834.51/367

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

No. 137

Sir: Reference is made to your despatch no. 260 of November 8, 1941,35 in which you reported that the Minister of Foreign Affairs of Paraguay informed you that the Paraguayan Government is ready to proceed with the utilization of the credits available from the Export-Import Bank as follows: $400,000 for port works and improvements; $350,000 for branch roads; and $150,000 for a cold storage plant. You also reported in this despatch that you believed the Paraguayan authorities might wish to expend the $350,000 for the construction of branch roads without utilizing the services of a construction or engineering organization from the United States. You indicated, moreover, that an agricultural survey of Paraguay by experts of the United States might reveal important possibilities for the economic development of the country and you mentioned your intention to suggest to the Paraguayan authorities that such a survey be carried out.

In connection with the projects which have been suggested for utilization of these credits, there is enclosed a copy of a letter of December 16, 194135 from Mr. Warren Lee Pierson, President of the Export-Import Bank, from which it will be observed that he now questions the practicability of the proposed port works and cold storage plant and suggests that the credits might be employed to better advantage if they were utilized entirely in the construction of feeder roads. You are requested to discuss discreetly with the appropriate Paraguayan officials the matter of the allocation of the credits in the light of the considerations advanced by Mr. Pierson and to report your comment and suggestions to the Department.

With respect to your comment that the Paraguayan authorities may wish to utilize the $350,000 credit for the construction of branch roads without the assistance of a construction or engineering organization from the United States, the views of Major R. W. Hebard were sought informally by the Department. Major Hebard expressed the view confidentially that he believed the Paraguayans might perform a large part of the construction work on the branch roads, but that he believed the Paraguayans themselves would wish to have the advice and guidance of qualified engineers in carrying out this work.

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The President of the Export-Import Bank has likewise expressed the view that utilization by the Paraguayans of the existing organization of the R. W. Hebard Company is the most practicable procedure to follow in undertaking additional highway construction, although he has suggested that if qualified Paraguayan engineers could be found to perform the work they might be given nominal charge of the construction under the general supervision of the company.

It is believed that a practicable procedure for construction of the branch roads might be arranged through the presentation to the Export-Import Bank of such suggestions from the Paraguayan authorities as they may wish to make in this respect. If you should be consulted by the Paraguayan authorities concerning the possibility of construction of the roads without a comprehensive contract with a construction or engineering organization from the United States, it would appear advisable for you to suggest discreetly that the Paraguayans embark upon such domestic construction activity gradually enough to assure an entirely satisfactory utilization of the credit. One method of embarking gradually upon such Paraguayan domestic construction activity might be to retain the engineering services and possibly the supervisory functions of highway construction engineers from the United States.

With respect to your comment that an extensive agricultural survey of Paraguay by experts from the United States might reveal important possibilities for the economic development of Paraguay, it is believed that it may be advisable at this time to await definite progress in the practical utilization of the credits of $900,000 before exercising initiative which may involve the incurring of further credit obligations by the Paraguayan Government. While agricultural investigation could of course be carried out by experts from the United States without immediate expenditure by the Paraguayan Government for resultant concrete developments, it would appear advisable to avoid giving the impression to the Paraguayan authorities that this Government is urging them to undertake activities or developments which they might not be disposed to undertake on their own initiative.

Very truly yours,

For the Secretary of State:
Sumner Welles
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