821.51/2534

Memorandum of Telephone Conversation, by the Chief of the Division of the American Republics (Duggan)

Mr. White telephoned to report the action of the Executive Committee of the Council on the suggested terms of the Colombian permanent debt settlement evolved at the July 6 meeting of Dr. Turbay and Mr. Traphagen in the Under Secretary’s office.

The views of the Council, Mr. White stated, on the terms of a permanent settlement of the Colombian debt are already known (3½%, et cetera). A modification is now suggested. The situation is complicated by Colombia’s request for a scaled reduction plus Colombia’s intention to insert a “reservation” clause. (The reference is to the point brought to the Department’s attention by Ambassador Turbay that the debt decree would include a proviso authorizing the President, if circumstances required, temporarily to suspend foreign debt service.) It is the Executive Committee’s view that this “reservation” would in effect be making the settlement a permanent one for the bondholders and a temporary one for the Colombian Government. The Council therefore would have to insist on abandonment of the “reservation” in any settlement.

In order to be as helpful as possible Mr. White stated that the Executive Committee, cognizant of the economic difficulties through which Colombia is passing, would prefer, if not welcome, continuation of the present temporary arrangement by which neither side would have to surrender anything permanently, such a temporary arrangement to provide interest payment at the rate of 3% on the $44,000,000 principal and no amortization. He offered the suggestion that whereas the Department and the Colombians felt that time was of the essence in view of the expiration on July 20, 1940 of the extraordinary powers delegated to the President by Congress in Law No. 54 of December 15, 1939, he believed the President’s powers could be extended just as well as the temporary suspension privilege clause could be included in the proposed decree.

Mr. Duggan asked Mr. White what the attitude of the Executive Committee would be if the Colombian Government made the offer. The Executive Committee, Mr. White said, could not entertain feelers or tentative offers, but would insist that the Colombian Government make first a definite offer, abandoning, of course, any “reservation” clause. Mr. White also asserted that the Committee would have to insist upon complete disclosure in case the Colombian Government went ahead on a unilateral basis.

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Essentially the action of the Executive Committee was (1) to reject the suggested terms as a basis for a settlement, (2) to state that only a definite offer could be entertained, and (3) to express a preference for continuation of the present temporary arrangement or a modified version thereof.