440. Letter From the Ambassador in Colombia (Bonsal) to the Assistant Secretary of State for Inter-American Affairs (Holland)1
Dear Henry: Al Waterston2 of the World Bank Mission has been keeping in fairly close touch with me. We had a bit of friction at the start because I was unable to conceal my reaction to the World Bank’s conduct with regard to the Export-Import Bank on the Paz de Rio matter. However, that is all now in the past and our relations are good.
For your own private information, and not for transmittal to the World Bank or to the Export-Import Bank for the present, I am appalled at what I learned from Waterston as to the views of the Paz de Rio operations which are being developed by the World Bank Mission. These views are in sharp contrast to the optimistic statements attributed to the Mission in the local press.3
Briefly, the World Bank finds the operation to be completely bankrupt and to be lacking in funds needed even for current cash outlays. There is no working capital. The Bank is going to recommend to the Government that it must make rather heavy advances of funds from the general budget just to keep the organization going. There must also be a thoroughgoing management reorganization. Everything is at sixes and sevens in operations and management. The Government must, in fact, divest itself of control and try as rapidly as possible to transfer the operation to private industry.
Nevertheless, the World Bank people believe that the steel industry prospects here are reasonably good and they agree that expansion along the lines contemplated by the Export-Import Bank negotiations is required. They are not, so far as I can judge, hostile to the operation. However, their view of its present status, particularly from the financial point of view, is a very gloomy one and I gather the impression that they have discovered facts and figures [Page 887] which the Export-Import Bank either did not know of or did not take into account.
We will be reporting more in detail on this situation. My good friend Ignacio Umaña4 tells me that he intends to proceed with great deliberation before reaching decisions as to the expansion or financing thereof. Waterston tells me that the Government, including the President, has generally accepted the preliminary views of the World Bank Mission regarding the bailing out with Government funds of the Paz de Rio enterprise and its gradual transfer to private industry.
I would appreciate it if you would make no use of the above outside ARA until we are in a position to report in more detail on the whole situation. I gather that Waterston has not yet reported to his home office.
Sincerely yours,
P.S. Enclosed is a copy of a memorandum prepared by Henry Hammond on our talk with Waterston. Incidentally, Henry, who was sent here as Labor Attaché, is doing a very good job of pinch-hitting as Economic Counselor.
- Source: Department of State, Holland Files: Lot 57 D 295, Colombia. Secret.↩
- Albert Waterston was head of the IBRD mission to Colombia.↩
- An account of Waterston’s views is contained in a memorandum of conversation dated October 3 by Henry S. Hammond, First Secretary and Consul of the Embassy. It was forwarded to Holland under cover of this letter. According to the memorandum, Waterston stated, in reference to a prospective Export-Import Bank loan for the Paz de Rio plant, that while he thought the loan was a good idea, “unless the basic deficiencies in the financial structure are corrected and the Government participation in the firm removed no other expedients will be successful.” (Department of State, Holland Files: Lot 57 D 295, Colombia)↩
- Umaña, a former governor of the state of La Palma, was President of the Paz de Rio project.↩