may make an attempt against the defense works within said areas
will receive punishment in proportion to the gravity of the crime.
  I take this occasion [etc.]                  VicTOR F. GOYTIA


711F.1914/424
Memorandum by the Chief of the Division of the American Republics
         (Bonsai) to the Under Secretary of State (Welles)

                                  [WASHINGTON,] February 5,1942.
  MR. WELLES:
             CURRENT NEGOTIATIONS WITH PANAMA
  The Panamanian Government has now replied to our most recent
proposal for a contract covering the defense sites. There are two
principal points at issue:
    (1) The applicability of Article II of the Treaty of 1936 and
    (2) The amount to be paid to Panama as annual rental for the
          defense sites.
  With regard to the first point, the present Panamanian administra-
tion takes almost exactly the same position as that assumed by Dr.
de Roux 13 in the course of his conversations with you last summer.
That Government feels that the acceptance by Panama of our inter-
pretation of Article II would mean an agreement to give the United
States lands and territories on a permanent basis beyond that con-
templated in the agreement under negotiation. Ambassador Wilson
feels that reference to Article II might be omitted in the agreement,
but that our position as to the interpretation of this Article might be
made plain to the Panamanian Government through some other
means. This matter has been discussed in RA 14 and the proposal is
made, subject to your approval, that the agreement on defense sites
omit all reference to specific Articles of the Treaty of 1936 and that
it be based upon the joint obligation of the two countries to take all
necessary measures for the effective protection of the Canal. A draft
along these lines is being prepared.
  With regard to the second principal point upon which agreement
has not been reached, the Panamanian Government now proposes that
all lands occupied by the defense sites (with the exception of Rio
Hato 15), whether public or private, be paid for at a rental rate of
$100 per annum per hectare. This would involve the payment of
about $700,000 per year (which compares with the Canal annuity of
2 Ralil de Roux, former Minister for Foreign Affairs.
  Division of the American Republics.
  Most of the defense sites were relatively small, from 20 to 25 acres; the
Rio Hato area consisted of some 19,000 acres.



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PANAMA