821.51/2365
Memorandum of Conversation, by the Chief of the Division of the American Republics (Duggan)
Mr. White stated that he had just completed a two and one-half hour conversation with the Colombian Ambassador and Mr. Laylin. The Ambassador informed Mr. White that he had now received a cablegram from his Government to the effect that the Government would not consider the proposal advanced by the Council; that it [Page 499] did not wish to bargain; that it had hoped the Council would take a helpful attitude; and that it was still very desirous of reaching a settlement.
Mr. White inquired whether this meant that the Colombian Government stood firm on its original offer. The Ambassador stated that it did not; that the Colombian Government was ready to go further toward meeting the desires of the Council.
The Ambassador stated that the Minister of Finance proposed to put in the budget which will go forward on Monday a request for $1,624,000 for external debt service. This is the amount of service proposed for the first year by the Colombian Government in its project. The Ambassador said, however, that there would be no breakdown of this amount in the budget as between interest and amortization.
Upon being informed by the Ambassador that he had no further suggestions to make at this time, Mr. White stated that since the Colombian Government had stated that it did not propose to bargain that he would place all of his cards on the table. He said that the Executive Committee when it met at its last session had agreed to recommend to the bondholders a permanent settlement based upon a 4½% interest rate. He therefore suggested the following formula: for the first year, an interest rate of 3½%, no amortization, which would work out at the sum of $1,624,000 which the Minister of Finance proposed to place in the budget. This interest rate would be increased until it finally arrived at 4½% which would require $2,036,000 which was $28,000 less than the $2,064,000 which the Colombian Government proposed for the five years under its project. 1% amortization would add to what Colombia had proposed to pay in the fifth year by $424,000.
I asked Mr. White what the reaction of the Ambassador was to this proposal which did not provide for any amortization in the first year and possibly none for several years. Mr. White said that the Ambassador had made no comment.
As the Ambassador and Mr. Laylin left together, Mr. Laylin stated that they would wait to hear from Mr. White on Tuesday after he had presented his proposal to the Executive Committee. Mr. White stated that he informed Mr. Laylin rather sharply that there was no need for the Ambassador to withhold presenting the idea to his Government since the Executive Committee had already decided to recommend to the bondholders a proposal for permanent settlement based upon the 4½% interest rate. This would be 75% of the contractual service and in line with settlements made with Poland, the City of Warsaw, the Province of Cilicia, Uruguay and China. Of course the Council will present to the bondholders whatever proposal Colombia may make but would not recommend the proposition first advanced by [Page 500] the Government nor any proposition that did not provide for an ultimate interest rate of 4½%.
Mr. White concluded by stating that he felt the Council was going a long ways to meet the Colombian Government and that if the Department could do anything to secure a favorable attitude by the Colombian Government to the Council’s last proposal, the time had come.