The Acting Secretary of State to the Ambassador in Colombia ( Wiley )
48. ReEmbs no. 4 of January 2; no. 10 of January 3; no. 51 of January 10;62 no. 54 of January 10. In view of the general Colombian attitude with regard to the coffee quota increase the Department wishes to make the following observations for the information of the [Page 872] Embassy. The Embassy may, at its discretion, use certain of this information, should it have occasion again to discuss the matter with officials of the Colombian Government.
Except as related to the attempt to force higher coffee ceiling prices, the change in the Colombian attitude with regard to quotas is quite startling. It was stated in an official document presented by the Colombian delegate to the Coffee Board on March 31, 1944 that the operation of the Coffee Agreement63 had demonstrated “that the quota of Colombia clearly proved insufficient to absorb an adequate part of Colombian production”. He introduced a resolution in April 1944 for an increase to 200 percent. This was apparently the occasion to which President López refers (Embassy’s no. 4, January 2) as the time when he intervened in an effort to secure higher quotas.64
Before Colombia consented on May 31 to renewal of the Agreement unchanged for a year following October 1, 1944 the Colombian delegate proposed a motion that the Coffee Board recommend to the participating governments an increase in the Colombian share of the total quota to about 24 percent. This policy was reversed when the Colombian delegate voted on December 28, 1944, along with Brazil and Haiti, against the quota increase effected by the Board.
It would appear that Colombia stands to gain more than any other country from a large quota since she has relatively more coffee that would find a ready market in this country. If it was Colombia’s main concern in seeking a larger portion of the basic quota to secure for herself a greater share of this market, present circumstances give her an admirable opportunity to accomplish this.
President López seems to believe that the United States in some way insists that Colombia meet its new increased quota with attendant increases in holdings of “unwanted American dollars”. While we hope that Colombia will ship as much coffee as possible, this country cannot and does not compel any country to export increased quantities against what it regards as its own interests.
With respect to the inflationary effects of accretions of dollar exchange as a result of the quota increase, it may be observed that such effects are not a necessary concomitant of increases in holdings of dollar exchange since these could be offset by any of a number of anti-inflationary measures such as have been used in other countries.[Page 873]
Furthermore, the opposition of President López to the quota increase on the grounds of the impetus it would give to inflation in Colombia seems not consistent with Colombian efforts to have coffee prices raised, as this would have a like effect, although probably of a different magnitude.
Information has come to the Department which suggests that the Colombians might be willing to sell us substantial amounts of coffee provided some assurance is given that they may receive in exchange merchandise rather than dollars. The Department invites the Embassy’s comments on this information.