The Federal Loan Administrator ( Jones ) to the Under Secretary of State ( Welles )

Dear Mr. Secretary: Copy of translation of memorandum23 left with you February 25 by the Paraguayan Minister is noted with interest.

Mr. Pierson and I had a very pleasant visit with the Minister February 24, at which time he requested:

(1) An additional line of credit to the Banco de la República of $500,000.

June 1, 1939, we approved a line of credit to the Banco de la República of $500,000, to enable that institution to meet dollar exchange requirements during periods between export seasons. The Banco has drawn $200,000 of this amount and repaid $66,666.66, leaving a balance unused of the established credit to the Banco of $366,666.66.

We stated to the Minister that when this was exhausted we would give consideration to any additional requirements that the Banco might need.

(2) The Minister requested additional funds for road building.

June 1, 1939, we authorized a loan of $3,000,000 to the Republic of Paraguay for the construction of a highway between Asunción and Villarrica.24 $1,285,000 of this credit has been used, leaving a balance yet to be expended in the construction of this highway of $1,715,000. This amount will supply a good deal of dollar exchange for Paraguay.

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Recent estimates we have received from the contractor, R. W. Hebard & Co., Inc., indicate that the final cost of this highway will approximate $4,000,000. This would require an additional loan of $1,000,000. However, the Export-Import Bank’s engineer strongly recommends that the specifications of the uncompleted portion of the project be modified, which he insists can be done without affecting the usefulness of the road and yet considerably reduce the cost. The modification would be a one lane road instead of two lanes, and since the traffic over this road will not be heavy, a one lane road would be ample. As our own experience in this country proves, another lane can be constructed when needed. In the meantime, the savings from this could be used for lateral or feeder roads.

(3) The Minister insisted that we immediately authorize a loan of $3,000,000 to Paraguay to build a complete water and sanitation system for Asunción.

We stated to the Minister that we would, if they desire, send an engineer or engineers at the first opportunity to make an estimate of the cost of such a plant. He insisted that we send the engineer with him, which I stated we could not do, but would as soon as convenient.

Since Asunción has done without these facilities until now, and because we need our resources for emergency matters, I think this project should await our convenience, although we will send the engineer.

(4) The Minister wanted an additional amount of $1,000,000 for feeder roads, and this I have discussed in the latter part of the last paragraph of (2).

(5) He wanted $500,000 for river work and port improvements.

We are sympathetic with Paraguay, as we are with all South and Central American countries and want to cooperate with them …


We will send engineers to investigate the water and sanitation system for Asunción.
We will consider applications for additional credits to the Banco when they are needed.
We will have our engineers investigate and report on the harbor facilities and will give favorable consideration to a loan of not more than $500,000 for such work, if circumstances appear to warrant.
You state that the Department of Agriculture expects to send two men to Paraguay for the purpose of studying certain readjustments in their agricultural economy, particularly with a view to developing the growing of mandioca.

If the Department of Agriculture, after investigation, recommends a loan in connection with this agricultural development, the Bank will give favorable consideration to a loan up to $400,000.

Sincerely yours,

Jesse H. Jones