Foreign Relations of the United States Diplomatic Papers, 1941, The American Republics, Volume VII

834.51/330

Memorandum by the Assistant Chief of the Division of the American Republics ( Collado ) to the Under Secretary of State ( Welles )

[ Washington ,] January 29, 1941.

Mr. Welles: At the request of the Under Secretary, Mr. Hooker¹³ and I have had extensive conversations with the Paraguayan Minister¹⁴ regarding the desire of the Government of Paraguay to obtain additional credits from the Export-Import Bank. There is attached a table¹⁵ summarizing the original requests of the Government of Paraguay of last September, Mr. Lamb’s¹⁶ formal recommendations to the Government of Paraguay, and a new distribution of items informally handed to me by the Paraguayan Minister. With respect to Mr. Lamb’s formal recommendations it should be recalled that in a personal letter to the Export-Import Bank he recommended as economically fully justifiable only the refinancing of the Port of Asunción Concession.

The following recommendation of additional credits to Paraguay is based on (a) the desirability of devoting a part at least of our cooperative efforts towards direct development and improvement of the Paraguayan agricultural situation; (b) the desirability of maintaining at least a minimum flow of dollar exchange into the hands of the exchange authorities during the present period of reduced markets for several of Paraguay’s export staples; (c) the desirability of giving some prestige to the present Paraguayan Government, the entire credit for the existing cooperative effort having been given to the late Marshal Estigarribia:¹⁷

1) Agricultural Development—The most important cooperative action which we can take with Paraguay is to improve the basis of the Paraguayan economy. Dr. Bressman¹⁸ has indicated that with an expenditure of $400,000 over several years and the loan of two agricultural experts, a part or all of whose expenses would be paid out of the credit, a real contribution to the improvement of Paraguay’s agriculture can be made. There is attached a copy of a letter¹⁹ of Dr. Bressman on the subject. It is recommended that the Export-Import Bank work out the details of such a credit with Dr. Bressman, and that the Department of Agriculture be requested to make available the two experts.

2) Feeder Roads—Of coordinate importance with improved agricultural methods are feeder roads on which to bring the agricultural production to the markets. Mr. Lamb and Colonel Durham have listed useful feeder roads in the amount of $900,000. It is recommended that this amount be allocated by the Export-Import Bank, and that the Bank’s engineer, Mr. West, in his forthcoming visit to Paraguay determine whether such roads can efficiently be constructed by the Hebard Company simultaneously with the completion of the present highway project. It will be recalled that Mr. West is to be sent to Paraguay to investigate reports that the costs of construction by the Hebard Company are excessive.

The construction of additional roads should be scheduled with some relation to the exchange needs of the central bank. Mr. Lamb has indicated that over half a million dollars of foreign exchange may be expected to come into the hands of the central bank as the result of expenditures during 1941 under the existing contract on local labor and supplies. The construction of additional highways should be in part at least timed to provide a continuing small amount of exchange rather than any great bursts of dollars to the central bank.

3) Banco de la República—Mr. Lamb has argued that the continuing highway expenditures and existing $500,000 revolving credit to the Banco de la República would make any increase in the revolving fund unnecessary, if the Export-Import Bank were to enter upon a program of financing surplus stocks of cotton. Since we are not recommending such action with respect to cotton it will probably be necessary at some subsequent time to increase the revolving fund credit to $1,000,000.

4) Sanitary Works in Asunción—It is recommended that Mr. West on his forthcoming trip study carefully the cost and feasibility of constructing water and sanitary works in Asunción.

5) Piers, Warehouse, and Dredging Equipment—It is also recommended that Mr. West study further the economic desirability and cost of constructing piers at Pilar, Encarnación and Concepción, the construction of a warehouse in Asunción, and the purchase of dredging equipment for use in the vicinity of Asunción.

6) Port of Asunción Concession—It is suggested that the Government of Paraguay should attempt to arrange a new contract with the port concession which would not involve any Export-Import Bank financing.

Such a program would give the Paraguayan Government a modest amount of additional credits, and would provide for the immediate departure to Asunción of two agricultural experts plus the Export-Import Bank’s engineer. With respect to the Paraguayan Minister’s informal suggestion that the mineral resources be studied, I am informed by Mr. Charles Will Wright²⁰ who recently visited Paraguay that there are no important mineral deposits in the entire country with the exception of possible indications of petroleum in the region near Bolivia and Argentina. I am informed that the concern of Herbert Hoover, Jr.,²¹ has been making a cursory survey in this region, presumably for private interests.

I have already discussed these matters informally with Mr. Pierson²² and, if you approve, would be in a position quickly to discuss further the studies to be made by Mr. West and the actual credits to be allocated.

13. John S. Hooker, Assistant Executive Secretary, Board of Economic Operations of the Department of State.
14. Juan José Soler.
15. Not printed.
16. Eric Lamb, representative of the Export-Import Bank in Asunción and financial adviser to the Paraguayan Government.
17. President of Paraguay, 1939–40.
18. E. N. Bressman, Assistant Director, Office of Foreign Agricultural Relations, Department of Agriculture.
19. Not printed.
20. Member of the United States Bureau of Mines.
21. President of the United Exploration Company.
22. Warren L. Pierson, President of the Export-Import Bank.