Memorandum of Conversation, by the Chief of the Division of the American Republics (Duggan)

Mr. White, of the Foreign Bondholders Protective Council, Inc., telephoned me from New York to say that the Colombian Ambassador had dropped in to see him yesterday afternoon. Mr. White has prepared a memorandum of the conversation29 and is sending a copy of this to the Department.

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In brief, the Ambassador informed Mr. Welles [White?] that his Government had turned down the suggestion of a temporary offer, preferring to arrive at a permanent offer at this time.

In response to the Ambassador’s inquiry as to whether Mr. White had anything to suggest, Mr. White told him that as a result of his study of the extensive documentary material left with him at the first meeting with the Ambassador, he had framed a proposal. Under the proposal of the Colombian Government the total service in the fifth year would be $2,064,000 or 49% of the contractual service. Although the Council could not recommend acceptance of this suggestion to the bondholders, Mr. White thought that the Executive Committee would be prepared to recommend a proposal for service of $2,715,000 or $651,000 more than Colombia would pay in the fifth year under its plan. Mr. White pointed out that the contractual service comes to $4,200,000 a year, whereas under his proposal Colombia would only have to pay $2,715,000 a year, or a saving to the Colombian Government of approximately $1,500,000.

Mr. White reminded the Ambassador that his Government had maintained that owing to the drop in the value of the peso it now took more pesos to acquire the dollar exchange necessary to make service. Mr. White stated that the depreciation in the peso had been 42% and that under his proposal the contractual service would come to 36%, so that the bondholders would be bearing six-sevenths of the hardship to Colombia as a result of the depreciation in the peso.

The Ambassador further argued that the proposal was not practicable from a political point of view. Later in the conversation he agreed to submit it for the consideration of his Government. Mr. White expressed the hope that it would be possible to instruct Mr. Braden to support this proposal before the Colombian Government. I told him that to do so would not be in keeping with our policy, and that there were special reasons why it would not in any case be possible to do it at this time. Mr. White argued that it would be preferable for this Government to make known its position, since that might dispose the Colombian Government to give his suggestion greater consideration. He was so insistent in his point of view that I finally told him I would place his views before Mr. Welles, but that I was absolutely confident that this Government would not wish to instruct the Ambassador as he had suggested at this time.

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