Mr. Howard S. Le Roy, Office of the Solicitor, Department of State, to the Solicitor (Woolsey)7

Dear Mr. Woolsey: The following is a summary of the recent developments in the Asuncion port concession granted to the Construction, Engineering and Finance Corporation (MacArthur Brothers of New York), submitted with a view to formulating the position of the Department in this case.

On June 7, 1919, at a conference between you and Minister Gondra of Paraguay, it appeared that the Government of Paraguay felt some disappointment over the progress made in the port improvement. This seemed to be due in part to a feeling that the concessionaire did not have the necessary financial backing to push the project to completion. This feeling seems to have been confirmed by the knowledge that the concessionaire had effected a contract with the Superveille and Company, bankers of Buenos Aires and Montevideo for the transfer of the concession, conditioned on its reinstatement by the Paraguayan Government.

On June 19 Mr. Janes of the Construction, Engineering and Finance Corporation, wrote a personal letter to you explaining in some detail the circumstances and reasons for entering into the contract with Superveille and Company, and enclosing a copy of the agreement. The agreement provided, among other things, that on the transfer of the concession the bankers would organize in such jurisdiction and with such capitalization as they should determine a corporation for the construction and operation of the port; and that the concessionaire (Construction, Engineering and Finance Corporation) [Page 334] retain a sufficient amount of the securities to exercise a 25% control of the proposed corporation.

The above provisions at once involved a consideration of the propriety of extending the aid of this Department to an enterprise that might shortly lose its color as a purely American venture by transfer of control to a new corporation that might or might not be organized within the jurisdiction of the United States and with the stock control in the hands of American citizens.

Minister Mooney, under date of June 13, sent his confidential despatch No. 473 which reached this office on August 26, expressing the opinion that the circumstances had so changed since the death of President Franco, that there was a chance that the concession might be revived, with certain modifications, providing that the two American meat packing concerns already operating within the port zone should be immune from port charges.

A copy of an unnumbered despatch from Minister Mooney, under date of July 10, states that “President Franco having died in the meantime, his successor and other officials of the Paraguayan Government seem disposed to look at the matter in a more favorable light and, at the time of this report, there is some prospect of a reconsideration of the decree revoking the concession”.

On July 17 Mr. Percival Farquhar, connected with the International Products Company, one of the meat packing concerns located within the port zone, telephoned to Mr. Lay8 and copied to him a letter addressed to Mr. Stabler of this Department, incorporating a telegram received from the General Manager of the International Products Company at Asuncion, reading as follows:

“Dr. Eusebio Ayala informed me Port concession probably will be renewed. President Montero in favor of renewal. Congressional action not required. Unfortunately State Department passed those three notes to Paraguay Minister created impression here that failure recognize concession may have bad effect foreign investment.”

Under date of July 24, Minister Mooney telegraphed the Department that—

“The President of Paraguay has expressed himself as personally favoring reconsideration of the decree of his predecessor declaring a forfeiture of the port concession in Asuncion but public opposition thereto is so general and so outspoken that he will not take affirmative action thereon at this time.”

On July 28 the Department telegraphed the Legation at Asuncion as follows:

“Important. Referring to port concession, packing company is protesting against action in support of renewal of concession. Please [Page 335] report action taken by you under Departmental instructions, result thereof, and present status.”

On July 28 Consul Balch at Asuncion telegraphed the Department recommending that the Legation be instructed to withdraw its support for the reinstatement of the concession because of an alleged conflict with the packing house interests.

At a conference on August 5 between Mr. Janes and Mr. Carpenter, of this office, Mr. Janes was advised of the substance of the above cablegrams and was requested to supply, as soon as possible, information in satisfactory explanation of the Superveille Contract. Mr. Janes promised at an early date to secure a satisfactory modification of the Superveille agreement as to the incorporation and control of the new port corporation. He also suggested confidentially that his corporation would be willing to enter into a satisfactory arrangement with the packing houses operating within the port zone.

On August 14 Mr. Janes wrote Mr. Carpenter, requesting a slight extension of time in order to complete satisfactory arrangements for the organization of the port corporation. He suggested that there was no real conflict with the packing house interests and that on the reinstatement of the concession, an arrangement could be reached with the packing houses which would be satisfactory to all.

At this time the Trade Adviser’s Office began to take an active interest in this case, urging that the standing instructions to the Legation at Asuncion for cooperation in securing the reinstatement of the concession should be cancelled on the theory that the reinstatement of the concession was bad, per se, for the packing interests and would, therefore, ultimately be detrimental to the best interests of Paraguay, and that such a result might be indirectly achieved by allowing the instructions to stand. The view of the Trade Adviser’s office seemed to be based entirely on one side of the case. A conference was held in the latter part of August, attended by Mr. Manning and Mr. Gittings, of the Trade Adviser’s office, Mr. Carpenter, representing this office, and Mr. Janes, representing the concessionaire. The conclusion reached, after discussion of the general situation, was that since the instructions to the Legation were merely “to cooperate”, the contingency feared by the Trade Adviser’s Office might be forestalled by instructing the representative of the Construction, Engineering and Finance Corporation at Asuncion to remain inactive for the time being.

It was further agreed that, in view of the alleged conflict with American interests and a request of the International Products Company that they might be heard, an invitation might be extended [Page 336] to both interests to present their cases to the Department at a joint conference.

On August 28 Mr. Janes wrote saying that their Paraguayan representative had been instructed to ask for no further assistance from the Legation.

On September 10 a telegram was received from the American Minister, Mr. Mooney, reading as follows:

“The representative of the Port Company claims the Paraguayan Minister for Foreign Affairs is allied with adverse interests and is accordingly hostile to the renewal of the Port concession. He has therefore made an insistent request that I make an emphatic personal statement to the President of the Republic of the serious and earnest intention of the U.S. government to bring about a renewal of the concession. I do not understand that my previous instructions are sufficiently broad to warrant such action as it would savor of real discourtesy to the Paraguayan Minister for Foreign Affairs. Port representative also states that the Department will want to extend consideration to the fact that the delay in renewing and extending the port concession has caused the Superveille Bank to threaten to withdraw its offer to aid in financing the proposition unless extension is granted at an early date. Please instruct specifically.”

On September 11 Mr. Gittings, of the Trade Adviser’s Office, after again urging the cancellation, telegraphed to the Legation as follows:

“Department is studying question of the rights of the port company to its support and expects to reach a decision shortly. Until then you are instructed to remain quiescent.”

On September 13 a letter was sent to Mr. Farquhar inviting him to participate in the joint conference.

On September 24 Mr. Janes telephoned from New York that he had been in conference with Mr. Farquhar and that an agreement had been practically reached and was about to be reduced to writing. (This seems to have been an overenthusiastic statement.)

On September 26 Mr. A. F. MacArthur wrote advising the Department that the new port corporation would be organized in some American jurisdiction and that the control of the stock would be in American hands. On October 1, 1919, Mr. Janes wrote the Department enclosing a memorandum on the port charges under the concession. This was in explanation of the contention made by the packing house interests that the port scheme would be monopolistic and detrimental to Paraguayan commercial interests, and that the charges were excessive.

On October 3 Mr. Janes wrote concerning an interview had with Mr. Farquhar in New York and enclosed a copy of a letter addressed to the packing people in which the port company made certain definite [Page 337] statements of what it was willing to agree to. Up to this time the Department is not informed that the packing people have accepted the offer.

On October 10 Mr. A. F. MacArthur wrote the Department giving the terms of the additional clause agreed to in the Superveille contract giving assurances that the new port corporation would be organized in some one of the United States and that a majority of the stock would be issued to citizens of the United States.

On September 24 Mr. Carpenter wrote Mr. Farquhar acknowledging his letter of September 15 and promising him an opportunity of a hearing before the Department before further action should be taken in the case.

The questions presented in the present aspect of the case are:

Is the modification of the Superveille contract sufficient?
If so, is the Department prepared to support the port concession in spite of the protest of the packers, in view of the offer made to them by the port company?

[Howard S. Le Roy]
  1. The correspondence referred to in this memorandum is not printed elsewhere.
  2. Julius G. Lay, Acting Foreign Trade Adviser of the Department of State.