834.6363/202: Telegram

The Ambassador in Paraguay (Frost) to the Secretary of State

111. Reference Embassy’s number 100, February 17, 10 a.m. Union Oil representatives were handed Saturday morning, Paraguayan counter proposal providing three exploration rights entire Chaco against payment of approximately $100,000 first year $200,000 second year and $400,000 third. This to give rights to take out as many area licenses as desired under the present law which provides for the [Page 1473] boring of one well in each area within 2 years after each license, life of license being 4 years.

As to exploitation areas thus chosen Paraguayans suggest 30 year contract for mixed exploitation, corporation gross profits to be divided 50% Union Oil and 50% Paraguayan Government from which Government [apparent omission] return 60% towards payment expenses exploration and amortizement installation. In fact scheme works out at net 20% for Paraguayan Government.

Company representatives regard proposal as showing fear lest present Government should be later criticized for having alienated national resources on insufficiently profitable terms plus desire to start bargaining on maximum terms. They conferred informally Saturday evening with President of Bank of Republic Pedretti who has been prominent in negotiations and had extensive interview at 6 a.m. Sunday with Minister of Public Works before taking plane for United States at 9 Sunday morning. They are considering inviting Minister of Public Works, President of Bank of Republic, and Engineer Gaguier38 to proceed to Los Angeles at Union Oil expense to continue negotiations. Meanwhile they are stating that seismograph exploration apparatus due Buenos Aires early March will be at once shipped elsewhere. I have suggested that Paraguay’s counter proposal be furnished to the Department and to the Embassy. Company representatives remaining here have no copy but will telegraph to Rubel and Sherwell en route. Representatives now remaining here plan to leave in near future.

Frost
  1. Presumably Fernando Saguier Caballero, technical consultant of the Minister of Public Works.