Memorandum by Mr. Spencer M. King of the Division of North and West Coast Affairs to the Director, Office of American Republic Affairs (Daniels)
Subject: Interim Credits for Bolivian Development Corporation
You will recall that we decided to support the Bolivian Ambassador’s request that the Export-Import Bank make available to the Bolivian Development Corporation (BDC) sufficient funds to enable it to continue maintenance and limited construction operations on the Cochabamba–Santa Cruz Highway until such time as a credit for the project’s completion by a US contractor was arranged. We agreed that the Ambassador’s fears of serious repercussions and waste of material and equipment, were operations to be suspended, appeared well founded.
On December 21, word was received that the Staff of the Export-Import Bank was prepared to recommend that the Bolivian application for interim credits be denied. However, in view of the political implications of such a move, the Staff agreed to present the subject to the December 22nd meeting of the Board of Directors without recommendations. It seemed that the Staff’s opposition was based on several unproven assumptions which, in brief, indicated a belief that BDC did have adequate funds in spite of contrary information received from La Paz and the Bolivian Embassy here. With my collaboration, ED prepared a memorandum for Mr. Thorp1 with the result that the Board meeting postponed final consideration until the meeting [Page 343] to take place on the 29th. Meanwhile, a telegram was sent to Embassy La Paz requesting up to date figures on the financial position of BDC and the Embassy’s estimate of possible repercussions were all operations to be suspended for the time being.
The Embassy’s reply (telegram 638, December 23, copy attached),2 although agreeing that a suspension of operations would have undesirable repercussions, indicates that BDC can continue its present operations through the first quarter of 1949 with a deficit of only 2,500,000 bolivianos (US$59,523.81) for the period. This information contradicts the Bolivian Ambassador’s statements that BDC is without funds and must have interim credits of $175,000 per month or operations will be suspended. However, the Bank has been of assistance in that an amortization payment of $142,000, due from BDC on December 31, was postponed recently until June 30, 1949, thus making this amount available to finance current operations. BDC also will be able to draw $130,000 remaining from the $320,000 Export-Import Bank credit granted in October as reimbursement to BDC for expenses involved in the completion of the survey and plans by PRA.
This leaves the Department with no good reason for urging that interim credits be granted, especially since the Bank hopes to decide on the application for $26,000,000 within the next two months. Unless we indicate otherwise, ED will withdraw its recommendation and the meeting of the Board of Directors on the 29th undoubtedly will refuse the Bolivian application for interim credits. I see no reason to interfere.3