821.51/12–1748
The Ambassador in Colombia (Beaulac) to the Secretary of State
Sir: I have the honor to report to the Department press statements made by Messrs. Alfonso Araujo and José Gutiérrez Gomez, concerning the results of the recent Colombian Economic Mission to the United States of which both were members.
In an interview published in El Tiempo on December 11, Dr. Araujo stated that the object of the Mission was three-fold: 1) conclude negotiations for the settlement of the departmental and municipal bond indebtedness. In this connection, Dr. Araujo pointed out that arrangements for the servicing of the bonds were virtually completed. In January, 1949, the first coupon or premium on the new bonds, which have the guarantee of the national Government, will fall due and that the various municipalities and departments now have funds on deposit to cover the initial payment. Dr. Arujo stated that after sixteen years Colombia is now able to settle in full its credit obligations in a mutually satisfactory and equitable manner; 2) obtain credits from the International Bank for Reconstruction and Development and the Export-Import Bank for required public works projects and to relieve present pressure on Colombia’s exchange position; 3) treat on other matters, such as the practicability of the multiple exchange tax and Colombian entry into the General Agreement on Tariffs and Trade.
In answer to a query as to the status of the loan negotiations, Dr. Gutiérrez pointed out that the settling of the question of repayment of the department and municipality indebtedness would undoubtedly make the acquisition of new loans a great deal less difficult. Dr. Araujo said that a loan of U.S. $70,000,000 had been requested from the International Bank for Reconstruction and Development and that full justification as to the need of such loan had been presented to the Bank.…
In commenting upon Colombia’s plan for repayment of any loans negotiated with the International Bank, Dr. Araujo stated that the Bank of the Republic would guarantee all loans and would, in turn, issue equivalent bonds and loan paper to the Colombian public in order to always assure available funds to service the loan.
Referring to Export-Import Bank loan negotiations, Dr. Araujo stated that in addition to the U.S. $10,000,000 which Colombia had obtained for reconstruction purposes and to stimulate agricultural production following the political disturbances of April, another U.S. $20,000,000 loan had been requested. He stated that the Export-Import Bank was giving serious consideration to this loan request. However, [Page 477] before authorizing such a loan the Bank was particularly interested in learning what Colombia’s policy was going to be on such vital questions as the public debt, Colombia’s budgetary expenditures, emission of new circulating media, public credit, multiple exchange tax and Colombia’s position with the International Monetary Fund. Dr. Araujo stated that devaluation of the gold content of the peso, contraction of public credit by increasing bank reserve requirements, and elimination of the 10-point coffee bonus satisfied the requirements of the International Monetary Fund. Pending legislation, he pointed out, would insure a balanced budget during the ensuing year. He added, however, that continuance of the exchange tax in modified form constituted an important revenue-producing measure required to equalize the budget. In concluding this phase of his press comment Dr. Araujo stated that the completion of the pending legislation on the above matters would facilitate an early decision on Colombia’s loan requests.
Commenting on the multiple exchange tax, Dr. Araujo stated that critics had as their principal arguments against the exchange tax the following three points: 1) that it is an indirect tax which falls on the consuming masses; 2) the tax is preferential and favors only one group of commercial interests; 3) the tax has contributed to increased living costs. Proponents of the multiple exchange tax maintain that such tax must remain in effect until there are adequate tariff reforms to insure the needed protection to national production. It was stated that the tax is only transitory in character and that it forms a realistic basis for tariff adjustment in the pending negotiations to enter GATT. In further justification, Dr. Araujo stated that the tax was a much-needed revenue measure and that the various rates of the multiple exchange tax were in conformity with the increases in all other Colombian taxes. In this connection, he pointed out that since 1931, with the sole exception of tariff duties, all other taxes had shown substantial increases. Depreciation of Colombian currency and the increase in the value of imported merchandise warranted the imposition of the multiple exchange tax.
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Dr. Gutiérrez, in praising the new economic law which was enacted by the Colombian Congress on December 14, stated in a press interview, published in El Tiempo on December 15, that the law devaluing the peso by 10 percent to a more realistic base, the approval of a balanced budget, the maintenance of the multiple exchange tax, the individual import quota system, and the quantitative restrictions on imports, the guarantee of prompt international payments, the reorientation of private credit were all measures which would bring normalization and stability to internal commerce without prejudicing [Page 478] international markets, especially in the United States. Dr. Gutiérrez stated that, as he informed the local press on November 2, both the Bank for Reconstruction and Development and the Export-Import Bank of Washington were disposed to consider favorably a loan program for Colombia immediately after the adoption of legislative measures which would place Colombia on a sound economic footing.1 All of these prerequisite to loans from the two banks, Dr. Gutiérrez pointed out, have been met with the present law just enacted.
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Respectfully yours,
Commercial Attaché
- On April 27, 1949 the Export-Import Bank authorized a credit of $3,057,600.00 (No. 365–B) for goods and services for hotel construction. The International Bank for Reconstruction and Development approved a loan of $5,000,000.00 to the Colombian Government on August 17, 1949 for purchase of agricultural equipment. Except for the credit of $10 million authorized to the Colombian Government by the Export-Import Bank on April 13, 1948, no other Bank loans were made to Colombia during 1948–1949.↩