824.51/1175: Telegram
The Acting Secretary of State to the Chargé in Bolivia (Dawson)
Washington, April 16, 1942—11
p.m.
216. Your 242, April 13, 6 p.m.
- 1.
- The negotiation of a stabilization arrangement with the Treasury will take several weeks, a draft of contract not yet having been handed to the Bolivian Ambassador for transmission to La Paz.
- 2.
- Stabilization arrangements entered into by the Treasury must directly involve the Government. They are in no sense loans, which our Treasury is not directly empowered to make. They are rather monetary arrangements in which the Treasury on request purchases Bolivian currency which is held for its account by the Bolivian Treasury or Central Bank, which in turn is credited with the dollar equivalent at the Federal Reserve Bank of New York. The arrangement calls for the repurchase of the bolivianos by Bolivia for dollars under certain terms and conditions at the request of our Treasury. Provision would be made for periodic meetings to consider the boliviano—dollar exchange relationship and other relevant monetary matters. They provide a basis for complete collaboration by the monetary authorities of the two countries.
- 3.
- Since the Treasury holds bolivianos, it is not felt desirable to request additional security in the form of gold. A loan against gold is hardly more than a mere facility since the Federal Reserve Bank or any commercial bank under appropriate conditions and with a nominal rate of interest would be prepared to make such an advance. The type of operation contemplated by the Treasury provides a real secondary reserve for seasonal or special balance of payments fluctuations, and would strengthen the boliviano both for psychological and directly economic reasons.
Please continue your efforts to accomplish the transfer of the Standard Oil payment, and inform the Department of any developments.77
Welles