821.51/2347a: Telegram

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

66. White of the Foreign Bondholders Protective Council has informed Department that on July 13 Ambassador Miguel López informed him under instructions that the debt proposal submitted about June 15 was the best that Colombia could offer at this time. White informed López that he could not recommend to the Executive Committee of the Council that it recommend the proposed settlement to the bondholders.

The Ambassador again brought up the possibility of refunding the internal issues. White said that he was prepared to recommend to his Executive Committee a proposal for a 1-year temporary settlement with a 3 percent interest rate, the year to be used by the Colombians to refund its internal bonds at lower interest rates. At the end of the year further negotiations would be carried on for a definitive debt settlement for the external debt at higher interest rates that would take into account the savings to the Colombian Government because of the lower interest on the internal issues. White does not think the Colombian Government will be interested in this idea.

White also suggested for consideration the possibility of making increases in debt service contingent on increase in the Colombian budget.

Miguel López stated that he would cable his Government a résumé of their conversation and request new instructions.

White believes that Miguel López was seeing him for purpose of feeling out how low an interest rate would be acceptable.

For your strictly confidential information and not to be in any way communicated to the Colombian Government, White states that he is preparing a proposal that he will place before the Executive Committee next Tuesday. If the Executive Committee approves he will present it to the Colombian Ambassador the next time López gets in touch with him.