-that we build an all-weather road from Vera Cruz to Arrajan-about 8-10 miles.

III. Bob Andersonís thinking

Up to this point he has made no concessions to the Panamanian position. His thought is that he move his offer up from 17Ę a ton to 20Ę, leaving us 5Ę. As an alternative he is considering letting 20Ę be the base, letting the Panamanian take rise 1Ę a year for 5 years, but reserving 10Ę for ourselves (this reservation would not be real unless tolls were raised over this period or operating costs declined).

Without any commitment he would be prepared to give a letter indicating our willingness to consider the problem of Panamanian preference in the U.S. market.

He is hesitant about the roads, underpass, etc., because he doesnít know the price tag and they would be subject to Congressional appropriation.

The atmosphere has gotten increasingly emotional as the climax of the negotiation comes near. De La Rosa has stated that he would probably have to resign if the Panamanian proposal is not accepted. They have almost certainly been in informal communication with their President. They have suggested Presidential communications. Bob Anderson has tried to discourage this by saying thatís not the way we operate.

As he approaches this final stage, having narrowed the issues, his general attitude is to be mildly generous about the financial terms-and prepared to take the heat in the Congress for that-rather than to risk for the President and the country a Panamanian explosion.

He concluded, as I indicated, by saying that he didnít wish to burden you at this time. He wished you to know how things were proceeding and that he would welcome any guidance you might wish to give him before his meeting on Monday afternoon./3/

/3/ In a June 17 note to Rostow, the President wrote: "Walt, call and thank him very much and tell him we follow his general judgment." Rostow annotated this note: "done." (Johnson Library, National Security File, Country File, Panama, Vol. IX, Memoranda and Miscellaneous)



439. Information Memorandum From the Acting Assistant Secretary of State for Inter-American Affairs (Sayre) to Secretary of State Rusk/1/

Washington, June 27, 1967.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 33-3 CZ. Confidential. Drafted by Clark and R.A. Frank (L/ARA).

Panama Canal Treaties

President Johnson and President Robles announced June 26 that the negotiating teams of the United States and Panama had reached agreement on the details of three new treaties relating to (a) the present Lock Canal, (b) a possible Sea Level Canal in Panama, and (c) the Defense of the Panama Canal and its Neutrality. The announcement, copy attached,/2/ states that the Treaties are being submitted to the representative Governments, that arrangements will be made for signature after approval by the two Presidents, and that the Treaties will then be presented to the two countries legislative body for consideration in accordance with their constitutional processes. Neither the texts nor details of the Treaties are being made available to the press or public at this time.

/2/ The statement that Johnson and Robles announced on June 26 was attached, but is not printed. For text, see Department of State Bulletin, July 17, 1967, p. 65, or American Foreign Policy: Current Documents, 1967, p. 660.

The following are the major points in the three treaties:

1. The Lock Canal Treaty

(a) The Treaties of 1903, 1936, and 1955 with Panama are terminated as are all other agreements or treaties which are inconsistent with the Lock Canal Treaty.

(b) The Administration. A United States-Panama binational entity, called the "Joint Administration of the Panama Canal", would be established and would operate the Panama Canal and administer the "Canal Area". The Administration would assume control of the Canal and Canal Area not sooner than six months nor later than twenty-four months after the Treaty enters into force. The Administration would be governed by a Board of nine members, five appointed by the President of the United States and four appointed by the President of Panama. The Board acts by a majority vote unless otherwise provided in the Treaty. The Chairmanship of the Board would alternate annually between a United States and a Panamanian member. In order to carry out its responsibilities and functions, the Administration would have numerous express rights and powers, including the right and power to promulgate a statute of laws, to establish a court system, and to establish a police force. Some Panamanian civil laws would apply in the Canal Area and some Panamanian criminal laws may apply in the Canal Area. The Panamanian courts would have some jurisdiction in the Canal Area.

(c) The Canal Area. The "Canal Area" is delimited in the Treaty and includes land and water areas which comprise the present Canal Zone. Land and water areas in the present Zone which are no longer necessary for the operation of the Canal would be returned to Panama.

(d) Employees. The Administration would have all rights and powers relating to employment policies and labor relations with its employees. Persons presently employed by the Panama Canal Company and the Canal Zone Government would be transferred to employment of the Administration under conditions established in the Treaty. Such persons would receive the same compensation they presently receive; would be guaranteed increases in minimum wages; would receive salary increases to offset any possible increase in the cost of living or other net financial disadvantage through their transfer; and would continue to receive the benefits of the United States Civil Service retirement law and all other protections and benefits equivalent to those in effect prior to the transfer.

(e) Taxation. The Administration would be exempt from all Panamanian taxes, with the exception that the Administration would pay Panamanian taxes on certain retail or other commercial enterprises it may continue to operate.

(f) Tolls. The Treaty provides that the Administration will operate the Canal to provide to Panama and the United States a fair return "in the light of their contributions to the creation and maintenance of the Canal and in the interest of world commerce". The Administration, in its first year of operation, would pay to Panama seventeen cents per long ton of commercial cargo transiting the Canal, and that annual payment would increase by one cent for five succeeding years, the annual payment to Panama thereafter being twenty-two cents per long ton. In fiscal 1969, seventeen cents per long ton would, according to present predictions, be approximately sixteen million dollars. The Administration would, in its first year of operation, pay to the United States eight cents per long ton of commercial cargo, and that annual amount would increase by one cent for two years, the annual payment to the United States thereafter being ten cents per long ton.

(g) Neutrality and Non-Discrimination. The Panama Canal would remain neutral and would be open to vessels of commerce and of war of all nations on terms of entire equality and non-discrimination.

(h) Termination. The Treaty would remain in force until December 31, 1999; however, it would be superseded by the Sea Level Canal Treaty if the United States constructs a sea level canal.

2. Sea Level Canal Treaty

The Sea Level Canal Treaty in effect provides that the United States has an option, which it must exercise within twenty years, to construct a Sea Level Canal on the site of the present Lock Canal or in the Darien region of Panama. The Sea Level Canal would be operated by an

"Inter-Oceanic Canal Commission". The Commission would be governed by a Board consisting of nine members, five appointed by the President of the United States and four by the President of Panama. The United States, after consultation with Panama, may offer others the right to participate in the financing of the Canal, and, in this case, those who participate in the financing might be represented on the Board. The Board would have numerous express powers to operate and maintain the Sea Level Canal; however, the "Canal Area" would be abolished and the Commission therefore would have no powers with respect to court, laws, and law enforcement. The Treaty would terminate sixty years from the date the Sea Level Canal is opened, but not beyond 2067.

3. Defense Treaty

Both the Lock Canal Treaty and the Sea Level Canal Treaty provide that Panama and the United States shall provide for the defense, security, neutrality, and continuity of operation of the Canal in a Defense Treaty signed on the same date. Under the Defense Treaty, the United States retains certain defense areas in which it may maintain its Armed Forces. The Treaty provides that "In case of an international conflagration or the existence of any threat of aggression or any armed conflict or other emergency endangering Canal defenses," Panama and the United States "would take such preventive and defensive measures necessary for the protection of and common interests in effectuating purposes of the Defense Treaty." The United States may act unilaterally in the Defense Areas or in the Canal Area. The United States would be able to use the Defense Areas for "related security purposes" and would consequently continue other military activities, such as training. The Defense Treaty contains extensive provisions relating to the status of our forces similar to other status of forces agreements.


440. Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, August 8, 1967, 7 p.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. IX, June 1967-April 1968. Secret. There is an indication on this memorandum that Johnson saw it.

Robles Delays Signing of Panama Canal Treaties

Panamanian President Robles has assured Ambassador Adair that the Panama Canal Treaties will be signed but not without further delay.

Robles hopes to be able to sign before the end of August but the State Department believes a more realistic date would be the middle or end of September.

In the attached copy of a cable from Panama,/2/ Adair reports that Robles says he needs additional time for discussions with Panamanian leaders. He believes, and Adair agrees, that the delay in signing is working in favor of eventual approval. Adair believes Robles will not press for ratification of the treaty before his 1968 elections.

/2/ Telegram 368 from Panama, August 8, is attached but not printed.

State officials agree with Adair that we should not pressure Robles into an early signing.

Secretary Rusk will be making recommendations shortly. He is expected to suggest that key members of Congress be informed of the current situation at an early date. Consideration is also being given to releasing to the press the texts of the treaties accompanied by an explanation of the delay in signing./3/

/3/ Memorandum from Rusk to President Johnson, August 8. (Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 37, August 1-10, 1967) On August 10 Sayre informed Rusk that the President had approved the official release of the draft treaties, but only after consultation with Panama. On August 11 Anderson stated he "saw no positive advantage to releasing the draft treaties." Eleta and Panamaís chief negotiator both thought release at this time "undesirable." (Memorandum from Sayre to Rusk, August 16; National Archives and Records Administration, RG 59, Central Files 1967-69, POL PAN-US) Leaked texts of the treaties had already appeared in the Chicago Tribune and were printed in the Congressional Record of July 17, 21, and 27, 1967.



441. Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, October 6, 1967, noon.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. IX, June 1967-April 1968. Confidential. A handwritten L on the memorandum indicates the President saw it.

Panamanian Developments

Encouraging Economic Outlook

A year ago we were concerned about public unrest in Panama arising from sluggish economic conditions. You will recall that you authorized a high impact economic assistance program.

We are a long way from solving Panamaís basic problems of unemployment and maldistribution of income, but the short term gains are encouraging. Our Embassy reports that Panama has achieved a remarkable annual growth rate of 8%, which is expected to continue. Business is booming. Growth in the manufacturing sector is higher than the overall average. Exports are up, but so are imports. The deficit is made manageable by higher earnings from the Zone. The Embassy says that much of the growth stems from confidence by the business community that satisfactory treaties will be negotiated which will bring larger income to Panama.

Further Slippage on the Treaties

With respect to the treaties, we have more slippage in the Panamanian timetable. Robles is still consulting key persons on the drafts. This process will not be completed until the end of October. During November, Robles and Eleta expect to consolidate all the changes recommended by the Council, Cabinet and ex-Presidents. The Panamanian negotiating team would return to Washington around mid-November. Talks on the changes they want-Eleta says about 70-are expected to last until the end of January. According to their schedule, signature would take place in late January or February, with ratification to follow in a special session of the National Assembly after their May Presidential elections.

All of this hinges, in the first place, on the nature of the treaty changes they propose. Eleta says most of them are "drafting" changes. Assuming this hurdle is passed, there remains the question of who the Presidential candidates will be and who wins the elections. Beyond that arises the question of whether we want to seek ratification in the middle of our presidential campaign. The prospects for the treaties continue to be "iffy".



442. Information Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, December 28, 1967.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. IX, June 1967-April 1968. Confidential. A handwritten notation on the memorandum indicates the President saw it.

Panama: Politics and the Treaties

Five months ago we were ready to sign the new Canal treaties. Today it is clear that the lameduck Robles Government will not be able to follow through on signature./2/ The treaties will pass to the successor administration which assumes office on October 1, 1968. It is a safe bet that this administration will want to put its stamp on the treaties. So renegotiation to some degree early in 1969 is a virtual certainty.

/2/ In a November 13 memorandum to Helms, Director of the Office of National Estimates Sherman Kent stated, "the political maneuvering now underway in Panama in preparation for the presidential election of 1 May 1968 is increasing the chances of civil disorder and has virtually eliminated any chance of progress on the draft Canal treaties-at least until after a new Panamanian president takes office in October 1968." Kent indicated that Arnulfo Arias was "the odds on favorite" to be the next president if elections were free and fair. He would be "sticky" to deal with. The Robles government, according to the memorandum, was in no position to press approval of the treaties, especially because popular, nationalistic opinion was increasingly opposed to them. (Washington National Records Center, OSD Files: FRC 330 72 A 2468, Panama 000.1, 1967)

This turn of events has worked out well for us:

-we will have gained 5 years of relative stability following the 1964 riots.

-the generous treaties which Bob Anderson negotiated have disarmed our critics.

-the delay in signature is not due to us but to failure of Robles to prepare the way for action in Panama-this is well understood.

-the delay removes the treaties from the Panamanian electoral campaign (elections are on May 12, 1968) as well as our own, which is to our advantage.

At Punta del Este Robles urged you to ask the US negotiators to step up the pace of the negotiations so that he could sign and obtain National Assembly ratification before the 1968 political campaign got underway. You obliged him. But he had not done his homework with his congress. He ran into trouble, temporized, and ended up unable to muster sufficient support to put the treaties through.

The electoral campaign caught up with him. What little chance he had at least to sign the treaties vanished when he mishandled the selection of his successor by his loosely-knit coalition. As a result, four of the parties bolted and joined his arch-rival Arnulfo Arias. If the elections are anywhere near honest, the charismatic Arias is bound to win.

Arias-who was twice elected President and both times deposed by the National Guard-is a flamboyant and erratic leader. His problems with staying in power have been with his own people rather than with us. Whether he has mellowed with the years, we donít know. We have followed carefully his attitude toward the treaty negotiations. In this he has been most prudent. He has aimed his criticism at Robles as a president who had no right to negotiate the treaties because of his fraudulent election in 1963 [1964]. But he has carefully avoided attacking us or the contents of the treaties.

A year from now when the treaties are looked at again, there may be substantial reasons for a major overhaul. Assuming Arias wins and is allowed to take office, he may seek substantial changes. But we may also want to reconsider the approach in the light of what the Plowshare experiments demonstrate and the Canal Study Commission may have concluded by then on the best route to follow.



443. Action Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, March 19, 1968.

/1/ Source: Johnson Library, National Security File, Agency File, SIG, 32nd Meeting, March 21, 1968, Vol. 4. Secret.

Panama Situation

The Panamanian electoral crisis is coming to a head/2/ with the impeachment trial of President Robles now slated to begin on Monday, March 25./3/ I recommend you devote a few minutes of todayís luncheon meeting to a review of this problem./4/

/2/ In telegram 125046 to Bogota, San Josť, and Panama City, March 5, the Department pointed out that "while a physical clash between the opposing Arias and Samudio [Roblesí successor candidate for President] factions has been averted, the underlying issue of control of the electoral machinery-and hence the outcome of the May 12 elections-has not been resolved. Therefore, it is only a matter of time before the political cycle produces another crisis." (National Archives and Records Administration, RG 59, Central Files 1967-69, POL 14 PAN)

/3/ Telegram 128456 to Mexico City, Rio de Janeiro, and San Josť, March 12, provides background on the onset of the impeachment crisis. (Ibid.)

/4/ Tom Johnsonís notes of this luncheon meeting do not include discussion of Panama. (Johnson Library, Tom Johnson Meeting Notes)

The Present Situation

Neither President Robles nor Opposition Candidate Arias give any sign of backing off from their intransigent positions. Robles keeps putting pressure on National Guard Commander Vallarino to side with him, but so far Vallarino has kept strictly neutral.

The trial may force Vallarinoís hand. Arias will expect him to carry out the National Assemblyís verdict and whatever orders the new President gives him. Robles will not step down. He hopes the Supreme Court will invalidate the Assemblyís action and Vallarino will close the Assembly.

Under these circumstances, the pressure on Vallarino will be to say plague on both houses and take over the government. There are some unconfirmed indications he is planning such action if the politicians do not compose their differences.

What We Have Done

We do not want to take sides, nor become too heavily engaged in any mediation effort. We believe a face-saving formula for all parties would be to have the OAS send electoral technicians and observers to help in arranging honest elections. The OAS has done this in several Caribbean countries.

At our urging, the Colombians and Costa Ricans have proposed electoral specialists, but gotten nowhere. We have encouraged Archbishop Clavel and his "third-force" group of civic and business leaders to advance the idea, but they have had no success. There are indications that Arias would probably accept outside observers if Robles and his candidate, Samudio, would. Anything that promotes fair elections favors Ariasí election. But Robles last weekend publicly stated that observers were not necessary because the elections would be "free and pure".

What We Might Do

State has so far approached the problem with extreme caution./5/ While I think prudence is called for, I also believe some modest risk-taking might spare us from a military coup in Panama and possible bloodshed.

/5/ In a March 19 note for Rostow, Bowdler pointed out: "I have not gotten very far in persuading ARA to take more initiative in the Panamanian situation." Bowdler continued, "I am not a wild-eyed interventionist. But remembering what neutral inactivity cost us in the DR, I would like to try an additional low-risk initiative." (Ibid., National Security File, Agency File, SIG, 32nd Meeting, March 21, 1968, Vol. 4)

The key is Vallarino and his National Guard. Only he has the power to enforce a settlement on both sides or take over the government.

So far we have not dealt directly with Vallarino. Last week he expressed a desire to see CINCSO Commander General Porter, but word was sent back that he should deal with Ambassador Adair on political matters. Ambassador Adair has instructions to urge Vallarino-if he comes calling-to push both sides into accepting outside observers.

What I would like to have Secretary Rusk explore with his advisers is for us to take the initiative with Vallarino and press him to use the OAS observers formula as the way out of the impasse. If he is agreeable and asks for our help, we should be prepared to support his efforts with Robles, Samudio, Arias and the Archbishop.

Should it become public that we have taken this initiative, I do not see that we have lost anything. For, we are not taking sides, we are supporting constitutional government, we are encouraging free and honest elections using a method already employed by four other Caribbean countries, and we are trying to head off either a bloody clash between the contending parties or a military coup.

W. W. Rostow/6/

/6/ Printed from a copy that bears this typed signature.


444. Information Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, March 26, 1968, 8 p.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. IX, June 1967-April 1968. Secret. A note on the memorandum indicates the President saw it.

Panama Situation

There is a marked deterioration in the situation in Panama in the wake of the National Assemblyís impeachment of Robles on Sunday/2/ and the increasingly repressive actions taken by the National Guard against the rival government of "President" Del Valle and Opposition Candidate Arias.

/2/ The United States was notified on March 27 that, by virtue of a judgment issued by the Panamanian National Legislative Assembly, Robles had been deposed and First Vice President Maz Del Valle had been sworn in as President on March 24. (Telegram 139993 to all Latin American posts, April 1; National Archives and Records Administration, RG 59, Central Files 1967-69, POL 15 PAN)

National Guard Commander Vallarino has not formally abandoned his neutral stance of maintaining law and order until the Supreme Court rules on the Assembly action./3/ But under this guise, he has ransacked the headquarters of opposition candidate Arias and cordoned off the National Assembly Building-the seat of the Del Valle Government.

/3/ The Supreme Court of Panama, with one dissenting vote, ruled the Robles impeachment proceedings unconstitutional, and Robles, with the support of the National Guard, retained the Presidency. Additional information is in circular telegram 136251 to all Latin American posts, March 26 (ibid., POL 15-1 PAN), and in a memorandum from Rostow to President Johnson, April 1. (Johnson Library, National Security File, Country File, Panama, Vol. IX, June 1967-April 1968)

There was a showdown at 5:00 p.m. today when "President" Del Valle, his Cabinet and the majority of the National Assembly members tried to enter the Assembly Building. Ambassador Adair has just reported the National Guard drove them off with barrages of tear gas.

So far, we have not been dragged into the dispute. But the danger signals are up. The heavy-handed action by the National Guard against the Arias-Del Valle group could bring a sharp public reaction./4/ This reaction could be turned against us out of frustration or hostility by playing on the fact that the tear gas (being used rather indiscriminately) is from the US and we have heavily subsidized increases in the strength of the National Guard during the past two years. References to this are beginning to appear in the anti-Robles propaganda.

/4/ In a March 25 memorandum to Rusk, Oliver noted that "the position taken by the Guard has aroused considerable resentment in opposition circles, who interpret it as evidence of Guard partiality to Robles." (National Archives and Records Administration, RG 59, Central Files 1967-69, POL-PAN)

So far, the general public-and even the students-have been apathetic and aloof from the political maneuvering. Even the communists and their allies have not taken sides. Whether the action by the Guard this evening will bring the people into the streets in support of Arias and Del Valle remains to be seen.

Ambassador Adair continues to monitor the situation closely. He believes there is little we can do to influence events in this domestic squabble which would not drag us into the middle.



445. Information Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, May 11, 1968, 11:55 a.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. X (part 3 of 3), May-December 1968. Secret. A note on the memorandum indicates the President saw it.

Panama Elections: Sunday, May 12, 1968

Tomorrow Panama holds national elections. The outlook is for peaceful balloting. If there is trouble, it is most likely to come after the results are announced./2/

/2/ On April 26 Helms warned the President: "in view of the Panamanian election two weeks hence, I think you may be interested to note our concern that it may not go off as smoothly as one is inclined now to think." (Memorandum from Helms to Johnson; Central Intelligence Agency, Job 80-B01285A, DCI (Helms) Chronological Files, January 1, 1968-July 31, 1968)

The assumption is that the official candidate, David Samudio, will win. President Robles controls the electoral machinery. The National Guard is actively backing Samudio. So the stage is set for Samudio to emerge the victor-by foul means if fair ones do not work. The CIA reporting shows that the Robles government is ready to engage in massive manipulation of the ballot boxes if necessary.

Opposition candidate Arnulfo Arias has campaigned actively despite his loss of face in the unsuccessful impeachment struggle against President Robles last month. Prior to this setback, most observers believed Arias would win a clear majority. How voters will react to Ariasí lack of muscle in the impeachment showdown and the governmentís apparent intention to insure Samudioís victory, we do not know.

The intensity of any public reaction to manipulation of election results will hinge on the degree to which the ballot boxes are stuffed and how blatant Robles and Samudio are about it. The showdown should come on Monday or Tuesday./3/

/3/ May 13 or 14.

Bromley Smith/4/

/4/ Smith signed for Rostow above Rostowís typed signature.


446. Editorial Note

On May 30, 1968, the Panamanian Board of Election announced that Arnulfo Arias had defeated David Samudio by approximately 175,000 to 134,000 votes. In an assessment of the prospects of the Arias government, Director of the Bureau of Intelligence and Research Hughes informed Secretary Rusk that "When it was obvious that despite extensive irregularities committed by Samudio partisans and the Guard, Arias and the NU had received an overwhelming majority of the votes in the May 12 elections, the Guard, perhaps fearing violence, moved to a neutral position assuring a relatively fair vote count and an Arias victory. It seems unlikely that Samudio can block Ariasí accession to the Presidency by October 1. The period prior to the inauguration will be one of horse trading between Arias, the other NU leaders, Samudio supporters, the National Guard, and anyone else who desires influence in the incoming government." (Research Memorandum RAR-16 from Hughes to Rusk, July 22; National Archives and Records Administration, RG 59, Central Files 1967-69, POL PAN-US)


447. Telegram From the Embassy in Panama to the Department of State/1/

Panama City, May 20, 1968, 2250Z.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL PAN-US. Secret; Exdis; No Distribution Outside the Department.

3434. Subject: Minotto/2/-Vallarino Conversation.

/2/ James Minotto, former staff member of the Senate Appropriations Committee.

1. Minotto met privately with Vallarino at noon today for approximately half an hour. His report on meeting follows:

2. Having met General Vallarino twice before in 1965 and 1967 there was no problem in immediately resuming our previous cordial relationship.

3. I advised the General that I was on a business trip to Panama and points south and that prior to leaving my hometown of Phoenix, Arizona, the superintendent of the Arizona Highway Patrol had given me a personal letter for the General and also a large gold star appointing him a Colonel in the AHP (the highest rank this organization had to confer). Vallarino was very pleased and said he would thank Superintendent James Hegarty of the AHP in a personal letter for the honor conferred on him. Having successfully disposed of the "cover," I then asked the General if he would be good enough and give me 10-15 minutes of his time for a private and confidential discussion. His answer was, "I will be very happy to talk to you."

4. I started our conversation by making it very clear that I was not connected with the U.S. Government at this time, not like a year ago and other times when I was a staff member of the United States Senate, Committee on Appropriations.

5. I also made it very clear that the Ambassador, or any person connected with our Embassy in Panama, was not aware of what I would discuss with him, nor had I seen the Ambassador prior to my visit to him today.

6. I informed the General that on my way from Arizona to Panama I had further discussions with people of authority and particularly in Washington with Members of Congress, people with a long record of service (such as Senator Hayden) and who had over the years gone by shown a warm interest and a friendly feeling towards Panama and its people.

7. These people, whose names I did not elaborate on (except Senator Hayden) were all quite concerned about the newspaper reports emanating from Panama and gave a rather detailed and vivid account of the presidential elections and the present status of uncertainty and unrest.

8. I told the General that I as a private citizen and being fairly familiar with Latin America was equally concerned with the people above referred to, that Panamaís image was in grave danger as not being a democratic republic that adhered to the democratic principles of the people electing their president, but that unscrupulous forces were, according to many newspaper reports, and I emphasized that my knowledge was solely obtained from newspaper sources, trying to manipulate the election of their candidate, even though he had been defeated by a substantial majority at the polls./3/ I did not mention the name of this candidate. I continued to explain to the General the seriousness of this situation in our relations with Panama, because the American people get their information about what is going on in the world from newspapers, TV and radio, and that the large volume of critical reports about the honesty of the Panamanian election could have very damaging repercussions in the political and economic field as well.

/3/ On May 17 Hughes informed Secretary Rusk that "Arnulfo Arias apparently received such large majority in the May 12 election that the government cannot impose its presidential candidate, David Samudio, without resorting to extensive and blatant fraud. Nevertheless, the Samudio forces seem determined to arrange their victory. Once again the National Guard is caught in the middle, but this time internal dissension is threatening the unity of the Guard. Commandant Vallarino, who is wavering in his support for Samudio, must contend with a powerful clique of officers so deeply committed to Samudio that they fear a NU victory would cost them their jobs." (Memorandum from Hughes to Rusk, Intelligence Note 360, May 17; National Archives and Records Administration, RG 59, Central Files 1967-69, POL 14 PAN)

9. Congress has its ears tuned to public opinion, and if the thought were to prevail that Panama had a government that did not represent the choice of the Panamanian people, such programs as aid, military assistance, and the pending Panama Canal negotiations could be seriously impaired.

10. I said to General Vallarino: "General, I am speaking solely in a private capacity, but let me tell you that people of great prominence in the United States feel that the future of Panama lies in your hands. You have had over many years an unblemished record, you yourself told me a year ago that you had no ambitions to be President, that you were dedicated to your job as head of the National Guard of Panama, the only armed forces of your republic, to maintain law and order and to protect the constitution and the rights of the people.

11. I have assured my friends at home that you would never tolerate any crooked practices and that you would stand firm for an honest election. I also understand that at present the National Election Board is checking the presidential elections returns and rejecting any irregularities. May I ask you the one and only question that I would like to have your views on?" His answer was, "Yes, go ahead." Then, sir, please tell me if you would stand by the decision of the National Election Board and if necessary enforce it. His answer was, "I will enforce the decision of the constitutionally created National Election Board, and I will not tolerate any act that would void the will of the people." I added, regardless who the presidential candidate is, who would get the majority of the popular vote? His answer was, "Yes".

12. Finally I mentioned the National Tribunal, which I understand is composed of three men, to whom complaints about irregularities are submitted. I also mentioned that there was a rumor that such a small group of men could be swayed by material promises, thus nullifying the will of the people.

13. He smiled and said: "My actions will be guided by the decision of the National Election Board, and I will not go beyond the decision of the NEB.

14. As I bade the General goodbye, I told him that I would pass on to my friends at home what he had told me and that I felt sure they would be very happy to hear this and that he (General Vallarino) was doing a great service to his country, to the cause of democracy, and to the continuance of amicable and useful relations between his country and the United States.

15. In conclusion, I wish to state that our conversation was at all times an extremely friendly and open discussion, and I very definitely gathered that impression that the General was sincere in what he told me and that his statements honestly reflected his stand in this matter.



448. Telegram From the Embassy in Panama to the Department of State/1/

Panama City, October 9, 1968, 2105Z.

/1/ Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 98, October 5-9, 1968. Secret; Exdis; Immediate. Repeated to Pancanal Govt and USCINCSO. Rostow sent a copy of this telegram to President Johnson at 7 p.m. October 9 and commented: "The attached indicates that there are now again thoughts within the National Guard in Panama of a coup against Arias." (Ibid.) On September 26 the CIA had sent the White House a memorandum alerting them to "coup talk" among members of the National Guard likely to be affected by Ariasí proposed changes in the leadership of the Guard. (Ibid., Vol. 96, September 26-30, 1968)

4872. For Asst Secretary Oliver and Sanders ARA/Panel.

Subject: Possible New Crisis in National Guard.

1. New GN crisis is presently in the making. Dept has by now received reports submitted this morning through intelligence channels./2/

/2/ The White House received information indicating that a group of National Guard officers reached a decision to stage a military coup and take over the government within the next 48 hours. (Ibid., Country File, Panama, Vol. X (2 of 3), May to December 1968)

2. At noontime Col Urrutia asked MLGP CMDR Seddon to come to his office where he explained that President Arias was not keeping his earlier promises relative to the GN and that the GN officers feared the President was eventually going to destroy the GN organization. As examples of broken promises he mentioned (1) Ariasí latest intent not formally to name Pinilla as first commandant because of shortage of funds and (2) Ariasí statement to Urrutia (which Urrutia says he did not pass on to the officers concerned) that Torrijos and Boris Martinez would have to go. Urrutia did not mention to Seddon anything about a coup.

2. Urrutia said he wanted to be sure that Ambassador Adair was aware of the current situation and that he would like an opportunity to talk with me. He did not specifically ask Seddon to make an appointment for him. Seddon promised to convey Urrutiaís explanation to me. Seddon, having talked with me before meeting Urrutia, told the latter that the Ambassador could not involve himself in changes of personnel in the GN. Seddon also commented that as CMDR in chief the president had right to assign GN officers as he deemed fit. Urrutia acknowledged this but added that the officers "were not fools and could see the handwriting on the wall."

3. A few minutes after talking to Urrutia this noon, Seddon talked with Vallarino who told him the outlook was not good and that he should watch developments closely. He expected trouble-not now-but in about six months time.

4. The question is whether I should speak with Urrutia and if so what to tell him. My door has always been open to anyone wanting to see me. If Urrutia calls on me, Arias will know it soon thereafter. I feel it would be almost imperative for me to tell Arias of Urrutiaís call. Urrutia probably would not object. By such action I and the USG would be in the middle. Other GN officers as well as political supporters of both Arias and Samudio would soon know of my involvement.

5. If Arias and the GN should become reconciled thereafter, we might gain good will. If the GN should reluctantly abandon the reported but still unverified plans for a coup on grounds of an inferred disapproval on part of US after my talk with Urrutia, the opposition press would probably charge interference and claim this was proof of US support of Arias in the recent elections.

6. If a coup occurs and Urrutia should claim he asked for an appointment beforehand with the US Ambassador and was refused, we may come in for criticism from other sources.

7. In the event Urrutia should come to my office, I could make the following points:

(1) The USG has made clear its stand on respect for constitutional processes. (2) USG has maintained strictly neutral attitude in Panamaís recent elections and does not intend to interfere in Panamaís domestic politics. Relationship between President of Republic and GN is domestic matter. (3) Panama has established reputation in recent years for law and order. Panama has completed three 4-year terms of office without an unconstitutional change. These are important facts to bear in mind relative to GOPís image both at home and abroad. (4) I trust that whatever GN does, it will have good of country at heart rather than individual personal advantage. (5) Suggest that GN make every effort resolve its problems through peaceful discussions.

8. I propose (but will await Dept reply) to send Seddon back to Urrutia to say he has given me Urrutiaís message, that I appreciate the information and that I hope differences can be resolved through friendly reason and discussion. If Urrutia again raises point of meeting with Ambassador, Seddon would tell him the door of my office was always open and if he wanted to make an appointment Seddon would arrange it. If Urrutia asks for the appointment, Seddon will tell Urrutia that I would probably feel compelled to inform Pres Arias of the discussion.

9. If Urrutia comes to my office, I would subsequently seek an appointment with Arias. Failure to do the latter would almost inevitably lead to greater criticism of US involvement if a coup were to follow my talk with Urrutia.

10. Embassy has no hard evidence which would support claim of some GN officers that Arias is planning to destroy the GN although intelligence reports do indicate that Arias is planning further changes to consolidate his control over the GN. On the contrary, the statement issued by Arias immediately prior to the inauguration bespake respect for GN and intent not only to preserve promotion system but to raise salaries. Torrijos and Boris Martinez are both strong-minded officers and being the most vulnerable may well be the force behind the present crisis./3/

/3/ On October 9 Samuel Lewis of the NSC staff sent a memorandum to Rostow stating that "there is substantial danger that a coup is in fact being contemplated." Lewis wrote that there was "nothing more on this situation than contained in the two messages [see footnotes 1 and 2 above]. I have talked to State and stressed the importance of doing everything we can to avoid the demise of another constitutional government on the heels of the Peru affair. Oliver will get guidance to Adair tonight. [less than 1 line of source text not declassified] of what is in the wind, in case he has not already sniffed it out." (Ibid., (3 of 3), May-December 1968) The guidance telegrams have not been found.



449. Memorandum for Record/1/

Washington, October 12, 1968, 6:50 a.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. X (part 3 of 3), May-December 1968. Secret.

Coup in Panama

1. At about 2200 EDT on 11 October, Guardia Nationale (GN) elements began taking over the National Government in Panama City and the City Governments of Colon and David. USCINCSO Duty Officer confirmed the fact that the Tocumen Airport had been closed to traffic by the GN. He also reported that USSOUTHCOM forces were in Readiness Condition 2, that Major General Dany was present in the Joint Operations Center and that battle staffs were being manned.

2. Within several hours, the GN took over the Presidential Palace and appeared to be in general control of the provinces. Meanwhile, President Arias, with several members of his cabinet, took refuge in the Canal Zone and requested to see the US Ambassador or the Canal Zone Governor./2/

/2/ In telegram CAP 82541, sent to President Johnson at the LBJ Ranch at 12:12 a.m. EST and received at 1:15 a.m. CST, October 11, Rostow informed the President: "A military coup has taken place against President Arias after 11 days in office. The National Guard is evidently following orders from General Vallarino who went through the motion of resigning as Guard Chief earlier yesterday, along with other disgruntled officers." The telegram continued, "troops control the Presidential Palace but Arias had escaped to the Canal Zone and has requested asylum." The telegram concluded that while Ariasí large popular following could be expected to resist, the coup had some civilian support and was "well organized and planned." (Ibid.)

3. The coup appears to be headed by Lt Col Omar Torrijos and supported by Major Boris Martinez and Major Federico Boyd. Lt Col Urrutia, the newly appointed commandant of the GN, is under arrest. Guardia Nationale troops are arresting the political followers of President Arias (Panamanistas) in both Panama City and Colon.

4. Former GN First Commandant Vallarino, who reportedly was fishing on an off-shore island, expressed surprise at the coup and GN troops reportedly have been ordered to prevent him from entering the Commandancia. The Tocumen Airport was reopened early on the morning of 12 October and although sporadic acts of violence have been reported, the GN continues to maintain public order.

5. Ambassador Adair and Canal Zone Governor Major General Leber, who were in Washington, D.C. on 11 October, are returning by USAF aircraft to Panama, with an ETA of 0838 EDT 12 October.

M. W. Kendall
Brigadier General, USA
Deputy Director for Operations (NMCC)


450. Telegram From the Presidentís Special Assistant (Rostow) to President Johnson in Texas/1/

/1/ Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 99, October 10-15, 1968. Secret.

Washington, October 12, 1968, 2103Z.

CAP 82561. Herewith the line Secretary Rusk is taking on Panama. State 254600 to Panama.

1. At present seems to us we have three immediate objectives:

(A) Prevent civil strife and bloodshed;

(B) Seek some solution to political crisis that will preserve as much constitutionality as possible; and

(C) Avoid to the extent we can having US be target enmity of significant elements of Panamanian nation.

What happens in Panama on heels of Peru will also be relevant in terms encouraging or discouraging similar acts other countries.

2. We believe following is appropriate scenario for immediate


(A) We should not facilitate any attempts by Arias overturn junta by violence. All your reports thus far and intelligence assessment here indicate he cannot now be successful and any effort would only lead to bloodshed without satisfactory solution. It may in fact be necessary at some future point to actively discourage Arias from all political activity, and we may have to return to our original posture of asking him again to refrain from political activity while in the zone.

(B) We believe that we should now approach junta and guardia through appropriate informal channels and tell them compromise with Arias coalition and utilization some formula of constitutional government is critical to nature of our future relationships, and that US attitude toward new governments will be guided thereby. We understand this may eventually mean giving up on Arias, but critical now to see if his government can be utilized to form new civilian or part-civilian government. For example, we note CIA sitrep here indicates coup leaders have asked First VP Arango to assume presidency but he has thus far refused.

(C) Per telcon,/2/ approach to Aleman will be made along following lines.

/2/ Not further identified.

"You know that a complete break with constitutional government is much more difficult for other countries to deal with than is some variation on the original constitutional arrangement. First preference would be to see if something canít be worked out for Arias to return. If this proves impossible, how about a government headed by Arango? The worst situation would be for a military junta to set itself up completely apart from the constitution."

(D) In addition you are now authorized have Seddon make similar discreet and quiet approach to Guardia officers making same points and pointing out in appropriate tone how difficult it will be for us to continue be of assistance to Guardia in long-run future.

(E) All such approaches are, of course, to be quiet, unofficial and undertaken with utmost discretion./3/

/3/ On October 12 the IRG Group discussed appropriate U.S. action in response to the coup in Panama. In reporting results of this meeting to Adair, Oliver noted: "key question is as to manageable and desirable extent to which U.S. should seek to influence formation of new Ďrespectableí government by Junta." (Telegram 254640 to Panama, October 13; National Archives and Records Administration, RG 59, Central Files 1967-69, POL 2 PAN) A report on these discussions is in the minutes to the IRG meeting, held 8:40-10:40 p.m. October 13. (National Archives and Records Administration, RG 59, ARA/IG Files: Lot 70 D 122, 5451, IRG/ARA Minutes)



451. Information Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, October 14, 1968, 5:30 p.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. X (Part 3 of 3), May-December 1968. Confidential. A separate copy of this memorandum indicates that it was drafted by Samuel W. Lewis. A note on the memorandum indicates the President saw it.

Panama Coup

I am attaching the latest situation report on Panama, drafted by Covey Oliverís inter-agency working group. Its tenor is encouraging./2/

/2/ Dated October 14; attached but not printed.

Avoidance of major bloodshed or violence which could threaten the canal has been the top priority governing US actions toward President Arias. We have denied him access to radio facilities in the Zone with which he might have fomented mob action against the Junta, and have, of course, refused to help him militarily. Time is now rapidly running out for him.

Although we have no formal relations with the Junta, key US moves in the last 36 hours have included:

-discreet efforts to persuade the Junta to take Arias back peacefully, or to install the Vice President in his place. (Unsuccessful.)

-stressing the importance of a civilian character for the government-and promptly calling new elections. (Junta agrees.)

-allowing Arias to remain in the Zone, but insisting that he stop his political operations so long as he stays there. (Political activity apparently reduced or suspended since the warning was given last night.)

-trying to engage the OAS with some mediation role (Galo Plaza wonít call the OAS Council into action unless any violence erupts; however, informal OAS consultation is now going on among eight key country representatives).

-avoiding making public statements on the bankruptcy of Ariasís situation as long as possible so as not to increase the possibility of his attempting to turn his followersí ire against the US. (Pressure from the US press now is enormous, however-and distorted news stories are appearing widely here. State will provide a full background briefing tomorrow.)/3/

/3/ The press background briefing has not been found.

Multilateral consultations about recognition of the Junta will begin tomorrow-after it is obvious to all that Ariasís bid for forceful return has failed, and that the Juntaís provisional government is indisputably in control.



452. Information Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, October 21, 1968.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. X (Part 3 of 3), May-December 1968. Secret. A note on the memorandum indicates the President saw it. Another copy of this memorandum records Lewis as the drafter. (Ibid., Memos to the President, Walt W. Rostow, Vol. 100, October 16-22, 1968)


Two issues will very soon require your decision:

1. What to do about President Arias, still a refugee in the Canal Zone.

2. Recognition of the new provisional government.

Ariasí Future

Ten days after taking refuge in the Zone, Arias still refuses to leave the Zone voluntarily, either to seek asylum in other countries (several have offered it) or in the US. The OAS refuses to become involved. Bob Anderson is trying today to persuade him to come to the US. There is some chance he may succeed./2/

/2/ Rostow reported that evening that Arias "will leave voluntarily for the U.S. tonight by U.S. military aircraft." He added: "Bob Andersonís telephone call apparently did the trick." (Memorandum from Rostow to President Johnson, October 21, 8:10 p.m.; ibid.)

We have progressively tightened control on his visitors and communications. Yet despite his repeated assurances of "good behavior" to Governor Leber, he continues political activity which threatens to incite violence. Recent examples include:

-telegrams to you, other American Presidents, the UN, and the OAS Council; (Tab A)/3/

/3/ Attached but not printed.

-a press conference Saturday by his principal advisor;

-supply of money and encouragement to supporters in Panama;

-calls via clandestine media for violent resistance to the Guard.

Initially stunned and disorganized by the National Guardís coup, Ariasí supporters are regrouping. A general strike today is eighty percent effective in Panama City; some skirmishes with the Guard have occurred; tension is rising, and a spark could ignite serious bloodshed. Arias now has no chance to return to office except through violence. Should it erupt while he is in the Zone, the National Guard will blame the US and might well stand aside from protecting US installations.

According to Governor Leber, Ambassador Adair and General Porter at CINCSOUTH, Ariasí presence in the Zone can be tolerated only 2 or 3 more days at most./4/ If persuasion fails, forcible expulsion would raise the spectre of a western hemisphere "Dubcek case." Army and State are working on "scenarios" in which we would expel him using plausible legal procedures to minimize the "kidnapping" appearance. Nonetheless, involuntary removal would undoubtedly be widely condemned, no matter how justified.

/4/ In a meeting between U.S. military authorities in the Canal Zone and General Torrijos on October 19, Torrijos pressed for "help of U.S. military and other U.S. Government agencies" to "get Arias out of Canal Zone promptly." Torrijos argued that Ariasí presence in the Canal Zone was a "threat to political stability in Panama," a threat to regularizing commerce and the Panamanian economy, a threat to U.S.-Panamanian relations, and a threat to Junta plans for returning the government to civilian constitutional control. ([text not declassified]; Central Intelligence Agency, Directorate of Operations, [file name not declassified])


Several factors bear on the timing of diplomatic recognition:

-no other governments have yet recognized and they are moving slowly so long as Arias is in the Canal Zone./5/

/5/ In an October 19 memorandum to Rusk, Oliver noted: "I have managed fairly wide communication through the Latin Americans of the dilemma, and I am now beginning to get some promise of results as to resumption of relations by Latin American countries. I should like to see Japan, the U.K., and the EEC countries act fairly soon." (National Archives and Records Administration, RG 59, Central Files 1967-69, POL PAN-US)

-rapid recognition by the US will imply to many Latins US support for the military coup and probable connivance.

-prompt recognition would reassure the new government that we are not favoring Arias and would calm their nerves (they are getting extremely nervous and unpredictable).

-early recognition might make expulsion of Arias easier to justify, since he would no longer be a President still technically in his own country.

In light of the conflicting arguments, Secretary Rusk has not yet decided to recommend early resumption of relations./6/

/6/ At the Tuesday luncheon meeting on October 22, Rusk reported: "Arias left the Canal Zone. We can now hold up on recognition of the government." Later in the meeting, President Johnson responded: "Okay on that, holding off for a while." (Notes on Presidentís Tuesday Luncheon, October 22; Johnson Library, Tom Johnson Meeting Notes)



453. Memorandum From Samuel W. Lewis of the National Security Council Staff to the Presidentís Special Assistant (Rostow)/1/

Washington, October 29, 1968.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. X (part 3 of 3), May-December 1968. Confidential; Limdis.


Tom Mann talked with Bill Bowdler yesterday about Arias. At Ariasí request, Mann spent an hour with him on Sunday morning. Mannís record of the meeting is attached./2/

/2/ Attached was an October 28 memorandum prepared by Mann of his meeting with Arias on October 26.

Mann feels that we should do our best to continue being nice to Arias, to the extent possible, because he and his followers will continue to be important in Panamanian politics. Mann thinks we will have to retain Ariasí goodwill if we are ever to get a canal treaty which can be ratified by Panama.

So far, no US officials except Bob Anderson have talked with Arias, although Covey Oliver has been prepared to see him if he asked. Mann is suggesting some kind of "hand-holding" by State may be in order. Iíve discussed this with Oliverís Deputy, Pete Vaky, in Oliverís absence, and they are thinking it over. There are obvious risks because of Ariasí unpredictability and the way in which he may distort any such contacts.

Incidentally, an FBI report suggests Arias is attempting to arrange for air and sea transportation back to Panama.



454. Special National Intelligence Estimate/1/

SNIE 84-1-68

Washington, November 1, 1968.

/1/ Source: Central Intelligence Agency, Job 79-R01012A, O/DDI Registry. Secret; Controlled Dissem. According to a note on the cover sheet the Central Intelligence Agency and the Departments of State and Defense and the NSA participated in the preparation of the estimate, which was submitted by the Director of Central Intelligence and concurred in by all members of the United States Intelligence Board except for the AEC and FBI representatives who abstained because the subject was outside their jurisdiction.


The Problem

To assess the character and the short-term prospects of the military regime.


A. Military rule of Panama is likely to continue for some time, perhaps a year. The provisional government, headed by two former colonels, is mainly a front for the leaders of the coup, who are now in command of the Guardia Nacional./2/ But the situation is fluid, and relationships among the new leaders of the Guardia and between the Guardia and the provisional government are subject to a variety of strains.

/2/ In a November 1 memorandum to Rostow, Lewis reported that "CIA confirms that there is no communist influence visible in the Panamanian Junta or Provisional Government." Concerns about Colonel Omar Torrijos, one of the principals in the coup, were primarily about his brother, but "Torrijos himself, however, has shown no sympathy for the Party in the past." Lewis added: "All indications are that the problem with the Panamanian Junta is that it may succumb to the temptation to impose rightist authoritarian solutions, not that it is under leftist influence." (Johnson Library, National Security File, Country File, Panama, Vol. X (part 1 of 3), May-December 1968)

B. The Guardia staged the coup of 11 October in order to protect its own position rather than to carry out any specific program for Panama. The new regime has pledged a return to constitutional government via elections, but has not specified any time-table and the procedures it has outlined could cause a considerable delay.

C. It is unlikely that any effective opposition to the new regime will develop over the short term from supporters of Arnulfo Arias, extreme leftists, or the oligarchy. We expect the regime and most of the oligarchs to adjust gradually to each other.

D. Although it is eager to secure recognition by the US, we doubt that the regime would be very responsive to pressure from the US, particularly with respect to a time-table for elections. A prolonged delay in recognition would bruise the feelings of the leaders of the new regime, but they would not be likely, in any case, to encourage blatant anti-Americanism.

E. We doubt that the military regime will act upon the draft Canal treaties which were widely criticized in Panama. The regime, however, might move to open discussions looking toward revised agreements which would be signed and ratified only after constitutional government had been restored.

[Omitted here is the 12-page Discussion section of the estimate.]


455. Action Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, November 9, 1968.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. X (part 3 of 3), May-December 1968. Secret.


State is very anxious to obtain your approval to resume diplomatic relations with Panama on Monday, November 11. (Tab A)/2/

/2/ Tab A, attached but not printed, is a November 1 memorandum from Rusk to the President requesting authorization for resumption of diplomatic relations with the new Government of Panama.

By delaying until now, we have obtained important concessions from the Provisional Government.

-restoration of some of the constitutional guarantees which had been suspended by the junta;

-dismissal of two pro-Communist newspaper editors who had received their jobs as a favor to the brother of a key member of the military junta;

-formal public commitment to hold new elections, restore all constitutional guarantees, and return government to full civilian control-within a reasonable period of time;

-relaxation of press censorship, and reopening of opposition newspapers.

Further delay, however, will probably be self-defeating.

We have FBI and CIA reports showing that Arias is planning to try to regain power by violent means./3/ He is trying to arrange to re-enter Panama clandestinely and is encouraging supporters in Costa Rica to initiate guerrilla warfare from across the border. Failure by the U.S. to recognize is encouraging these efforts.

/3/ Information from the FBI report on Ariasí plans is in a November 11 memorandum from Vaky to Ruskís Special Assistant, Harry Shlaudeman. (National Archives and Records Administration, ARA Files: Lot 72 D 33, Entry 5396, Panama) Information from the CIA report is in an Agency memorandum of November 21 entitled "Activities of Arias Supporters in Costa Rica." (Johnson Library, National Security File, Country File, Panama, Vol. X (part 3 of 3), May-December 1968)

Ambassador Adair believes that we should resume relations on Monday, November 11, so that our announcement will follow closely the action yesterday restoring some of the constitutional guarantees. Stateís proposed press release highlights our concern for continued movement toward full restoration. (Tab B)/4/

/4/ Attached draft dated November 9; see footnote 5 below.

Eighteen countries have now recognized. The thirteen in Latin America include all the major nations of the hemisphere except Canada and the United States.

CIA has looked carefully at Ariasí public charges that the military junta is Communist-dominated. All available evidence shows that leftist influence is slight-less than was present in Ariasí own government.

I recommend that you authorize resumption of diplomatic relations with Panama on Monday, November 11.


Approve recognition/5/
Call me
Approve press statement
Call me

/5/ This option is checked and two handwritten notes on the memorandum, both dated November 12, indicate the Presidentís approval and Rostowís notification of Reed, Lewis and Bunker. The Department requested the Embassy in Panama to inform the Panamanian Government of this decision in telegram 270098 to Panama, November 12. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL PAN-US) On November 13 the Embassy in Panama City advised the Panamanian Foreign Ministry of the resumption of relations. The Department statement released that day is in Department of State Bulletin, December 2, 1968, p. 573.


456. Telegram From the Department of State to the Embassy in Panama/1/

Washington, December 6, 1968, 9:41 p.m.

/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 15 PAN. Secret. Drafted and approved by Oliver. Also sent to San Josť and USUN for Anderson.

283324. For Ambassador. Subject: Ariasí Plan for Reestablishment of Democracy in Panama: Arias-Oliver Conversation.

1. Arias and Oliver met alone, December 6, at Department. Conversation was based on Ariasí Nov 19 letter to President./2/ Arias agreed that conversation was to be held under "strict rules of confidential state security", as his letter to President had suggested. Oliver said he was going to listen, as President would have, pointing to a wall photo of President listening to Oliver.

/2/ Not printed. (Johnson Library, National Security File, Special Heads of State Correspondence, Panama, Presidential Correspondence) In informing the President of the Arias letter on November 23, Lewis indicated that Arias had said that "such a meeting could head off unspecified dangerous problems in Panama." Lewis also reported that although the Department did not recommend that the President meet with Arias, Lewis thought that he should be seen by "a responsible U.S. Government official" and suggested Covey Oliver. (Memorandum from Lewis to Johnson, November 23; ibid.)

2. Conversation was cordial. Oliver found Arias in good control of himself and seemingly objective about his problems. At four points in conversation, Oliver was able to warn and advise against adventurism on Costa Rican-Panamanian frontier,/3/ thanks to way in which conversation was steered. Arias agreed throughout that he did not want bloodshed and that he sought ways of keeping groups on frontier from engaging in use of force.

/3/ In a December 3 memorandum to the President, Rostow reported that, "ex-President Ariasí followers have started some guerrilla efforts along the Costa Rican frontier. Only one encounter with the Panamanian National Guard has been confirmed, but the prospect is for continuing skirmishes." (Ibid., Country File, Panama, Vol. X (part 1 of 3), May-December 1968)

3. In letter to President Johnson, Arias had said he wished to pre-sent a "simple pragmatic plan" to restore Constitutional Government. In conversation with Oliver, Arias outlined plan as follows:

(a) USG to continue policy of keeping all types of assistance relations with present Junta at minimum and seek all opportunities to indicate moral displeasure and concern at continuation military regime in Panama.

(b) Arias to continue and intensify his efforts to work out a united front of civilian politicians. Front would include all elements of Panamanian traditional politics that could be brought together, including Samudio and practically everybody else, except Eletas, who are only civilians playing ball with Junta. (Arias insisted that Junta had shown disrespect and distaste for all civilian politicians except Eletas and a few of their hangers-on.) Arias intimated that he might be willing to deal with other civilian politicians on question of who would lead in first reinstallation civilian government.

(c) Build up of pressures under lines of action (a) and (b) should be directed toward displacement top command of present Junta and its replacement by wiser and more moderate National Guard leaders. After this transitional change in Junta had been made, in due course Panama could go back to some form of civilian government, either on basis of past election, de facto shift from military to civilian Junta, or some new electoral basis. Arias insisted present Junta leaders would not permit this evolution to take place; hence they have to be displaced;

(d) To make (a) effective, according to Arias, Seddon and Angueiras should be replaced on U.S. MilMission by new men, loyal to prospect of shift back to civilian rule. These men must be very able and astute. Arias explained that regardless of their personal attitudes and viewpoints, Seddon and Angueiras are popularly thought to be in cahoots with present Junta leaders. Their replacement now would be signal to people that USG not in fact overly friendly to Junta.

(e) Probably best man to replace top of present Junta under

(c) would be Col. Abel Quintero, presently on duty at Inter-American Defense Board here. Arias seemed to dismiss Vallarino and Urrutia.

4. In conversation Arias complained mildly at outset about attitude U.S. Embassy in San Jose as being opposed to needs of Panamanian refugees in Costa Rica. This led to first of several Oliver tacks on dangers of border adventurism. In synthesis Arias came to these positions:

(a) He is opposed to violence and does not want to see operations from Costa Rica;

(b) He recognizes that violence may bring other leaders to top, using his name, and that present Junta might be strengthened by a frontier challenge;

(c) He cannot be sure he can control the frontier groups unless he has something to give them in the way of hope, such as by evolution of proposal in para 3. (At this point Oliver made it clear that he did not think Arias ought to try to "bargain" his dissuasion of frontier elements against USG "acceptance" of Arias Plan. Arias then recast his position, saying that main thing was to see what could be done to take care of refugees who could not safely return to Panama. Arias insisted there were far more unarmed and homeless refugees than potential guerrilla fighters along Costa Rican border and expressed belief that proper refugee care would reduce danger armed conflict.)

5. Arias tried throughout to establish environment for further discussions on basis "Arias Plan". Oliver made no such commitments but said he would transmit Ariasí views.

6. Department will now begin study of situation and shortly will instruct as to further passing of this information and as to possible lines of action. Meanwhile Ambís comments on basis this report are invited./4/

/4/ During a December 10 meeting Anderson "strongly advised Arias to withdraw from public view, stay out of Panamanian affairs, go where he can be comfortable and unnoticed, and sit and wait." Arias "expressed warm appreciation for this advice and assured Anderson that he will follow it." (Telegram 285234 to Panama City, December 11; National Archives and Records Administration, RG 59, Central Files 1967-69, POL 15 PAN)



457. Memorandum for the File/1/

Washington, December 9, 1968.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Vol. X (part 1 of 3), May-December 1968. Secret. Prepared by Lewis of the NSC staff.


Walt Rostow told me today that the President does not want to "provide any military assistance" to the Panamanian junta during the remainder of his Administration, unless it were a case involving vital US national security. Rostow agreed that such a situation does not currently exist./2/

/2/ On December 3 Rostow informed the President that the National Guard Commander had asked to purchase from U.S. Army stocks, $20,000 worth of field equipment and combat rations for counter-insurgency operations. Adair recommended approving the sale, which did not include weapons or ammunition. The Department authorized Defense to make the sale, but Rostow noted that Arias and his followers would create adverse publicity if they learned of the transaction. The President wrote on the memorandum: "I question this, call me. L." (Ibid.) On December 5 a representative of the Junta approached U.S. officials requesting military assistance, particularly two helicopters, "for use by the National Guard to contain insurgency in Panama." (Undated CIA report under cover of a memorandum from William V. Broe to Assistant Secretary of Defense Lang, December 9; National Archives and Records Administration, RG 59, ARA Files: Lot 72 D 33, Entry 5396, Panama)

Rostow authorized me to talk discreetly with Covey Oliver, without putting anything on paper, to see that all decisions on MAP or public safety assistance are stalled through January 20. Rostow indicated the Presidentís concern covered even innocuous MAP assistance items such as spare parts, tools, field canteens, etc. on a straight sales basis. If State insists on the necessity for some sort of military aid, whether it involves hardware or training, the issue should be presented to the President by Secretary Rusk for decision.

I discussed this matter orally with Ben Read (S/S), Art Hartman (U), and Pete Vaky (ARA) in Covey Oliverís absence, making the Presidentís wishes clear to each of them. They all affirmed that no affirmative decisions would be made on any MAP or Public Safety items without prior consideration by the President.

Samuel W. Lewis


458. Action Memorandum From the Presidentís Special Assistant (Rostow) to President Johnson/1/

Washington, December 30, 1968, 6:30 p.m.

/1/ Source: Johnson Library, National Security File, Country File, Panama, Filed by LBJ Library. Secret. A handwritten note on the memorandum reads: "Jones told Walt."

Military Assistance for the Panamanian National Guard

Since the Panamanian coup in October all U.S. assistance to Panamaís National Guard has been suspended. Secretaries Rusk and Clifford have now concluded we should resume assistance on a very limited scale in order to safeguard our working relationship with the Guard necessary for security of the Canal Zone. Rusk states:

-We have turned down Guard requests for training, repair and maintenance services, and routine "soft goods" items. Guard officers are already showing some resentment against the U.S.

-We may have to ask for the Guardís help during January, should anti-U.S. agitation occur as in past years on the anniversary of the 1964 student invasion of the Zone.

-The Panamanian Government has been taking steps toward the restoration of constitutional government; new elections are publicly planned for early 1970; Panama also is seeking our advice on badly needed reforms in public administration and education.

-We cannot indefinitely suspend assistance to the Guard and continue to count on Guard assistance in protecting the Zone.

Rusk believes that some renewed training plus about $15,000 worth of spare parts, shop and maintenance equipment, and automobile tools-all previously programmed-will safeguard our relationship with the Guard for the time being. Deliveries of arms, tear gas, ammunition, or heavy equipment would remain suspended-along with training for combat operations. Adverse publicity should be minimal.

The Canal Zone Governor, the Joint Chiefs of Staff, and Secretary Clifford all concur in Ruskís recommendation.

Former President Ariasí efforts to stir up guerilla operations against Panama show no real results to date.

I believe you should approve resumption of very limited military assistance to Panama, as detailed in Ruskís memorandum.

Attached is the memorandum from Secretary Rusk./2/

/2/ Dated December 26; attached but not printed.


Call me

/3/ This option is checked.



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