833.51/1001: Airgram

The Ambassador in Uruguay ( Dawson ) to the Secretary of State

A–81. Department’s telegram 569, September 17, 1942, and previous correspondence concerning desire of Uruguayan Government to obtain a dollar loan for public works.

(1)
Contents of Department’s telegram were communicated on September 24 to President Baldomir whose reaction may be summarized as follows:
(a)
Government’s public works program is provisional and highly flexible and will be adjusted to availability of materials and funds and necessity of providing employment in particular areas. President will have memorandum prepared explaining this.
(b)
President states that no scarce materials other than iron and steel will be required; that a substantial part of program (particularly highway construction and work on Carrasco Airport) can be undertaken with little or no imported materials; and that, as respects entire program, Government will “cut its coat according to its cloth.”
(c)
It is apparent that Government is not linking up proposed loan with any commitment to make materials available.
(d)
Instead of 30,000,000 dollars originally mentioned, President is now thinking in terms of a dollar loan to yield 10,000,000 pesos desired promptly in order to stimulate and strengthen local bond market on which Government expects to count for great bulk of deficit and public works financing.
(2)
In view of President’s statements and in order to assist Uruguay in maintaining its economic and political stability, Embassy considers it desirable that loan discussions proceed without reference to material requirements but on the basis that no commitment is given or implied to supply materials for any projects to be financed from loan; that iron and steel requirements must be taken by Government from over-all allocations to Uruguay; and that, since allocations will necessarily be below requirements, it will not be possible to undertake projects requiring any considerable amounts of iron or steel.
(3)
In view of purposes of loan, flexible nature of program, and manner in which projects would have to be undertaken, any loan arrangement should give the Uruguayan Government great latitude to use the funds when and where needed.
(4)
Before recommending that request for loan be presented through official channels, I should appreciate instructions as to whether Department prefers that matter be taken up by Uruguayan Government through its Embassy in Washington.
(5)
Further details by airmail pouch.
Dawson