Memorandum of Conversation, by the Assistant Chief of the Division of Caribbean and Central American Affairs (Newbegin)

Colonel Morales López30 called this morning to discuss certain aspects of the Aviateca case. He said that he hoped to go to Guatemala in the near future and in as much as he had personal relations with a number of people concerned, he thought that if he thoroughly understood the Department’s point of view he might be instrumental in bringing about a settlement of the difficulties.

I reviewed with him the developments emphasizing that the Department, as was he and undoubtedly the Guatemalan Government, was interested in settling the matter as promptly as possible. He said that the impression had been gained that the Department was hostile to Aviateca and that this impression was having unfortunate repercussions. I expressed regret that this was the case telling him that our only interest was that adequate and just compensation for the expropriated Aerovias be made to the latter’s stockholders. I informed him that there was no objection whatsover to the expropriation as such but that the compensation had not been prompt nor had it been possible [Page 898] to determine as yet whether the compensation was adequate; that the amount set aside as compensation was reached by Aviateca alone without negotiation with all of the stockholders.

Colonel Morales López then referred to Mr. Denby in disparaging terms. I told him that the Department took the point of view as had been previously pointed out to the Ambassador by Mr. Cochran31 that until definite proof was forthcoming of illicit or improper actions on the part of Mr. Denby, the Department necessarily must consider him innocent. I said that to date no such proof had been forthcoming and that however convinced certain individuals might be, we could not be guided by opinions and hearsay. Colonel Morales López said he understood this perfectly.

I pointed out that much of the delay in reaching a conclusion as to whether the compensation was adequate was due to the fact that the books had not been available to Mr. Denby’s representatives and that they had therefore not been in a position to make their own evaluation of the shares. Stressing that the Department was still not in a position to judge whether the compensation was adequate, I likewise mentioned that Mr. Gherini, Mr. Denby’s son-in-law, was now investigating the matter in Guatemala City and that it had recently been alleged that new difficulties had been put in his way since officials of Aviateca were reviewing the books at the same time. I told him that I could not confirm this latter statement since it was purely unofficial. Colonel Morales López suggested that representatives of Aviateca, Denby, the Guatemalan Government, and State Department, go into the matter together. I replied that whereas this might well afford a method of settling the problem, I was not sure that the Department would be willing to designate a representative for this purpose and probably in any case would not be willing to do so until a genuine effort had been made on the part of Aviateca and the Denby interests to reach a solution by direct negotiation. I asserted that his proposal was one which would require further consideration.

R[obert] N[ewbegin]
  1. Col. Oscar Morales López, Guatemalan Military and Air Attaché.
  2. William P. Cochran, Jr., Chief of the Division of Caribbean and Central American Affairs.