821.51/1101: Telegram

The Minister in Colombia (Caffery) to the Secretary of State

121. Department’s 63, October 2, 2 p.m. In order to answer properly Rublee’s question I must review happenings of the year:

At the time Olaya forced Congress approval Catatumbo contract (my despatch No. 2633 of May 23rd),43 oil law, issued oil decree, et cetera, et cetera, public believed (unwarrantedly of course) that as a result of Olaya’s many successful efforts on behalf of American interests American help would be forthcoming for the already unfavorable economic situation existing here. Later on Olaya attempted to secure help from the Gulf Oil Company; appealed to the United Fruit Company; offered business to International Telephone and Telegraph Company, et cetera, et cetera, with object of securing funds to avoid moratoria but was refused. Then came the situation created by the cancellation and reduction of credits by New York banks. Finally at the suggestion of the Government’s foreign bankers he proceeded recently to take certain drastic measures (some of which are now known to the Department). The reaction to these measures among the public in general has been that while they accept the necessary sacrifices they say they “do not desire to sacrifice themselves” in order to pay foreign debt services. The attitude of the public is exemplified by remark a colleague made to me that “the man in the street is saying that Olaya was deceived by the North Americans who did not keep the promises they made him at the time he was putting through the many laws and measures they wanted”. Moreover, it is not possible to persuade the public that no such promises were made; meanwhile Olaya asks for quid pro quo it is impossible to give him. He now asks this (and this would be accepted by public opinion); a loan of at least $7,500,000 (guaranteed by specified revenues) solely to take care of the debt services of the National Government departments and municipalities for 6 months. He asserts that the measures taken on advice of Government’s bankers will cause Government’s revenues even with new taxes to fall to such an extent that Government will be unable to bear the burden of its debts until normal conditions are restored. He insists on declaring that the present situation has been brought about by the cancellation and reduction of commercial credits plus the failure of American entities to give him the assistance he asked of them: He asserts that had “the little help” he asked for been given him by American concerns during the past few months, the present difficulties [Page 39]could have been easily avoided; he feels that something could have been done by us.

For the first time since I have been dealing with Olaya, he is not inclined to listen to reason: his private secretary tells me the President said to him that “his international policy has been a complete failure; he has been abandoned by the United States into the hands of his enemies; he has declared repeatedly there would be no moratorium and if now forced to a moratorium all the enemies of the United States will arise and taunt him: Thus far he has had the political situation in his hands: now he will probably lose it”.

  1. Not printed.