File No. 819.77/112.

The Acting Secretary of State to the American Minister.

No. 42.]

Sir: Referring to past correspondence in the matter of the construction of a section of the Panamá-David railway in which Messrs. J. N. Hyatt, H. G. Prescott and R. Wilcox are interested, and particularly to your No. 96 of March 22 last enclosing a communication from the Minister for Foreign Affairs of the 21st of that month, stating that the contract had not been entered into with the above-mentioned persons because of the suggestion made in the Department’s instruction of September 20, 1911, that no arrangement of this sort be consummated without previous detailed study by this Government, and requesting that you obtain from this Government an expression of its opinion on the projected contract referred to, you are informed that in a letter from the Department to the Secretary of War of March 19, it was observed that in view of the technical character of this question and of others that might be brought to the Department’s attention for its study, it would be advisable to form a board to pass upon this class of questions. A copy of the Department’s letter of March 19 to the Secretary of War and of his reply of the 3d instant are enclosed for your guidance.1 From this you will observe that the Secretary of War approves in principle the formation of such a commission, and suggests that a board charged with the duties above mentioned be formed, to be composed of the American Minister to Panama, a member of the Isthmian Canal Commission to be designated by the chairman thereof, and the Chief Engineer of the Panama Railroad Company.

For the better understanding of the views of the Department in this important matter, and of its desire scrupulously to proceed in the manner that may best consult the mutual interests of the United States and of Panama, I am enclosing a copy of a memorandum1 prepared in the Solicitor’s office, dated March 4, 1912, which, with the letter of the Department to the Secretary of War above mentioned, should make clear the attitude taken by the Department.

A copy of the reply which the Department is sending to the Secretary of War signifying its entire approval of the formation of a board as indicated in his letter of the 3d instant is also enclosed.1

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The Department desires you to put yourself immediately in communication with the other members of the board to the end that the questions involved in the project of the Aguadulce-Santiago Railroad may be passed upon with the utmost despatch and the final results of the examination of this matter transmitted promptly to the Department in order that an expression of the opinion of this Government on the projected contract may be communicated to the Panama Government at the earliest possible date.

It should be added that the board should limit its attention to the technical aspects of the matter now submitted to its examination, the Department reserving for itself the determination of the general questions involved such as that presented by the inclusion of the so-called Calvo clause and the pledging of the canal annuity.

The files of the Legation, it is felt, will furnish the board all information regarding the provisions of the proposed contract needed in order to proceed at once to the study of the questions submitted to its examination. You are authorized to make request of the Panaman Government for any further data regarding this matter which the board may desire in connection with the examination of this question.

I am [etc.]

Huntington Wilson.
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