823.51/1557
The Ambassador in Peru (White) to the Secretary of State
[Received June 10.]
Sir: I have the honor to inform the Department that the seventh formal conference between Finance Minister East and Dr. James G. Rogers took place at the Central Reserve Bank of Peru from 4:30 to 6:15 on May 31.…
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Mr. East reiterated and emphasized his previous assertion that all of the Peruvians desire to meet the debt obligations in the fullest extent consistent with the economic possibilities of the nation, which is the same statement ex-Finance Minister Dasso made in Washington when he signed the various agreements with the United States and which he, President Prado, and others have declared consistently since that time.
He said that no one would criticize Peru for not attempting that which the evident figures prove cannot be done, but that all would criticize her for promising to do the impossible and then failing.
The Department’s Aide-Mémoire of May 22,64 and the notes from this and the British Embassy to Minister of Foreign Relations Solf y Muro, all of which were firm and authoritative, made no visible impression on Mr. East or Dr. Solf.
There probably would be no difficulty in pursuing the conversations further, here or in the United States, now or later, with any [Page 1583] representative group of Peruvians and Americans; but we feel the results will always be the same so long as reliance is placed exclusively on the expert discussion of figures, precedents, Peruvian economics, delinquencies, duties, etc.
Only the balancing of advantages against advantages will bring results. Various general suggestions have been made over the years, and particularly in the different despatches of this series, which are listed at the end of this communication. Of several practical plans, the following in outline impresses the Embassy as the most feasible. It is based on the idea that the United States has underwritten its agreements and good neighbor policy with Peru to the extent of millions of dollars and has paid. Against this Peru has placed an unfulfilled promise. Peru argued she could not pay before because she had no dollar exchange. After 70 to 100 million soles of her annual cotton crop (all sold in dollars) has been guaranteed; all of her flax, rubber, most of the minerals and metals, rotenone, and quinine have been sold at high prices under contract for one or more years or the duration; all her sugar and petroleum disposed of under exceptionally good conditions and largely to the United States or through United States lend-lease; her military establishment renewed without payment so far; her food situation, sanitary conditions, and educational facilities improved with extensive United States funds,—in short, after the preponderant bulk of her entire exportable production has been sold—mostly to us—and prosperity has attained unprecedented proportions, Peru still cannot serve the debt, or at least spare more than $616,000.
The plan envisages rewriting all of the existing special agreements with Peru into one document to be observed by all of the United States Government.
Welfare and service agreements, such as those dealing with foods, sanitation, education, agricultural stations, possibly the naval, air, and military missions, could continue as usual, but the sums contributed by the United States would go integrally into a debt fund. Peru could defray all of the expenses in soles, since all of those so far consulted seem to be in agreement that foreign exchange is the only problem.
Many or most expenses of the United States Embassy; Vice Consulates; FEA; Military, Naval, and Legal Attachés; Carnegie Magnetic Observatory; Pan American Sanitary Bureau; Rubber Development Corporation;—in short of all American official and other operations not directly affecting exchange produced from ordinary trade could be handled in the same way.
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There are those who assert we cannot use these bargaining items because we need the commodities, but it is equally certain Peru needs [Page 1584] to sell them. Others say we must offer agreements to Peru because we promised the same conditions to other American nations. But the others have settled their debt problem or rendered effective and costly war service in one way or another.
I believe it is entirely our responsibility to determine whether Peru resumes service, and that she will do so if we provide and require the fulfillment of a rational plan.
It is almost inconceivable that conditions will again be so favorable. And even if they should be, we have been reminded that the following items are obstacles to overcome:
- 1.
- Peruvian internal development.
- 2.
- Lend-lease.
- 3.
- UNRRA.
- 4.
- International bank.
Respectfully yours,
- See telegram 542, supra. ↩