821.51/2400
The Ambassador in Colombia (Braden) to
the Secretary of State
No. 381
Bogotá, November 2,
1939.
[Received November 9.]
Sir: I have the honor to report that Dr.
Esteban Jaramillo has been appointed Colombian representative on the
Financial and Economic Advisory Committee scheduled to convene in
Washington on the fifteenth instant. Also, he has been appointed
Economic adviser to the Colombian Embassy in Washington. A biographical
sketch of Dr. Jaramillo was given in my Despatch No. 309.52 Dr. Jaramillo
should reach New York by the Grace liner Santa
Lucia on or about November 13, and I request that appropriate
facilities and courtesies be given him on his arrival.
Enclosed is a résumé of conversation I had with Dr. Jaramillo yesterday.
It will be observed therefrom that, with the approval of President
Santos, promptly after his arrival in Washington, he will endeavor to
reach a settlement of Colombia’s foreign debt in the United States on
the basis that interest payments shall be resumed at 3 per cent and
thereafter increased by stages to 4 per cent. He will then wish to
obtain financing from the Export-Import Bank or other sources in the
amount of $10,500,000. Subsequently additional financial assistance will
be required up to $25,000,000.
I emphasized to Dr. Jaramillo the benefits Colombia might possibly gain
by reason of a rapid debt settlement. Likewise I expressed my optimism
that, if a debt settlement is promptly concluded, he will find not only
United States Government authorities but, perhaps, private bankers
anxious, if possible, to assist Colombia financially.
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It is generally felt here that so great is Dr. Jaramillo’s prestige in
economic and financial matters any agreement he makes will be approved
in Colombia.
Dr. Jaramillo also is apparently ready, as soon as the public debt has
been accommodated, to arrange a refunding of the National City-First of
Boston group loan. In this connection, it occurs to me that Mr. Frank
Smith, National City Bank’s General Supervisor for Colombia, by reason
of his knowledge of Colombian conditions, might be useful as a
consultant, from time to time, during these conversations. If the
Department desired his presence, I am sure his principals would arrange
for him to go to Washington.
Since the announcement of Dr. Jaramillo’s appointment, there have been
several commendatory editorials and other comment in the local press,
most of which accept as a fait accompli a
forthcoming debt settlement and the extension of further loans to
Colombia.
An interview in Washington with former Ambassador Lopez and his brother,
the ex-president, was prominently displayed in all the Bogota
newspapers. These articles feature the Ambassador’s censure of the
Foreign Bondholders Protective Council and express the hope that
organization will be eliminated from future negotiations, which instead
will be advanced by United States Government authorities (sic). A typical article from La
Razón of October 21 [31], 1939, is
enclosed.53
Mr. Smith of the National City Bank confidentially informed Mr. Wright of
this Embassy that Dr. Jaramillo was annoyed by the stories of the
Schroeder Banking Corporation speculating in Colombian bonds. Dr.
Jaramillo is reported to have added that neither Schroeder nor anyone
else could intervene, for their own profit, in the forthcoming
negotiations. Mr. Smith believed, therefore, that the aforementioned
firm would be dropped as financial advisers to the Colombian
Embassy.
Respectfully yours,
[Enclosure]
Memorandum of Conversation, by the Ambassador in
Colombia (Braden)
[Bogotá,] November 2, 1939.
Yesterday, Dr. Jaramillo informed me he expected to reach Washington
on November 14. He will immediately inform Ambassador Turbay on
recent discussions within the Colombian Government, relating to the
settlement of its foreign debt and other financial or economic
matters. He is confident his attendance at the Financial and
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Economic Advisory
Committee meetings will not hinder his initiating active
discussions, looking to the settlement of the Colombian debt in the
United States and in obtaining financial assistance from such units
of our Government as the Export-Import Bank.
Dr. Jaramillo said he had talked at length with President Santos and
other members of the administration and was glad to inform me
Colombia would not stand on the offer made last May to the Council
for Foreign Bondholders, Inc. but, pursuant to informal discussions
between Ambassador López Pumarejo and the State Department, will
make a proposal to holders of Colombian bonds to resume service on a
3% basis, thereafter, increasing the interest rate by stages up to
4%. Although there will be suggested some minor changes from the
plan discussed in the State Department, Dr. Jaramillo had not yet
been informed by the Minister of Finance what these changes would be
but, in any case, they will not amount to more than $3,000,000 over
the whole period of the liquidation of the loan. I remarked that I
understood the Washington conversations had contemplated a maximum
of 4½%, but he felt the limit should be 4%.
In his opinion there will be a long war in Europe, coffee prices may
decline and Colombia, therefore, will have to face many economic
problems. Its immediate necessity is to reestablish confidence
amongst its own and foreign capitalists, in fact there had already
been some tendency by Colombian moneyed interests to withdraw from
all activities but they would again come into the market as soon as
the financial stability of the Government and the banks is
assured.
Dr. Jaramillo will seek an immediate loan, or at least a commitment,
of $10,500,000, of which approximately $4,500,000 will be used to
re-equip the State railways with rolling stock and other materials
from the United States. One of the principal requirements is the
financing of the Agricultural Mortgage Bank (see my Despatch No. 117
of May 15, 1939). Other items are the purchase of two dredges for
the Magdalena river at a cost of about $500,000. each and
approximately $1,500,000. for revenue cutters, in accordance with
paragraph e. of my October 23 Confidential
Memorandum to Under Secretary.54
Subsequent needs of his Government will amount to an additional
$25,000,000., a large portion of which will be dedicated to
essential road construction and public works.
I told Dr. Jaramillo I was hopeful the Export-Import Bank, if
Congress increased its loaning power, would assist in financing
purchases in the United States but the funds required for the
Agricultural Mortgage Bank presented a more difficult problem. He
replied that in Panama Dr. Feis had indicated that, since an
adequate financing
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of this
Institution would enhance Colombian purchasing power, thus
indirectly aiding the buying of agricultural machinery and
implements from the United States, something might be done in
connection therewith. Dr. Jaramillo asked for my advice. I said,
speaking without full knowledge of present conditions in Washington,
I, nevertheless, hoped something could be done, as for instance, it
occurred to me if a gold stabilization loan were made to the Bank of
the Republic that Institution’s resources would be so reinforced as,
perhaps, to enable it to make the loan to the Agricultural Mortgage
Bank. Another possibility, I said, was that Colombian credit would
so improve with a settlement of the foreign debt that financing
might be obtained from private sources.
I indicated to Dr. Jaramillo that, as soon as a debt settlement had
been reached, it might be well also to refund the National
City–First of Boston Group loan. Representatives of the National
City Bank had implied to me that an interest rate, such as was
contemplated on the public debt would be satisfactory to them,
although they would require a rapid amortization in say eight to ten
years but they added, if a refunding agreement were consummated, the
Group would be disposed to re-lend to Colombia considerably greater
amounts than were involved in this transaction. Moreover, the
National City Bank, according to its General Supervisor for
Colombia, Mr. Frank Smith, would then be ready to extend commercial
credits in volume within Colombia.
Dr. Jaramillo, without reservation, accepted my recommendation that
the most important thing of all was speedily to reach a debt
settlement, thereby, laying the credit foundation which would
greatly facilitate the obtaining of financial aid from both United
States Government and private sources.
I told Dr. Jaramillo I would send letters introducing to him a few
leading New York bankers whom I thought, after conversations with
him, might become interested in financing and investments in this
country. Copies of these letters addressed to Mr. George W. Davison,
Chairman ‘of the Board of the Central Hanover Bank and Trust
Company; Mr. Henry C. Von Elm, Vice Chairman of the Board of the
Manufacturers Trust Company; Mr. E. Roland Harriman of Brown
Brothers Harriman & Company; and Mr. Herman G. Brock, Vice
President of the Guaranty Trust Company, are attached hereto.55
In conclusion, I assured Dr. Jaramillo he could count on sympathetic
understanding and a wholehearted will to cooperate from the Under
Secretary and others in the Department.
[A memorandum by the Chief of the Division of the American
Republics, dated December 14, 1939, reports a conversation in
which Mr.
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John Laylin
told of further discussions between representatives of the
Colombian Government and of the Foreign Bondholders Protective
Council, Inc. No agreement was reached in these discussions.
(821.51/2414½]
