740.34112 RP/12a: Telegram

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

137. Department and Eximbank do not deem it advisable to indicate, even by discussion, possibility that the Bank would consider additional lines of credit to Paraguay for purpose referred to in your telegrams 98 of February 16 and 178 of March 2774 during time that payments to Bank are in arrears or thereafter until Government [Page 1498] of Paraguay has evidenced its intention and ability to meet installments promptly.

It is assumed that you have already informed Paraguayan officials of the previously stated position of Department and Bank that United States should be requested to furnish financial assistance to effect a program of eliminating undesirable interests only in the event and to the extent that local capital cannot be made available for such purposes. Please emphasize arguments against unnecessarily creating dollar obligations and thereby placing a burden on future dollar exchange position of Paraguay in order to carry out a program which will involve payments solely in local currency. It may be possible to finance purchase of Axis enterprises by issuance of Paraguayan bonds, to be deposited in blocked Accounts.

For your confidential information you are advised that even if it should later appear that extension of dollar credits is necessary and circumstances are appropriate the Bank in such event would consider extending such credits only to and against the unconditional obligations of Banco de la República or if that should not be practicable directly to Government of Paraguay.

Hull
  1. Latter not printed.