821.51/2567
The Colombian Ambassador (Turbay) to the Under Secretary of State (Welles)
Dear Mr. Welles: On July 18 of this year I had the honor to confirm on behalf of my Government a proposal for the permanent settlement of the External Sinking Fund Gold Bonds of 1927 and 1928 of the Republic of Colombia, discussed at a meeting which I had with you, the Under Secretary of the Treasury, Mr. Daniel W. Bell, and Mr. Jesse H. Jones, now Secretary of Commerce.
This proposal called for the issuance of new bonds or the stamping to accomplish the same purpose of certificates on the present bonds. The new principal would amount to the face value of the present bonds, estimated at about $44,000,000, plus 50 percent of the face value of the outstanding interest coupons in arrears, a total of slightly over $50,000,000. This new amount of bonds would draw interest at [Page 721] 3 percent. During the first 5 years of the arrangement, the Republic of Colombia would make $1,800,000 available annually for debt services; thereafter $2,000,000 annually. The balance of such debt service after setting aside the amounts required for interest payments would be devoted to the purchase of bonds in the market. Bonds purchased with such balance would be retired and canceled before the next succeeding interest payment date and the amounts so retired would be reported annually.
On July 17 and 18, 1940, decree laws were promulgated which provided for putting the settlement into effect. Copies of these decrees are enclosed. Under the terms of these decrees, the formal contract covering the settlement will have to be approved by the President of the Republic and the Junta National de Empréstitos. When the contract has been so approved and the formal offer is made to the bondholders thereunder, it will constitute a binding obligation of the Republic of Colombia in favor of all of the holders of bonds who accept the offer.
My Government has authorized me to renew the assurance of its willingness to proceed immediately with the settlement. My Government has also authorized me to state with regard to Article 2 of the Decree Law of July 17, 1940, that the new decree which, in accordance with Colombian law, will approve the formal contract between my Government and the bondholders, will fix the responsibility of my Government according to the terms of that contract. It is not the position of my Government that it will have any contractual right to postpone payments, and such new decree will of course not contain any reservation with respect to such a right.
Furthermore, if events should oblige my Government to suspend payments, and negotiations should prove necessary before these payments were resumed, the bondholders would not be in any way disadvantaged in such negotiations by reason of their acceptance of the permanent settlement now proposed. The contract giving effect to this settlement will provide that there will not be offered to other holders of external bonds of the Republic of Colombia now outstanding any settlement on terms more favorable than those set out in such contract.
I remain [etc.]