834.51/405a
The Secretary of State to tine Ambassador in Paraguay (Frost)
Sir: There are enclosed for your information copies in English and Spanish of a draft agreement29 between the Export-Import Bank and the Republic of Paraguay which was handed to the Paraguayan Ambassador by Mr. Pierson of the Export-Import Bank on June 3, 1942.
You will note that the contract establishes in favor of the Republic [Page 661] of Paraguay a line of credit of $3,000,000 to be utilized for projects approved by the Export-Import Bank. The type of project which can be financed under the credit is treated in very general terms in the contract in Article One. Any withdrawals under the credit are to bear interest at the rate of four percent per annum, the principal to be repayable in twenty semi-annual installments. No principal payments are to be made for two and one-half years after the date of the issuance of a note by the Republic of Paraguay evidencing a withdrawal under the credit. Principal payments then become due over the next ten years, increasing gradually from a rate of one percent of the face value of the note semi-annually during the first two years to nine percent in the last two years.
There is also enclosed for your information a copy of a memorandum30 which was handed to the Paraguayan Ambassador at the same time as the draft contract, setting forth the procedure which should be followed by the Paraguayan Government in order to execute the contract with the Bank.
The Paraguayan Ambassador is studying the contract and will probably transmit it to his Government for approval. The Department feels that the contract in its present form should be acceptable to the Paraguayan Government.
Very truly yours,