823.51/1199
Memorandum of Conversation, by the Under Secretary of State (Welles)
The Peruvian Ambassador44 called to see me this morning at my request. I told the Ambassador that it had been a matter of great satisfaction to me to note during the past two years the steadily increasing economic prosperity of Peru and the very definite general improvement in financial and commercial circles in his country. I said that a few days ago the Vice President of the Protective Council of Foreign Bondholders45 had stopped in to see me and had referred [Page 875] to the gesture made during the preceding year by the Peruvian Government to its American bondholders46 and had reminded me that the Peruvian Government under its constitution and laws would have to determine in its budget before the end of the coming month of March the amount to be set aside for service on its foreign-held debt. I said to the Ambassador that there was not much time now left before the Peruvian Government would have to determine what it was going to do with regard to its American creditors. I then went on to say to the Ambassador that owing to the recent fall in the price of coffee certain American republics which had reached agreements with their bondholders had been forced to suspend servicing the debts so held and that other republics which had been about to commence negotiations had been forced to postpone them. I said that in the case of the Government of Mexico he was familiar from press accounts with the difficulties with which American interests had recently been confronted; and I reminded him that in the case of Brazil, notwithstanding the efforts of Ambassador Aranha to commence the negotiations for a new agreement between Brazil and the American bondholders,47 no progress had yet been made. I said that I reminded the Ambassador of all of these facts because they were unfortunately beginning to have a very definite effect upon public opinion in this country. I said that a very large percentage of our citizens had invested in securities of the other American republics and had borne, I thought, with unusual patience in view of the individual circumstances of so many of them the long-continued default on the part of so many of the American governments. In the past two years, however, these American bondholders had seen conditions improved very materially in almost every American republic, and they were now at a loss to understand why in view of this improved situation the respective American governments did not take steps quickly to resume at least in part the servicing of these debts held here. I said that fortunately Peru had not been affected in the prejudicial manner in which the other republics I mentioned above had been affected and that, consequently, she was in the opinion of impartial observers perfectly able to undertake the negotiation of a satisfactory agreement with the American bondholders. I added that, if my understanding was correct, the servicing of her foreign debt amounted to only about 13 percent of her present revenues and that it would seem to me that in her own interests some approach should now be made to solve this problem. I said that in the interests of Peru herself such a step at this time, in view of the failure of so many other governments to meet their just obligations to our nationals, would create a very friendly [Page 876] and favorable atmosphere for Peru in this market and that conditions were such as to make it highly likely that a fair settlement from the standpoint of Peru could readily be found. Later on I reminded the Ambassador that Peru would undoubtedly want American investments in Peru for the sake of the development of the country and that it was undoubtedly of interest to the Peruvian Government to bear this fact in mind.
I then reminded the Ambassador that in my conversations with the present Foreign Minister, Dr. Concha, last summer, Dr. Concha had assured me that just as soon as he became Foreign Minister he would seek to find a satisfactory solution of all of the matters affecting American interests in Peru and that he had specifically mentioned the American-held portion of the Peruvian debt. I concluded by saying that it had been a matter of great satisfaction to the Department of State that the sugar legislation48 passed in the American Congress last summer had given fair and reasonable treatment to Peruvian sugar, a matter in which the Peruvian Government had been so deeply interested, and that while this had been done unilaterally and not as a result of any bargaining, nevertheless I felt that it was only fair to expect equally friendly and considerate treatment on the part of the Government of Peru in the interests of our nationals.
The Ambassador said that he was wholly in accord with my own point of view; that he felt that the step I had suggested should be taken, not only because of the ultimate interest of Peru, but because it was inherently sound and just. He said that he was perfectly confident that Dr. Concha, to whom he would at once report our conversation, would be entirely in accord with the desire I had expressed. He said, however, that he thought the difficulty would come from President Benavides, who was interested beyond everything else in the continuation of his public works program, and that it would be very difficult to persuade President Benavides that any portion of government revenues now being utilized for the construction of public works should be diverted to other purposes, no matter how legitimate these purposes might be. The Ambassador said, however, that Dr. Concha undoubtedly had great influence on the President of Peru and that he believed he would do his utmost to reach a satisfactory settlement of this question. The Ambassador said that he would advise me as soon as he received an answer to the communication he would now send his Government by air mail.
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