The Minister in Paraguay (Mooney) to the Acting Secretary of State

No. 397

Sir: Referring to the Department’s cable instruction of December 14, 6 p.m., in the matter of the port works concession and, incident thereto, the possible consummation of a loan long desired by the Paraguayan Government, I have the honor to report that I have had a full discussion of the subject with Dr. Ayala, the Paraguayan Minister for Foreign Affairs, and learned that it is a fact that an intimation had been conveyed to the Paraguayan Government that a loan might be granted in connection with a revival of the port works concession, which the Paraguayan Government now regards as expired by reason of laches of the concessionaire. The offer was made by a claimed representative of Superveille & Cia., the French banking house of Buenos Aires and Montevideo. While I have but little evidence to support the suspicion I believe the obscured source of the offer was the Engineering Construction and Finance Company, the original grantee of the concession. A circumstance lending color to the suspicion is that the active agent of the concessionaire, Henry L. Janes, once in the American diplomatic service, made his home for some time in Montevideo, is acquainted in banking circles there, and would doubtless try to vivify the grant through an intermediary, after having failed to accomplish that object by direct negotiation.

[Page 327]

Dr. Ayala said, with unreserved positiveness, that no serious consideration would be extended to this offer by the Paraguayan Government, but that final and unalterable conclusion had been reached by his Government to regard the port works concession as defunct; and that the present Government would neither revivify nor consider a substitute therefor, either alone or in connection with any other project. He said that the port would be improved incidental to a reclamation project at the earliest convenient time, but that the work would be done by the Paraguayan Government and that the port would then be operated for public revenue.

For this purpose, and more for the purpose of stabilizing the medium of Paraguay, as well as to retire two outstanding loans, a loan to this Government upon fair terms would now be viewed with favor. Estimates of the amount that would be necessary to accomplish these purposes take a range of from $10,000,000 to $20,000,000, though in the interest of conservatism the loan should be kept as near as possible to the first named figure.

The wide and frequent fluctuation in the value of Paraguayan money, the same not infrequently changing as high as 3% daily, and having advanced 100% in value during the last year with no logical reason therefor, wherefore the increased value is regarded as unstable and treated with suspicion, is most prejudicial to Paraguayan commerce and is giving growth to a crystalized sentiment in favor of some fixed and inflexible value for the local circulation. This can not be done without a sufficient gold reserve which is building up slowly but the business interests are disinclined to await its completion by accretions from revenue. Therefore the desirability of a public loan.

Heretofore on account of lack of governmental stability Paraguay has not been regarded as an attractive field for public investment, but conditions are now changed and the politics of Paraguay are but little if any more turbulent than in the other South American republics.

Minister Ayala further stated, both on his own behalf and as quoting President Franco, that it is highly desirable to create closer relations with the United States and, that, accordingly, a favorable loan proposition on the part of American financial institutions at this time would be given such an interpretation, if possible, as would result in a consummation of the loan. It is my personal belief that Paraguay is in such a receptive condition for a loan at this time that deserving investors should improve the opportunity.

I have [etc.]

[Daniel F. Mooney]