Memorandum of Conversation, by Mr. Emilio G. Collado of the Division of the American Republics

I called Dr. Monteros at Mr. Duggan’s request to go over the questions of a possible stabilization arrangement with Mexico, a silver agreement, and highway financing. With respect to the stabilization arrangement Dr. Monteros referred to our previous conversations and stated that he felt he fully understood the suggested arrangement.

With regard to silver, I indicated that the Treasury might reenter upon an arrangement similar to that which formerly existed with Mexico and which still is in effect with Canada. Dr. Monteros stated that such an arrangement would be of considerable benefit to Mexico.

With respect to highway financing I stated that two possible arrangements had occurred to us. Both involved credit extensions by the Export-Import Bank in the amount of $10,000,000 to $12,000,000 for ten or twelve years, and at perhaps 4 percent. One would be a dollar loan to the Bank of Mexico, collateraled by Mexican road bonds, of which the Bank now holds some 60,000,000 pesos. The extension of such a credit would put the Bank and the Mexican financial mechanism in a position to handle the financing of the remaining link of Pan American Highway to the Guatemalan border internally. Another type of credit would of course be a direct construction loan similar to those extended to Nicaragua and other countries, in the case of Mexico to cover American materials only.

Dr. Monteros suggested that it would be desirable to complete the western highway, the link between Guaymas and Guadalajara. He estimated its cost at perhaps $20,000,000 and indicated that a large part of the expenditure would be for steel for bridges. He stated that probably the Monterrey company would not have enough capacity and that in any case it was not efficient to transport steel from Monterrey to the projected highway. I stated that within the above-mentioned amounts the credit might well include, if desirable, the cost of some of the bridge steel.

Dr. Monteros stated that rather than enter into a construction, his Government would prefer a financial operation with the Bank of Mexico, or credits on actual steel and materials imports.

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I reiterated that all of these suggestions were of course tentative. Dr. Monteros and I made an engagement to discuss the matters further on Tuesday.