The Ambassador in Colombia (Braden) to the Secretary of State
[Received 3:59 p.m.]
177. For Under Secretary and Duggan. Department’s 127, May 27.97 All my comments on financial assistance to Colombia have been [Page 68] always premised on it being politically advisable and the necessity for maintaining this country’s economic equilibrium but at all times keeping in mind that control in so far as possible should be on sound economic basis, that our largesse should not be given all at once, that Colombians should be made to understand it is not merely an easily obtained handout and that they must reciprocate in every way.
Yesterday President and Minister of Finance separately informed me negotiations were proceeding very satisfactorily in Washington and they expected closing before June 15. Latter added thanks to me for obtaining approval $6,000,000 credit since thereby they were assured of at least that amount. They stated Turbay had proposed $7,000,000 for this year, $5,000,000 for 1942 and [$] 1,000,000 for 1943.
I shall, of course, comment in full on receipt of Colombian memorandum but my preliminary impressions are:
Loans for banana district, irrigation and drainage, prudent amount for highways and navigation if it be for improvement of Dique or other sound projects appear reasonable. Municipal development fund is loosely run and any advance should be for carefully scrutinized specific projects and then only for import requirements. Industrial Development Institute is unproven; of two and two-thirds million pesos paid—in capital two million is from last year’s loan; only 547,000 pesos so far invested in new projects none of which are known to be functioning; hence need now for further capital is questionable and any advances should be subject to approval of detailed plans. No advance for hydroelectric plants which could remotely compete with those now operated by American capital should be countenanced.
Over 75 percent gold reserve on note circulation and other present favorable factors indicate nothing required now for stabilization fund, which has been profitable organization and I would favor advance only when actual need appears. President claims construction of public buildings will bring great saving in present rentals but here again scrutiny is desirable.
In final analysis request for additional loan appears to be motivated in large measure by Lopez attacks alleging Santos was not getting enough from us. Therefore to help latter over this obstacle some earmarking along the lines requested by Turbay may be acceptable always provided it is thoroughly understood by Colombians that money will be handed over only after completely detailed and satisfactory plans have been approved.