Memorandum by the Chief of the Division of North and West Coast Affairs (Mills) to the Director of the Office of American Republic Affairs (Daniels)


Subject: CP Insistence Colombians Comply with Our Trade Policy Program if Loan is to be Granted

At meeting which took place in my office on July 28 Mr. Saugstad stated that U.S. shipping interests wished the U.S. to hold up action on any loan application from Colombia until Colombia removed discriminations against foreign shipping.

I took the position that our policy should be to consider loan applications on their merits and not use loans as a club to obtain economic advantages. Later August 19 Mr. Gerberich and I provided Mr. Saugstad with a statement that in our opinion action on the loan application should not be made contingent on removal of the shipping discriminations.

A second meeting was held on August 27 to discuss whether the Colombians should be advised that their action towards U.S. oil companies might have an effect on the loan. It was decided, later in a meeting in your office, that the Colombians should be told that their attitude towards the oil companies appeared to be having an adverse effect on the investment of foreign capital in Colombia and this is of importance in considering their balance of payments position which, in turn, is of great importance in deciding whether Colombia can service a loan. This was done by Mr. Knapp later in the month.

During the August 27 meeting Mr. Hobbs of CP asked whether we could not tie in with the loan, Colombian action on exchange taxes. The others present at the meeting were opposed. Hobbs indicated that CP very likely would insist on such a tie in.

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I had long and involved discussions with CP regarding our reply to an inquiry from Ambassador Beaulac as to whether the loan application would be affected by Colombia’s violation of the Trade Agreement. The answer finally agreed on (section 6 Deptel 476 Sept 141) reads as follows:

“6. Re Eximbank loan application, Bank’s policy is consider applications strictly basis economic justification, and Dept not in position to offer loan as quid pro quo for settlement outstanding issues. However, economic policy applicant Govt, including attitude tariff and trade, has important bearing upon attitude Dept and other agencies on Natl Advisory Council which must make recommendations to Eximbank re loan.”

The Eximbank has approved advising the Colombian Government that it will “consider” a loan of $20 millions providing the Colombian Government carries out the fiscal reforms prescribed by the International Monetary Fund. The NAC has approved this action.

Any follow-up telegram which CP wishes to send on the loan should, in my opinion, not be in contradiction with the excerpt quoted above from Deptel 476.

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