821.51/2493
Memorandum by the Ambassador in Colombia (Braden)4 to the Under Secretary of State (Welles)
Mr. Welles: After considerable discussion with Mr. Warren Pierson5 and Ambassador Turbay, the following plan for executing the [Page 699] credit to Colombia in my judgment is the most desirable from both the United States and the Colombian point of view:
1) The Export-Import Bank open a line of credit in the amount of $10,000,000 through New York banks in favor of the Banco de la República de Colombia. The Banco de la República would be enabled to draw against this credit as needed during the next few months in order to obtain funds with which to pay for imports from the United States. (Note: These imports so far as possible, and it should be possible to arrange it up to practically the full $10,000,000, would be the heavier equipment which Colombia is now importing in addition to such American equipment as will be needed immediately in order to progress with the development program outlined below. The complete centralization of exchange operations in the Banco de la República would make this possible.)
The terms to the Banco de la República would be repayment over eight years and interest at 4%, the schedule of amortization payments being so arranged as to make total service payments in approximately equal amounts each year of the eight years. (Note: The form of this credit would thus be essentially similar to that which was extended to the Banco de la República O. del Uruguay6 except that the term is eight years instead of five.)
The loan would be guaranteed by the Colombian Government.
2) At the same time, the Colombian Government and the Banco de la República would enter into an understanding with this Government and the Export-Import Bank that the entire proceeds of the loan would be destined ultimately to development projects. (Note: A portion of the total would be put directly and immediately into the purchase of American equipment needed for highway, railway and agricultural development works. In addition, the availability of the total credit to the Banco de la República would permit, indirectly at least, the liquidation of the existing exchange arrears in the amount of some $8,000,000. The payment of such arrears would release to the Banco de la República the equivalent in pesos which would enable it to finance, through loans to the Government and to the Agricultural Bank and so forth, the local expenditures in connection with the above-mentioned developmental projects.)
3) The Colombian Ambassador has also suggested that his Government would be willing to pledge and even to submit vouchers demonstrating that over the first five years of the program it would directly purchase for development a total of at least $10,000,000 of American heavy equipment.
The above program would appear to satisfy as far as possible the various positions. The Colombian bank would obtain the funds it requires, which the Colombians feel will restore confidence in the Colombian peso, and useful developmental works will be carried out. From the Export-Import Bank’s point of view the initial use of the funds will be entirely linked to American exports, and the ultimate effect of the credit will be to enable Colombia to carry out a long [Page 700] term developmental program, all of the funds eventually at least going into heavy equipment. From the point of view of the United States this credit will also permit the clearing up of the present exchange situation which will enable Colombia to move forward with its new exchange régime which it is hoped will avoid the accumulation of further exchange arrears.