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amendments and adjustments to treaty documents. Therefore the answer would be yes; I would be concerned about the potential for that. Senator Scorr. During our trip on behalf of the Armed Services Committee we were told by numerous individuals that some of the top advisers to the Panamanian Government were Communists, and that this was common knowledge in Panama.

As one who has been in Panama-and I am not going to ask for any names or identify anybody at all. I personally intend to do that in executive session before our Armed Services Committee.


As one who has been in Panama for a number of years, what is your personal opinion as to Communists within the structure of the Government of Panama. Do you feel there are or that there are not Communists there?

Governor PARFITT. I believe the general consensus is that the Panamanian Government itself is not Communist-leaning, but advisers in various places within the Government are in fact Communists.

Senator Scorr. This would be advisers to General Torrijos? Some of his advisers are believed to be Communists?

Governor PARFITT. That is correct.

Senator SCOTT. As I understand it, General Torrijos became the Chief of State taking over from a lawful government. I would assume that you are familiar with the history of the country of Panama. Does it have a history of being an unstable government?

Some figures were given to me that it was volatile, and that there have been 59 different governments in the past 70 years. Do you know if that is a fairly accurate statement? I would not hold you to the exact figures, but over the years has it been a volatile government?

Governor PARFITT. Well, over the years it has been a volatile situation, but I do not think that the number you have indicated is completely representative of the actual facts. Many of those changes in government were not in the context of an upset or an overthrow or a change, really, but included in the changes in Presidents because of the absence from the country of a President, and so forth.

In summation, yes, it is a volatile situation. It is not nearly as extreme as those figures would indicate.

Senator SCOTT. Well now, in your personal opinion, General, do you believe that the Panamanian officials are of the opinion that demonstrations and disturbances of various kinds tend to influence our Government to accede to their desire that the Canal be turned over to them, and that they can more readily obtain a treaty by demonstrating and by resorting to various kinds of violent action?

Governor PARFITT. I am concerned that there may be this impression amongst some. There are indications to that effect.

Senator SCOTT. General, I am very grateful to you for your candid comments here. If time would permit I would like to have further questions, but certainly it would be unfair for me to take any more time. We are running behind schedule. I would like an opportunity, if you are free, after while to just visit with you privately for a bit on a personal basis.

Thank you very much for being with us.
Governor PARFITT. Thank you, sir.

Senator ALLEN. Thank you, Senator Scott.

Senator Hatch?

Senator HATCH. Governor, would you review for our benefit the total payments, if you can, for the Canal Zone property, including the annual annuity payments to Panama? I do not think they are in your statement. You list the total cost.

Governor PARFITT. I will provide the precise figures for the record. [The aforementioned information was subsequently supplied for the record.]


1. Reflected on company books as title and treaty rights

a. Payment to Republic of Panama___

b. Payment to individual property owners (depopulation
of C.Z.).

c. Payment to French (land rights).

d. Madden Dam Area land rights, 1924–1932_


2. Further payments to French

a. Inventories, salvage credits, other__

b. Panama Railroad Capital Stock-

c. Channel costs_-_


(Combined with lc., payments to French total $40,000,000). 3. Payment to Colombia (not reflected on Company books) Indemnity to Colombia for loss of Panama__.

4. Payment to Panama for annuity

$10, 000, 000

3, 965, 254 326, 016 437, 619

4, 728, 889

1,282, 664 7, 000, 000

31, 391, 319

39, 673, 984

25, 000, 000

a. 1913-1920 (Capitalized as construction costs).
b. 1921-1951 (Dollar value in gold changed, 1933).

2, 000, 000

10, 990, 000

c. 1952-1976 (Dollar value in gold changed, 1973 and 1974:
includes payment by State Department, 1956–76).

43, 610, 992


56, 600, 992

Total payments to Panama, France and Colombia------ $136, 003, 865

Note: The above figures report actual dollars paid at the time of payment and have not been adjusted to reflect the value of payments in terms of 1977 dollars. Senator HATCH. I do not wish to put you on the spot, but I would just like to have the American people know a little about this.

Governor PARFITT. Titles and treaty rights were bought. We paid $10 million to Panama as part of the treaty and roughly $4 million for the acquisition of property from ownerships that existed-buying out the ownerships.

We paid $40 million to the French company for the interest that they had. In 1922, we paid $25 million to the Colombian Government under a separate treaty.

We also paid at the outset, in the treaty arrangement of 1903, $250,000 a year in gold in an annuity. That was escalated over time. Senator HATCH. That is to Panama?

Governor PARFITT. That is to Panama directly. That was increased. to about $430,000 in 1934 and to approximately $1.9 million in 1956. Then there have been some adjustments for the devaluation of the dollar to the current level of payments of $2.3 million per year, which is the annuity paid to Panama now.

Senator HATCH. If we were to take the extra payments for the canal to the French Company, to Panama, to Colombia, et cetera, and weight them in terms of present dollars, can you tell me what that would have been worth?

Governor PARFITT. Not in present dollars, sir. The actual unrecovered investment, as I indicated, is $752 million. That is in historic dollars.

Senator HATCH. To categorize this as a matter of a few million dollars cost to the United States to operate the canal would be somewhat misleading and probably unenlightening. It has cost us many hundreds of millions of dollars to have the canal. If you count the present value of what that money was-the present value of the moneys that were spent then would be several hundred millions of dollars.

Governor PARFITT. Yes, in fact as indicated in my testimony, if you took the actual acquisition cost of all of our in-use property plant and equipment, which is about $855 million, and inflate it as you suggested, it would come to about $3.5 billion.

Senator HATCH. That is a lot of money.

Governor PARFITT. Yes, sir.

Senator HATCH. What percentage-we are paying a little over $2 million a year now in annuity payments to the Government of Panama. What percentage of the total income for the Government of Panama is that payment; do you know?

Governor PARFITT. That in itself is very small. I think you may be alluding to the fact that quite apart from the direct annuity payment there is an inflow to the Panamanian Government annually, or to the economy of Panama, not to the government, of somewhere between $240 million and $250 million annually.

Senator HATCH. In other words, if this canal was not there, what major industries in Panama would keep that country alive and well economically?

Governor PARFITT. Well, certainly it can be said that the presence of the Panama Canal has infused much money into the Panamanian economy, and is responsible for the high standard of living in that part of Central America.

Senator HATCH. Some people have said that the canal is almost obsolete anyway, and by the year 2000 it would have to be either totally rebuilt or revamped. Do you agree with that opinion?

Governor PARFITT. No; I do not believe so. At the current moment our estimates would indicate that up through the turn of the century there will be adequate capacity in the canal-at least until the end of the century-to take care of all of the tonnage that is projected for passage across the Isthmus.

Senator HATCH. If we have the sea-level canal or the proposed system of the new locks, we could keep the canal pretty well modernized well into the 21st century?

Governor PARFITT. Yes, sir.

Senator HATCH. Let me ask you this: If circumstances were to prevent the Panamanians from coming into the zone, could the canal be operated on an emergency basis by U.S. civilian and military personnel?

Governor PARFITT. In our contingency planning, sir, we envision the possibility of periodic disruptions because of disorders of one type or another possibly in Panama. In those cases, given the size of the U.S. contingent, given the presence of the Panamanian citizens who live in the Canal Zone, given the fact that certain numbers of Panamanians would be present, we feel that an operation could be continued at a reduced level of efficiency for a short period of time-say, about 10 days. Beyond that we would probably need augmentation from external sources.

Senator HATCH. In other words, it has been stated by others that if we do not give up the canal, that we shall be faced with guerrilla warfare, all types of insurgency; the destruction of various locks, or in general would have a chronic problem of maintaining order in the Canal Zone. Do you agree with that?

Governor PARFITT. That has been postulated, and certainly it is a possibility. There is a very high probability of disorders and disruptions and so forth. I would certainly hope that the mutual interests of the United States and Panama in an efficient operation of the canal would be overriding and that would not entail.

Senator HATCH. The fact of the matter is that the Panamanians would find it in their best interests to help preserve the integrity of the canal, because that is where they get most of the money they need to run their country.

Governor PARFITT. A high proportion of their economy is based on that. One would presume that logic would prevail and that they would not be interested in destruction of that source of income.

Senator HATCH. If any governmental leader in Panama is advancing that as a reason for the ultimate transfer of the canal to Panama by the United States, he should be unsuccessful. As a practical matter he really cannot advance that, because he has got to maintain the integrity of that canal and cooperate with the United States in maintaining it in order to have any kind of economy in Panama of any substance.

Governor PARFITT. It certainly would be in their interest to do so. However, one cannot rule out the acts of individuals that do not make


Senator HATCH. In other words, there may be terrorists who might try to do that. Isn't that true even if the United States gets out of the operation of the Panama Canal?

Governor PARFITT That is true, but probably to a lesser degree. It is true, though.

Senator HATCH. Is it really true to a lesser degree? Would not the Panamanian Government and the canal be more vulnerable to terrorism without the awesome might of the United States? Keep in mind that I understand that any treaty has to contain a provision that the United States can maintain the territorial integrity and use of the canal on a nondiscriminatory basis, at least this has been represented to me both by Mr. Bunker and Mr. Linowitz personally.

The point I am trying to make is that it may be just as reasonable to expect that terrorists could sabotage the canal if the United States. divests itself of this property or if it keeps it. Isn't that true?

Governor PARFITT. The distinction I am trying to make, sir, is that given the full support of Panama and the Government of Panama, there is probably a better possibility of containing that. If the Panamanian Government were to stand aside, as has been suggested on occasion, then the likelihood of those types of activities is greater.

Senator HATCH. As a practical matter, the Government of Panama cannot stand aside or it would be overthrown because of the importance of the canal to the Panamanian economy.

Governor PARFITT. It certainly would not be in their ultimate interests to stand aside.

Senator HATCH. It seems to me that no leader could advocate standing aside and believe that his leadership would be continued.

Governor PARFITT. I am not sure of that, sir, because the Panamanian Government has done a rather good job of mobilizing support for their concept of taking over the Canal Zone and the Panama Canal. It is a great emotional issue. The overriding sentiment that you hear amongst the militant group-which is not representative of everybody-is support for whatever action is necessary to, in effect, get what they feel is rightfully theirs.

Senator HATCH. As a practical matter, unless they can bring about that change very effectively, assuming the United States does not divest itself of the canal, there would be supremely powerful economic forces against the continuation of that particular leadership.

Governor PARFITT. That is correct, sir.

Senator HATCH. Therefore, both sides can be very well argued. The fact that we would divest ourselves of the canal does not necessarily guarantee that terrorism or acts of terrorism will not occur. Governor PARFITT. That is correct.

Senator HATCH. What percentage of vessels in the world can actually go through the Panama Canal?

Governor PARFITT. Approximately 92 percent, sir.

Senator HATCH. Ninety-two percent can go through?
Governor PARFITT. Yes, sir.


Senator HATCH. Let me just ask you this question: What is the average value of a single family dwelling which is rented to the U.S. Canal Zone employees-U.S. citizen Canal Zone employees.

Governor PARFITT. The average value, sir?

Senator HATCH. The point I am getting to is that some of the supporters of a new treaty have said that the American presence is a source of trouble because Americans are living a life of luxury down there in Panama. I would like you to give us your viewpoint and perspective concerning that. Are we or are we not?

Governor PARFITT. I would say that definitely we are not. We have quite a wide range of quality of housing. I would say that it is modest and represents kind of a middle America, except for the Governor's house in which I live. Except for the Governor's house there is no really resplendent set of quarters.

Senator HATCH. Well, that is only right.

Senator Scort. If the Senator will yield very briefly-
Senator HATCH. Yes.

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