823.10/1–2554

Memorandum of Conversation, by Edgar L. McGinnis, Jr., of the Office of South American Affairs

confidential

Subject:

  • Peruvian Request for Stabilization Loan
  • Participants: Ambassador Berckemeyer, Peruvian Embassy
  • ARA—Mr. Cabot
  • OSA—Mr. McGinnis

Ambassador Berckemeyer said that following discussions in Lima with his Government, he had been instructed by President Odria to request a stabilization loan from appropriate sources in the United States for the purpose of stabilizing the exchange value of the sol and paying off the backlog of commercial debts. He stated that while Peru had imposed credit restraints and had taken measures of retrenchment to prevent the further depreciation of the sol, these measures had not yet shown results. He indicated that overspending by the Government [Page 1512] on development was a major contributing cause and that this was being remedied. The Ambassador went on to say that the situation was aggravated by a flight of capital which would be prevented through a restoration of confidence in the value of currency. For this reason, a loan was necessary. Although, he said, it was unlikely that the loan would be drawn on to any great extent. The simple fact that dollars were available from such a loan would reestablish confidence in the currency. The Ambassador said that his Government did not desire to resort again to official currency and import controls which it had worked so hard to eliminate when the Odria administration came into power.

Mr. Cabot said that we were aware of this situation and had already given some preliminary consideration to the matter. He said that it appeared that the best method would be for Peru to request a drawing from the IMF. When the Ambassador indicated that this procedure might not yield sufficient amounts for the purpose Peru had in mind, Mr. Cabot replied that this could be regarded as a first step. If other steps were needed later, we would be glad to consider which further measures might be necessary. He said that in view of Peru’s favorable record in encouraging foreign private investment and eliminating official economic controls, there existed a favorable disposition among United States officials to be of assistance in this situation. Mr. Cabot said that he personally had a good hope that appropriate assistance could be rendered and inquired as to the sum the Peruvian Government had in mind for stabilization purposes.

Ambassador Berckemeyer replied that his Government had a figure of $30 million in mind which could be used both for purposes of stabilization and for elimination of the backlog of commercial debts. In reply to an inquiry by Mr. Cabot, the Ambassador said that he would be available for a meeting with IMF officials tomorrow morning, but that he would be out of town from noon Tuesday to about noon the following day. He remarked that he had to travel to New York to be present at the opening of the exhibition of Peruvian art objects at the Museum of Modern Art.

Mr. Cabot said that he would be pleased to do what he could to help arrange an early meeting with IMF officials and said that he would communicate later with the Ambassador on the subject.

The Ambassador said that a memorandum1 had been handed by his Government to Ambassador Tittmann describing the current exchange situation and Peru’s request for assistance. When Mr. Cabot stated that the memorandum had not yet reached Washington, Ambassador Berckemeyer promised to send a copy to the Department today.

  1. Not identified.