811.516 Export-Import Bank/11–448
Memorandum of Conversation, by Mr. Walter Bauer of the Division of Investment and Economic Development
|Participants:||Mr. Restrepo Jaramillo, Colombian Ambassador|
The Colombian Ambassador, visiting at his request, impressed upon ED the urgent need for Eximbank action on the $50 million loan application. In referring to the principal reason for this application, i.e. the events of April 9, he emphasized that the manner in which the Colombian Government handled the uprising was quite different from the actions of other Latin American governments under similar circumstances and plainly indicated the democratic and liberal make-up of his government. By such inference having laid claim to special consideration of Colombia’s problems on the part of the U.S. he attempted to strengthen his argument by pointing to Colombia’s efforts to establish [Page 467] economic order and President Truman’s reelection as factors creating a particularly favorable basis for economic aid to his country. Although the Ambassador stated that he wished to stress the political significance of the loan and not talk about its economic aspects, he reminded his listeners of the fact that trade between the two nations has shown a constant upward trend over a long period of time and that failure to make the loan might cause this trend to change to the detriment of both nations. At one point in the development of his preamble he recalled that it was the Department which suggested to the Colombian Economic Mission to take the application to Eximbank.
Mr. Whitman assured the Ambassador that the Department is fully aware of Colombia’s problems and her need for economic aid. The principal objection to the loan, however, rests upon its balance of payments features. It is felt in some quarters that other countries are in exactly the same position in which Colombia finds herself with respect to the necessity of equilibrating the balance of payments by drastic curtailment of imports. If there were evidence or assurance that this and other economic controls are actually being applied, present objections to a Colombian loan of less than $50 million might disappear. Also, if it could be shown that the loan is not for general balance of payment purposes, but one to supply Colombia with specific essential capital goods, for example agricultural machinery or transportation equipment, the opposition might be overcome.
In reply, the Ambassador related the following conditions attached by the International Bank to proposed loans: (1) balance the budget, (2) equilibrate balance of payments and (3) devalue the peso and declare new parity following International Monetary Fund recommendations. These steps are being taken. The proposed budget is in balance, and non-essential imports are being eliminated in order to achieve balance of payments equilibrium. For example, no import license for passenger automobiles has been issued for some time. He wished to make clear, however, that if payment of compensation for stocks of merchandise lost during the April events had to come out of the budget, there would be a deficit. In response to Mr. Whitman’s inquiry as to how much $20 million would represent in relation to the Colombian budget it was established that it would amount to roughly 10 percent. According to the Ambassador the Colombian Congress does not question the budget proposed by the Government. A reduction by 74 million pesos is contemplated, but it is very difficult to determine where the cuts should be made. Government expenditures have increased in harmony with the decrease in the purchasing power of the peso. The Colombian budget is modest if the real purchasing [Page 468] power of the peso is applied in the conversion of the figures instead of the official rate of exchange. In addition to the importance of the loan from the viewpoint of budget balancing it will have great political significance not only in Colombia but throughout the Western Hemisphere. It will be viewed in terms of the Good-Neighbor-Policy and Mr. Truman’s reelection. At Bogotá the U.S. delegation issued a declaration to the effect that $500 million will be used for lending in Latin America. The making of the Colombian loan would signify that the declaration is actually valid.
Mr. Whitman pointed out that in this spirit Colombia has already received aid to the extent of $10 million and that in making the loan Eximbank departed markedly from its lending policies. Since it is felt, however, that Colombia needs additional assistance he would like to know whether the Ambassador would accept the previously outlined approach. The Ambassador stated that, originally, Dr. Araujo had no intention to take the $50 million loan to Eximbank. In fact, he had questioned the advisability of doing so, but it had been suggested to him by the Department whose representative Mr. Knapp agreed that this was not an ordinary Eximbank loan proposition. The Ambassador then restated the three broad categories of the loan (i.e. $20 million for replenishment of merchandise stocks destroyed or looted, $8 million for army, police, government equipment and hospital; $22 million for importation of goods essential to industry and agriculture) and inquired into Eximbank’s attitude on the first two categories. Mr. Whitman replied that the Bank is more inclined to make the loan under the third category than to finance the replacement of losses. In the last analysis, it makes no difference under which category the $20 million are being lent because they constitute that much economic aid. But, since Eximbank has the final say, the Department must follow the approach which is most acceptable to the Bank. The Bank prefers to finance expenditures for capital goods which would be of lasting benefit to the Colombian economy and it would also like to make the loan contingent upon satisfactory action by the Colombian Congress.
The Ambassador illustrated the existing dilemma approximately as follows: “We in Colombia need to know what the decision of the Bank is before we can decide what to do; you, on the other hand say that in order to make a decision on the loan you must know what the Colombian Congress will do”. Therefore, he proposed the solution that Eximbank approve the loan on the condition that the Colombian Government take specific lines of conduct in economic matters. The Colombian Government would then be in a position to go before Congress with definite arguments and to say: “Take it or leave it”. Mr. Whitman replied that the Department is thinking along these very [Page 469] lines and that in view of imminent Congressional adjournment, he expects to inform the Ambassador of the outcome more definitely around the end of next week. The Ambassador, while not wishing to insist on $50 million, called to attention that his experience as a banker had taught him the difference between too low and reasonably low. Mr. Whitman emphasized again that he would not be able to give the Ambassador definite figures next week but expected to be ready to discuss specific categories of essential capital goods to be financed and that it is the aim of the Department to bring about some action to aid the Colombian economy.
- Roswell H. Whitman, Division of Investment and Economic Development.↩