Memorandum of Conversation, by the Ambassador in Colombia (Beaulac)1


Participants: The Minister of Foreign Affairs, Dr. Evaristo Sourdis
The Ambassador

Subject: Shipping Discriminations on the Part of the Flota Mercante Grancolombiana

I told the Minister that I wanted to discuss the case of the Flota Mercante Grancolombiana2 with him in outline and leave additional details to be discussed later on.

I told him that the Flota, soon after its organization, had accepted an invitation to join several steamship conferences in the United States. Experience of many years has shown that only through the medium of steamship conferences can fair and economic competition among lines of diverse nationalities engaged in international trade be assured. Departure from the Conference system inevitably results in ruinous competition which brings no good to anyone.

The rules of the various Conferences are approved by the United States Maritime Commission.

One of the rules accepted by the Flota when it joined the Steamship Conferences was that southbound freights should be collected in dollars. The reason for that rule is obvious. The dollar today is the only convertible currency in the world. Steamship lines engaged in international trade have costs in different currencies, some of them in many currencies. Dollars can be immediately, and without limit, converted into any currency desired. It is no discrimination against the Flota, for example, to have to accept freights in dollars because it can convert its dollar immediately into Colombian pesos if it so desires. It is a discrimination, on the other hand, for an American line to be required, for competitive reasons or other reasons, to accept freight payments in Colombian pesos since the peso is not convertible into dollars or any other currency.

Soon after entering the Conferences and accepting their rules, including the provision for payment of southbound freights in dollars, the Flota nevertheless began to collect southbound freights in pesos. [Page 812] The Exchange Control Commission encouraged this practice by granting dollars for imports on a F.O.B, basis instead of on a C.I.F. basis as had been the custom. Importers immediately began to direct their cargo to the Flota for two reasons: first, they wanted to conserve all their dollars and spend them on merchandise, and second, even those still willing to pay dollars for freight were unable in many cases to obtain the dollars for that purpose from the Exchange Control Commission.

As a result, the Flota Mercante Grancolombiana, a new line, within a short time was carrying into Colombia from the United States more cargo than all the other lines combined. It could not seriously be alleged that the near monopoly which this new line had obtained for itself within two years was the result of superior efficiency. It was due entirely to discriminations against foreign lines engaged in by the Flota and by the Exchange Control Commission of the Colombian Government.

Last fall I had discussed this matter with the then Minister of Foreign Affairs, Dr. Eliseo Arango. The latter had immediately grasped its significance. After giving the matter study, and presumably after having consulted the President, the Minister had told me that he had told Dr. Alvaro Diaz, General Manager of the Flota, that it was the desire of the Colombian Government that the Flota arrive at a friendly solution of this problem with the other Conference Lines. Dr. Diaz, with authorization from the Board of Directors of the Flota, had gone to New York and had signed an agreement3 with the Conferences promising to revert to dollar collections completely by June 30, 1950.I left a copy of the Agreement with the Minister after reading to him the pertinent passages.

The process of reversion to dollar collections was to be gradual. However, to date there are no indications that the Flota is carrying out or intends to carry out the Agreement. Representatives of Conference Lines are in Bogotá endeavoring, unsuccessfully so far, to see Dr. Diaz.

In view of all the foregoing I asked the Minister to please interest himself in the matter in an effort to see that the two agreements freely entered into by the Flota, the last one at the instance of the Colombian Government, were carried out by the Flota.

I told the Minister that I attach great importance to this case. It involves the principle as to whether relations between Colombia and the United States will be characterized by cooperation or by discrimination. Discrimination will not work in the long run. The United States has means to protect American lines against foreign discrimination. If worse comes to worse it can exclude ships of the Flota from [Page 813] American ports and if no solution is reached to this problem, some such action by the Government of the United States will be inevitable.

I hoped, however, that it would not reach this stage. I hoped that the matter could be settled through the friendly intervention of the Minister of Foreign Affairs. I said that I had drawn up a lengthy memorandum giving the history of the case but that I had decided not to leave it with the Minister yet. So far my intervention in the matter had been purely oral and I preferred to leave it that way, but I might decide that it would be necessary for me to leave something in writing and, of course, if the Minister wished to receive the memorandum I would be glad to give it to him.4

I said that it was difficult for me to anticipate what Dr. Diaz’ attitude would be since he had avoided communication with the Conference and Conference Lines since he signed the Agreement in New York in October, but I had heard indirectly that Dr. Diaz had alleged on at least one occasion that the Flota was not bound by the October Agreement because publicity to the Agreement had been given in the newspaper El Relator of Cali some time ago. This publicity, according to Dr. Diaz’ alleged statement, contravened an oral agreement between Dr. Diaz and representatives of other Conference Lines that the Conference or other Conference Lines would not give publicity to the Agreement but that the publicity which must necessarily be given to the Agreement in Colombia, if the Agreement were to be carried out, would be given by the Flota itself.

I told the Minister that any allegation by Dr. Diaz that the Flota was relieved of having to carry out the October Agreement because of the publicity that had been given to the Agreement in El Relator could not be supported inasmuch as no evidence had been presented or probably could be presented that the Conference or any other Conference Line was responsible for the publicity given in El Relator, and it is a well known principle of law that agreements cannot be vitiated by the acts of third persons. I said that even though the October Agreement had been vitiated, however, which was not the case, the Flota was still bound by the terms of the original Conference agreements to collect southbound freights in dollars.

Dr. Sourdis said that he was aware that there was some difficulty of the nature that I had mentioned but that he had been unaware of any obligation on the part of the Flota to collect southbound freights in dollars. The matter was obviously very important to the Flota’s economy. He would talk to the President5 and officials of the Flota [Page 814] and give the matter his most earnest attention. He would let me know as soon as he had something to communicate.

I thanked the Minister.6

  1. Transmitted to the Department by the Ambassador in his despatch No. 372 from Bogotá, April 3, 1950, not printed.
  2. For previous documentation regarding discriminatory treatment of American shipping interests by Colombia, see Foreign Relations, 1947, vol. viii, pp. 554569
  3. The Spanish text of this agreement, signed October 17, 1949, forms part of enclosure to despatch 457 from Bogotá, April 21, 1950, not printed. (911.5321/4–2150)
  4. Ambassador Beaulac handed to Minister Sourdis on April 5 an aide-mémoire on the shipping problem. It was forwarded to Washington as enclosure 2 to the despatch cited in the previous footnote.
  5. Mariano Ospina Pérez.
  6. In telegram 99 to Bogotá, April 5, the Department informed the Embassy in part that it strongly endorsed the position taken by the Ambassador in this conversation and that Department officers were discussing the freight rate problem with the Colombian Embassy. (921.53/4–550)