834.51/348: Telegram

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

62. Your 110, July 19, 6 p.m. The Export-Import Bank has within the last few months set aside $900,000 for additional financial cooperation with Paraguay, the $400,000 for agricultural works and $500,000 for river and port works. The Export-Import Bank has indicated that it is prepared to see any reasonable utilization of this amount.

Specifically, the Department and the Export-Import Bank do not feel that we should press Paraguay to carry out a mandioca and [Page 492] general agricultural program in the face of the apparent Paraguayan reluctance to enter into this work. It would not be feasible for the American experts for a several years program to be furnished free under Public 63 and of course it would not be feasible for an American market for mandioca to be guaranteed.

It is suggested that the $900,000 be allocated in the following manner:

About $400,000 for port and river works.
About $150,000 for cold storage equipment. The Export-Import Bank cannot, of course, finance the acquisition of German equipment through Argentina. It is prepared to consider any other reasonable proposal and it is suggested that you request the Minister of Agriculture to submit a detailed proposal at once.
The remaining $350,000 for feeder roads. It should be possible to make a good start on feeder roads with this amount by diverting a part of the equipment which the Hebard Company is using on the central highway. The construction of feeder roads is largely a matter of local labor expenditure.

The Export-Import Bank would make arrangements whereby the Hebard Company undertook to work in the additional construction works, both for feeder roads and for port works in its general construction program.

With respect to your remarks that the central highway is not being well received, the Export-Import Bank would be glad to receive your suggestions or comments as to other methods of completing the work and of utilizing in the most desirable manner the funds allocated for that purpose.

It is the Department’s view that the additional $900,000 of Export-Import Bank credits plus the large unexpended balances of the earlier credits should go a long way towards maintaining the economic situation of Paraguay and towards providing useful works. The Department believes that with these works and with the $11,000,000 arms arrangement, which is on exceedingly generous terms, the Paraguayan Government is receiving the most ample financial cooperation. The Department feels confident that you can use these arrangements in the most effective manner.