The Secretary of State to the Ambassador in Colombia (Braden)
127. Your 158 of May 17, 11 p.m., and 160 of May 19, 5 p.m.21 The Colombian Ambassador has submitted to the Department a lengthy memorandum22 prepared in the Colombian Treasury requesting Export-Import Bank credits totaling $13,000,000 or the equivalent of 22,750,000 pesos. This peso total is made up as follows (all figures in millions of pesos): banana disease and agricultural development fund—1.1; increase in capital for the Institute of Industrial Development—2.0; construction of three hydroelectric plants—5.7; increase in capital of the stabilization fund—2.0; highway and navigation works and construction of public buildings—7.9; total—22.8.
Regarding terms which are not treated in the memorandum, the Ambassador stated that the Colombian Government had heard that terms longer than 10 years were being offered to Cuba and that Colombia would have to have similar treatment. He also stated that the Government had in mind 3% interest with an annual amortization payment of $750,000. The Ambassador was informed that 4% interest was the lowest that could be expected on this type of operation, and that it would not be possible to arrange for annual amortization payments in as low amounts as he had suggested. The Ambassador stated that the amount of $13,000,000 would take care of all of Colombian requirements through the end of 1942, and that the public works mentioned are all now in process of execution but cannot be completed without financial assistance.
The Department is proceeding to study the detailed request and consider it in connection with the Export-Import Bank, the Department of Agriculture, and, with special relation to the stabilization fund request, the Treasury Department.
With respect to your Section A of your 158, the Department is pleased to learn of the reaction of the President to the military defense program. It is presently contemplated that the amount suggested would be available only for military goods to be acquired in the United States.[Page 8]
With respect to Section B, it is intended to present drafts of the suggested notes to the Colombian Ambassador here within the next few days.
With respect to Section C, special comments and instructions will be sent to you.
With respect to Section D, your comments are of course the appropriate ones, and the Department will continue to inform you regarding our own export control and priorities procedures and will continue to press for a hemisphere system of export control such as that suggested in the Department’s circular instruction of April 1, 1941.23
With respect to Section E, it has been mentioned above that the new matter is being considered. As you know, the Department finds itself in a position of great embarrassment with respect to the Federal Loan Agency and can only attempt to work out what may be best in view of a difficult situation arising entirely from the handling of the matter by the Colombian authorities. The comments on the balance of the economic requests with the military requests do not appear well founded as each are based on particular exigencies and are not parts of a related whole. Moreover, the military arrangement covers a long period of time whereas the original $6,000,000 request was specifically designated for one year. There is of course no truth in any suggestion that this Government is proposing to lend $20,000,000 to Ecuador. And in any event credit arrangements are based upon specific programs and needs and not on any attempt to balance amounts between nations.
The Department will furnish you with a copy of the Colombian memorandum, and requests your comments.
The matters discussed in your 160 will be discussed with Ambassador Turbay in connection with the further negotiations for the new credit.