351. Memorandum From the Director of the Office of Southwest Pacific Affairs (Bell) to the Assistant Secretary of State for Far Eastern Affairs (McConaughy)0
- The Peso-Dollar Problem in Connection with Payment of the Balance of War Damage Compensation Under the Philippine War Damage Act
The Philippine Rehabilitation Act of 1946 (Public Law 370–79th Congress)1 appropriated $400 million to assist in the restoration of private property destroyed during World War II in the Philippines. Claims were originally stated in pesos when the Philippine peso was pegged at two to the dollar. Each approved peso claim was converted into dollars for United States accounting purposes. There is nothing in the law that requires payment in pesos. The United States Philippine War Damage Commission provided by regulation for payment in pesos as the currency most immediately useful to the majority of claimants. It was recognized in 1946 that $400 million might not be sufficient to pay off all approved claims and it was clearly understood that an additional sum would be appropriated to pay the balance. The final sum generally agreed upon and accepted is $73 million. In 1960 it was agreed that all claimants now residing in the United States should, as a matter of equity, be paid in dollars to relieve them of the hardship of converting pesos to dollars under the stringent currency controls prevailing in the Philippines. Since that time the Philippine peso has been devalued until the official free market rate is now three pesos to the dollar.
On June 1, 1961, Assistant Secretary Martin, testifying before the sub-committee of the House Foreign Affairs Committee, presented the Executive Branch position recommending that all claimants, regardless of location, be paid in dollars. This would allow those resident in the United States to utilize payments immediately without loss due to exchange. This would also permit all claimants in the Philippines, both Americans and Filipinos to obtain pesos at the prevailing rate of exchange and not to be penalized for the action of the Philippine Government.[Page 767]
The Committee Chairman Mr. Zablocki indicated his approval of the Executive Branch position. Dr. Walter Judd, a member of the Committee,2 indicated his desire to pay off all claims at the original rate of two pesos to the dollar. This would require the appropriation and expenditure of only about $52 million instead of the generally accepted and unanimously anticipated figure of $73 million. Dr. Judd’s position, widely reported in the Philippine press, drew protests of poor sportsmanship, poor diplomacy and recriminations as to how such tactics revealed the contrast between United States treatment of allies and neutrals, with the advantage clearly on the side of the latter.