The President of the Export-Import Bank (Pierson) to the Under Secretary of State (Welles)

Dear Mr. Welles: We have indicated to Dr. Prebisch and his associates that the Bank is willing to ‘undo’ the former $20,000,000 short-term commitment—no part of which has been used—and approve a new arrangement under which up to $5,000,000 will be loaned monthly for twelve months.

The terms contemplate interest at 3.6% per annum with amortization of 5% semiannually, commencing eighteen months from the date of each note and continuing to the 72nd month, at which time the balance (55%) will be due; provided, however, that if all earlier installments of principal and interest have been met in accordance with the above-mentioned schedule, upon request of the Banco de la Republica, the final payment may be satisfied by 5% in cash, and the balance in five semiannual installments of 10% each. The effect of the foregoing is to make available a credit of 8½ years.

The proposition as stated seems to be quite satisfactory to Dr. Prebisch.

Before leaving my office, however, he broached the question of obtaining an additional $10,000,000 to be used to construct an oil pipe line from Mendoza to the seaboard. This project is seriously opposed by American oil interests and I said that before we acted upon such [Page 482]an application we should like to know that some mutually satisfactory agreement had been reached between the Argentine Government and the interested American companies. Unless this is done the effect will be to drive these companies out of business through loans made by the United States Government. He indicated that my proposal was a reasonable one.

Sincerely yours,

Warren L. Pierson