823.24/5–1348

Memorandum of Conversation, by Mr. George H. Owen of the Division of North and West Coast A fairs

confidential
Participants: Ambassador Alfredo Ferreyros of Peru
Mr. Sheldon T. Mills, Chief, NWC
Mr. George H. Owen, NWC
Mr. Charles W. Kempter, EP

At the request of Mr. Mills, Ambassador Ferreyros called at the Department this morning to discuss settlement of the Peruvian Government’s [Page 726] Lend-Lease account on which a balance of over $2,800,000 is still due. Mr. Mills recalled that the matter had already been discussed with the Ambassador earlier this year, when officials’ of the Department had informed the Ambassador that, in view of the difficult dollar exchange situation prevailing in Peru, the Department would give consideration to any proposal on the part of the Peruvian Government to settle the account in Peruvian currency, which could be used in connection with our foreign building program.*

Mr. Kempter said that if the Peruvian Government contemplates making such a proposal, the Department is anxious to receive it as soon as possible. He said that a demand was now being made for a payment of soles against Peru’s obligation of $600,000 under the Surplus Property Credit Agreement1 and, since these funds are available for expenditures in Peru in connection with cultural activities under the Fulbright Act, our program for the construction of Embassy buildings, which is already under way, would benefit by the collection of the Lend-Lease account, likewise in soles, for the completion of the program. If no arrangement is made with respect to the settlement of the Lend-Lease Account there would be no funds available for the cultural activities. Mr. Kempter also said that the Lend-Lease account should be converted into soles at the rate of exchange normally available to our Embassy in Peru, which is the free rate.

The Ambassador expressed his gratification at the suggestion that the Lend-Lease account be payable in Peruvian currency. He discussed the question of the rate of exchange at which the obligation would be converted into soles and maintained that the Peruvian government in any such an agreement would have to apply the official rate of 6.50 soles per dollar. Mr. Kempter pointed out that the conversion at the official rate would result in a substantial loss for the U.S. and that the rate of exchange applied in this case should be the same as that prescribed in the existing Surplus Property Agreements which we have with several countries, wherein the rate specified is the most favorable rate lawfully available to the U.S. Government for government activities,

[Page 727]

The Ambassador reiterated that there might be some legal difficulty involved in agreeing to any rate other than the official one and referred constantly to the “black market rate” until Mr. Kempter pointed out that there was no question of a black market rate but rather the free rate as opposed to the Central Bank rate applied in merchandise transactions. The Ambassador then remarked that, as a practical matter, this free market was a small scale affair and that it would be impossible for anyone to sell a large amount of dollars, such as $100,000, within a single day, without causing a marked fluctuation of the “free rate”.

There was no agreement on the question of the rate of exchange, and Mr. Mills jokingly pointed out that if the Peruvian government insisted on paying the Lend-Lease account in dollars, we would, of course, be obliged to accept.

Mr. Kempter then referred to the proposed sale of several U.S. Naval vessels which had been transferred to the Peruvian Government under Lend-Lease charter party arrangements during the war, and said that it was the intention of the U.S. Government to offer these ships for sale to the Peruvian Government at a nominal price of $68,000, and that this amount could also be applied to the Lend-Lease Account.

Mr. Owen inserted a reference to a claim of the Peruvian Government against the U.S. of $57,000 for damages suffered by the Compañía Peruana de Vapores in connection with the detention of the steamship Marañón in New York in October 1941 and pointed out that, while a request had been made for the appropriate legislation by Congress to pay this claim, such action might not be necessary if the claim were found to be one that could properly be offset against the Lend-Lease indebtedness of Peru. The Ambassador did not indicate that there would be any objection to settlement of the Marañón claim in this manner, except to point out that there might be some provision under Peruvian law which would prevent the government from being credited with the amount of the claim on behalf of the Compañía Peruana de Vapores.2

  1. Memorandum of conversation, NWC, March 3, 1948. [Not printed. Footnote in the source text.]
  2. The United States Government extended to Peru a credit of $600,000 for the purchase of surplus military property payable in Peruvian currency at the option of the United States, under the Surplus Property Credit Agreement of August 8, 1947, not printed.
  3. The fact that our demand for a payment in soles under the Surplus Property Credit Agreement, had been met with an offer by the Minister of Finance of Peru to make payment at the official rate of 6.50 soles was not mentioned at this meeting. See Lima telegram 249 of May 5. [Not printed. Footnote in the source text.]
  4. Note of Peruvian Embassy of November 12, 1947. [Not printed. Footnote in the source text.]
  5. In despatch 876 of October 22, not printed, the Ambassador in Peru (Cooper) reported receipt by the Embassy on October 15 of a communication of October 4, 1948 from the Peruvian Director General of Finance, referring to Peru’s obligation of $530,469.53 for surplus materials and suggesting the offset against this indebtedness of a claim in amount of $57,886.92 against the United States Government by the Corporacion Peruana de Vapores, the settlement of which had been proposed in the sum mentioned by the Department in a note to the Peruvian Embassy in August 1946 (823.24 FLC/10–2248).