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

823.24 FLC/12–949

The Secretary of State to the Embassy in Peru

confidential

Washington, December 28, 1949.

No. 310

The Secretary of State refers to the Embassy’s confidential telegrams No. 681 of November 21,¹ No. 696 of November 30,² No. 699 of December 1 and No. 713 of December 9, 1949;¹ also to the Department’s confidential telegrams No. 423 of December 8 and No. 430 of December 14, 1949,¹ all relating to the general subject of the Peruvian lend-lease settlement negotiations.

The Department, which has continued to exert pressure upon the Embassy of Peru in an effort to influence suitable action on the lend-lease matter by the Government of Peru, has greatly been aided by the completeness and clarity of the several communications received from the Embassy reporting the course of developments which have taken place in Lima. Through these reports it has become apparent to the Department that the course of the negotiations has become somewhat confused insofar as the Government of Peru is concerned. This is evidenced in the fact that it has been incumbent upon the Officer in Charge to discuss phases of the lend-lease settlement negotiations with so many officials representing as many branches of the Government of Peru and to reconcile the various shades of thinking expressed by each of them. Also, the fact that, after repeated refusals by the Department, in its talks with Ambassador Berckemeyer and with Sefior Pedro Beltrán,³ to discuss settlement terms which would exceed five years for full payment, an offer was made by President Odría which, had it been so much as taken under serious consideration, might have had the effect of committing this Government to a continuing program of payments in the amount of the so-called “token offer” of 300,000 soles per month thus requiring, on the basis of the present uncontrolled rate of exchange, approximately fifteen years for full and final liquidation of the indebtedness.

A copy of the Department’s Memorandum of Conversation of December 2, 1949,⁴ covering Ambassador Berckemeyer’s call to present this “token” offer was sent to the Officer in Charge under transmittal slip. The reaction of the Department was reported briefly to the Embassy in confidential telegram No. 423.

There are transmitted herewith a Memorandum of Conversation dated December 12,⁴ reporting a meeting with Peruvian Embassy officials at the Peruvian Chancery on December 9, 1949, and an attachment⁴ representing a suggested settlement formula which the Peruvians might wish to consider as a model for submitting a formal settlement proposal to the Department. While the coverage of these two documents is sufficiently clear and appears to require no special amplification, the attention of the Officer in Charge is directed to the fact that, although the draft note explicitly indicates a three year term of payment, the Department has stated very clearly that a proposal couched in the same general terms but allowing for a five year term will be accorded most sympathetic consideration. It was on the assumption that a five year settlement would be more readily acceptable to the Peruvians than would a three year settlement that, in reply to the Embassy’s telegram No. 713, the Department, in its telegram No. 430, indicated that an appropriate Peruvian budget appropriation for lend-lease payments in the next fiscal year should amount to $600,000, payable in its soles’ equivalent.

It may be noted that the first paragraph of Section A of the draft settlement formula specifically leaves the acceptance of soles in lieu of dollars “at the option of the Government of the United States”. In our conversations with the Peruvian Ambassador and members of his official staff it has been agreed, in principle, that about half of the total amount due, i.e., $1,500,000, may be paid in soles with the remainder ($1,472,717.84) payable in dollars with convertibility to soles only at the option of this Government.

If the Government of Peru had been prompt in making an acceptable offer of settlement, the Department would have been willing to have given consideration to a reasonable middle rate. With the recent abandonment of the old par value for the sol,⁵ which had long ceased to be realistic, and the adoption of a floating rate determined by supply and demand, it is obvious to this Government that this new rate should apply if the Peruvian Government wishes to propose partial settlement in soles rather than dollars.

The Department, contrary to the possible misconception of some Peruvian officials, does not under-rate the economic and financial stress of Peru either at this time or for the near future. On the other hand it does believe that the terms offered for reaching a lend-lease settlement are neither unreasonable nor prohibitive.

Ambassador Berckemeyer has made it clear to Department officers with whom he has long been engaged in negotiations on this problem that he sincerely regrets that his Government has been so dilatory in its settlement of this long standing World War II indebtedness. The credit standing of a Government is subject to careful scrutiny whenever new accommodations are sought and a record of indifference with respect to past obligations cannot but be a serious impediment. Moreover it has not escaped notice that preferred attention apparently has been given by the Government of Peru to a much more recently assumed commitment to the Argentine Government.⁶

The Department, in deciding to give a new start to the negotiations in the described manner, is most serious in its determination to reach the earliest possible conclusion to the course of those negotiations which, in their earlier phases, were started on March 3, 1948, with former Ambassador Ferreyros.⁷

The continued valuable cooperation of the Embassy is anticipated.

1. Not printed.
2. See footnote 4 to telegram 409, November 25, to Lima, p. 769 and footnote 1 to telegram 699, December 1, from Lima, p. 769.
1. Not printed.
1. Not printed.
3. Chairman of the Board of the Central Reserve Bank of Peru.
4. Not printed.
4. Not printed.
4. Not printed.
5. See footnote 2 to telegram 423, December 8, to Lima, p. 772.
6. On August 22, 1949, Peru and Argentina had concluded a Commercial and Financial Agreement, a copy of which was transmitted to the Department with despatch No. 755, August 31, from Lima, not printed (623.3531/8–3149). On November 21, the Government of Peru published a decree authorizing payment of $1 million to Argentina under the terms of the Agreement (623.3531/12–849; 823.51/12–2749).
7. For pertinent documentation, see Foreign Relations, 1948, vol. ix, pp.725–727 and 734–736.