313. Memorandum of Conversation0


  • Spanish Stabilization Program


  • The Acting Secretary
  • The Spanish Ambassador
  • Sr. Aragones, Spanish Embassy
  • Mr. Waugh
  • Mr. White, EUR
  • Mr. Beigel, WE

The Spanish Ambassador called at his request to discuss this subject. He said that he understood the board of the IMF would consider the Spanish program on the morning of July 17, that the OEEC Council would also take up the Spanish program and membership that day, and that public announcements on this subject should follow sometime during the week of July 20. He gave the Acting Secretary a copy of the Spanish memorandum on the program.1

The Ambassador pointed out that the Spanish proposals involve extension of its trade liberalization lists, global quotas and state trading to dollar countries on a non-discriminatory basis which would cover some $875 million in estimated imports during the coming year, whereas U.S. exports to Spain, including aid-financed commodities, have run about $280 million over the past year. He said that dollar trade opportunities will therefore rise to more than three times the actual level of U.S. exports to Spain over the past year. He added that his people believe imports may also increase more sharply than would otherwise be the case simply because Spanish importers have this access to the U.S. as a source of supply. The Acting Secretary expressed some surprise that this would be the case. The Ambassador said that the Spanish [Page 730] technicians estimate there may be a substantial shift in Spanish purchases of raw materials and semi-manufactures from other sources to the U.S.

The Ambassador said that his Government anticipates that the build-up in inventories and possible bulge in imports of liberalized goods following the announcement of the new program requires that foreign exchange resources amounting to at least $250 million should be available over the next six months. He said this amount takes into account increased earnings from tourism as well as increased exports. He said that Spain hopes and expects that in addition to the OEEC, IMF and private U.S. banks, the U.S. Government through some means can provide short-term stand-by credit to Spain. He said his Government fully appreciated the extent of U.S. loans, grants and commodity sales which have contributed to the rehabilitation of the Spanish economy over the past five years. He said Spain now intends to go forward without hesitation on the new stabilization program and there will be no political maneuvering by the Government in this respect. He pointed out that Spain is a sound client for foreign credits, and provided Mr. Dillon a copy of the Spanish debt service2 prepared by experts of the IEME who had arrived in New York earlier in the week. The Ambassador said that in addition to such balance of payments assistance which he hoped would be available for a period of 24 to 36 months, he would like to indicate in a public announcement whatever project loans the Export-Import Bank had in mind.

The Ambassador said that another possible form of U.S. support that had occurred to him would be the purchase by the U.S. from the IEME of the pesetas necessary to meet the accommodation requirements of U.S. personnel in Spain. He said that Spanish estimates would put such dollar earnings by Spain at around $15–20 million a year. Mr. Beigel said that the problem in such a suggestion for the U.S. is the fact that considerable amounts of pesetas are on hand and will continue to accrue to U.S. accounts in Spain from the proceeds of the programs presently under way in Spain. The Ambassador then requested that consideration be given to the possibility of making some of these peseta accruals available to Spain as additional financing for its investment budget.

At this point the Ambassador said that plans had been made for the Spanish Minister of Commerce to visit New York to discuss the possibility of credits from the private banks, and to speak to the board of the IMF on July 17 at the invitation of Mr. Jacobson. He said that Sr. Ullastres would also spend July 14–15 in Washington. He said he would like the [Page 731] Minister to have an opportunity to speak to both the Acting Secretary and Mr. Waugh during his visit in Washington.3

The Acting Secretary asked about progress to date with the New York banks and the Ambassador said that $50 million is in sight from a group of banks so far. He then referred to letters he had received from the Spanish Ministers of Commerce and Finance with regard to the short-term requirements of Spain, and raised again the question of such financing by the Export-Import Bank. He asked about the possibility of such a credit which, if unused, could be converted into project financing. Mr. Waugh said that the Bank would not tie up its funds in that fashion, and that the Bank preferred to devote its funds to long-term projects which he said were in the greatest interest of Spain. The Ambassador asked if DLF funds could be made available on such a short-term basis and the Acting Secretary replied that under the legislation they cannot be used for this purpose.

The Acting Secretary referred to the OEEC Mission report calling for $200–220 million in resources, and said he had discussed with the Ambassador a few weeks ago the notion of assembling an aid package totalling around $230 million.4 He said that we are pressing in Paris for $100 million from the Europeans and we hope the Spanish Government will do so as well. He said that we had pushed the IMF and now expect to see the Fund go as high as $75 million. With $50 million from the private banks, this would make $225 million. He said that we also envisage an announcement of $30 million in Export-Import Bank credits for projects now under study, and that this would not foreclose approval of additional projects during the course of the year. The Ambassador asked whether the specific projects could be announced. Mr. Waugh said he would prefer not to give out a list now but announce only the over-all amount, with the specific projects announced as they are approved. He then noted that the Bank will pay out $26 million in the coming year on projects already approved.

The Acting Secretary and Mr. Waugh both said that their impression is that the New York banks will give Sr. Ullastres a very good reception, and that lines of credit should be available in excess of the figure mentioned by the Ambassador. Mr. Dillon said he wondered whether it might not also be desirable to include in the announcement a reference to the defense support and P.L. 480 sales that might be reached this year, subject to appropriations in the first case and the negotiation of a sales agreement in the second. He said that language could probably be [Page 732] worked out to cover these conditions. He said our estimate is that in view of the expected crop situation in Spain the P.L. 480 sales may be $60 million in the coming year, but this is only an estimate; and that on the defense support side, we tentatively estimated that $40 million might be a reasonable figure. The Ambassador said these suggestions would seem to be acceptable to his Government.

The Acting Secretary said that we would have to look into the suggestion regarding the attribution of counterpart funds to the Spanish investment budget. Mr. Beigel asked whether the Ambassador had in mind the attribution of proceeds to the financing of the 80 billion peseta budget for 1960, for which blanks had been indicated in the memorandum submitted to the OEEC and IMF. He said our impression was that the anticipated deficit of 10 billion would, in Spanish thinking, be partly financed with an attribution of 6 billion in Spanish-use counterpart and sales proceeds. The Ambassador indicated this was the figure he had in mind.

Mr. Waugh said that he would not have believed two months earlier that Spain could arrange credits with the private banks to the extent he now believes to be the case. The Acting Secretary agreed with this and noted the desirability of having private bank credits associated with this program as well as the U.S. Government. Mr. White said that from the point of view of indicating public confidence in the new Spanish program it is of even more significance that private banks are participating in the aid package than that the U.S. Government is doing so. The Ambassador agreed that it would be desirable, and likely, that the private bank contribution would rise about the $50 million estimate he had given.

  1. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199. Confidential. Drafted by Beigel.
  2. Not found in Department of State files, but see Document 314.
  3. Not found in Department of State files.
  4. A memorandum of Dillon’s conversation with Spanish Minister of Commerce Alberto Ullastres Calvo on July 14 is in Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199.
  5. A memorandum of Dillon’s conversation with Areilza on June 19 is Ibid.