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

No. 234

Sir: I have the honor to refer to my despatch No. 227 of September 521 concerning the present status of Colombian-German trade relations and to my despatch No. 228 of September 721 reporting that I had taken occasion to remind Dr. Olaya Herrera of a previous conversation with him touching the “coffee mark” situation and that at his suggestion the Foreign Office would shortly arrange for me to discuss the matter with the Exchange Control Board.

By appointment made through the Foreign Office, I had this morning an interview with Sr. Alberto Bayón, Chief of the Control Office, who is the Official directly in charge of matters pertaining to the operation of the exchange control system.

In the course of our conversation, I informed Sr. Bayón of the difficulties resulting for our export trade from the artificial advantages enjoyed by German competitors, of the natural resentment felt by American merchants, of our Government’s policy of liberal trade and its attitude towards special exchange agreements and restrictive exchange control systems, and of the potentially injurious effects of such practices. As in my conversations with Dr. Olaya Herrera, I was guided by the Department’s telegram No. 46 of July 6, 4 p.m., in discussing the situation and setting forth the viewpoint of our Government. I informed Sr. Bayón that I was not making diplomatic representations but merely desired to present in an informal and friendly manner the American point of view to the appropriate Colombian authorities.

Sr. Bayón stated that he was very glad to be informed of our position and that he would always be ready to discuss these matters with the Legation. He said that, while the existing special arrangement with Germany had benefited Colombia in so far as it had led to a considerable increase in coffee exports to that country, Colombia had no interest in the maintenance of low rates for the “coffee mark.” He pointed out that, on the contrary, coffee exporters would be benefited by an increase in the exchange value of the “coffee mark,” and that, as far as the import trade was concerned, the Colombian authorities had no wish to stimulate imports through an artificially low medium of exchange, the less so since German products are handled very largely by German firms with little benefit to Colombian economy.

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Sr. Bayón attributed the low exchange value of the “coffee mark” to the circumstance that up until recently operations in “coffee marks” were controlled by Germany. He stated that, prior to the Exchange Board’s ruling of June 25, 1935, centralizing operations in the Bank of the Republic in Colombia and in the Bank’s correspondent, the Dresdner Bank, in Germany, neither the Exchange Control Board nor the Bank of the Republic was in a position to exercise any effective control. He confirmed reports, already noted in previous despatches to the Department, that as a result of German opposition to this ruling trade relations between Colombia and Germany are virtually suspended. The German exchange authorities have, he said, refused to make available more than nominal credits to the Bank of the Republic, and, since the Exchange Control Board refuses to permit operations save through that Bank, practically no new shipments of coffee to Germany are being authorized. Speaking off-hand and without consulting his figures, Sr. Bayón stated that, if he recalled correctly, Germany had limited coffee credits to be opened in the Bank of the Republic to the ridiculously low figure of 150,000 marks per month, offering at the same time to increase this limit to 500,000 marks provided that Colombia would accept an arrangement under which credits totalling 3,000,000 marks would be allotted to other banks.

Sr. Bayón intimated that the Exchange Control Board is determined to exert an effective control over operations and he expressed the opinion that as a result of this control the “coffee mark” will be maintained at a rate which will put an end to the artificial advantages now enjoyed by German exporters and which, he repeated, are not to the interest of Colombia. In this connection, Sr. Bayón was careful to state that the rate would not necessarily be the same as that of the reichsmark and that it might be somewhat lower. He said that this was a matter which he would always be ready to discuss with me and concerning which he would, when the time came, be willing to consider any suggestions which I might wish to make.

Activities of German Commercial Attaché

Sr. Bayón did not in the course of our conversation refer specifically to the German Commercial Attaché, Mr. Schmitt, and his associate, Mr. Borne, whose arrival and activities have been reported in previous despatches.

From reports that reach me from various sources, I infer that the German representatives have thus far met with little or no success. A reliable informant, who has met Mr. Schmitt and has contacts in German commercial circles, tells me that the Commercial Attaché is aggressive and tactless and has made a very poor impression.

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In conclusion, I may note that Mr. Stanley Foster, in charge of the maritime agencies of the Grace organization in Colombia, who has been spending a few days in Bogotá, told me this afternoon that for various reasons sentiment in business circles has veered perceptibly against Germany, that the “coffee mark” situation is meeting with growing disfavor, and that the outlook for American trade is distinctly better in so far as German competition is concerned.22

Respectfully yours,

William Dawson
  1. Not printed.
  2. Not printed.
  3. In despatch No. 363, November 7, 1935, the Minister in Colombia reported that an agreement adjusting trade relations was signed on November 5 by the German Chargé and the Colombian Exchange Control Office (621.6231/9).