810.20 Defense/1145: Telegram

The Acting Secretary of State to the Minister in Paraguay (Frost)

70. Your 114, July 26, noon. There is no clause in the draft of the basic lend-lease agreement handed to the Paraguayan Minister on July 7 which would enable the United States to demand in payment from Paraguay the local products to which you refer. The [Page 477] amount of $300,000 in cash spread over 6 years is the only payment expected of Paraguay for a total obligation of $11,000,000. For your confidential information these terms are by far the most generous accorded to any of the American republics. Most of the republics are requested to repay between 30 and 60 percent.

It is possible that the Paraguayan authorities are misconstruing article II of the first draft which has been transmitted to you. This article is purely a reciprocal undertaking and does in no way commit Paraguay to such payments as you mention. We have handed the Paraguayan Minister and the other diplomatic representatives in Washington revised drafts which vary only with respect to the preamble and protocol. Copies of these are being placed in today’s airmail.

With reference to your statement that you suspect that the Foreign Minister is not really pleased by the arms arrangement, it is the Department’s strong conviction that the terms afforded Paraguay are the most generous terms which could possibly be conceived for any type of a financial transaction.

With respect to delivery of the goods, it is of course true that our defense requirements are pressing to the utmost degree upon our productive capacity. Nevertheless, our statement that the United States expects to deliver to Paraguay $2,000,000 of equipment during the period ending June 30, 1942 is a firm statement of our present program and must of course be accepted as such.

Aguilera has already left for Paraguay.