Office of the Historian

435. Memorandum From the Director of the Office of International Financial and Development Affairs (Corbett) to the Assistant Secretary of State for Economic Affairs (Waugh)1

Washington, August 22, 1955.

SUBJECT

  • Proposed Loan to Colombia

Last week you mentioned that a telegram had gone out which might have given undue encouragement to Colombia about the prospects of receiving a balance of payments credit. At that time I assured you that no such telegram had gone out. I learned subsequently [Page 878] that a message2 had been sent on the day I was not in the Department. Looking at this message, I can see that rather more encouragement than I would have thought advisable had been given our Embassy in Bogota, and, further, the Embassy had been authorized to indicate that the principal reason for our reluctance to consider a balance of payments credit was based on lack of information.

I believe this message was a mistake and I have been further confirmed in this view by receipt of information from Frank Southard. According to Southard, who bases his information on a very recent consultation with responsible officials from the Central Bank of Colombia, the Colombian internal financial situation is under fairly good control, imports have been cut back to about $30 million a month and dollar income is expected to be about $50 million a month for the remainder of the year. The Colombians believe this situation will permit them to work off the backlog over the coming months. The pressure, therefore, for the backlog credit seems to come from the Minister of Finance, Villaveces.

The Colombian estimate of dollar income in the coming months is based upon the price of Colombian coffee not falling significantly below 55 cents a pound. In turn, whether or not there is a further fall in coffee prices is very much dependent upon the coffee and foreign exchange policy of Brazil.

In conclusion, I believe it would be desirable to send out another message to our Embassy in Colombia advising them of this recent information which we have received from Southard and suggesting that they discourage the Colombians from seeking at this time a balance of payments credit. This is all the more important in view of the survey which the IBRD now has under way in Colombia.

If you agree with the above recommendation, I believe an indication from you to Holland to this effect would be desirable.3

  1. Source: Department of State, Central Files, 821.10/8–2255. Official Use Only.↩
  2. To Bogota, 57, 8/16/55. From Bogota, 82, 8/15/55. [Footnote in the source text. Neither printed. (Ibid., 103–XMB/8–1655 and 103–XMB/8–1555, respectively)]↩
  3. A handwritten notation on the source text reads: “Let us see what develops. I hesitate to stir any more on this project right now. SW”.↩