Memorandum of Conversation, by Mr. H. Gerald Smith of the Division of Commercial Policy and Agreements

Señor Chavez called to discuss the general provisions of the proposed agreement, bringing with him a Spanish draft which had been approved by Señor David Dasso, Peruvian Finance Minister now in Washington. It became apparent, after examining a few of the articles, that the Peruvian officials in Lima had made a translation into Spanish of the Department’s draft general provisions of June 1941 [Page 686] rather than the revised draft of January 1942. Señor Chavez therefore made changes from time to time to bring the style of the draft in Spanish into line with the revised English draft.

There were no questions of substance raised by the Peruvians on the Preamble nor on Articles I, II, III, IV and V. Señor Chavez mentioned, incidentally, that the Finance Minister had vetoed a proposal from Lima that the provision for national treatment on internal taxes in Article II be eliminated.

In Article VI Señor Chavez said that it was the desire of the Finance Minister, under the second paragraph, that the provision be dropped for thirty days advance notice on changes by administrative ruling. I explained to Señor Chavez that we regarded this as a matter of some importance, it was of value to both countries, its inclusion prevented the working of hardships on traders as a result of sudden tariff changes and we therefore hoped that the Finance Minister would consider the possibility of including the thirty-day provision, which had appeared in trade agreements with most other countries. Señor Chavez said that he would bring this to the attention of the Finance Minister.

With respect to Article VII, Señor Chavez stated that the Finance Minister wished the draft amended so that the Peruvian Government, if it were faced with a difficult situation as a result of loss of customs revenues from currency depreciation or other causes, would be enabled to increase the rates of duty or surcharges on imported articles included in Schedule I. Señor Chavez referred particularly to the recent situation as a result of which the Peruvian Government had found it necessary to impose a flat 20 percent surcharge on basic customs duties in order to compensate for depreciation of the sol. I told Señor Chavez that in formulating our requests for concessions we had endeavored to be modest in our requests; in fact, including both requests for reductions in duty and bindings of existing rates, our requests covered only 20 percent of total Peruvian imports from the United States in 1940. Therefore, if the Peruvian Government at some future time found it necessary to take the action contemplated, there would be 80 percent or more of imports from United States which would not be affected by the provisions of Article VII binding basic rates of duty and supplementary charges on Schedule I products. I also told Señor Chavez that it would probably be difficult to explain to exporters in this country why, when we had received concessions on 20 percent or less of our shipments to Peru, even that 20 percent could not be guaranteed against less favorable customs treatment in the future. Señor Chavez seemed to appreciate these points and said that he would pass them on to the Finance Minister. However, as he still had some doubts as to whether the Finance Minister would accept these arguments, I pointed out to Señor Chavez [Page 687] that, leaving Articles VII and VIII as proposed by this Government, if the Peruvian Government at some time in the future should find itself in an extremely difficult financial position and should need the additional revenues from an increase in customs duties on scheduled products, I was sure that this Government would give sympathetic consideration to any proposals which the Peruvian Government might make looking toward the relief of their financial situation. I told Señor Chavez that this was precisely one of the things that could be considered by the Mixed Commission which was provided for under the second paragraph of Article XI.

I told Señor Chavez that during the next few days we might possibly want to advance a proposal regarding the binding of export duties and taxes on scheduled articles. I told him that I did not have a definitive proposal on this but I merely wanted to let him know that we might wish to bring it up a little later.

At this point Señor Chavez had to leave to keep another appointment and it was agreed that the discussion would be continued the next day.