The Paraguayan Minister (Fernandez) to the Secretary of State

D. 45

Excellency: I have the honor to address myself to Your Excellency with the object of presenting the following Memorandum with regard to the program of economic and financial cooperation with Paraguay, to which I have referred substantially in numerous conversations, which were confirmed by His Excellency the Minister of [Page 1127] Foreign Affairs of Paraguay, Doctor Don Tomás A. Salomoni, in his recent visit, which formed part of the program elaborated by the late President of the Republic of Paraguay, General Don José Félix Estigarríbia,3 whose directive norms are continued by the present Government, an official declaration which I take pleasure in bringing to the attention of Your Excellency, fulfilling precise instructions of the National Chancery.

The program to which I allude has been studied carefully, taking into account the economic and financial possibilities of Paraguay, and their realization will be made progressively in such manner that the services of amortization and interest of the sums invested may be paid regularly with the orderly recourses of the National Treasury and with the product of the charges and the taxes which may be created from time to time and because of the realization of the projected works.

Financial Readjustment. When the Government of General Estigarríbia was inaugurated in August of last year, it was hoped that the expropriations with which the Bank of the Republic built up its conversion funds would give a normal return; but the European war affected the expropriation business in such a manner that to date the return has been considerably reduced.

The conversion funds of the Bank of the Republic have decreased consequently in a very marked manner and a credit of $2,000,000 to the said institution is indispensable in order to maintain and regulate the monetary stability. The Bank of the Republic is able to service the interest and the amortization of the said credit with complete regularity, it being understood that the credit mentioned would not be used all at once nor in its entirety, since it will be opened for the said sum in accordance with the conditions which will be stipulated.

Financing the Unexported Surpluses. One of the consequences which has made itself most felt in Paraguay because of the dislocation of the financial economy since the start of the European War was the lack of the possibility of placing exportable products since the export market and the placement of the export products is found in Europe.

The principal products which are now without possibility of being exported are tobacco, cotton, hides, tannin, petit-grain oil, et cetera, the financing of which would require the investment of the sum of $3,000,000.

Financing of the Port of Asunción. In the month of December of the present year the concession for the port works of Asunción, financed and constructed by the “Asunción Port Concession Corporation”, an entity organized in the United States of America, will terminate. In conformity with the concession contract, the Paraguayan [Page 1128] State must take charge of all the remaining debt and must pay it in five years, a debt which to date amounts to the sum of $4,000,000 more or less.

The regularization of this situation is the object at the present time of a study with the concessionaire company; but it is indispensable in order to make a satisfactory arrangement for both parties to obtain a long-term loan for the payment of the same.

This loan of $4,000,000 will be paid regularly since for the payment and the interest of the amortization of the same there will be available the port charges whose annual return is $200,000 more or less.

Public Works.

(1) Highway Program: In the eastern district of Paraguay there is necessary around 800 kilometers of good roads to give effective circulation to the national production. Through lack of roads Paraguay lacks internal economic connection and pays exorbitant freight rates which make difficult on the one hand production and on the other the entry into foreign markets on advantageous conditions in view of the competition.

This network of roads of more or less 800 kilometers would not be entirely with permanent surfacing since the paving would be made only partially of concrete or asphalt and the remainder would be of stone. The principal sections would be:

(a) Paraguarí to Misiones 170 kilometers
(b) Pilar to Misiones 130
(c) Asunción–Paraguarí (Through Itá and Yaguarón) 70
(d) Coronel Bogado to Encarnación, passing through various plantations 60
(e) Concepción to Pedro Juan Caballero 286
(f) Siding to Bella Vista from the previous road 96
(g) Vicinity of Asunción 50
Total 862

Of this network of 862 kilometers approximately half would be roads finished with permanent surface. For this construction there would be necessary about $4,250,000, including in this sum the machinery, equipment, bridges, culverts and other improvements.

In the foregoing network there is not included the prolongation of route 2 of the central highway to its termination at Iguazú. This branch would have a length of 200 kilometers of surfaced road and would cost around $2,500,000.

With the construction of the network indicated above, the consumption of combustibles in general would have to increase considerably and said works would be amortized with the entire revenue from the customs charges or internal taxes on combustibles.

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(2) Wharves: The construction of three important wharves, one in Pilar, another in Concepción and a third in Encarnación and wharves which would constitute the indispensable complement for the roads, is indispensable. The approximate cost of the same would be distributed in the following form:

Pilar $100,000
Concepción 80,000
Encarnación  120,000
Total $300,000

The revenue arising from the exploitation of the said wharves would, make up the payment for the same.

(3) Sanitary Works in Asunción: The construction of sanitary works in Asunción would contribute to one of the most urgent necessities of the capital of the Republic and is by its nature one of those which could most easily be paid for. It is not necessary to go at length into the considerations to describe the importance of this work; and the fact that the construction of the same would constitute one of the remunerative investments. The price of the same is estimated; in the sum of $2,600,000.

(4) Creation of a Merchant Marine: The problem of creation of a national merchant marine for Paraguay is of vital importance for the development and the progress of its great riches and natural products, whose exportation is impeded by the permanent high freight rate. There is necessary a merchant marine capable of transporting 150,000 tons per year, composed of four to six units of 1,000 to 2,000 tons, capacity each, and of lesser ships controlled and directed by the state. The merchant marine would produce a sufficient return to insure the payment of the amortization and the interest on the capital employed for the same, which is computed in the sum of $500,000 more or less.

(5) Agricultural Development:

(1) For silos, refrigerating plants and fruit storage warehouses 600,000
(2) For implements (10,000 sets) plows, carpidoras, harrows, sowing machines, groups at $35 for each set 350,000
(3) Ten sets of stump removers at $5,000 each 50,000
(4) Capital for the Agricultural Bank of Paraguay 500,000
(5) Mortgage Bank (Section of the Bank of the Republic) 500,000

Form of Payment

The sum for silos for fruit would be reimbursed with the charges which are charged those who utilize them. The sum [Page 1130] for implements would be reimbursed with the income from the sale of the same on long terms. The sums for the stump removers, for capital for the Agricultural Bank, and for the Mortgage Bank would be reimbursed by the State.

The foregoing program of financial and economic reconstruction of Paraguay contains a general outline of the same in each case. Each one of the points will be the object of a detailed study. I must point out once again to Your Excellency that the program set forth is in conformity with the economic and financial possibilities of Paraguay, it being indispensable only that there be agreed upon the manner of payment in reasonable periods. In requesting Your Excellency to be good enough to pay favorable attention to the request for economic cooperation for Paraguay, I take advantage [etc.]

Horacio A. Fernandez
  1. Estigarríbia had been killed in an airplane accident.