506. Memorandum of a Conversation, Ministry of Foreign Affairs, Asunción, November 14, 19571


  • Foreign Minister Sapena Pastor
  • Ambassador Walter C. Ploesser2
  • A.E. Carter, First Secretary

The Foreign Minister, who had asked the Ambassador to come to the Ministry, began by expressing his own and his government’s thanks for the care and attention being given Dr. Martin Cuevas, Minister of Agriculture, in the United States, where Dr. Cuevas was recently flown for treatment.

The Minister then said he had an “unpleasant” topic to take up and expressed his regret that he had to deal with a matter of this nature the first time he asked the Ambassador to come to the Foreign Office. He proceeded to refer to the U.S. action limiting tung imports—or Paraguayan exports, as he put it—and said this was working a great hardship in Paraguay. He said that practically all of Paraguay’s tung comes from the Encarnación region in the southern part of the country. He said the people there devote approximately 90 per cent of their time to the production of tung and that any reduction in exports can only result in hardship for them. The Minister said that one of the reasons Paraguay had developed its tung production to the present point was because it had been encouraged to do so by Point IV.3 The Minister said that one of the most unfortunate aspects of the U.S. action was that while it had allowed Argentina to continue to export to the United States pretty much the same as always, it had cut Paraguay back to a “third” of its former exports. Dr. Sapena said he recognized the reasons back of the U.S. action and assumed it would be very hard to do anything at this time, but he appealed to the Ambassador to help Paraguay in this regard. The Minister said he knew that this was a difficult thing [Page 1020] to ask and said U.S. assistance might be in the form of helping Paraguay find another market for this product.

The Ambassador told the Minister he appreciated the problem outlined but pointed out that in the circumstances it would be exceedingly difficult to do anything about it. He recalled that at the time Paraguay had been encouraged to produce tung, U.S. producers had also been urged to do the same because more tung was needed at that time. Since then, the Ambassador explained, the picture has changed. In many of its uses, he said, tung has been replaced by other products, among them recently developed synthetics. The Ambassador gave the Minister no encouragement that anything could be done, but assured him the Embassy would study the matter.

Dr. Sapena said he was preparing a note on the subject which would shortly be delivered to the Embassy,4 but said he wished to have this prior discussion with the Ambassador in order to explain more fully his views. The Ambassador promised that the note would receive prompt attention.5

The Minister then referred to the Embassy’s recent note inviting the Government of Paraguay to submit a request for a new PL–480 loan.6 He said that during his own recent visit to Washington, Assistant Secretary Rubottom had indicated Paraguay could probably expect in the neighborhood of $3,000,000 on such a loan. Dr. Sapena said, however, that Paraguay really needs $5,000,000. He referred to the tung situation and told the Ambassador that he realized fully what a difficult thing it would be to do anything in that regard, but said that on the other hand he would appreciate the Ambassador’s support in getting $2,000,000 in PL–480 funds over and above the amount which, according to the Minister, Mr. Rubottom had indicated Paraguay might be able to obtain. Dr. Sapena said Paraguay would like to use the additional funds, if available, in road construction.

[Page 1021]

Dr. Sapena said a PL–480 note asking for a $5,000,000 loan would be delivered to the Embassy shortly.7 The Ambassador assured the Minister it would be studied carefully.

The Minister turned to the question of the oil pipeline and the triangular PL–480 deal under which Paraguay had hoped it could be financed. He said the U.S. view in this regard was clear8 and that Paraguay is now completely dropping this approach. In this connection, however, he said that both the Fives–Lille people and Williams Brothers had, during the course of their negotiations, indicated that financing could be arranged through a triangular PL–480 deal. The Minister explained that the French company had been given the contract not just because its bid was lower, but more importantly because of the very substantial saving to the Government of Paraguay in the manner in which the pipe for the line was to have been brought into the country. The Williams bid included delivery of the pipe only to Buenos Aires or Montevideo, the remainder of the shipment to be for the account of the Government of Paraguay, whereas the Fives–Lille bid included complete delivery.

The Minister then said he would inform the Ambassador of something in the strictest confidence,—a matter, he emphasized, known at present only to the President and himself.

Noting that the Fives–Lille people had been able to do nothing about their contract, and that it will therefore expire the 30th of this month, the Minister informed the Ambassador that immediately following, probably in early December, the Government of Paraguay, in cooperation with Williams Brothers and Pure Oil, will form a company for the purpose of constructing the pipeline. Dr. Sapena said that no more than 10 to 20 per cent of the company’s stock will be held by the Paraguayan Government and that the rest will be held by Pure Oil and Williams.

The Ambassador thanked the Minister for this interesting news and emphasized the advantages of having the pipeline developed by private enterprise rather than by the Government. The Ambassador pointed out that private enterprise was more likely to build what is needed, not only for the present, but for the foreseeable future as well, and would do so at no cost to the Government; also that the private enterprise operation would in addition provide revenue for the Government. The Ambassador said there would be no advantage politically and certainly none economically in Government ownership of the pipeline. Dr. Sapena agreed and said the only reason the [Page 1022] Government planned to be in the new operation at all was to satisfy the elements in the Government, particularly the Minister of Hacienda,9 who wanted a pipeline entirely owned by the Government. The Minister clearly stated that he personally had never been in favor of a Government-owned pipeline.

The Ambassador brought up in a general way the difficulties Paraguay has encountered in connection with its river transportation system and stated that he thought private enterprise could do a great deal to help Paraguay solve its problems in this regard. The Minister said he considered this problem different in that one here was dealing with the virtual monopoly of another Government, that of Argentina, and said he thought only a government-operated enterprise could achieve the desired results.

In reply to a question from the Ambassador regarding the nature of restrictions on Paraguay’s river transportation, Dr. Sapena said there are no treaty restrictions, but that in practice Paraguay suffers from various controls which Argentina has imposed that run up the cost of river transportation. The Minister mentioned in this connection the number of pilots boats are required to carry, the maintenance of harbor facilities, dredging and so on.

Dr. Sapena informed the Ambassador “confidentially” that Paraguay is now actively trying to do something about the foregoing and stated that his Government is at present engaged in negotiating a new treaty with Argentina on the river and its traffic.

The Ambassador emphasized that in his opinion the full utilization of Paraguay’s river system was of paramount importance to the natural economic development of the country and the Foreign Minister stated that he was in full agreement with this point of view.

  1. Source: Department of State, Central Files 411.3441/11–2157. Confidential. Drafted by Carter. Transmitted to the Department in despatch 164 from Asunción, November 21. (Ibid.)
  2. Ploesser was appointed Ambassador to Paraguay on August 5, 1957; he presented his credentials on November 6.
  3. President Harry S. Truman, in his inaugural address on January 20, 1949, announced his “program for peace and freedom.” The fourth point of that program suggested that the United States “must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas.” For text of Truman’s inaugural speech, see Public Papers of the Presidents of the United States: Harry S. Truman, 1949 (Washington, 1964), pp. 112–116.
  4. On November 18, Sub-Secretary Ramirez Boettner delivered to the Embassy a memorandum concerning tung oil. It was transmitted to the Department in despatch 167 from Asunción, December 2. (Department of State, Central Files, 411.3441/12–257)
  5. Instruction A–51, January 16, 1958, requested the Embassy to reply to the memorandum, stating in part, “The determination to limit imports of tung oil into the United States was made only after a careful consideration of all factors bearing on the situation including those set forth in the Foreign Ministry Note of November 18, 1957 and a finding that imports in excess of the specified quotas would materially interfere with the tung-oil price support program of the United States.” (Ibid., 411.3441/1–1658)
  6. Reference is to a note of October 30. (Ibid., 411.3441/10–3057)
  7. The Paraguayan memorandum requesting the loan was handed to the Ambassador by the Foreign Minister on December 10, and was transmitted to the Department in despatch 193 from Asunción, December 12. (Ibid., 411.3441/12–1257)
  8. The United States opposed the plan. Further documentation relating to this matter is ibid., 411.3441/10–457.
  9. Cesár Barrientos.