823.51/1294: Telegram

The Chargé in Peru ( Dreyfus ) to the Secretary of State

79. The Secretary General and the Chief of the Political Section of the Ministry of Foreign Affairs, both of whom are competent and well informed officials, made statements to me which are of interest in connection with economic and financial cooperation with Peru that may be undertaken as a result of the Panama Conference.16 They said that the Peruvian Minister for Foreign Affairs was very pleased by the sympathetic and helpful attitude shown by Mr. Welles. In commenting upon possible assistance from the United States, they observed that Peruvian Government revenues have declined, that very little dollar exchange is available, and that Peru needs financial help to meet the war situation. They apparently expect that a representative of the Export-Import Bank will visit Peru soon to discuss these matters. They indicated that in their opinion studies relating to a possible trade agreement might be expedited by the Peruvian Government, if a large enough loan could be obtained in the United States, service on the defaulted bonds might be resumed. Aside from repeating that my Government naturally would welcome any progress toward a solution of pending problems I made no specific comment.

The exchange situation continues unsatisfactory. The rate for the dollar is officially held at 5 soles 36 cents although official quotations of sterling and other free exchanges are the equivalent of about 5.60 soles per dollar. The National City Bank is receiving about 25% of requirements for urgent coverage and about 10% of all requirements. The manager expresses the opinion confidentially that United States trade has not been seriously affected as yet but that it is doubtful if dollar exchange can be found to pay for any substantial shipments of merchandise that may be en route or for large orders that may be diverted from Europe to the United States. A serious problem of frozen commercial balances therefore may arise. He does not anticipate exchange control legislation in the near future but if the present situation continues until a new administration takes office in December there may be such a backlog of funds awaiting exchange that control will be essential.

Meanwhile, the local political situation remains confused and uncertain. It is most unlikely that the administration at present in power will allow the dollar to reach rates corresponding to those for other free exchange currencies or that it will adopt any financial measures [Page 782] that would mean the diversion of funds from the public works program to requirements for trade or other obligations.

Dreyfus
  1. For correspondence concerning the Panama Conference, see pp. 15 ff.