August 13, 1942

White House press release.

". . . this Government should promptly withdraw from the real estate business in the Republic of Panama."


The Treaty of Friendship and Cooperation between the United States of America and the Republic of Panama, effective on July 27, 1939, was a definitive step in the clarification of this Government's relations with the Republic of Panama. The Panamanian Government has demonstrated its willingness to assume promptly and wholeheartedly the burdens imposed upon it as partner in the defense of the Panama Canal, a responsibility which was accepted by that Government under the provisions of the new treaty.

The attitude of the Panamanian Government in the present international crisis has been thoroughly cooperative. On March 5, 1941, the President of the Republic of Panama issued a manifesto making available for use by the United States certain defense sites in the territory of that Republic. Pending the conclusions of final arrangements regarding the terms on which these sites are to be used, the Panamanian Government has permitted our armed forces to occupy and develop them. Immediately following the attack by the Japanese on Pearl Harbor Panama declared war on the three major Axis powers, and since has taken numerous protective steps to cooperate with the other American republics in the interest and security of the Panama Canal and the defense of this hemisphere.

This attitude is tangible evidence that the relations between the two countries are now firmly based upon a recognition of mutual interest and a disposition to assume common responsibilities.

In my opinion, the time has come for this Government to make certain concessions which have been desired by the Republic of Panama over a period of years, and in this manner to correct certain factors in the relations between the two countries which do not make for confidence and friendship between our two countries.

Accordingly, I deem it advisable that this Government convey to Panama the water and sewerage systems in the cities of Panama and Colon; that it relinquish its extensive real estate holdings in the cities of Colon and Panama, so far as these holdings are not essential to the operation and protection of the Canal; and that it liquidate the credit of two and a half million dollars made available to the Republic of Panama by the Export-Import Bank for the construction of Panama's share of the Chorrera-Rio Hato Highway, a road essential to our defense requirements and constructed in accordance with standards made essential by these requirements.

It will be recalled that the interest of the United States in the sanitation of the Canal Zone, together with that of the cities of Panama and Colon, has been of outstanding importance. Concurrent with the construction of the Panama Canal, through agreement with Panama, the United States installed water and sewerage systems in the cities of Panama and Colon, and throughout subsequent years has been responsible for the operation and maintenance of these systems and for the sanitation of the two cities.

I now propose to the Congress, that since in accordance with Article VII of the Canal Convention of 1903, the "system of sewers and waterworks shall revert to and become the properties of the cities of Panama and Colon" in the year 1957, it authorize the Government to convey all its right, title and interest in the Panama and Colon water and sewerage systems to the Republic of Panama; provided, however, that the Republic of Panama shall pay quarterly a rate of B/0.09 per one thousand gallons or a reasonable rate to be agreed upon by both Governments to the appropriate Canal Zone authorities for water supplied at the Canal Zone boundary; and provided, also, that the turning over to the Government of the Republic of Panama of the physical properties of the water and sewerage systems and the administration thereof, including the collection of the water rates, does not in any way modify the existing arrangement for the responsibility for the public health services of the cities of Panama and Colon as specified in the second paragraph of Article VII of the Convention between the United States of America and Panama, signed at Washington, November 18, 1903, which reads as follows:

"The Republic of Panama agrees that the cities of Panama and Colon shall comply in perpetuity with the sanitary ordinances whether of a preventive or curative character prescribed by the United States and in case the Government of Panama is unable or fails in its duty to enforce this compliance by the cities of Panama and Colon with the sanitary ordinances of the United States the Republic of Panama grants to the United States the right and authority to enforce the same."

This Government, in continuing to maintain the health services in the cities of Panama and Colon, will ask the Government of the Republic of Panama to cooperate fully with the appropriate Canal Zone officials in carrying out the proposal regarding increased participation of Panamanian personnel in sanitation activities in those cities as provided for in the exchange of notes accompanying the General Treaty of March 2, 1936.

You will recall that the Panama Railroad Company, a corporation whose stock is now wholly owned by the United States, acquired the Island of Manzanillo (the present site of the city of Colon) through concessionary contracts with the Republic of New Granada, signed in 1850, 1856, and 1867. The railroad's interest in this property was acquired for ninety-nine years from August 1867, or until August 1966. The reversionary rights to these lands remained originally with the Republic of Panama, which, however, in the Canal Convention concluded between the United States and Panama in 1903, conveyed these rights to the United States. Thus until August 1966, the Panama Railroad Company enjoys the usufruct of the lands on which the city of Colon stands, and thereafter the United States will acquire title thereto, in perpetuity. As an element of such ownership the railroad company has, of course, over a period of years rented the property in Colon to Panamanian citizens-merchants, business men, and residents, and is, in fact, the principal landlord in Colon. For obvious reasons this is unsatisfactory.

I think, therefore, that this Government should promptly withdraw from the real estate business in the Republic of Panama and convey to that country its right, title and interest, as well as its reversionary rights, to all the Panama Railroad Company land in the cities of Panama and Colon which is not needed for the operation of the railroad or for the operation, maintenance, sanitation or protection of the Canal.

I also wish to invite your attention to the Act approved July 20, 1939 (Public Numbered 200, Seventy-sixth Congress, Chapter 335, First Session) authorizing an appropriation of not to exceed $1,500,000 "to meet such expenses as the President, in his discretion, may deem necessary to enable the United States to cooperate with the Republic of Panama in connection with the construction of a highway between Chorrera and Rio Hato in the Republic of Panama."

I also wish to refer to the Act approved August 9, 1939 (Public Numbered 361, Seventy-sixth Congress, Chapter 633, First Session) entitled "An Act Making Appropriations to Supply Deficiencies in Certain Appropriations for the Fiscal Year Ending June 30, 1939 and June 30, 1940 and for Other Purposes," which contains under the heading "Corps of Engineers" the following appropriation:

"Chorrera and Rio Hato road, Republic of Panama: To enable the United States to cooperate with the Republic of Panama in connection with the construction of a highway between Chorrera and Rio Hato, in the Republic of Panama, as authorized by the Act approved July 20, 1939 (Public- Numbered 200, 76th Congress), $1,500,000 fiscal year 1940, to remain available until expended."

It is to be noted that, while the appropriation of the United States for its share of the cost of the highway amounted to $1,500,000, the Export-Import Bank, in a contract signed February 21, 1940 with the Banco Nacional of Panama and the Republic of Panama, agreed, under specific conditions, to cooperate in the financing of the Panamanian share of the construction cost to the extent of $2,500,000.

In accordance with the provisions of the aforesaid Acts of Congress and the arrangements made by Panama with the Export-Import Bank, the Ambassador of Panama in Washington, representatives of the War Department, of the Export-Import Bank, and of the Public Roads Administration, Federal Works Agency, in 1940 reached a mutually acceptable basis on which the two governments would cooperate in this work, and which provided that responsibility for the construction of the highway would be in the hands of Panamanian authorities but with the advice of engineers of the Public Roads Administration.

The War Department, through the Public Roads Administration, in 1941 stressed the urgency of rapidly completing the Rio Hato Highway and asked that every effort be made immediately to transfer the responsibility for this work from the Panamanian Government to the Public Roads Administration.

The Panamanian Government agreed to this request and the transfer of responsibility was effected on December 29, 1941, with a request by the Panamanian Government that, in accordance with conversations held between the Panamanian Foreign Minister and the Under Secretary of State in June 1941, Panama's indebtedness arising out of a credit made available by the Export-Import Bank be liquidated at the earliest possible date.

With a view to effecting the proposed changes indicated, I recommend to the Congress its consideration of a draft Joint Resolution which is hereto annexed.

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