The Chargé in Peru (Barber) to the Department of State

No. 1270

Subject: Conference With Minister of Finance1

On May 31, 1951 Mr. Turkel2 and Mr. Bridgett3 called upon the Minister of Finance at their request to discuss outstanding economic problems. The conversation covered a wide range of subjects; they are listed below in the order of their interest in the Department rather than in the order in which they were discussed.

Troops for Korea.
Point IV.
Loan policy of the IBRD.
Peruvian requirements for scarce supplies.
Increase in copper ceiling price.
Payment of lend-lease obligations.
Payment of commercial debts.
Peruvian participation in GATT.

1. Troops for Korea

This subject arose owing to a discussion of the size of the expected budgetary surplus for 1951. The Minister of Finance stated that recently in a Cabinet meeting, when the subject of troops for Korea was being discussed, the President turned to Sr. Dasso and asked, “How much is all this going to cost me?” The Minister of Finance replied, “How should I know? You’re a soldier. You ought to know.” There [Page 1595] upon the President gave orders for the military member present to draw up a memorandum on the cost of the proposed troop contribution. The Minister of Finance stated that this study is now being made, but that the military experts will have to estimate what the attrition rate will be of the troops in Korea in order to calculate death benefits to families, hospitalization, etc. Mr. Turkel replied that he would request the Department for comparative data on casualties of military contingents of members of the United Nations in Korea.4 The Minister went on to say that he felt that the proposal to send troops to Korea would not meet with popular favor. Korea is so far away; almost any other place would be better. Mr. Turkel responded that unfortunately Soviet aggression had to be contained where it was launched, and not on the ground of our own choice. In the foregoing conversation no mention was made, of course, of the substance of the Embassy’s secret despatch No. 1251 of May 29, 1951.5

Point IV Operations

In a meeting about ten days earlier with the Minister of Finance, not hitherto reported to the Department, Mr. Turkel had shown the Minister of Finance a list of authorizations of Point IV projects in Peru dated April 17 with a view to overcoming the increasing Peruvian disappointment with respect to actual Point IV accomplishments. Mr. Turkel mentioned that when he was in the Department on May 21, 1951, Mr. Haldore Hanson6 had shown him an up-to-date account of Point IV authorizations which brought the total for Peru to 1-⅓ million dollars. The Minister was pleased. Mr. Turkel then stated that he had made a considerable point of submitting to the Technical Cooperation Administration the application of the Minister of Fomento7 in the amount of $250,000 for American engineering services to design dams in five areas in Peru. He had told the TCA authorities that this application was supported by a memorandum drawn up by Mr. Cruise of the International Bank for Reconstruction and Development, and that he was fairly certain that if the engineering studies could be made, IBRD financing for these dams would follow. He felt that this was the key to expanding irrigation developments in Peru, and that all parties concerned must follow through on this project. Mr. Turkel had told Mr. Carlos Gibson8 of the Peruvian Embassy of his conversations in the Department on this and other economic subjects.

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3. Loan Policy of the IBRD

Mr. Turkel stated that the preceding day he had received a visit from Mr. Orvis A. Schmidt, Dr. Harold Larson, and two other officers of the International Bank for Reconstruction and Development. He told the Minister of Finance in strictest confidence that he felt that this mission was beginning to become somewhat skeptical of the Peruvian application for 1.8 million dollars for port equipment to modernize the Port of Callao. The bank mission is not yet convinced that such equipment would actually facilitate the flow of strategic raw materials through the port. Adm. Stanley’s report dealt only with general cargo, and not with bulk cargo such as ores and grain. Mr. Turkel had given them the facts concerning the ore in storage at the port, and the probable amounts of such ores in the future, whether or not these facts support his thesis that the loan ought to be made.

The Minister of Finance stated that the President was becoming considerably annoyed at the large number of missions coming to Peru without producing tangible results. Five eminent authorities have studied the Chimbote coal deposits and submitted favorable reports but without any present results. The Argentinians are talking of building a 400 ton blast furnace at Chimbote using coal as fuel. Mr. Fritz Mandl will return to Peru at the end of June. The Minister is not anxious to have the Argentinians in Peru, but the Peruvians will accept financing, especially private investment, wherever they can get it. Mr. Turkel concluded this phase of the conversation by saying that he felt that developments might shortly be expected in connection with large-scale financing, and that the Minister should not be disheartened because all such studies were necessarily slow.

4. Peruvian Requirements for Scarce Supplies

Mr. Turkel stated that he had spent nearly a day in trying to ascertain the reasons for possible delays in Washington which caused members of the Peruvian Mining Ministry to complain that they were not receiving equipment from the U.S. He told the Minister that the person responsible for U.S. export controls for Latin America is one of our best economic officers, Mr. Claude Courand,9 of the Office of International Trade. Mr. Courand had said that D.O. ratings for the Peruvian mining industry were now being granted by his office within a period of ten days. Such D.O. ratings entitle the holder to receive, for the month of May, 1/12 of the amount of supplies shipped during 1950; that the D.O. rating will allow a similar amount to be shipped for the month of June; thereafter the Controlled Materials Plan takes over, and the situation should shortly be regularized and facilitated. Mr. Turkel stated that he had put the Purchasing Agent of the Cerro [Page 1597] de Pasco Copper Corporation in touch with Mr. Courand in the hope of assisting that corporation. He concluded that the large Peruvian mining companies could pretty well take care of themselves because they have purchasing departments in New York, or representatives in Washington, but that the difficulty would be with the small and medium Peruvian producers. He suggested to the Finance Minister that the Director of Commerce, Dr. Jorge Guerinoni, keep in touch with the Commercial Counselor of the Peruvian Embassy, Sr. Carlos Donayre, who, in turn, would be in contact with Mr. Claude Courand. This procedure was suggested because the Embassy is so short of personnel that it is deeply in arrears in its requirements reporting, and while it is beginning to make progress in catching up, it is expected there will be substantial additions to the critical list, and, therefore, the Embassy ought not be appealed to except in cases of great necessity or urgency. The Minister was grateful for the suggestion.

5. Increase in Copper Ceiling Price

Mr. Turkel stated that he had spoken to Mr. Getzin of the Office of International Materials Policy in an effort to impress him with the absolute necessity of treating Peruvian copper on the same basis as Chilean copper,10 as far as concerns price ceiling in the United States. Mr. Turkel stated that as a result of his conversation he felt sure that the final outcome would be that Canadian, Rhodesian and Peruvian copper would all be treated on the same basis as Chilean copper. The President of Cerro de Pasco11 has stated to Mr. Turkel on May 30 that while copper was still quoted at 24-½¢ per pound on the New York commodity market, blister copper being brought in in bond for refining, and re-exported was quoted at 27-¼¢per pound. This confused situation is expected to clear up in a week or so. The Minister stated that he was somewhat comforted by these remarks, and reiterated his profound concern for equal treatment for Peruvian copper.

6. Payment of Lend-Lease Obligations

Mr. Turkel stated that he then had to bring up the perennial question of the lend-lease debt, and to state that he had received another instruction12 to seek early liquidation of this 3 million dollar debt. The lend-lease accounts in Latin America have been 97% settled, and Peru is one of three countries having small balances owing.13

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The Finance Minister stated that he was anxious to improve the debt record of Peru, but in view of the budgetary demands for economic development, troops to Korea, commercial and other debts, and so forth, he could not see how he could meet all of these various demands. Mr. Turkel then recalled that the Klein Mission report of November 5th stated that the profits from the revaluation of the reserves of the Central Reserve Bank should be used for debt payment, and inquired what had happened to that money. The Minister stated that of some 45 million soles only 20 million had been utilized, and that the debts involved could not be satisfied from that source alone. Mr. Bridgett then mentioned the possibility of revaluing the “intangible” gold reserves of the Central Reserve Bank. The Minister grinned, and asked us to present a complete plan as to how he could pay all debts, and meet all obligations to the United States and Argentina with the resources at his command. Mr. Turkel stated that the time left before he sails for Greece is so short that he could not undertake such a study, but recommended that the Klein Mission be asked to make this study. The Finance Minister asked that Mr. Turkel get together with Dr. Klein to start the study. Sr. Dasso added that after the adjournment of the next regular session of the Peruvian Congress he hoped to put into effect a widescale plan for the liquidation of all outstanding debts utilizing profits from the revaluation of these “intangible” gold reserves, and possibly other resources.

7. Payment of Commercial Debts

Mr. Turkel stated that he was somewhat disappointed that the month of June had arrived, and no checks had yet been mailed to American exporters entitling them to the difference between the former official rate, and the rate of 14.20 for their registered commercial debts. The Minister of Finance concurred with Mr. Bridgett that while there were only some 400 checks to be mailed, the burden of calculating the percentages was very considerable, and since the Comptroller of the Republic was following a very tough policy, the checks were not mailed this month because of the lack of a few hundred thousand soles, but would certainly be mailed in the month of June.

8. Peruvian Participation in GATT

Mr. Turkel stated that the Department does not expect to accelerate the entry into force the U.S.-Peruvian schedules to the Torquay Agreement;14 that 15 Contracting Parties to GATT have already approved the membership of Peru, and that it was quite certain that the remaining number necessary to make Peru an acceding Member would shortly be obtained. The Finance Minister was pleased to hear this, and stated [Page 1599] that he would shortly meet with Dr. Jorge Guerinoni to discuss the Supreme Resolution to eliminate the existing 25% ad valorum luxury tax on automobiles.

In summary, the Minister of Finance again displayed his usual fine understanding and sympathy, but it seems clear that the Peruvians feel that they are receiving scant assistance from the United States in comparison with other countries of the Western Hemisphere.

For the Chargé d’Affaires a.i.;
Harry R. Turkey

Counselor of Embassy for Economic Affairs
  1. Andrés F. Dasso, Peruvian Minister of Finance.
  2. Harry R. Turkel, Counselor of Embassy for Economic Affairs.
  3. W. Charles Bridgett, Assistant Attaché.
  4. Such information was furnished by the Department of State to the Embassy in Peru for transmission to the Peruvian Government in airgram 7, July 7, 1951, not printed (795B.5/6–1251).
  5. Not printed.
  6. Acting Assistant Deputy Administrator, Technical Cooperation Administration.
  7. Carlos Salazar Southwell.
  8. Second Secretary, Peruvian Embassy.
  9. Claude W. Courand was detailed to the Department of Commerce, May 15, 1950, as Assistant Director, American Republics Division, Office of the Assistant Director for Export Supply, Bureau of Foreign and Domestic Commerce.
  10. For documentation on the understanding concerning copper reached between the United States and Chile in April-May 1951, see pp. 1238 ff.
  11. Robert P. Koenig, President, Cerro de Pasco Copper Corporation. 5–2451).
  12. Apparent reference to instruction 140, May 24, 1951, not printed (723.56/5–2451).
  13. In a note to the Peruvian Embassy, dated May 24, 1951, not printed, the Department of State informed the Embassy that the amount of $2,970,742 remained unpaid on Peru’s lend-lease debt, and indicated that the United States was still awaiting receipt from the Peruvian Government of a settlement proposal (723.56/5–2451). No such proposal was offered by the Peruvian Government in 1951.
  14. For text of the Torquay Protocol to the General Agreement on Tariffs and Trade, dated at Torquay, April 12, 1951, and entered into force for the United States June 6, 1951, see TIAS No. 2420, or 3 UST 588.