821.51/2342: Telegram

The Ambassador in Colombia (Braden) to the Secretary of State

47. Department’s No. 56, July 1, 3 p.m. In conversations Saturday and 3 hours yesterday with Minister of Finance I strictly adhered to instructions and net of discussion was: Minister of Finance still anxious for speedy settlement believing Congress within a month from its opening will become so involved in political bickering as to make approval extremely difficult. He inquired to which of consideration[s] raised by the Council the Department gave [apparent omission]. I told him I do not know and I only pointed to those which appealed to me personally. The most encouraging feature of the conversation was that he several times expressed desire to know what rate would reestablish Colombia’s credit so that he might come as closely as possible to it. However, in contradiction to this, when White’s reference to Uruguayan settlement17 was discussed he said Colombia could not come anywhere near 4½ per cent. Also Colombia having made best possible offer under present fiscal conditions could not with dignity alter same; to do so would be politically embarrassing.

On July 5 he sent air mail letter to Colombian Ambassador at Washington answering various points raised by White and instructing that offer be renewed.

He asked me what would be effect of this. I told him probably they would get nowhere; in fact I was disappointed to see both sides involved in a protracted discussion of factors which had been thoroughly reviewed, the essence of the problem was for them rapidly to get together across the table on a rate which would reestablish Colombia’s credit and make possible Council’s approval. I suggested in view of his desire for rapid settlement perhaps best procedure might be for [Page 484] him to abandon trading tactics and forthwith to make maximum offer Colombia could contemplate. He replied this was inexpedient course politically and said only procedure was for White to dress up present offer leaving essentials the same as now. The only concrete proposal he could think of in this connection was for payments reached in fifth year to be continued thereafter until extinguishment of debt. He would not consider making present apply for temporary settlement. When I pressed for other suggestions of [to?] make “dressing up” worthwhile he replied it was up to White to use imagination. I said that imagination would have to come from this end.

He was evidently concerned by my insistence offer would have to be improved and that action was up to him and not to expect counter offer from White. He promised matter would have his preferential attention, it was most important subject before him and Government was extremely anxious to have it settled.

To meet charge of discrimination Colombian Ambassador had suggested giving option foreign bondholders to convert into internal issues. The Minister agreed with me that this did not merit much consideration.

In reply to my question he said Ambassador at Washington was authorized to declare that English and American bondholders would receive identical treatment.

Minister again brought up gold bullion loan and when I explained situation to him he inquired whether it would be possible once debt was adjusted and Colombia returned to free exchange (always controlling compensation countries through import restrictions) for Bank of Republic to obtain loan from Federal Reserve Bank which possibly would be little used but mere existence thereof would insure stability of exchange. He also again emphasized urgent necessity of acting on cotton goods in connection with trade agreement. I told him I would reply on these points when instructed by the Department. He promised to keep me posted of any communication from Ambassador at Washington and I said I would also keep in touch with him.

To conclude, Minister of Finance is torn between desire for settlement with Council, fear of political repercussions here. He is still trading but can be induced to improve offer somewhat but I fear not enough to satisfy White.

  1. See Foreign Bondholders Protective Council, Inc., Annual Report 1989, p. 62.