Memorandum of Conversation, by the Adviser on International Economic Affairs (Feis)

The Spanish Ambassador called upon Mr. Welles to discuss the possible financing of cotton sales to Spain. I was present.

The Ambassador related the course of his recent dealings with Mr. Jesse Jones.8 He said that at a previous meeting with Jones, it had been indicated to him that the Export-Import Bank would be willing to enter into the financing arrangements for 300,000 bales of cotton for Spain on the following terms; that the credit for 150,000 bales should be a two-year credit, that the credit for the other 150,000 bales should be on an amortized scale under which the Spanish Government would begin paying for each shipment three months after shipment. The Ambassador said that in his most recent talk with Mr. Jones he had come with his Government’s counter proposal, to wit, 180,000 bales on the two-year basis and 120,000 bales on the amortized basis.

He related that now Mr. Jones had brought to the front the question of the suits of the Spanish Government against the Treasury arising out of the purchases of Spanish silver,9 saying that the Treasury still was taking a firm position in the matter and asking the Ambassador whether the Spanish Government would be willing to drop these suits if this financing deal was consummated. The Ambassador had replied that this was a political matter which he felt could only [Page 833] properly be discussed with the State Department. The discussion seems to have come to a halt on this point—though the Ambassador said that Mr. Jones had put forward another possibility, to wit, that the discussion for the moment be limited to the possible financing of 50,000 bales of cotton on arrangements similar to those summarized above.

Mr. Welles said that he wished to repeat what he already said to the Ambassador, that it was the President’s decision that the question of the silver suits should not be brought forward in connection with this matter of cotton financing. He told the Ambassador that he would again discuss this with the President on the President’s return, and endeavor to get it finally clarified and would then get in touch with the Ambassador again. The Ambassador expressed satisfaction.

Mr. Welles then said that he wished to repeat those general reflections and ideas which he had already expressed to the Ambassador on the matter of the relationships between Spain and the United States. The Department was interested in this Spanish financing as a step towards the renewal and resumption of normal and satisfactory commercial and economic relationships between the two countries, and that if we undertook it it would be on the supposition that the Spanish Government shared the same wish and purpose, and that accordingly it would grant to American property in Spain and other American interests the same friendly and cooperative consideration which had been received in the past. The Ambassador said that he understood this and had presented this attitude to his Government.

I interjected myself into the conversation for the purpose of underlining a little bit further the idea expressed by the Under Secretary. I said that perhaps what Mr. Welles had in mind were preoccupations similar to those which I knew were in the minds of various people in the Department, including the Secretary, to wit, that the refusal of the Spanish Government to admit Colonel Behn into Spain so that he could deal with his Company’s affairs was creating apprehension lest it signify an intention on the part of the Spanish Government to create difficulties for that Company. I stated that the Ambassador would realize that if this Government undertook this financing and then shortly afterwards the Spanish Government used its power or influence adversely to affect American property interests in Spain, or in Latin America, our action in financing this cotton sale would obviously be subject to criticism. The Ambassador stated he understood our feeling in the matter and had advised his Government of it. He expressed a conjecture as to whether the difficulties put in the way of Mr. Behn’s entry might be of a personal character rather than indicative of any policy in regard to the country. He referred to certain stories—the truth or significance of which he said he had no way of [Page 834] knowing—to the effect that Behn and other officials of the Telephone Company had been on congenial terms with officers of the Republican Spanish Government and that the Telephone Company had been of use in bombardment activity. Mr. Welles clearly expressed the view that the Telephone Company had handled itself completely properly, dealing as any American Company would have had to deal in the circumstances with both sides, and in an impartial fashion.

The conversation ended with an understanding that Mr. Welles would communicate again with the Ambassador.

  1. Chairman of the Reconstruction Finance Corporation and member of the board of trustees of the Export-Import Bank.
  2. Suits instituted by the Spanish Nationalist Government in June 1938 to recover some 15,000,000 ounces of silver acquired in 1938 by the United States Treasury from the Spanish Republican Government. The suits were dismissed by the New York Federal Court July 14, 1939.