834.6363/200: Telegram
The Ambassador in Paraguay (Frost) to the Secretary of State
[Received 8:30 p.m.]
100. Union Oil representatives Sherwell and Rubel are apparently making smooth progress toward definitive preliminary agreement along the lines of memorandum submitted to Department. Sherwell has visited not only President34 and all leading Cabinet Ministers but also Archbishop, President of Bank of Republic and chairman of local Inter-American Development Commission. They are stressing that seismograph apparatus from Peru will reach Buenos Aires within fortnight and that crew of 12 technicians is ready to proceed from United States. They stress their ability to go into immediate activity. Summary memorandum handed to President ends with statement contract or contracts to be concluded must merit the approbation of Department of State. It twice mentions that it can supply all needed machinery depending on attitude of American Government. They have asked President to recommend local legal talent to advise them and have requested that dynamite en route from Peru be placed in charge of Paraguayan army.
I have strongly hinted on three occasions to Foreign Minister35 that Department has felt a consortium to be safer for Paraguay than a single company. I have also mentioned this in three informal conversations with Finance Minister during past month and adverted to Department’s offer to place Paraguay in touch with an American consortium. I have even indicated the advisability of caution in making commitments. The consortium suggestion meets no response. The necessity for caution is recognized but both Ministers repeat that their inquiries indicate Union Oil to enjoy general respect as honorable. [Page 1471] They have been flattered by attentions shown them in the United States as well as by deference and affability of Sherwell and Rubel. All the representatives of Union Oil who have thus far appeared have been men of excellent personality and private character. On the other hand, no other American company has sent representatives here since early last autumn and Metzger36 visit then does not seem to have marked any forward step in his negotiations. It is possible that other American petroleum companies which are believed to be aware of Union Oil negotiations may have decided not to persist in attempts here. I have had no communications with them in recent months.
Sherwell states the Finance Minister has indicated that an agreement will be reached with Union Oil and my impression is to the same effect. I should be glad to receive further instructions particularly as to whether proposals covered by letter of January 11 from Hubert C. Ferry to W. H. Geiss37 and submitted by latter to Department should be made subject of comment here by Embassy.
Rubel and Union Oil have informed Government that one or both of them must leave here February 20 so that decision is necessary. They ask “formal manifestation of definitive understanding” on broad outlines as formulated leaving details to be worked out by attorneys sent later from the United States. As indicated, it seems probable they will reach some arrangement unless something intervenes as their approach has been more adroit and assiduous than that of other firms. They have no apparent competitors now showing.