834.6363/213
The Ambassador in Paraguay (Frost) to the Secretary of State
[Received April 20.]
Sir: I have the honor to refer to despatch No. 1923 of March 25, 194442 reporting that Mr. Glenn Ruby43 had been engaged by the [Page 1476] Paraguayan Government to advise it respecting its negotiations with the Union Oil Company of California.
Mr. Ruby left Asunción this morning for Buenos Aires en route to Santiago, Chile, and Magallanes,—at which latter point he is heading an exploration party for the Chilean Government.
Shortly after reaching Asunción Mr. Ruby informed me that he had read that a fund of five million dollars had been provided by Congress for Petroleum Administrator Ickes44 to be used in exploring for new oil fields in foreign countries from which the United States might eventually draw supplies. He suggested that this Embassy make inquiries as to the availability of these funds for exploration in Paraguay. At my suggestion the inquiry was made through the Paraguayan authorities, and the reply received was adverse.
Mr. Ruby informed me confidentially last week that the Paraguayan Government was bent upon imposing conditions which would tend to preclude the Union Oil Company from proceeding with its plans for exploration and development here. He indicated that the Paraguayan proposals sought to secure minor fees and payments in connection with each of the various initial steps in their undertakings; while he was himself advising that they negotiate a simple contract based on royalties or a participation in profits. Later he informed me that he found the Paraguayans hardly disposed to a reasonable approach to their problem, although he had avoided any discussion with them. He finally prepared a full memorandum of suggestions, which he left with the Ministers of Public Works and Finance. He told me that it was his view that on the whole Paraguay had little reason for standing off the Union Oil Company unduly as the Company is sound and efficient and can do for Paraguay as much as any such company would be likely to do. He preferred, however, in view of the distrust and anxiety for immediate gain shown by the Paraguayans, to disassociate himself quietly from the negotiations after furnishing conservative and adequate advice.
A brief informal chat with the Minister of Finance gave me the feeling that Paraguay will adapt her demands to the realities of the situation, and that negotiations with the Union Oil Company may probably proceed gradually to a successful conclusion.
Respectfully yours,