821.51 Cooperation Program/3
Memorandum by the Ambassador to Colombia (Braden), Temporarily in Washington
Colombian Request for Financial Assistance
As will be recalled, President Santos on January 30, 1941, summoned me to indicate that Colombia would appreciate receiving in the near future financial assistance for both economic and military purposes.
Following other conversations with the President and his Ministers, which were reported to the Department, Dr. Santos on the morning of March 31, 1941 had delivered to me a letter and memorandum, as per the enclosed copies,78 requesting a $10,000,000 loan for 10 years to be made direct to the Colombian Government (not to the Banco de la Republica with the Government’s guarantee, as was done last year).
The proceeds of this $10,000,000—17,500,000 pesos according to the enclosed memorandum would be distributed:
- —Military requirements 7,000,000 pesos or $3,990,000.
- —Economic requirements (irrigation, highways, public buildings and electric power plant machinery) 9,850,000 pesos or $5,614,500.
My observations on certain details of the military requirements are given in the enclosed memorandum. It is pertinent to add that I have expressed to President Santos, the Minister of War and Ambassador Turbay79 my purely personal opinion that the Export-Import Bank might be unable, under its authorization, to grant credits for military purposes, but that subject to priority restrictions Colombia’s necessities in these particulars probably could be cared for under the provisions of the “Lend-Lease Bill”80 and in that case the interest rate and other terms might be more advantageous to Colombia than through a straight banking operation.
There is also enclosed copy of memorandum78 handed me by Ambassador Turbay—pursuant to Dr. Santos’ promise to forward further details to me. It will be noted that the amount requested in this document—7,000,000 pesos—covers only the program for this year of the Ministry of Public Works. The Ambassador estimates that the Ministry of National Economy will need between 3,500,000 and 4,000,000 pesos for its plan of irrigation and power plant construction. [Page 58] These last two items in the President’s memorandum total 3,638,000 pesos. The Ambassador includes 1,000,000 pesos for navigation, not in the President’s memorandum, increases the public building estimate by 500,000 pesos and reduces the highway item in the President’s memo by 712,000; as a result his total estimated requirements range from 10,500,000 to 11,000,000 pesos. The latter maximum figure plus the military requirements would bring Colombia’s total request to 10¼ million dollars. However, it is worthy of comment that on the public works program alone the government plans to expend an additional 6,000,000 pesos or $3,420,000 from internal sources. This evidences good faith and is in a manner a guarantee of the soundness of the loan.
I also call attention to the Ambassador’s remarks pointing to the urgency of this financial aid for the preservation of his country’s economic and social equilibrium.
Dr. Turbay mentioned Argentina having received recently an interest rate of 3½ percent and hopes the same may be done for Colombia.
I confirmed to Ambassador Turbay the assurances given me by President Santos that since he recognized the difficulties of our position certain guarantees as to exchange would be given to this loan. I said that while the extension of a credit perhaps should not be made contingent on these guarantees, nevertheless the following should be considered coincidently:
- Foreign exchange should be made quickly and readily available to our exporters. Exchange permits should be issued at the same time with import permits.
- Exchange regulations should not be made retroactive, as has been done heretofore with prejudice to American exporters.
- It should be possible to accomplish an adjustment and renewal of service on some of Colombia’s foreign indebtedness, such as that of the Agricultural Mortgage Bank; the City of Bogotá and the Departments of Santander and Santander del Norte.
- Similarly, exchange should be provided so that service on the Barranquilla loan would henceforth be remitted to the bondholders.
- The National City–First of Boston Banking Group loan should be refunded to avoid repeated renewals thereof every six months.
More detailed comment on the foregoing and on other points is given in the enclosed memorandum. I do not recommend the adjustment of these several matters being exacted as a quid pro quo for the granting of a loan but I do feel they should be discreetly called to the attention of our Colombian friends.
I told the Ambassador that President Santos on March 28, 1941, after talking with me, had summoned the Manager of the Agricultural Mortgage Bank and the Mayor of Bogotá to insist to them that an attempt be made promptly to accommodate their respective foreign debt situation.[Page 59]
Dr. Turbay acknowledged that at the time when the national debt offer had been approved by the Under Secretary82 and Messrs. Morgenthau83 and Jones,84 he had promised that a representative of the Agricultural Mortgage Bank would come to the United States to negotiate. The Ambassador inferred that this visit had been deferred because there was no one with whom he could deal, since manifestly Colombia could not with dignity and self respect carry on discussions with the Foreign Bondholders Protective Council, Inc.
I replied that my personal suggestion, and I had no idea of the Department’s views in the premises, was for some one person to be fully authorized by both the bank and the Municipality of Bogotá, to come here and begin informal conversations. During the course of such discussions I said perhaps a way to a formal settlement would be uncovered and at least Colombia would have taken this step to indicate her good faith.
Respecting the Bankers Group loan, the Ambassador said the National City Bank officials had displayed scant interest to negotiate when he had suggested a refunding at 3 percent and amortization of $1,000,000 per year to liquidate the indebtedness in approximately 15 years.
Conclusion: The economic purposes to which the larger part of this financing will be dedicated appear to be sound and should improve the country’s productive capacity in several particulars. The servicing of this credit probably will not be too great a burden on Colombian capacity to pay. For us to lend assistance in this manner, from the political and diplomatic aspect, is a worthwhile gesture. It is expedient for Colombian economy to be supported by us in these times. Therefore, I recommend that favorable consideration be given to this project.
The 7,000,000 pesos requested for military ends is of course dependent on many production and priority conditions here with which I am unacquainted. However, I recommend that it might be beneficial to us in principle and assist in the defense of the Panama Canal were special consideration to be given to the following items in President Santos’ memorandum.
- Aviation 2,700,000 pesos, or $1,539,000. As per my memorandum, it might even be advantageous to increase this allotment.
- Repair of two destroyers, estimated at something in excess of $200,000.
- Munitions for rifles, machine guns and ammunition therefor. Cost to be estimated.
- Six fast motor torpedo 70 to 80 ft. boats with equipment of torpedoes and depth charges. Cost estimated at $1,365,000.
The remaining military requirements do not impress me as being essential for Colombia nor of benefit to us.