823.51/1253: Telegram
The Ambassador in Peru ( Steinhardt ) to the Secretary of State
[Received 9 p.m.]
81. Your telegram No. 55, November 21, 7 p.m. The Peruvian Government has offered 52140 pounds annually to be applied to payment of interest and amortization on the guano loan, the rate of interest to be 4%.
The difference in terms which Minister Roca proposes as between the British held guano loan, the American held tobacco loan, and the National loan which is both British and American held, rests upon three principal considerations as follows.
- (a)
- The interest rate of 7½ per cent on the guano loan as against 6% on the National loan.
- (b)
- The fact that the guano loan is secured by all revenues from the sale of guano which revenues have at all times exceeded the service contracted for, as against which the National loan is wholly unsecured and the tobacco loan is secured by revenues which have been inadequate to meet the service contracted for.
- (c)
- The vast difference in the amount of bonds outstanding, there being approximately 4 million dollars of guano bonds as against 91 million dollars of National and tobacco bonds.
In denying any intention or desire to discriminate, Roca points out that the British owned tranche of the National loan, amounting to nearly 10 million dollars, exceeds the guano loan and will receive no better treatment than the American tranche and not as favorable treatment as the tobacco loan which is wholly American owned. Roca argues that a total of 14 million dollars of British owned bonds will be receiving no better treatment than 80 million dollars of American owned bonds after the National loan pays 3 per cent and this notwithstanding Peru’s dependence on Britain to market its cotton.
Whatever conclusion the Council may ultimately arrive at, there certainly has been no conscious discrimination on Roca’s part who insists that he would be glad to pay 4 per cent on the bonds of American issue if the total outstanding were 4 million instead of 91 million dollars, even though the interest contracted for is less than on the guano loan.
Roca also points out that the percentage of amortization inevitably bears a direct relationship to the amount of bonds outstanding and that the sinking funds must be within the budgetary capacity and the foreign exchange obtainable.
Roca sustained serious intestinal hemorrhages 2 days ago and is in a precarious condition. By Presidential Decree the Ministry of Hacienda has been temporarily assumed by the Minister of Justice.