and the Inter-American Development Bank. That was a background briefing. There were two subsequent meetings. The U.S. directors did not take part in those meetings.

But at all meetings there were representatives both of State and Treasury present.

Senator ALLEN. What was the general nature of these discussions? Mr. MUNK. As I mentioned, at the initial meeting, Mr. Barletta gave a general background briefing on Panama's development plans and needs.

The second and third meetings were discussions of what might possibly be done by both parties with respect to those needs. Certainly our people were not empowered to put any specific proposals forward. We still do not have proposals. No agreements were made. They cannot realy be called negotiations.

PANAMA TO RECEIVE PROPERTY PLUS MONEY

Senator ALLEN. The thrust of these meetings is really to find ways and means of providing hundreds of millions of dollars to Panama for taking the Panama Canal; is that not about the size of it?

Mr. MUNK. I do not think we look at it quite that way. In the past we have been concerned with Panama's development needs and welfare. If we have a new treaty we will be just as concerned or even more concerned. We want to see them do well, and we want to do all we can to make sure the canal has a good home.

Senator ALLEN. Yes.

Panama is indebted to the American international banks, private banks, to the tune of $2.5 or $3 billion; is it not?

Mr. MUNK. I have a chart. I would not swear to the accuracy of it, but I think the total indebtedness is something over $1 billion. The biggest share of that is commercial banks.

Senator ALLEN. Over $1 billion that you know of?

Mr. MUNK. That is overall. The biggest share is the commercial banks. As I said, I would not swear to the accuracy of my chart.

Senator ALLEN. I have a statement from the Library of Congress, Congressional Research Service, which states:

Another source in the Federal Reserve indicated that foreign branches of U.S. banks had claims of $1.886 billion on Panama at the end of 1976, while the March 1977 Treasury Bulletin indicated that domestic offices of U.S. banks had $886 million in short and long-term claims against Panama as of that date. Of this amount, only 13 percent were long-term claims. Adding the two figures results in $2.772 billion in claims on Panama by U.S. banks and their foreign branches.

Mr. MUNK. Does that include both public and private debts? Senator ALLEN. No; it indicates it is all by U.S. banks and their foreign branches.

Mr. MUNK. On the Panamanian side, is that private borrowers in Panama?

Senator ALLEN. It indicates it is the Government of Panama. This letter is dated July 21, 1977.

I will insert a copy of that letter in the record at this time. [Material follows:]

As we have discussed on the telephone, we are enclosing photocopies of different materials pertinent to the above-mentioned subject. There is a statement by Henry C. Wallich, Member, Board of Governors of the Federal Reserve System, dated March 23, 1977, to the House Subcommittee on Financial Institutions of the Committee on Banking, Finance and Urban Affairs, which includes a table on claims of U.S. banks on various foreign countries, including Panama.

We have also included a June 3, 1977 Federal Reserve press release which has tables on U.S. bank claims on selected foreign countries in 1976. Panama is included in the section on offshore banking centers on page 5 of the tables.

Another source in the Federal Reserve indicated that foreign branches of U.S. banks had claims of $1.886 billion on Panama at the end of 1976, while the March 1977 Treasury Bulletin indicated that domestic offices of U.S. banks had $886 million in short and long-term claims against Panama as of that date. Of this amount, only 13% were longterm claims. Adding the two figures results in $2.772 billion in claims

on Panama by U.S. banks and their foreign branches. This appears to be the number used by Governor Wallich in the attachment to his statement.

We are also including a photocopy of the World Debt Tables, Volume II, p. 117, which shows the external public debt position of Panama. Unfortunately, the table includes data only up through 1974.

Conversation with a World Bank official revealed that 1975 and 1976 figures are in the process of compilation and some results are expected by the end of next week.

If you would like further assistance on this matter, please do

not hesitate to contact us on 426-5750.

David Hoyt

Analyst in Banking and
Capital Markets

Mr. MUNK. My figures are from the Comptroller General, and they concern the central administration of the Government of Panama and the Panamanian Government agencies and state enterprises. It comes to something like $625 million.

MARKED INCREASE IN PANAMANIAN DEBTS

Senator ALLEN. That is a marked increase from 1975; is it not?
Mr. MUNK. Yes.

Senator ALLEN. Since only 13 percent of this money, according to the Congressional Research Service is long term, then it would seem that the international banks are in a position to demand their money back on a short-term basis, creating a financial bind on the part of Panama, which they hope to have alleviated in these negotiations with the United States; is that not correct?

Mr. MUNK. I have not heard of any pressure or influence being brought to bear by the commercial banks on the U.S. Government to reach a favorable agreement with Panama.

Senator ALLEN. I did not suggest that. I just said that Panama is in a bind as a result of these tremendous debts that they have. Is that not correct?

Mr. MUNK. I do not have the maturity structure. If they have lots of short-term debts coming due soon, then I would think they would probably be happy to have some money from any source.

Senator ALLEN. They might hope to get that out of the U.S. Treasury in these negotiations; would they not?

Mr. MUNK. Again, I would think if they could get some money from any source, they would be happy.

Senator ALLEN. I wonder why it is necessary to pay Panama to take over American property. Could you give us the theory behind that? Mr. MUNK. Again, we are concerned about Panama's welfare. We think that they need development in the area of agriculture and energy. They import a lot of oil for thermal power generation. They have possible hydropower development that they could undertake. We are anxious, if we enter into this new relationship, that they get along all right.

Senator SCOTT. Are you more concerned about the interest of Panama than the interest of your own country?

Mr. MUNK. No.

Senator SCOTT. The conversation that I just interrupted would indicate that you are. I assume that you are an American citizen; are you not?

Mr. MUNK. I am.

Senator SCOTT. Thank you, Mr. Chairman.

Senator HATCH. You mentioned in your testimony that a range of options is under consideration for extending financial aid to the Republic of Panama. Inasmuch as you have not given us any specifics, would you at least identify for us the nature of the options being considered? Mr. MUNK. I would hesitate to identify the nature of the options, because the President may have decided on a completely different set of alternatives.

Senator HATCH. The committee is interested in seeing the options which are being considered.

Mr. MUNK. Given the fact that we have not decided on anything, I do not believe I am able to give you the range of options this morning. Senator SCOTT. Mr. Chairman, what does this statement mean, "that the administration will, as it always has, keep Congress fully informed? You say you are not able to tell us anything. Are you participating in the negotiations? Do you actually know yourself what is going on?

Mr. MUNK. As I said, the negotiations are proceeding

Senator SCOTT. Are you a participant in the negotiations?
Mr. MUNK. No.

Senator SCOTT. Thank you.

Senator HATCH. Has anybody in the Treasury Department participated in these negotiations?

Mr. MUNK. We have had these discussions, preliminary discussions, on the matters which are outside the scope of the negotiations. Senator HATCH. Have you participated in those?

Mr. MUNK. No.

Senator HATCH. Who does on the part of the U.S. Treasury Department?

Mr. MUNK. Mr. Solomon has participated in three meetings and Mr. Nachmanoff.

Senator HATCH. I understand he was requested to come.

Mr. MUNK. That is correct.

Senator HATCH. Is there any particular reason why he did not come today?

Mr. MUNK. The reason is that, in looking over the chairman's letter inviting us to appear, it appeared to us that the concerns that the Senator was worried about, that is, how the financial arrangements were going to be handled at the time of the decision on the treaty by the Senate, would be better addressed from someone from the General Counsel's office rather than Mr. Nachmanoff.

Senator HATCH. Mr. Chairman, I would suggest that we have Mr. Nachmanoff come over at that time. I think it would be helpful to the committee if he would testify. So you might mention to him, Mr. Munk, that we expect to hear from him, perhaps in September. Mr. MUNK. Certainly.

Senator ALLEN. In your negotiations or plans for negotiations, has the Department of the Treasury or any other agenecy of the executive branch contemplated a note-swap with the Government of Panama to avoid the appropriations process of Congress?

Mr. MUNK. Do you mean from the Exchange Stabilization Fund? Senator ALLEN. You suggest the agency. There are so many of them. You would have better knowledge of that than I.

Would you answer the question?

NOTE-SWAP

Mr. MUNK. We have not contemplated the note-swap.

Senator ALLEN. You are obviously familiar with the term noteswan. Has it been given discussion at all?

Mr. MUNK. To the best of my knowledge, no. I am virtually certain that I would know about it if it had been.