Foreign Relations of the United States, 1951, Europe: Political and Economic Developments, Volume IV, Part 1

No. 395

852.10/4–2351: Telegram

The Chairman of the Export-Import Bank (Gaston) to the Embassy in Spain ¹

confidential

Washington, April 23, 1951—6 p. m.

729. Griffis from Gaston. Fol is first cable (reDeptel 711 Apr 13)² covering background position current problems Eximbank re Span credits.

A. Bank’s gen policy Span credits laid down in Nov 14, 1950 memo approved by Pres, substance which included ECA press release Nov 15 and Emb’s memo to FonOff Nov 16 (Embdes 536, Nov 20).³ Highlights policy guiding Bank fol:

1. Credits only for purposes which demonstrated as making substantial contribution Span economy and serving US interests; Dept, ECA and Bank agree “contribution” means generally lasting contribution for benefit Span people as whole and excluding therefore expendables. Exceptions to date re expendables are cotton, fertilizer and wheat. These, especially wheat, regarded by Bank as nonrecurring. In considering credits Bank’s primary concern is achieve most in shortest time making credit dol go around as much as possible.

2. Credits extended generally in favor privately owned and operated Span enterprises. Generally this excludes INI or other Govt favored or controlled enterprises which Span Govt shld take care of through own resources, gen exchange earnings, credits from Eur and other sources and by loosening up Span restrictions private capital investment in Spain including Amer investments.

3. Credits to be on project-by-project basis rather than for lines of commodities or general programs of equipment or parts. Essential credit requests and projects be for highly specific purposes.

4. Indispensible credits include soonest mineral mining projects of interest to US. These are needed not only comply with ECA Act, as stated in Presidential memo and ECA press release, but also to lay foundation for more balanced Span trade with US.

5. Off-shore procurement always possible provided need demonstrated by applicant. Such demonstration wld include fact item only procurable for dols, and not available in US at all, at equal or lower price, or in same relatively reasonable delivery dates.

6. In light available info Bank continues regard agricultural development first order priority, and anxious consider projects improving agricultural output for domestic consumption and for export. Bank urged and urging Span offs give more weight agricultural production. Bank’s views other sectors Span economy indeterminate owing lack overall picture re order urgency or possibility achieving given projects within reasonable period. This true especially transportation and power systems, whose rehabilitation appears require immense resources and where Span thinking or planning seems still hazy.

B. Span conceptions and hopes continue contrary policies outlined above despite rptd clear-cut explanations Span officials including Suner. Examples Span refusal take seriously above policies:

1. Protracted and sustained efforts to include expendable items originally asked by Suner. (See Bank’s Memos Conversation Dec 7, 19, 22, 26, 1950 and Jan 8, 1951 available Emb.)⁴ Recent efforts press financing gen imports of 500,000 tons coal from US.

2. Continued determination give INI or other Govt enterprises such as RENFE major share of credits directly or by curtailing nr or amount credits for private enterprises. Example latter is request for only 200,000 dols for Minas del Rif when US Steel Corp’s interest in mines output warrants several-fold credit.

3. Refusal to fol up Bank’s suggestion for submission projects pesticides and other materials needed for Span agri.

C. Simultaneously there appears Span unwillingness or inability understand importance submitting detailed applications as explained repeatedly. No firm detailed applications submitted since Suner’s departure early Jan. Even projects specially mentioned in Bank’s letter Span Emb Feb 13⁵ (Sefanitro, airfield ground installations, Mineral projects) not yet reed though promised daily. Some projects being held up apparently by bargaining considerations, exemplified Span refusal submit airfield ground installation project unless and until Bank consents in principle financing double dol value of long-delivery DC 6’s.

D. Another important obstacle is Span tactics on approved credits which Bank fails understand. Specific instances:

1. Whereas Bank acted on four credits Feb 13 no definite action yet by Spans take up any of money. Draft credit agreement cotton submitted end Feb and agreement fertilizer plant project early Mar; Spans also told agreements on fertilizers, tractors and wheat wld be similar to cotton draft agreement. No word yet recd by Bank on agreements.

2. Span procedures on tractors and parts also puzzling. Span showed no interest originally in getting parts. Despite Bank’s insistence, Spans finally agreed to take only insignificant amount of parts. Procurement procedures still unclear as are motives for changes thereon.

3. Fertilizer imports represented as immed urgency. Bank accordingly informally agreed recognize purchases prior signing agreement provided interim outside financing available. View procurement difficulties in US, Bank also agreed finance offshore including fertilizer of doubtful Western Eur origin. Hence Bank unable understand Span inability to date secure all fertilizer. Bank understands number of orders accepted by recognized US firms, but only one US supplier has delivered fertilizer valued $900,000 out of credit $3.5 million.

4. Bank’s experience wheat and cotton credits again not such as confirm Span statements of urgency of need. Bank’s guess these credits being used by Spans establish position for future rights, claims or quotas on US supplies or allocations. View shipping and other difficulties, Bank suggested Spans buy wheat offshore. Spans refuse on grounds only Amer wheat will do; this surprising view small share such wheat in total supply.

E. Bank approved to date 5 credits totalling $17.2 million:

1. $5 million for cotton (procurement difficulties being cabled separately).

2. $3.5 million for fertilizer.

3. $3 million tractors and parts.

4. $700,000 fertilizer project Sociedad Iberica Nitrogeno.

5. $5 million for wheat.

F. Dept advised you Apr 13 re use credit authorization beyond June 30.⁶

G. No detailed and fully supported applications are now under consideration by Bank.

Generally Spans confine approach to Bank by discussing broad terms types of projects. Bank asked repeatedly whether wld consider Escatron fertilizer project requiring credits $10 million and steel mill project requiring $50 million credits. Bank repeatedly discouraged Spans from submitting either project because of amount credits required and longtime necessary study and completion projects. Bank likewise discouraged submission of Adaro mining development project, for which $1.5 million requested, on ground public funds could not be made available for exploration underground resources. Nevertheless Spans have brought to Washington Adaro’s mining engineer discuss matter further with Bank.

Only this week Spans furnished details regarding Madrilena hydroelectric project. Even if project adequately prepared doubtful whether Bank can act on it soon owing lack survey Spain’s overall power problem and measure of contribution Madrilena project to this problem.

Application for Almagrera lead mining development for $150,000 submitted several weeks ago to Board Directors. Board unable act because lack economic justification and other technical details. These requested of Spans but not yet furnished.

H. Eximbank memo Apr 4 and letter Apr 13 (airpouched by Dept Apr 13)⁷ contain details on status discussions re proposed Span applications. Span intentions and Bank’s position on each briefly fol:

1. Spans propose ask increase wheat credit order make up for 25% higher market price for wheat over internatl agreement price. Bank advised Spans Amb. Lequerica’s request was for $5 million worth of wheat, and any change wheat credit involves exceedingly difficult problems outside Bank’s scope.

2. Spans intend ask increase in cotton credit to procure and ship 23,000 bales cotton. Bank answered primary problem is obtain allocation of cotton within present credit figure; if allocation in near future higher Bank wld consider increase in credit.

3. Spans propose apply for $12 million credit to finance 500,000 tons US coal for general consumption. Bank stated unable consider gen purpose imports such as coal but prepared consider coal requirements for very specific purposes of a particular productive or export industry or enterprise together with other related requirements in project form.

4. Although Spans have no detailed and fully supported applications now before Bank, Spans stated they hope submit near future fifteen individual projects requiring credits of $32.7 million, comprising fol types or names projects (in mil dols):

[Here follows a list of fertilizer, mining, railroad, power, and aviation projects.]

Spans informed Bank wld welcome soonest Sefanitro fertilizer project and first 5 mining projects. Bank repeated its readiness consider airground installations and its inability consider purchase expensive long-delivery aircraft for Span airlines. (Spans advised requests for spares or other equipment for existing Amer aircraft in Spain wld be considered.) Bank unable consider appropriateness or urgency of railroad and power projects mentioned by Spans in absence Span surveys or studies indicating needs and urgency rehabilitation of transportation and power. Bank urged Spans submit soonest transportation and power surveys permitting Bank evaluate role specific projects within each field. Bank ready consider both RENFE steel rails and project for power supply Huelva pyrites mines forthwith provided adequate details submitted by Spans.

I. Span Emb informally advises Bank reps and potash industry already in US to consult with Bank, and rep Escatron and Iberduero leaving for Washington when visa granted.

J. Bank’s main problem now is study process and consider fifteen projects being submitted immed future.

K. Bank welcomes Emb’s assistance especially along fol lines:

1. Advice and comments on copies of projects submitted Emb according proposal Embtel 891 Apr 5 and Deptel 686, Apr 6.⁸

2. Maintaining with Span offs Madrid parallel position with Bank re subjs covered this and future cables.

3. Providing Bank continuing basis info readily available Emb such as offered in Embdes 1103 Mar 20.⁹

[ Gaston ]

1. Drafted by Dunham and the Eximbank. In telegram 958, April 25, Ambassador Griffis expressed “deep appreciation for Deptel 729. This is just what we need and puts it right on the line. Arranging immed mtg with Suanzes and Suner to attempt end Span efforts circumvent Bank policies.” (852.10/4–2551)
2. Telegram 711 reported that the Eximbank would advise Griffis directly on the Spanish application. (852.10/4–351)
3. None printed.
4. None printed.
5. Not printed.
6. In telegram 710 to Madrid, April 13, Ambassador Griffis was informed that the efforts to carry over the funds to fiscal year 1952 would probably be successful. (852.10/4–1351)
7. Neither found in Department of State files.
8. Neither printed.
9. Not printed.