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which they are not at all clear. It is their understanding that it has something to do with back interest payments. Department has no record of this. Bankers state that cable received this morning informs them that President Olaya was suggesting the payment of this latter sum over a period of years and that this might definitely settle the matter. They also felt that Olaya was perhaps trading on this and that his attitude toward the American bankers was in order to make them help him out with this sum. Department has no information on this matter whatsoever and will be glad to have such comments as you may care to make.

Department will be glad to have you explain to President Olaya either directly or through supporting the bankers' representatives in Bogotá the true situation regarding the Supía Marmato claim as set forth above.

STIMSON

821.51/872: Telegram
The Minister in Colombia (Caffery) to the Secretary of State

[Paraphrase]
BOGOTÁ, March 17, 1931–5 p. m.

[Received 10:07 p. m.] 39. Your 16, March 16,4 p. m. This incident has adversely affected President Olaya more perhaps than it should. The President holds that he has based his entire political program on cooperation and friendship with us, but now, in view of the action of the bankers, his confidence in American businessmen seems to be a bit shaken. I am, of course, trying to combat this, but I am not convinced that he will continue to support the Barco contract with the same vigor, and he may not veto all the many objectionable articles in the general tariff bill which is now in his hands for signature, which he has promised to do.

The Bank's statement to the Department that the bankers' representatives here confused the two $4,000,000 credits, etc., is not true.

The figures for the settlement of the Supía Marmato claim, as set forth in despatch No. 1779 of October 14, 1930,83 were correctly reported. The amount of the accrued interest is £40,000 sterling. President Olaya knows that the attitude of Lazard was due to pressure from the British Foreign Office. What he chiefly resents is that our bankers, after promising to pay the $4,000,000 upon certain conditions, when the conditions were complied with, at the last moment put forth this British claim.

* Not printed.

The President's prestige has suffered considerably. For instance, Senator Marulanda this morning remarked that he believed that all of President Olaya's talk about American friendship was “a lot of bunk”; that Congress, believing his promises, had carried out every condition of the bankers and still the bankers had not paid over the money.

CAFFERY

821.51/891

The Minister in Colombia (Caffery) to the Secretary of State

No. 2359

Bogotá, March 18, 1931.

[Received April 1.] SIR:I have the honor to refer to my confidential despatch No. 2323,34 submitting a report on the relations of the United States with the Latin American republics, with particular reference to Colombia, and to invite attention to the fact that the best efforts of the Department of State and our diplomatic missions abroad may be almost nullified by prejudicial activities of American business concerns. I have in mind especially the recent action of the group of American bankers, which has had such an unfortunate effect on our interests here in general in Colombia. Without question, activities of this kind have played a great part in creating the undercurrent of hostility against us which exists in Latin America; and I do not believe that that hostility will cease until some way is found to have American business concerns understand that it is imperative for them to act towards the Governments and peoples south of the Río Grande in the same manner as they act towards people and concerns in the United States; and we are only deceiving ourselves if we pretend that the majority of American concerns act in these countries as they do at home. Respectfully yours,

JEFFERSON CAFFERY

821.51/933 : Telegram

The Minister in Colombia (Caffery) to the Secretary of State

[Paraphrase]

Bogotá, May 12, 1931—7 p. m.

[Received 10:18 p. m.] 59. President Olaya says that following continued pressure from the bankers he has settled the British Supía Marmato mining claim; forced the organic budget law through Congress and that the organic

* Dated March 11, 1931; not printed.

customs bill will be passed in a few days; he is ready to put into effect by executive decree the principal provisions of the comptroller law; and now, in the face of this, the bankers still say they cannot pay the four millions because they have discovered that the revenues for the first quarter of this fiscal year are below their estimates; the bankers want him to reduce the budget again; he says that this is an impossible situation and that no government can function if its budget is subject to revision from month to month; that the bankers themselves accepted Kemmerer's 35 figures for the budget and in any event, in his opinion, the increased revenues later this year will make up for whatever they are short during this quarter; that if he ‘attempts further salary reductions at the present time, he will have social troubles on his hands; that these four millions are destined to pay the amounts still due by the National Government to the Departments and in case the Departments do not receive they will commence to default, as all his calculations have been based on that; for instance, the Department of Antioquia will be forced to default next month; the only reason why many members of Congress are supporting the Barco contract is that he has promised them part of the four millions for their Departments; he added that I could readily understand that after all he had done to force the Barco contract and the oil law and other legislation that I wanted through Congress, if he is compelled to state that my people have refused to cooperate with him there will be nothing left for him to do but resign, and that he did not think that our bankers would get very sympathetic treatment from his successor.

Again I respectfully ask that the bankers be made to understand what they are doing. If the bankers drive the President from office, the chances of their ever recovering their fifteen millions already invested will be remote. It is quite clear that after all that President Olaya has done for American interests (and in the face of bitter opposition), if he turns to Congress with empty hands he cannot retain the Presidency.

CAFFERY

821.51/933 : Telegram

The Secretary of State to the Minister in Colombia (Caffery)

[Paraphrase]

WASHINGTON, May 14, 1931-1 p.m. 26. Your 59, May 12,7 p.m. The matter has been discussed with an official of the National City Bank of New York who said that the

Edwin Walter Kemmerer, president of the American Commission of Financial Advisers to Colombia.

difficulty was that the budget was found to be unbalanced to the extent of $4,400,000. A balanced budget, he stated, was not a new condition now imposed by the banks but was the cornerstone of the whole agreement from the very beginning. The National City Bank has cabled to Bogotá suggesting that specific reductions be made in the budget, and this has been done by comparing the 1931 budget with the 1930 budget and suggesting that all increases in the former over the latter be scaled down to the 1930 figure. The increases in the 1931 budget over the previous budget amount to more than $4,000,000, so that if these reductions are made, they will have, in fact, a balanced budget. The Department does not know what items are on this list, but it has been told that there are few, if any, salary reductions involved.

The National City Bank stated that this information was cabled to Bogotá; that a reply was received inquiring whether, if these reductions were made, the last $4,000,000 would be paid over; the National City Bank answered that it would. Report further developments.

STIMSON

821.51/937 : Telegram

The Minister in Colombia (Caffery) to the Secretary of State

[Paraphrase)

Bogotá, May 16, 1931–10 a. m.

[Received 5:11 p. m.] 61. Department's 26, May 14, 1 p. m. President Olaya admits that a balanced budget was one of the first conditions laid down in the agreement of June 30, and he agreed with the bankers on a balanced budget of $51,000,000 afterwards reduced to $49,000,000 for this year. What the President holds is that he cannot revise his budget month by month in accordance with the monthly receipt of revenues; what the bankers now demand is that he reduce the budget again as the receipts for the first quarter are below their estimates. The President says that the revenues will pick up later on. There are no salary reductions involved in the new reductions demanded, but the discharge of large numbers of employees is involved. The 1930 budget reached over $59,000,000.

CAFFERY 821.51/973: Telegram

The Minister in Colombia (Caffery) to the Secretary of State

[Paraphrase]

Bogotá, June 11, 1931–4 p. m.

[Received 7:30 p. m.] 80. Your 37, June 10, 1 p. m.37 Negotiations are still proceeding on the questions mentioned in my 73, June 1, 4 p.m.37 The local representatives believe that their principals in New York will reach a final favorable decision within a few days. If they do not, President Olaya may appeal again to the good offices of the Secretary of State.

CAFFERY

821.51/980: Telegram

The Minister in Colombia (Caffery) to the Secretary of State

BOGOTÁ, June 19, 1931—10 p. m.

[Received June 20—12:14 a. m.] 83. My telegram No. 80, June 13 [11], 4 p. m. At the last minute after everything else was agreed on for advance of last [$]4,000,000 bankers today have made a new condition: they desire to jump interest rate on renewal of whole loan June 30 from 7 to 8 percent. Olaya rightly says that in the face of the approval of the Catatumbo contract yesterday it is impossible for him to face the country and admit that the interest rate asked by American bankers has been increased immediately upon approval of Catatumbo contract when the entire nation believes that its approval will bring about improved economic and financial conditions here. He says that later in the year he might be able to pay more but certainly not now.

I agree entirely. An increase of this interest rate would now have absolutely disastrous consequences for the whole current of friendly feeling now existing here for the United States. The bankers apparently still have absolutely no understanding of the situation here or their own best interests. They are frivolously reopening the whole question of Olaya's continuing in office.

CAFFERY

37 Not printed.

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