Memorandum by the Chief of the Division of Latin American Affairs (Duggan)

Mr. Fred Lavis, of the Bondholders Protective Committee for the Republic of El Salvador, called on Mr. Welles.42 Mr. Duggan was present.

Mr. Lavis stated that the negotiations with the Salvadoran Government have reached a point where insofar as interest is concerned [Page 582] the two parties are not far apart. He said that the Salvadoran Government offers 4 percent interest on the total issue, or $680,000 per annum, whereas his Committee desires a payment of $710,000. Instead of a flat interest rate of 4 percent on all issues, his Committee has in mind a scheme that would result in the following approximate interest rates: 6 percent on the A loan; 4 percent on the B loan and 3¾ percent on the C loan. With regard to the sinking fund, Mr. Lavis said that the Government wanted to apply only about $50,000 a year, whereas his Committee desired around $200,000 to $250,000. He said that it had been pointed out to the Salvadoran authorities that the larger amount would be in their interest, but if there was continued opposition by the Government to this amount the Committee would be prepared to considerably reduce its proposal. Mr. Lavis said that he wished to present this information to the Department with the thought in mind that possibly the Legation at San Salvador might be instructed informally to state to the Salvadoran authorities upon appropriate occasion that the American Government hoped that the small difference between the two parties to the negotiations could be satisfactorily adjusted.

Mr. Welles replied that, pending the outcome of discussions with the Salvadoran Minister, he would prefer not to state what action, if any, the Department would take.

Mr. Lavis then stated that the hearings before the S. E. C.43 had created some doubt in the minds of the Salvadoran Government as to the standing of his Committee and that it would be helpful if the Department could see its way to inform the Government of the nature of the investigation of the S. E. C. and of its findings insofar as his Committee was concerned.

Mr. Welles replied that, as Mr. Lavis knew, the Department had no preference between committees and therefore he did not think it was appropriate for the Department to indicate to the Salvadoran Government its opinion as to the Committee. He stated that if the S. E. C. wished to inform the Department its opinion as to the standing of the Committee he would be glad to transmit this statement to the Salvadoran authorities.

L[aurence] D[uggan]
  1. Sumner Welles, Assistant Secretary of State.
  2. Securities and Exchange Commission.