833.6463/66b

The Department of State to the Uruguayan Embassy

Memorandum

The Government of the United States has studied carefully the request of the Government of Uruguay for assistance in the completion of the Rio Negro hydroelectric project, in order to satisfy the urgent requirements for electric power for the city of Montevideo. The Department of State on June 7, 1941 handed the Uruguayan Minister an informal memorandum,76 outlining the general basis on which discussion of such possible assistance might go forward. Since that time a group of United States companies has discussed in a preliminary way with technical representatives of the Uruguayan Government and with the appropriate agencies of the United States the technical and engineering aspects of the problem, including, especially, possible delivery schedules for the material which would be required, such schedules being considered in relation to the requirements of [Page 605] national defense. Such discussions have resulted in a tentative understanding on a proposed schedule of delivery between the manufacturers of the equipment and the appropriate agencies of the United States.

In view of the general progress which has been made in all of the technical matters mentioned in the memorandum of June 7, 1941, the Department is now in a position to submit the following bases for the continued discussion of the request of the Uruguayan Government:

1.
The present German consortium would complete the civil engineering work on the dam by January 1942.
2.
All German personnel in Uruguay would be at that point removed from any further connection with the project.
3.
A United States consortium now being formed would undertake to engineer the project, to manufacture and deliver the material to be exported from the United States, to provide engineers to supervise the installation and placing in operation of one generator unit, one transmission line, and the main sending and receiving substations, and accessory equipment and materials. The Uruguayan Government would undertake to supply all materials not exported from the United States and to install and erect under the supervision of the engineers supplied by the consortium such material so supplied together with materials supplied by the consortium. Details of this undertaking would be worked out between the Uruguayan Government and the United States consortium. The United States consortium would undertake, with the approval of the appropriate agencies of the Government of the United States, and the cooperation of the appropriate agencies of the Uruguayan Government, to complete the engineering design of the plant and manufacturing of the material to be exported from the United States within two years from signing of contract, subject, however, necessarily, to the emergency needs of this Government’s own national defense and of the other countries which this Government is aiding against aggression.
4.
The Export-Import Bank of Washington would be prepared to discuss appropriate credit facilities for materials and services to be furnished by the United States consortium.
5.
A United States Government representative would be appointed to represent the Government and particularly the Export-Import Bank to facilitate the carrying out of the project.
6.
No immediate decision would be taken with regard to the three remaining generating units and the second transmission line and associated equipment, but the United States consortium would be given an option good until January 1, 1943 to undertake this additional work, subject to the proviso that the United States consortium will agree not to exercise the option up until December 1, 1942 if the Uruguayan Government informs it that exercise of the option before that date would not be convenient. If the option is taken up, the contract with the German consortium would immediately be entirely abrogated. The United States consortium and the United States Government would, of course, be protected by the Uruguayan Government, in case of any claims arising out of this arrangement.
7.
Under no circumstances would German and United States personnel work on the project at the same time except such engineering studies as may have to be carried on by the engineers of the United States consortium. If the United States consortium should not undertake to exercise the option under 6, no foreign group would be permitted to engage in any construction included in the project until the United States consortium has completed the first generating unit and transmission line.

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