Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

458. Telegram From the Ambassador in Colombia (Bonsal) to the Department of State¹

Bogotá, September 14, 1956—6 p.m.

229. Waterston of World Bank arrived here September 11 and is departing tomorrow instead of remaining longer period as anticipated. He appears appalled at conditions he has encountered and in view Finance Minister’s resignation prospects for profitable conversations poor.² According to Waterston, Colombian Government has failed meet commitments economic measures on which World Bank credits based and prospects that World Bank will go beyond $16 million for highways already committed plus possible Bogota electric power loan similar amount appear very poor this year (World Bank last April had indicated probability total new credits $62 million during calendar 1956).

Waterston states backlog as of September 30 estimated at $280 million which is 50 million more than Colombian authorities admit. Central Bank reserves not over $90 million, of which 25 million includes monetary fund credit. Unsound investment projects plus heavy governmental expenditures largely military contribute to critical situation. Next Finance Minister will be confronted harsh decisions including devaluations since 2.50 official rate no longer sustainable.

I am much impressed by change in Waterston’s normally optimistic attitude toward situation here.

There have been rumors and even press items regarding approach by Colombian Government to Export Import Bank for exchange stabilization loan. Embassy has had no information on this. Villaveces today told Waterston that he was “desisting” from any such approach.

It appears to me important that US Government and World Bank cooperate in development accurate picture of economic problems here since coordinated “bail out operation” under rigorous conditions may be necessary if we are to avoid consequences of serious setback in development program.

Situation by no means hopeless in view basically promising conditions but heroic, unpalatable measures may well be required.

I believe it would be useful for Export Import Bank to send representative here to get first hand view of situation on which published statements and official pronouncements are possibly unreliable. Such visit could be described as “routine” and need not attract great publicity.³

Bonsal

1. Source: Department of State, Central Files, 821.10/9–1456. Secret; Limit Distribution.
2. Nestor Ibarra succeeded Villaveces as Minister of Finance in September 1956. Ibarra was replaced by Luis Morales Gomez, President of the Banco Popular, in October 1956.
3. In a memorandum dated September 26 to Bainbridge C. Davis, Maurice M. Bernbaum, and Terry B. Sanders, Jr., Gerberich reported on a conversation with Albert Waterston on the Colombian financial situation. Gerberich stated, “Waterston has strongly discouraged the idea of an Eximbank bail-out loan, both in talks up here and with Rojas and Villaveces in Bogota.” (Department of State, Central Files, 821.131/9–2656)