823.5017/28

The Chargé in Peru ( Patterson ) to the Secretary of State

No. 9120

Sir: I have the honor to acknowledge receipt of the Department’s instruction No. 2999 of January 3, 194483 transmitting a questionnaire on features of price control in Peru and in compliance therewith to enclose a confidential report on this subject prepared by Mr. Hinke of the Embassy’s Economic Reporting Section, accompanied by memoranda84 [Page 1535] prepared by officers of the Requirements and Priorities Section and the Financial Controls Section.

While the Embassy is not prepared at this time to estimate the extent to which Lima wholesale and cost of living indices reflect the present situation in Lima or in Peru, it may be stated with a considerable degree of assurance that the price situation is considerably easier than a year ago, even though prices in a number of lines are actually higher than at the beginning of 1943. The essential point is that in some important lines, such as steel reinforcing bars, prices appear to have reached their peak and to have receded normally as supplies have expanded. The Embassy is confident that the most satisfactory solution to the price situation in Peru, as it affects American merchandise, will be an elimination of controls on trade along the lines now being followed as rapidly as the supply and shipping situations permit.

Essentially, the control of prices in Peru is a problem requiring action by the Peruvian Government itself. In his message to Congress of July 18, 1943, the President of the Republic85 expressed his view that there is no inflation in this country but only ever-increasing prosperity. As a result, the Government has not undertaken to enforce severely its controls over trade and prices except possibly with respect to pharmaceuticals, drugs, basic foodstuffs, and a few other items. Its views on this subject are apparently not unwarranted, since the symptoms of inflation appear to be by no means as serious as are reported from Chile and Ecuador, for instance. In Peru, inflationary trends have appeared rather than inflation itself.

The Embassy is inclined to the view that the time for the United States Government agencies to take a serious view of the price situation in this country seems to be passing, in view of the marked increases in the quantities and varieties of American merchandise supplied to the market in the past six months as a result of the improved supply and shipping positions, and feels that as such supplies are increased the situation here will gradually readjust itself. On the other hand, the Embassy does not perceive how the United States Government can be of material assistance to the Government of Peru in meeting food shortages, largely arising out of its failure to accumulate reserve supplies of rice and flour to meet possible emergencies, or to increase deliveries of meat. This is the area where the price structure and the supply picture have been most unfavorable.

This occasion is taken to reiterate the view expressed in Mr. Hinke’s report that the initiative in obtaining the services of American advisers on price control or fiscal policies connected with the possible freeing of the market for gold in Peru should come from responsible officials of the Peruvian Government rather than from a United States Government [Page 1536] agency, whether directly or indirectly, and the Embassy would be reluctant to suggest to the Peruvian Government at this time that such advisers might be available in view of their known attitude, which is rather unfavorable except as concerns primary necessities.

It may also be mentioned that the Embassy considers that an approach to the Peruvian Government as to the possibilities of selling gold coin, issuing gold certificates or freeing the market for gold bullion would be premature at this time.

Respectfully yours,

For the Chargé d’ Affaires a.i.:
Julian Greenup

Counselor for Economic Affairs
  1. Not printed.
  2. None printed.
  3. Manuel Prado Ugarteche.