Memorandum of Conversations, by Mr. Alexander Schnee of the Division of North and West Coast Affairs

Participants: Sr. Carlos Montero Bernales, Peruvian Finance Minister
Sr. Carlos Vidal, Member Advisory Committee, Peruvian Finance Ministry
Sr. Carlos Franco, Member Advisory Committee, Peruvian Finance Ministry
CP6—Mrs. Amelia H. Hood
CP—Lt. Col. Harry R. Turkel
FN7—Mr. James C. Corliss
NWC—Mr. Alexander Schnee

At the outset of the conversations Mr. Schnee explained to the Minister that the Department was anxious to avail itself of the opportunity provided by his presence in Washington to learn something of the Peruvian Government’s plans with respect to import and exchange controls. It was explained that this interest grew out of the general interest in the subject as well as recent reports which indicated that the Peruvian Government was giving some thought to the desirability of enacting into law the controls which had been instituted early this year.

The Minister stated that he had already taken steps to reorganize the control administration with a view to centralizing administrative procedure and liberalizing control measures. The Minister stated that important measures had already been taken towards this end and that as a concrete example of the results he could point to the permits, [Page 1360] issued at his suggestion shortly before he left Lima, for the importation of 400 automobiles from the United States.

Sr. Montero stated that he was optimistic with respect to the Peruvian exchange position during the coming months in view of (1) the United States purchasing program, (2) the return of capital which had left the country because of the political uncertainty which followed the elections, (3) the prospects for future expansion of industry with the aid of United States capital, and (4) the informal arrangement (“gentlemen’s agreement”) made with a few of the larger American companies operating in Peru which would result in their voluntarily reinvesting a greater proportion of their returns in Peru for the next year or two.

As a result of the foregoing developments the Minister stated that he confidently expected that within a period of five or six months the Peruvian Government would be able to eliminate import and exchange controls.

Sr. Franco then reviewed briefly the conditions which necessitated the establishment of controls and stated that the flight of capital referred to above was an important factor in the establishment of these controls.

In connection with the subject of foreign capital in Peru, Sr. Franco mentioned plans to build up the economy of Peru, by industrialization and otherwise, and made the statement that he felt that Peruvian capital should be used to a greater extent, that Peruvians should have a 50 percent interest in enterprises in Peru in which foreigners are interested, and that foreigners should send out of the country only that portion of their net profits aggregating a return of 10 percent, investing the balance in Peru. Whether or not these were merely his own personal views or those of some of the members of the Aprista Party was not clear. The Finance Minister was not in the room when this statement was made.

In reply to a direct question as to whether it was the policy of the present Peruvian administration to continue controls the Finance Minister stated that it definitely was not and that he was sure of the support of Haya de la Torre, leader of the Aprista Party, and Senator Seoane in this viewpoint. Colonel Turkel referred to Articles III and X of the present trade agreement between the United States and Peru, which have to do with import restrictions, and stated that it has been the policy of our Government to discourage the use of exchange controls as a means of curbing trade and that under conditions requiring a nation to regulate imports the United States has favored publicly announced quota arrangements. Sr. Franco replied that he agreed that the proper procedure would be to eliminate exchange controls first and that if continued import controls were necessary, they [Page 1361] should be on a quota basis. The Minister made notes upon mention of the trade agreement, and Colonel Turkel gave him a copy of the agreement.

During this discussion the Minister stated that it was his hope that the new approach to international trade as envisioned in the Bretton Woods Agreement8 would facilitate the handling of Peruvian foreign exchange requirements and would thus decrease the necessity for trade and exchange controls. He mentioned the December 31 deadline, which would indicate that Peru hopes to sign the Bretton Woods Agreement before that date.

Finally, the Minister suggested that the proposed preliminary conversations regarding a new trade agreement be postponed until after the first of the year when the Peruvian situation would be clarified. This was the only mention of the proposed negotiations.

  1. Division of Commercial Policy.
  2. Division of Financial Affairs.
  3. For documentation on the United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire, July 1–22, 1944, see Foreign Relations, 1944, vol. ii, pp. 106 ff. For texts of the agreements, see Department of State, Conference Series No. 55: Final Act and Related Documents.