821.5151/12–547
The Ambassador in Colombia (Beaulac) to the Secretary of State
No. 165
Sir: With reference to the Department’s confidential telegram No. 587 of December 3, 1947,26 I have the honor to enclose a memorandum [Page 576] of a conversation I had with Mr. Victor Rose, Manager of the local branch of the National City Bank on November 21, 1947. Since the date of my conversation, the Embassy has been endeavoring to obtain additional background on the controversy between the National City Bank and the Colombian Government. It will be noted that during my conversation with Mr. Rose, I invited him to submit a memorandum concerning his difficulties, but he has not taken advantage of the invitation. However, he has orally volunteered much of the information given below.
It will be noted also from the memorandum that I declined to support the National City Bank’s position vis-à-vis the Colombian Government. So far, I see no reason for the Embassy to intervene in this matter nor am I impressed with the National City Bank’s statement that unless its position is accepted by the Colombian Government, it will close its branches in Colombia.
The following is the background of the case so far as Embassy has been able to obtain it.
The Colombian branch of the National City Bank, according to information received by the Embassy from the Manager of the bank, is considering liquidation because the Colombian Banking Superintendent has recently called upon it to import three million dollars of capital, and because of the onerous effect of Law 95 of December 30, 1946. It is understood that the importation of the capital was requested in order to relieve the foreign exchange shortage in Colombia. According to the Government, the National City Bank is legally obliged to import the capital and to substitute it for Colombian Government notes of more than two millions which the bank has been holding since 1929 and which it has tried to induce the Colombian Government to regard as its capital in Colombia.
Although the National City Bank agreed in writing, according to its Manager’s statement to the Embassy, to import the 3 millions into Colombia whenever the Banking Superintendent might request it, the Bank now contends that economic conditions in Colombia have changed so from what they were at the time the agreement was made, that the Bank can ill afford to import the capital now. The Bank is prepared, however, to live up to its agreement, but it has informed the Embassy in confidence that if it does accede to the Government’s present demands for the capital importation, it will serve immediate notice of its intention to liquidate its interests in Colombia.
. . . . . . .
The Embassy considers that the Colombian Government’s request for the capital importation is justified. At the same time, it sympathizes with commercial banks in Colombia because of the burdens [Page 577] of recent social legislation. But the Embassy cannot agree with the position that the National City Bank is not legally bound to import the capital being requested by the Colombian Government. Article 21 of Law 45 of 1942 states that the Banking Superintendent is authorized to regulate the manner of importing money to increase the capital of foreign banks, and on the basis of National City’s written promise to the Superintendent to import the capital when called upon, it would seem that the Bank has no legal out. Although the National City Bank defends its position by referring to Section 9 of Article 85 of Law 45 of 1923, this section goes no further than to state that investment in Colombian Government bonds is the only exception to the rule that commercial banks cannot invest more than 10 percent of their capital and reserves in bonds.
The Embassy does consider that Law 95 is a definite discouragement to private capital in Colombia, and Mr. Rose has been informed that the Embassy intends to make known its opinion on this subject to the Colombian Government.
Meanwhile, the National City Bank has contested the legality of the Banking Superintendent’s demand for the capital. As a result, the Government has requested the legal section of the Bank of the Republic to study the legislation in question and to render an opinion.
There is before the Congress now in session a petition signed by the majority of commercial banks in Colombia raising strong objection to the financial burdens imposed on the banks by the social benefits of Law 95 of 1946. The Embassy will report on this petition as soon as the Congressional committee assigned to its study makes a report.
Respectfully yours,
First Secretary of Embassy
- Not printed.↩