The Ambassador in Colombia ( Beaulac ) to the Secretary of State
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Replying to Department’s request for comment concerning political situation and probability Colombia would honor loan commitments, Embassy’s impression is political situation still delicate. I believe chances are either political party would honor loan commitments although impossible to be categoric and violation trade agreement not reassuring.
Embassy notes from Department’s 459, August 24,1 that, in addition to 10 million dollar loan already granted and 50 million dollars requested [Page 447] of Eximbank, Colombia also requesting 83 million from International Bank.
While Embassy is of course uninformed concerning details of loan applications or possible justification, it favors granting economic loans Colombia under circumstances calculated to be helpful to Colombia and to US. One of most interesting of Colombia’s loan requests is that to improve agriculture. This partly documented by US agricultural mission. Suggest priority be given to this application and loan be granted if bank convinced proceeds will be economically efficiently invested. This loan important not only from economic viewpoint but also from viewpoint political stability Colombia.
Satisfactory action Colombian Congress along financial and economic lines, would doubtless favorably influence consideration remainder of Colombia’s loan requests. In latter connection Department and Eximbank will wish to bear in mind that Colombian Government’s attitude toward oil companies, principally in labor matters, has caused latter to restrict investments Colombia with result dollar income this source being curtailed and possible increase petroleum production which would further improve Colombia’s dollar position and economy, is being prevented.
In considering Colombian Government’s attitude toward petroleum industry and relationship to extensive new financing by US Government, it should be borne in mind that oil company difficulties which have resulted in curtailed operations arise principally from activities of labor under direction Communist Party members or former members. Furthermore principal objective these labor leaders and frequent illegal costly strikes they provoke is to obtain increasing influence over and possible control of management of oil companies, doubtless for purposes of further curtailing or interrupting petroleum production Colombia. Reiterated promises Colombian Government that this situation will be adequately dealt with have so far brought little result.
Colombian Government (including Foreign Minister2 and members Colombian financial mission in Washington) has recognized necessity improved attitude toward petroleum companies (Embdes 349 of June 4, 19483) and I suggest that it be encouraged during loan conversations to adopt this improved attitude. This would be in accordance with our policy of encouraging private investments in other American republics and our policy of stimulating petroleum production.
I believe granting of extensive loans in absence of proper attitude toward petroleum companies would encourage Colombian Government [Page 448] in its present attitude which results in restricted oil production in face of urgent world demand, and would tend to deprive Colombia and other democracies of gains which would accrue from increased petroleum production. Conversely, action by Colombian Government which resulted in increased operations by petroleum companies would improve Colombia’s economy, make it better risk, and increase probability loans would have economic results and that repayment would be made.