Memorandum by the Assistant Chief of the Division of the American Republics (Bonsal)48
This memorandum is supplementary to my memorandum of May 22 regarding the so-called Casanova proposal, a copy of which was enclosed with Ambassador Martínez Fraga’s letter of May 20 to Mr. Welles.49[Page 767]
As the result of telephone conversations with Mr. Lancaster yesterday and today and with Ambassador Messersmith this morning, the following developments are reported:
The Casanova proposal has been somewhat modified in a special committee of the Constituent Assembly. Rates of interest and amortization appear to have been made even more generous for debtors. However, payments to be made in connection with sugar mill obligations have been related to the average price of sugar. This is considered by Mr. Lancaster to be a favorable development. The proposal in this respect involves no payments at all if the average price is below 1.40; when it is between 1.40 and 1.50, the debtor is to pay the creditors 3% of the gross value of the crop, this amount to be applied first to interest and then to amortization. When the price is in excess of 1.50, the percentage of the value of the crop to be paid in this manner increases by 4/100 of 1% for each point above 1.50. Thus, if the average price reaches 1.75, the debtor will pay to the creditor 4% of the value of the crop. These payments are applied to the total indebtedness. The fact that no payment is made in a given year because the price of sugar is below 1.40 does not relieve the debtor from the eventual obligation to pay.
The average price of sugar this year was in the neighborhood of 1.50 for the first four months but has probably dropped below 1.40 during the past two weeks. Apparently, the Casanova proposal in its present form provides that no payments whatever on sugar obligations will be made until 1942. This is subject to verification upon receipt of the text.
Mr. Messersmith states that there is a strong possibility that the Assembly will not take action today on this matter as there is a general feeling that it requires more careful study than the members of the Assembly have been able to give it.
The Ambassador had a long talk with President Laredo Brú yesterday afternoon. The President expressed himself as very much disgusted with the progress being made in solving the moratorium matter. I indicated to the Ambassador our desire to be fully informed of his views in the matter as soon as possible. He promised a telegram for today. He stated his intention to indicate very strongly to the appropriate people the necessity for speeding up the procedure of making a constitution. (The deadline is apparently June 8.)
Mr. Lancaster also promised to send me further information regarding the current credit moratorium proposal as soon as he has had a chance to analyze it further. He considers it to be very drastic in respect to the interests of creditors. He also indicated that it contains a provision for the reopening of foreclosure proceedings terminated between the years 1930 and 1933.