821.51/2528⅛
Memorandum by the Under Secretary of State (Welles)
At a meeting in my office this morning attended by the Colombian Ambassador, Mr. Jesse Jones11 and the Under Secretary of the Treasury,12 together with Mr. Traphagen representing the Foreign Bondholders Protective Council, an effort was made by Mr. Jones, Mr. Bell and myself, acting as friendly intermediaries, to find a basis of agreement between the Ambassador and Mr. Traphagen for a permanent settlement of the Colombian foreign debt situation.
After very considerable discussion Mr. Jones finally submitted to both parties with the approval of Mr. Bell and myself the following plan for a permanent settlement.
- 1.
- New debt to consist of the existing principal, estimated at $44,000,000, plus 50% of interest arrears estimated at $12,200,000, or $6,100,000, making a total of $50,100,000.
- 2.
- Interest on the new debt to be fixed at 3%.
- 3.
- During the first five years from the signing of the proposed agreement, the Colombian Government would agree to a total service on the debt of $1,800,000 each year, and upon the expiration of this five-year period the Colombian Government to service the debt in an amount of $2,000,000.
- 4.
- The arrangement would specifically provide that in the amount yearly set aside for debt service the amount between the total interest charges at 3% and the total devoted to debt service would be utilized for amortization.
The Colombian Ambassador insisted for some time upon the sliding scale which his Government had proposed. Mr. Traphagen was equally vehement in opposing any sliding scale proposal and as vigorous in objecting to the suggestions formulated by Mr. Jones.
At the end of the meeting the Ambassador stated that he would at once communicate the proposal made to his Government and would strongly urge its immediate acceptance without modification. Mr. Traphagen said he would convoke the members of the Executive Comimittee of the Council tomorrow, Sunday, July 7, and request them either to accept the proposal or to reject it.
It was further understood that if an agreement was to be reached for a permanent settlement on the terms suggested, the agreement must be concluded before July 13 in order to give the Colombian Government sufficient time to issue the necessary decrees before the expiration of the President’s special powers on July 20.