833.51/672: Telegram

The Minister in Uruguay ( Lay ) to the Secretary of State

14. In informal unofficial conversation with Uruguayan Minister of Finance he told me that he is anxious to effect a definitive integrated adjustment of Uruguay’s national and municipal dollar indebtedness in agreement with the bondholders. He advanced the following plan as embodying in general the maximum which Uruguay could offer, adding that he could not offer more than equality of treatment with France and England. He observed that Uruguay is meeting a larger service on its foreign indebtedness than any other South American country except Argentina which has much larger resources.

National debt: for the 5 and 6 per cent issues the present interest rate of 3½ per cent will be maintained; cumulative amortization will be resumed after July 1, 1936 on the following basis, first year one fourth per cent, second year one half per cent, third and succeeding years 1 per cent. On the 8 per cent issue interest shall be definitely fixed at 3½ per cent and cumulative amortization as follows: first year 1 per cent, second year 11½ per cent, third and succeeding years 2 per cent. Municipal bonds will be exchanged for national bonds which shall be accorded following treatment: For the 6 per cent issue the arrangement will be identical with that stated above regarding the 6 per cent nationals; for the 7 per cent issue interest at 3½ per cent will be paid and cumulative amortization resumed as follows: first year one half per cent, second year three fourths per cent, third and succeeding years 1½ per cent. Unpaid back interest will be amortized by scrip issued on each obligation.

The Minister has asked me to obtain confidentially and to communicate to him personally the views of the Foreign Bondholders Protective Council as to whether this plan would be of sufficient interest to the Council as a basis of negotiations to warrant a visit by him [Page 935] to New York. Provided the reply is favorable and encouraging he will go to the United States in May from the League of Nations’ Labor Conference at Geneva to discuss a settlement. He does not want this plan discussed with others.

Please ask the Council to send me a prompt telegraphic reply through the Department that I can communicate verbally to the Minister before his departure for Geneva on March 6.

Lay