321. Memorandum From the President’s Special Assistant (Rostow) to President Johnson 1

SUBJECT

  • Colombia: What We Achieved With Our Program Loan

A year ago when Colombia faced a severe political-economic crisis, you authorized a $65 million program loan to Colombia on the basis of meaningful self-help measures. Today the situation in Colombia contrasts most favorably with that of last fall, thanks in considerable part to that loan.

The outlook then was grim:

  • —The budget was seriously in deficit.
  • —The inflationary threat was grave.
  • —Disposable foreign exchange reserves were badly depleted.
  • —Substantial payment arrears had accumulated.
  • —An over-valued exchange rate resulted in stifling controls.
  • —Public confidence was at a low ebb.
  • —The spring general elections and survival of the National Front were in doubt.

In September, 1965, the Consultative Group (IBRD, IMF, AID) helped the Colombians draw up a stabilization program buttressed by external financial support. After a year the program has removed the main causes of instability. This is the picture today:

  • —The current budgetary surplus has reached levels permitting an acceleration of investment expenditures.
  • —The inflationary spiral has been brought under control.
  • —Net exchange reserves have increased by some $41 million, with payments arrears eliminated.
  • —Trade liberalization has exceeded the IMF target.
  • —There has been a resurgence of confidence inside and outside Colombia.
  • —The elections were orderly and the democratic, progressive forces of the National Front emerged strengthened.

Much remains to be done, of course, but our investment in this important Latin American country during the past 12 months has paid off.

Walt
  1. Source: Johnson Library, National Security File, Country File, Colombia, Vol. II, 8/65–9/66. Confidential. A notation on the memorandum indicates that the President saw it. A copy was sent to Bill Moyers.