834.796/11–2444
The Ambassador in Paraguay (Beaulac) to the Secretary of State
[Received December 2.]
Sir: I have the honor to refer to Embassy’s confidential despatch No. 184 of October 28, 1944.24 As a result of conversations between Mr. George M. Rihl, Vice President of Pan American Airways, Inc., and Mr. Kennedy, a lawyer for that company, and Major Pablo Stagni, Director of the Paraguayan Airforce as well as of Paraguayan Civil Aviation, tentative bases have been agreed upon in principal, which, if acceptable to the home office of Pan American, should result in that entity’s entering Paraguay on an operative basis. These bases are, as yet, strictly confidential and may well undergo substantial change before being finally adopted.
Present plans call for the formation of a new operating company in Paraguay. 51% of the stock of this new operating company would be owned by the local airline of the Paraguayan Government, known as Linea Aerea de Transporte Nacional (LATN). The remaining 49% will be owned by Pan American Airways, Inc. This new company [Page 1466] will take over the operations now carried on by LATN. Basically, therefore, the plan meets the aims previously expressed by Major Stagni. (See Embassy’s confidential despatch No. 12, September 194427).
Inasmuch as the equipment now owned by LATN, which is that transferred from the Airforce to it at the time the line was formed, is of relatively no commercial value, Pan American could not consider it as part of the contribution of LATN. Consequently, Pan American is loaning LATN the capital needed to complete its share of the new company to be formed.
This produces the most difficult and unsatisfactory part of the proposed agreement. Namely, that the new company to be formed will contract with the Linea Aerea de Transporte Nacional for the latter entity to furnish to the new company technicians, ground crews, pilots, and other personnel. This plan amounts to a labor contract between the new entity and LATN, rather than individual contracts between the new entity and individual personnel. As the salary scale paid by any commercial airline such as Pan American is many times those paid by any country like Paraguay to personnel of the armed forces, the prospect of numerous difficult problems is apparent. Presumably, the LATN will contract at relatively standard commercial salary schedules, but pay the actual pilots, technicians and others assigned to the company on a scale much below that, employing the difference for the liquidation of its debt to Pan American incurred for the purpose of obtaining capital to contribute to its share of the new company.
Details of the proposed agreement will follow, provided the bases are acceptable to the home office of Pan American, who will then send technicians and other service personnel to Paraguay, who, initially, will continue present operations of LATN. The first new activity will probably be a complete survey as to commercial prospects on the lines now in operation, other possible extensions, types of planes needed for early development stages, etc. As soon as the necessary equipment is available, recommendations resulting from the study would be placed in effect.
It is the Embassy’s recommendation that any favorable action on Paraguay’s request for six Beechcraft airplanes under Lend-Lease, reported in Embassy’s restricted despatch No. 238, November 11, 1944,27 be delayed, pending the findings of this study.
Respectfully yours,