Memorandum of Conversation, by the Chief of the Financial Division (Livesey)

Participants: Dr. Fernando Salazar, representative of the Agricultural Mortgage Bank of Colombia;
Mr. Livesey, FD;
Mr. Walmsley and
Mr. Wright, RA.

Dr. Salazar made his excuses for his long silence since his visit of October 3190 but said he had not been idle during this time. He had reported that conversation by a long cable and subsequently had much correspondence with the Mortgage Bank concerning the suggestions developed in that conversation. The Bank and the Ministry of Finance had made a thorough study of the Bank’s condition and had decided that its income was not sufficient to permit it to pay the interest and amortization on the lines then suggested, viz., comparable for the guaranteed bonds with the settlement made of the Colombian National Bonds and, in the case of the non-guaranteed bonds, comparable with the payments made of the sterling bonds.

There had been much consultation at Bogotá and by exchange of letters with him. Unhappily these had not resulted in any new proposals. However, the suggestion has come up that the Colombian Government could issue National Bonds, that is, three percent dollar bonds of the same type recently offered in the settlement of the dollar bonds of the Government of Colombia and offer these in exchange for the dollar bonds of the Colombian Agricultural Mortgage Bank. Dr. Salazar had not been informed of the terms on which this exchange would be made. He had been asked, however, to consult his friends in the Department of State as to (1) whether objection was seen to this method of settlement, and (2) whether it could legally be done from the point of view of laws of the United States.

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In discussion Dr. Salazar insisted that he had not been informed as to the terms on which National Bonds might be offered the holders of the Bank’s bonds. He thought it might be in mind to offer less favorable treatment of arrears of interest than had been given the holders of National Bonds in the recent settlement. This was with reference to guaranteed bonds. For the non-guaranteed bonds he thought that the holders might be offered a reduced capital amount. But on these points he had not been informed. All he was to do was to ask questions as to how this means of settlement was regarded in principle and as to any legal difficulties which could be foreseen.

On the basis of personal opinions he was told that no objection in principle was perceived to a type of settlement in which the Colombian Government would offer to exchange dollar bonds of its own for dollar bonds of the Agricultural Mortgage Bank. The idea might even be regarded as a favorable point of departure. On the legal side it was not perceived that there was any difficulty, although the offer of a settlement of this kind would, of course, have to be registered with the Securities and Exchange Commission in conformity with whatever requirements the Commission may establish, which would probably call for full information regarding Colombian finances and regarding the finances of the Agricultural Mortgage Bank.

It was suggested that on the legal question he might also want to speak to trustees of the Bank’s bonds and to the Fiscal Agent of the National Loan. Mention was also made that American counsel who have been retained in the recent adjustment of the Colombian National Bonds must be highly qualified in such matters as S. E. C.91 procedures, etc., and fully familiar with the question of the Agricultural Mortgage Bank bonds. Dr. Salazar indicated that part of the procedure might be for the Mortgage Bank to sell internal cédulas and pay the proceeds to the Government for assuming the Bank’s foreign debt. He did not define just what advantages would be derived from this but evidently from the Colombian point of view it is regarded as one of the attractive elements in the procedure.

Dr. Salazar expects to return to Colombia early in February and has long since asked the Bank to name his successor. He has never received a reply on this point. He said that if the procedure of the Government taking over the debt is followed, the negotiations might possibly be entrusted to the Embassy, although Colombia had no one here highly qualified to handle such a matter.

Dr. Salazar said that he would at once telegraph Bogotá the expressions of personal opinions which he had been given. He made it very clear that he understood that these conversations were not direct [Page 207] negotiations between two parties but that the State Department was merely offering its friendly assistance and good offices in his mission here.

He said that he would urge Bogotá to send him a detailed proposal with which he could again approach the Department of State. However, … he hardly expected that he would receive a new proposal before he leaves for Bogotá.

  1. See memorandum by Mr. James H. Wright, Foreign Relations, 1941, vol. vii, p. 75.
  2. Securities and Exchange Commission.