823.51/2–2747
Memorandum by the Director of the Office of American Republic Affairs (Briggs) to the Assistant Secretary of State for Economic Affairs (Thorp)
The Administration of President Bustamante is engaged in a desperate effort to maintain civil liberties and to avoid seizure of the Government by radical elements of the Left or the Right. Should President Bustamante fail in this effort, there would be a distinct possibility of a bloody and costly civil war with marked repercussions throughout the hemisphere.
A critical lack of dollar exchange has given rise to a basic economic problem which, if unsolved, will sharply reduce the President’s chances of creating stable political conditions.
Peru requires a long-term federal credit of at least $20,000,000 to create greater economic stability. There is presently under consideration in the Treasury a Peruvian request for a $20,000,000 stabilization loan. There is doubt in many quarters of the Department that short-term loans such as Treasury is authorized to extend will be sufficient to permit a solution of the problem. Development loans through the Eximbank or the International Bank would also be insufficient to meet the immediate problem in that results would not accrue for several years. The most hopeful possibility that occurs to me is that the World Bank is authorized to grant long-term stabilization credits.
As it is a matter of major interest to this Government to provide President Bustamante with such economic assistance as will strengthen his hand in the present crisis, it would be appreciated if [Page 1006] you would endeavor to find some way in which assistance might be extended. Specifically, I would like to suggest three steps:
- (1)
- To request the NAC to make a determination as to whether the American representative on the World Bank would be authorized to approve a long-term stabilization credit to Peru of between $20,000,000 and $30,000,000.
- (2)
- To request a prompt determination from the Treasury with respect to the pending Peruvian request.
- (3)
- The Department should use its good offices with a view to persuading the Foreign Bondholders Council to issue a moderate rather than harsh statement to the bondholders if the Peruvian Congress approves a unilateral settlement which is close to the most recent suggestion by the Finance Minister, i.e., annuities after six years of 2–1/2% interest and 1/2% amortization.