Office of the Historian

431. Telegram From the Embassy in the Philippines to the Department of State1

Manila, August 31, 1957—4 p.m.

829. Embtel 7222 and Secun l.3 Senator Laurel yesterday morning told Smith he was greatly worried over recent decreasing Phil exchange reserves and Phil economic developments in general and considered that only solution in long run was for new government elected in Nov to ask the United States for a currency loan of 300 million dollars to stabilize the Phil currency once and for all. Laurel readily admitted that Phil efforts so far to stabilize currency and preserve reserves had resulted in “more talk than action” and it could not be expected that the United States would find in this recent Phil record much to inspire the granting of a loan.

Smith pointed out the improbability of any such specially legislated loan in present climate U.S. Congressional attitude toward foreign aid and mentioned the International Bank, the Export-Import Bank and the International Cooperation Administration as slightly less unlikely sources of loans or credits. He mentioned probability that a survey of Phil needs and programs would be required before International Bank would be likely to extend credit or make loan and that the Export-Import Bank and ICA would have to be sure that Phil self-help and self-control would be adequate to warrant consideration. Smith had already pointed this out three weeks before to Senator Sabido4 in Laurel’s hearing when Sabido raised the subject and mentioned Phil need for a 200 million dollar currency support [Page 725] loan reminding Sabido that a few months ago the Phil Central Bank had over 200 million in reserves. Despite Smith’s discouraging remarks both Laurel and Sabido appeared to remain quietly confident that when the time comes the U.S. Govt can in practice be counted on to salvage the Phil economy even to the extent of a special currency support loan if convinced that is only way it can be salvaged.

Comment: Above typical of indications being received from numerous feelers by members top government and commercial banking communities that the U.S. Govt will probably soon receive a confidential request for a large stabilization loan.

Bohlen
  1. Source: Department of State, Central Files, 896.10/8–3157. Secret.↩
  2. In telegram 722, August 23, Bohlen informed Robertson that Governor Cuaderno, during a planned trip to Washington in early September, would probably “make another concerted effort to secure sizeable loans especially those not tied to US purchases.” (Ibid., 033.9611/8–2357)↩
  3. Supra.↩
  4. Pedro Sabido of the Nationalist Party.↩