Memorandum of Conversation, by Mr. Andrew E. Donovan II of the Division of the American Republics

Participants: José F. Estigarribia, Minister of Paraguay;
Dr. Feis;1
Mr. Briggs;2
Mr. Butler;3
Mr. Collado;4
Mr. Donovan.

The Paraguayan Minister called by appointment at 3 p.m. on April 19, 1939. After Mr. Briggs had explained that the Department desires to assist the Paraguayan Government in whatever way may be proper, he explained that it had been thought desirable to have a full and frank conference with the Minister in order to determine the most effective manner of helping Paraguay.

General Estigarribia, after describing the economic plight of his country following the Chaco War, said that he personally is convinced that the development of roads through the agricultural portion of the country east of Asunción is the most important step at the present time. He said that it was planned to construct a road from Asunción to the Brazilian frontier at Iguassu but that only the first section of this road, from Asunción to Villarrica, would be undertaken at this time in order not to assume greater obligations than Paraguay could pay. General Estigarribia explained that this road would follow the course of the railway for but a relatively short distance, approximately to Loque and would then swing north to Tobati and would proceed north of Valenzuela, through Ajos, and then south to Villarrica. He explained that this, section would cost approximately $3,500,000; would take three years to build; and that not only would it be a splendid step for Paraguay but that at the same time it would give employment to demobilized officers and soldiers.

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The General then said that the contract with Colonel Taylor had not been signed as certain minor revisions were necessary to make it acceptable to the Paraguayan Congress. He said that the Taylor group, which he explained had been formed only for this purpose, proposes to sign a contract for the construction of this road and that Paraguay should pay it with funds advanced by the Export-Import Bank.

Mr. Briggs thereupon gave a short explanation of the functioning of the Export-Import Bank in cases of this nature and referred briefly to the plan which had been worked out with the Haitian Government. He said that the Department would consult the Government departments involved and draw up an explanatory memorandum for the Minister, to be ready in approximately a week.

General Estigarribia then said that a second matter of great importance was to obtain a fund which might be used as a gold backing for the Paraguayan peso. He explained that the Government “expropriates” fifty percent of all exchange produced by exports, paying the exporters in Paraguayan currency. He said that this foreign exchange is supposed to be used to back the peso but that due to war necessities, it had all been spent and there is now very little gold backing. He said that if a credit could be obtained in the United States which would give confidence in the value of the peso, the exchange collected each year, which he estimated at a minimum of $2,000,000, could be used for public works in Paraguay and for the purchase of the necessary agricultural machinery, etc., to develop the country.

Dr. Feis said that the Department would give this phase of the matter every consideration but pointed out that the creation of a credit of this nature required Congressional action as in the Brazilian case, but that the Department would discuss it with the Treasury and include in its memorandum such recommendations as might be possible.

  1. Herbert Feis, Adviser on International Economic Affairs.
  2. Ellis O. Briggs, Assistant Chief of the Division of the American Republics.
  3. Robert H. Butler, Assistant Chief of the Division of the American Republics.
  4. Emilio G. Collado, of the Division of the American Republics.