Foreign Relations of the United States, 1949, The United Nations; The Western Hemisphere, Volume II

821.51/11–1549: Telegram

The Ambassador in Colombia (Beaulac) to the Secretary of State

confidential

Bogotá, November 15, 1949—6 p. m.

627. Deptel 365 November 10.¹ Embassy’s suggestion re future loans to Colombia by Exim Bank and International Bank is that persons in our government having duty and authority to pass on loan applications give careful thought to contents Embdes 644 October 19¹ and especially to Currie mission report² which presumably will go into all pertinent phases Colombia’s economy and that after they have done this a decision should be made as to whether, before granting further loans to Colombia, serious conversation should not be held with Colombian authorities re Colombian Government’s attitudes and plans in the fields of economics and finance. If those attitudes and plans indicate Colombian Government intends to continue to seek a constantly increasing degree of autarchy and State control of private activity and to give little or no real encouragement to investment of foreign private capital in Colombia, then I suggest Colombian Government be informed politely but clearly that future loans will be related to the degree to which Colombia is willing to liberalize its trade practices and make a greater effort to attract private investment.

Embdes 644 of course raises an important question of principle, which is not limited in its application to Colombia, and that is whether the loans we make or finance will have as a result the encouragement of liberal trade practices (which in turn are directly related to the progress of democracy in the Embassy’s opinion), or whether they will have the opposite result. It also is based on following premise:

(1) That prudent government bankers like prudent private bankers in scrutinizing loan applications have not only the right but the obligation to inquire into the details of the applicant’s business; (2) that Colombia like other subscribers to the International Bank is committed in various instruments to pursue liberal trade policies; (3) the pursuit of liberal trade policies is in the interest of Colombia’s credit; and (4) Exim and World Bank credits are not intended to substitute for private investment.

With reference to agricultural loan granted recently by World Bank³ and, having in mind general principle referred to above and not economic justification of loan, Embassy considers that withholding of loans for considerable period was directly responsible for (1) Balancing of budget by Colombian Government; (2) Elimination unfavorable exchange balance; and (3) Equitable agreement for reimbursing Electric Bond and Share for value of power plant expropriated by Cali municipal government. Granting of small loan for agricultural machinery in these circumstances probably had, in balance, a good effect but we believe granting of extensive loans without considerable improvement by Colombian Government in direction of liberal trade practices would have effect of confirming present trend toward economic and political authoritarianism.

In any event, Embassy assumes no loans will be made to Colombia until domestic political situation improves.⁴

Beaulac

1. Not printed.
1. Not printed.
2. See the memorandum by Mr. Gerberich to Mr. Miller, August 18, p. 611.
3. On August 18, the Colombian Government had announced approval by the IBRD of a $5 million loan to Colombia for purchase of agricultural machinery.
4. No loans were extended to Colombia during the remainder of 1949.