The Ambassador in Uruguay ( Dawson ) to the Adviser on Political Relations ( Duggan )
Dear Larry: With reference to your letter of November 30 in reply to mine of November 14 regarding the proposed Export-Import Bank loan to Uruguay for public works:
The memorandum which President Baldomir was to have had prepared regarding the revised program and the quantities of iron and steel required has at length been received from Dr. Guani. It proved to be very disappointing and illustrates again our extreme difficulties in obtaining a well-documented proposition from the Uruguayans. The trouble lies partly in the lack of coordination among the various government offices concerned.…
In view of the character of this memorandum, I fear that in the time that remains before Dr. Guani’s arrival in the United States it will be impossible to present to the Export-Import Bank a detailed program to be approved in advance of granting the loan. I am nevertheless transmitting a copy of the original Spanish text, together with a translation, for what the information may be worth—and also for the files, in case reference were to be made to the memorandum subsequently. In an effort to supply some of the missing information, Dr. Gilmore46 of my staff has prepared a supplementary and much more useful memorandum which I also enclose.47 He concludes that while the program as now described in the Uruguayan memorandum does not clearly involve the substantial reduction in iron and steel requirements which was requested, it is still of such a flexible character that, given financial assistance, the Uruguayan Government can proceed without much reference to materials shortages. As I have stated in previous letters and despatches it seems entirely possible and desirable to omit the question of imported materials from consideration.[Page 728]
Since the presentation of a detailed program for approval in advance appears out of the question within the time available, I would like to inquire whether, as I understand from Dr. Spaeth was done in the case of Venezuela, it would be possible for the Export-Import Bank to open a blanket credit for public works—if necessary with the provision that the funds would be made available upon subsequent approval of the projects involved.
Some arrangement of this sort appears to offer the most promising possibility of concluding a loan during Dr. Guani’s visit, and also of giving the Uruguayan Government something tangible upon which to base its calculations for the ensuing fiscal year. Whether or not it would be acceptable to the Uruguayans would probably depend largely upon the extent to which the Export-Import Bank insists upon detailed supervision of the subsequent expenditures. As I have previously stated, a considerable amount of liberty of action will have to be left to the Uruguayan Government in expending the funds. A method of control requiring detailed prior surveys of projects to be financed would, I believe, prove impracticable. Some form of certification that the funds have been expended for the intended purpose would probably be as far as it would be possible to go. I would greatly appreciate knowing as soon as possible (1) whether a blanket credit of this type could be granted, and (2) the nature of the minimum control procedures which the Export-Import Bank would require.
I am of course continuing my efforts to obtain from the Uruguayans a more adequate presentation of their loan application. It would probably be helpful if I might have samples of documents presented to the Export-Import Bank in connection with previous loan applications of a similar character.
I may add that Dr. Guani suggested the other day that the matter could be handled more easily if, instead of lending Uruguay funds for public works, we would acquire some of Uruguay’s bond issues which have not been marketed and are still in the hands of the Government or Government institutions. He said that this would achieve the desired result of reducing the pressure on the local bond market. I told him that I did not consider this practicable. (As I understand it, the Export-Import Bank could not or would not consider an operation of this sort, and according to our information it is quite unlikely than any commercial bank would be interested.)
For the record, the Uruguayan memorandum and Dr. Gilmore’s memorandum are being transmitted under cover of a despatch (no. 1930 of December 1148). An extra copy of the despatch is attached to this letter—and the original and usual copies are being sent in an [Page 729] envelope addressed to you in order that you may arrange for such action as you consider expedient.
With cordial personal remembrances,