1938: Panama

A boundary treaty signed with Costa Rica on Sept. 26, involving mutual concessions, was withdrawn from the Costa Rican Congress in October, due to popular protest expressing an opposition which was largely political. Final settlement of a frontier controversy which Panama inherited from Colombia, and which, in 1921, was the occasion for armed hostilities between Costa Rica and Panama, is therefore postponed. Following the withdrawal of the agreement a bill was introduced in the National Assembly authorizing an appropriation of $1,000,000 for the purchase of arms and munitions.

The treaty with the United States signed in 1936 still awaits ratification by the United States Senate. Its failure to receive approval has delayed payment of Canal annuities, now amounting to $2,150,000, which, in turn, is responsible for the continued default on the foreign debt of $17,837,696, guaranteed principally by these annuities. A reduction has been called for in the interest service of the external bonds, which now carry 5 to 5½ per cent. A plan to purchase Panama's defaulted bonds from the proceeds of a new 3-per cent issue of $6,000,000 was before the National Assembly in October. Foreign banks threatened withdrawal until a government decree, in November, exempted them from purchase of the bonds to the amount of 20 per cent of their deposits, as required earlier. Foreign trade reached the highest level in Panama's history in 1937, due chiefly to increased import trade caused by the broadening of the Canal Zone market for Panamanian merchants. The revised budget for the biennial period Jan. 1, 1937-Dec. 31, 1938 estimated receipts and expenditures at $18,814,000.

Japanese fishermen, who were accused of destroying fish by dynamite, were barred from Panama's waters by presidential decree, effective Feb. 1, for 'reasons of security and national defense.' The fishing grounds are now reserved to nationals of Panama. It was reported that the Japanese fleet would go to Costa Rica, where a concession had been requested, and to El Salvador and Nicaragua. Japanese shipping lines engaged in the Pacific Coast-East Coast South American trade were charged with unfair trade practices before the United States Maritime Commission in December. The threatened rate war was ended Dec. 22, when the Japanese lines, which had been cutting the charges on carrying coffee from $1 to 50 cents a bag and which had demanded 25 per cent of the coffee business, agreed to a common rate.

An enlargement of the Panama Canal, for reasons of military necessity, was proposed by Col. C. S. Ridley, Governor of the Canal Zone, in his annual report to the United States War Department. Secretary of War Woodring, in his report, also urged stronger Canal defense, such as the bombproofing of locks and dams and the elimination of chances of sabotage, in order that the Canal might be made 'impregnable.' Increasing the Canal's facilities and defense will be a major item in the 1939 defense plan. In the last fiscal year 5,837 commercial vessels, carrying 28,058,109 tons, passed through the locks, which have an actual capacity of 70,000,000 tons annually.