65. Memorandum of conversation, February 1, among DOS officials1

[Facsimile Page 1]

SUBJECT

  • Discussion of Colombian Political Economic Problems

PARTICIPANTS

  • Mr. Taylor G. Belcher, Director, WST
  • Mr. Herbert B. Thompson, Deputy Director, WST
  • Mr. Maxwell Chaplin, Colombian Desk, WST
  • Mr. Bruno Luzzatto, Economic Officer, REA
  • Mr. Arnesen, AA/LA
  • Mr. Green, LA/WC
  • Mr. Mitchell, INR

Political Scene

The discussion noted the political problems of maintaining an effective governing coalition, the recent growth in dissatisfaction with President Valencia, and the fact that opposition to him seems to be based [Typeset Page 164] more on his unsatisfactory image as a leader and on general belief he is permitting stagnation than on specific shortcomings. Dissatisfaction has not yet reached alarming proportions, and the politicians seem to be able to mobilize wide support in specific cases, but there have been reports of discussion of alternatives to Valencia.

A review of the range of possible alternatives to the present structure of the National Front government, such as military golpe, military alliance with the MRL, or some right-wing configuration, did not indicate that such a radical change is probable under present political conditions. A consensus did emerge, however, that the current Colombian dissatisfaction, loss of confidence, and sense of stagnation, are politically and economically destructive and bear watching, whether the feelings are rationally justifiable or not.

Consultative Group Results

It was noted that the recent announcements of large foreign financing for the development plan had served to improve the confidence climate. It was also noted that since disbursements on most of the projects to be financed [Facsimile Page 2] will be delayed up to a year, there is a serious risk of disillusionment if the consultative group announcements are not followed by some visible evidence of results.

In an effort to determine what part of the prospective U.S. AID program could be promptly implemented to serve as impact evidence of progress following the consultative group meeting, to improve confidence, it was noted that $13 million peso counterpart of the advance disbursement of the December $60 million loan is now available. It was then proposed that $5 million counterpart be utilized immediately as a U.S. contribution to the Private Investment Fund, and the other $8 million counterpart be made available for the labor housing project, which is ready to be executed immediately. It was further noted that the IBRD does not seem to be providing the leadership in establishment of the PIF which is required to execute this project rapidly, and more U.S. initiative is required to assure that the Fund is formally established in the next four weeks. It was agreed to instruct our mission in Bogota to explore the above proposals.

A review of the activities of U.S. AID/Bogota showed that the mission has assumed several entirely new functions in connection with the capital assistance program; the most important being long-range loan programming and design, and the surveillance of loan implementation. These activities require a degree of economic analysis not previously expected of the AID mission. Discussion emphasized that the problems for AID in the Colombian program are primarily ones of execution at this stage, since the program level and general projects to be financed are not in dispute. It was suggested that a bottleneck which [Typeset Page 165] will need attention is the actual preparation and processing of loan applications. It was noted that the mission is not yet completely staffed to carry out its new responsibilities, but that the necessary personnel should be on duty soon.

  1. Colombian political and economic problems. Confidential. 2 pp. DOS, CF, POL COL.