821.51/1748: Telegram

The Chargé in Colombia ( Dawson ) to the Acting Secretary of State

96. Article 2 of debt bill reads in translation:

“Obligations originally contracted in foreign currencies shall be paid, principal as well as interest, in Colombian currency at the rate quoted for the respective currencies on the date the obligation was contracted unless such obligations arise from import transactions or from sales contracts covering products for export.

[Page 263]

Obligations contracted in Colombian gold coin shall be paid at par in Colombian gold notes or in notes of the Bank of the Republic. Those contracted in any other kind of gold coin shall be paid in the same bills according to the intrinsic par of such moneys in relation to Colombian gold coin.

The provisions of the foregoing paragraph shall be effective for 5 years unless the exchange of banknotes of the Bank of the Republic for gold shall have been reestablished before the expiration of that period.”

First paragraph affects all American interests having dollar debts due to them except exporters. United Fruit Company hit both ways as debts owed to it (dollar advances to banana planters and the Colombian Government) would be repaid at the rates current when the debts were contracted whereas its dollar obligations in Colombia (contracts to buy bananas) would have to be met in dollars or peso[s] equivalent at existing rate of exchange. National City Bank considers that signature of the bill by the President would be contrary to the spirit of clause 20 of the contract embodied in decree 171 of 1933 (Legation’s despatch No. 514051) whereby the Government agreed in effect to require no further concessions to debtors by banks.

Both concerns are trying to get President to veto bill and have requested Legation’s assistance.

After my telegram No. 91 of November 6 [16], 4 p.m. I dropped efforts to see Olaya but have discussed bill informally several times with the Minister of Foreign Affairs. Latter has expressed the belief article 2 is unconstitutional and other provisions unjust but he has little influence on the President. Does the Department wish me to take further steps? Bill may be signed at any moment.

  1. Not printed.