The Ambassador in Paraguay (Beaulac) to the Secretary of State
[Received May 21.]
Sir: Referring to the Department’s telegram No. 168 of May 10, 7 p.m.48 in which it is stated that consideration of the possible allocation of the remaining $450,000 of the Export-Import Bank credit is being held up because of Paraguayan arrears, I have the honor to report that, as stated in my despatch No. 728 of April 19, 1945, I reminded Dr. Juan Plate, Minister of Finance, of Paraguay’s indebtedness several weeks ago. I mentioned it again to him this morning, in a long conversation, a portion of which I reported in my despatch No. 774 of May 1148 (subject: “Reports Reaching Embassy with Reference to Asunción Waterworks Project”).
Doctor Plate said that he hesitated to say exactly when Paraguay’s Export-Import Bank indebtedness would be cleared up, but that he hoped to clear it up next month.
Doctor Plate is an honest, able and conscientious Minister of Finance, and so long as he occupies his post, I believe that neither the Department nor the Export-Import Bank need be preoccupied about Paraguay’s maintaining service on the Export-Import Bank credits, although some delay in meeting specific payments may be expected in the future as in the past.
With reference to the proposed allocation of the remaining $450,000 of the Export-Import Bank credit, I stated in my despatch No. 728 of April 19 that I did not consider that any additional credit should be extended to the Paraguayan Government until service of the credits already granted had been brought up to date, nor did I think that the Paraguayan Government would request additional credits until this had been done. Those are still my opinions.
I took advantage of the opportunity this morning to discuss with Doctor Plate the proposed allocation of the remaining $450,000, and he agreed, in principle, to the allocation, although he made no request in connection with it.
He said that Paraguay’s most urgent need was for a sound financial plan, which he hoped to draw up. He said that it was very difficult for the Paraguayan Government to know today how much it could afford to borrow outside or whether it could afford to borrow outside. He said he hoped that such a plan would be drawn up shortly.
In partial explanation of the Paraguayan Government’s delay in servicing the Export-Import Bank loan, I may say that the service [Page 1302] of this loan is a heavy burden on Paraguay’s finances, although a burden which the Government can meet under the present circumstances, and intends to meet. It is, of course, lamentable, from the viewpoint of Paraguay’s ability to service the loan, that the construction of the two highways which we financed in Paraguay should have coincided with a sharp curtailment of supplies of gasoline and tires as a result of the war. This curtailment has made it impossible, of course, for Paraguay to exploit the highways or to utilize them to produce revenue with which to pay for them.
The situation is particularly difficult from this viewpoint because Paraguay’s quotas of gasoline and tires are based on consumption during pre-war years, when not a single kilometer of modern highway existed in Paraguay. Paraguay now has several hundred kilometers of all weather highways, financed through Export-Import Bank credits, but because of gasoline and tire shortages there is not enough traffic even to keep the highways in reasonably good condition. In subsequent despatches I intend to bring this situation to the Department’s attention in greater detail, with the hope that some improvement may be brought about.
In summary, therefore, I am certain that service on the Export-Import Bank credits will be brought up to date in a few weeks. It is possible that after that time the Paraguayan Government may request an allocation of the remaining credit along the lines suggested in my despatch No. 580 of February 22, 1945.49 I hope that the Department and the Export-Import Bank will be sympathetic to the Paraguayan Government’s request when it should be made.