823.51/1282: Telegram
The Secretary of State to the Chargé in Peru (Dreyfus)
39. Your telegram no. 43, June 8, 11 a.m. There is no basis for any feeling on the part of President Benavides that this Government lacks desire to develop fuller and closer economic relations between the United States and Peru or is in any way discriminating in another’s favor as compared with Peru. It is hoped that you can convince President Benavides that this is so.
Please inform President Benavides that this Government will be happy to welcome a mission here in Washington to discuss the means and terms for possible extension of economic cooperation between the two countries. When you convey this invitation please explain that the reason it is not extended to any designated official of the Peruvian Government, which was the form followed in the case of the invitation to Brazil and Chile, arises from the fact that the invitation is being extended at an earlier and more preliminary stage of the discussions than was the case with Brazil and Chile. In these instances essential preliminary conversations had been conducted for a considerable time with officials of these Governments, in the one case the Minister of Foreign Affairs of Brazil, and in the other the Minister of Finance of Chile, before invitations were arranged. It was then natural the invitations should be addressed to the particular officials with whom the work had already been carried forward.
In order that the discussions in Washington with the inevitable attendant publicity will have a successful issue it is essential, in the interests of both Governments, that there be a most careful and thorough preliminary exploration of the possibilities before a mission is sent. Please say to the President that your Government is confident that he will agree upon the usefulness and importance of such prior exchange of views.
The Department will for its part carry forward its studies. As a counterpart it is suggested that the Peruvian Government undertake and present in memoranda form proposals, as specific in detail as may be possible, of what it believes desirable and feasible. This will enable us to determine what may be possible. This will prepare the way for a successful mission to the United States.
[Page 777]It may be useful to have you make clear to the President the type of cooperation that might be considered as illustrated by the arrangements concluded with Brazil. Of course the form and scope of any arrangement with Peru must be determined primarily by the particular set of facts that present themselves. You may furnish the President with a copy of press release no. 84 of March 913 outlining briefly the arrangements undertaken and the assistance contemplated.
With regard to the reference made by President Benavides to the Chilean debt, you may point out that neither this Government nor the Foreign Bondholders Protective Council condones the practice of a debtor’s purchasing in the open market bonds which have been depreciated by the debtor’s failure to pay the interest on them. A settlement reached by negotiation between the interested parties which provides for reasonable amortization operating concurrently with interest payments at some agreed rate, is not open to this objection. The Government of the United States does not conduct direct negotiations to determine the terms of debt adjustments, but it does endeavor in all appropriate ways to obtain consideration of the interests of American bondholders and to facilitate the negotiations of their representatives. The question of the Chilean debt settlement was fully discussed by the Foreign Bondholders Protective Council with the Chilean Government and the Council on October 24, 1938, after analyzing the proposed settlement in detail, left “to each bondholder himself to determine whether or not he wishes to accept the amount of services offered.” You may add that it has been indicated to the Chilean Government that an essential condition of any arrangement for economic cooperation would be an assurance from the Chilean Government that at least the present interest payments on the external debt be continued.
In the case of Peru the Department has found it difficult to understand the attitude exhibited by the Peruvian Government in having assented to a settlement reached with the holders of the Guano Bonds whereas the negotiations on behalf of the American bondholders have not prospered and actually have been suspended regardless of the fact that the negotiator indicated a willingness to accept a settlement on a basis less favorable to the bondholders, in proportion to their contractual rights, than the one concluded with the British group. You may find it expedient to repeat the statement made by the Under Secretary to the Peruvian Ambassador that “in view of our knowledge of the very favorable economic and financial situation of the Peruvian Government, in which we all rejoice, it was very difficult to understand why no real effort had been made by the Government [Page 778] to reach an agreement for the adjustment of the legitimate obligations to the bondholders.” You may also point out that Chile is now making substantial payments on account of service whereas the Peruvian dollar bonds are in complete default and negotiations seeking a resumption of payments have been suspended.
It is not clear from your telegram that the subject matter of the last paragraph of the Department’s telegram no. 37, June 3, 1 p.m. was discussed in your conversation with the President. If you have not already done so, you may, in your discretion, refer to that matter and convey the statements already authorized.
- Department of State, Press Releases, March 11, 1939, p. 174.↩