Foreign Relations of the United States Diplomatic Papers, 1938, The American Republics, Volume V

823.51/1204

The Peruvian Ambassador ( Freyre ) to the Under Secretary of State ( Welles )

Washington , 25 February, 1938.

Dear Mr. Welles: In reply to a letter I wrote to Dr. Concha, on January 24th 1938, transmitting your remarks⁴⁹ with regard to the service of the Peruvian loans placed in the United States, he requests me to define as follows the position, views and purposes the Peruvian Government hold on the subject.

1. In order to appropriate S/. 4,000,000 for the service of the loans, the Peruvian Government had to overcome strong opposition. At a time when public works and social reforms required the expenditure of large sums at home, resumption of the debt service seemed unwise. Moreover, these loans had been looked upon with disfavour ever since the circumstances surrounding their inception were disclosed; nor did the manner in which their proceeds were spent render them more acceptable. The Peruvian Government’s action in the case should therefore not be judged solely in the light of the amounts appropriated, but due consideration should be given as well to the difficulties they had to face in going counter to a widespread feeling. The Peruvian Government proposed above all formally to acknowledge the validity of their contractual engagements, an issue they believed to be of paramount importance. As to how far they could go in meeting their creditors’ demands, they were well aware that little ground could be covered for the moment, but they trusted the creditors’ best judgement for the acceptance of a small offer as an earnest of the Government’s good faith and intentions.

2. National revenue has no doubt increased, but the needs of the country have likewise grown. In Peru as elsewhere the Government have been faced by social and economic evils that had to be corrected. The Peruvian Government consequently adopted the policy of undertaking public works on a large scale, so as to provide the labouring classes with adequate means of livelihood and to strengthen the country’s economic structure. Highways were built to connect distant parts of the land; irrigation projects were carried out; public schools erected; social security laws enacted. These varied Government efforts required an unusual outlay, forcing the Government to husband their resources. But if the cost seemed high, the results promised to be equally beneficial, for, with improvement of production and distribution, and proper care being taken of the people’s needs, the nation’s welfare and wealth would be promoted. Thus, with better revenues in view and law and order assured, the Government could look forward to the day when larger sums might be assigned to refund their debts.

3. The Peruvian Government’s firm intention gradually to liquidate their indebtedness is further evidenced by the appropriation they have made lately of S/.2,000,000 to pay off what was due to the Air Craft Corporation.

4. The budget for the present year has been in force since January 1st 1938, and cannot be altered until after December, 1938.

5. Failure on the part of the Peruvian Government to offer more liberal terms to their American creditors should not be interpreted as an unfriendly act. By all means at their disposal the Peruvian Government have endeavoured on the contrary to prove their friendliness. When they proposed the Hon. Cordell Hull for the Nobel Peace Prize, they wished to honour the statesman, but also to respond in some degree to the neighbourly attitude of his Government. The services of an American Naval Mission⁵⁰ were sought mainly, no doubt, for technical reasons; in so doing however the Peruvian Government were prompted as well by the knowledge that a Mission of the kind could not fail to stimulate a good understanding between our peoples. Nor did the Peruvian Government express their willingness to explore the possibilities of a trade agreement with the United States only for the purpose of obtaining material advantages; once more they kept in mind the need of bringing both countries closer together by forging new links. If in the matter of foreign loans the Peruvian Government may seem inadequately to have met their creditors’ demands, one should recall that the Government bear a heavy responsibility and have imperative duties to perform toward their own people. Much would be lost and little gained were the progress of the country to be stunted at the present time and order possibly perturbed, merely because the Government had been forced to curtail their expenditures at home for the sake of improving the service of their loans abroad.

With cordial personal regards [etc.]

M. de Freyre y S.

49. See Mr. Welles’ memorandum of January 24, supra.
50. See pp. 888 ff.