852.51/4–1349:Telegram
The Secretary of State to the Embassy in Spain
199. Dept has been studying its economic policy toward Spain with particular reference to repeated Span indications of desire to obtain financial assistance from US Govt.1
It is realized in view reported economic situation Spain assistance from Ex-Im Bank cld be very helpful either in form credits to Amer exporters to Spain or direct loans to Span agencies or enterprises. Dept has arrived at decision, which you may communicate Span authorities, that it will no longer object in principle to filing of applications with Ex-Im Bank for credits for specific purposes which wld contribute to Span economic rehabilitation. However any such applications wld be considered by Bank on same basis as those for any other country which means final decision will be made not only basis need for credit and suitability particular purposes to be served but also only if in judgment of Bank there is reasonable prospect of repayment in accordance with loan terms.
[Page 736]You shld emphasize these facts to FonOff and make clear to it that in circumstances: no assurance can be given that Ex-Im Bank will act favorably on loan applications. In fact both Dept and Ex-Im Bank have most serious doubts and reservations at present time as to Span capacity make repayment. Outlook for Span dol balance-of-payments such that even if particular project cld be shown to be self-liquidating in dol terms there might remain serious doubt re Span ability use dols yielded by investment to discharge service on credits obtained for purpose.
Critical situation in Span dol balance-of-payments derives from deep-seated economic difficulties many of which have seemed and still seem to Dept capable of correction by action of Span Govt. It is desired you again call attention of FonOff to particular problems mentioned below, adequate solution of which wld at least make some contribution to remedying Span balance-of-payments difficulties. Is of course impossible say whether action these fronts alone would provide sufficient reassurance to Span capacity to undertake additional external dollar obligations. In short you shld make it quite clear to Span authorities that general demonstration of capacity and willingness make more effective use of Spain’s own resources is prerequisite obtaining financial assistance from US Govt.
Among problems repeatedly called attention Span authorities are:
- 1.
- Adoption peseta rate of exchange at level calculated to increase volume of Span exports. While in sense there has been some progress this direction through abandonment former seriously overvalued rate of 10.95 pesetas per dol in favor multiple rate structure US Govt seriously concerned re discriminatory aspects present system including its susceptibility to being considered as export subsidy. Is believed much more effective method rehabilitating Span export trade wld be adoption realistic unitary rate exchange for commercial transactions.
- 2.
- Treatment accorded foreign capital. Dept believes many serious restrictions upon and barriers to foreign investment in Spain shld be removed or moderated in order enable Spain attract private equity capital from US to assist in economic rehabilitation of country.
- 3.
- Scope and functions of INI.2 Seems to Dept great step forward wld be accomplished if measures were taken implement official and public assurances by Ministry of Industry and Commerce to effect that scope of INI would be progressively reduced to conform to original purposes for which it was founded.
In your discretion suggest to FonOff Dept prepared explore with Span Govt its attitude toward negotiating with US modern and comprehensive Treaty of Friendship, Commerce and Navigation of type [Page 737] signed Feb 2, 1948 with Italy.3 That treaty illustrates nature, scope and underlying principles of sort of instrument Dept wld have in mind. Two copies being forwarded for Emb’s use in ascertaining whether Span Govt would be interested in treaty along these lines. If Span reaction is favorable Dept would on Emb’s recommendation undertake prepare draft adapted specifically to Spain for formal presentation Span Govt as proposed basis for negotiation, taking into account any specific suggestions Emb may care make concerning particular provisions which such draft would contain.
- U.S. economic policy toward Spain had been under study in the Department of State since the beginning of 1949. On March 25 and 29 Willard Thorp, Assistant Secretary of State for Economic Affairs, had sent memoranda to Under Secretary Webb, neither printed, stating that the United States as part of its efforts gradually to normalize relations with Spain, should instruct Culbertson “… to inform the Spanish authorities that the Department no longer objects in principle to the filing of applications with the Eximbank for exporter credits or direct loans to Spanish agencies or enterprises.” The Chargé was to impress upon the Spanish authorities that more effective use of their resources would be a prerequisite to obtaining financial aid from the U.S. Government. On the basis of the second memorandum, Thorp drew up a draft airgram which was discussed with and approved by President Truman on April 11, but sent to Madrid as the source text. Thorp’s memoranda, a memorandum of conversation with President Truman on them, and a copy of the draft airgram are in file 852.51/4–1349.↩
- Instituto Nacional de Industria.↩
- For the, text of the Treaty of Friendship, Commerce, and Navigation with Italy, see Department of State, Treaties and Other International Acts Series (TIAS) No. 1965, or 63 Stat. (pt. 2) 2255.↩