Memorandum of Conversation, by the Adviser, Office of Economic Affairs (Livesey)

At Mr. Cabot’s78 suggestion, I telephoned Mr. Munro at Princeton that the Salvadoran Ambassador79 had told the Department that the British Chargé d’Affaires80 had taken up the pending bond settlement with the Salvadoran Government. Apparently the principal, possibly the sole, point of protest had been that the holders of the sterling B bonds are offered only three percent interest on the funding bonds to be issued in respect of arrears of interest since 1938 whereas holders of the dollar bonds (eight percent A bonds and seven percent C bonds) are offered three and one-half percent. The Salvadoran negotiators are to see Mr. Munro on this point. I said that those in the Department who had discussed the matter were of the opinion that if this is all that stands in the way of British acceptance of the proposed terms no objection should be offered to giving the British [Page 1118] bondholders the three and one-half percent rate on funding bonds. Mr. Munro said he entirely agreed.

I said that no mention of the rate to be paid on arrears of interest on the B bonds appeared in the memorandum of agreement between Mr. Munro and the Salvadoran negotiators but we had found that in the Salvadoran proposal, of which Mr. Munro had informed the British Council81 through State Department telegram of December 4, 1943,82 provision was made for 50 percent of back interest since 1938 to be cancelled and remainder funded in new bonds at 3½ percent in case of arrears of A and C bonds, and 3 percent in case of B bonds. Mr. Munro reminded me that the telegram of December 4 informed the British Council that he would discuss with his executive committee so much of the plan as affects dollar bonds but that he could not negotiate for sterling bonds and that El Salvador must take up with the British Council the parts of the plan affecting the sterling bonds.

I said that it seemed to me that while it was not unreasonable to base the rates of continuing service on the bonds on a percentage of the contractual interest rates, there was little reason to charge different rates of interest on the new bonds but that it would be reasonable to give a uniform interest rate on the new bonds as compensation for the delay in paying the arrears. It would be fortunate if the British could be induced to assent to the bond plan by giving them a concession on this point. Mr. Munro said that he quite agreed and that he had never thought that the British would be prepared to accept the 3 percent rate on arrears which Mr. Bustamante had proposed for the B bonds.

I said that I had telephoned merely for his advance information and to indicate a point of view. I said that the Department had not received any report from our Mission in San Salvador giving the terms of the British protest delivered there and it is, of course, possible that there may be a misunderstanding as to what were the terms of the protest and what they may have included beside this point concerning the interest on the new bonds.

For the rest, Mr. Munro said that he is trying to get James Grafton Rogers83 to come to New York and agree to go to Peru on the Peruvian bond matter.84 Mr. Rogers has been vacationing somewhere in Western Pennsylvania but Mr. Munro hopes to get him to come to New York in a few days.

  1. John M. Cabot, Assistant Chief, Division of Caribbean and Central American Affairs.
  2. Hector David Castro.
  3. Edgar J. Joint, Consul in San Salvador with local rank of First Secretary.
  4. British Council of Foreign Bondholders.
  5. Not found in Department files.
  6. Mr. Rogers was at this time being considered as successor to Mr. Munro as President of the Foreign Bondholders Protective Council.
  7. For correspondence concerning U. S. interest in the Peruvian debt problem, see pp. 1568 ff.