821.51/982a: Telegram The Secretary of State to the Minister in Colombia (Caffery) [Paraphrase] WASHINGTON, June 22, 1931-7 p. m. 45. The position of the bankers is as follows: On December 31, 1930, the credits expired. They were renewed for a term of 6 months by agreement. No agreement now exists for extending them beyond June 30, 1931, because it was contemplated that long-term financing would take place by that time. Such financing is absolutely out of the question because of present market conditions. Even if the $4,000,000 credit were given it would likewise expire on June 30. The bankers are willing to give the $4,000,000 and desire to enter into a new agreement to cover the entire $20,000,000 involved. Shortterm financing now on the basis of present market prices of Colombian bonds would be at 10 percent. Nevertheless, the bankers are willing to extend the credits for a period of 90 days at 7 percent provided they are paid an initial commission for issuing the shortterm credit of one-fourth of 1 percent of the total amount of $20,000,000, that is, $50,000. This is to cover the amount they are out for expenses for cables ($35,000) and maintenance of Messrs. William J. Samels 38 and Howard M. Jefferson 39 in Colombia ($9,000). Today Mr. W. W. Lancaster 40 was in Washington and it was pointed out to him that some of the expenses for cables were due to the failure of the bankers to pay the last $4,000,000 and in bringing up new conditions. He admitted this, but also stated that a good deal of it concerned the fiscal agency agreement and the endeavor to find a satisfactory formula for President Olaya, who had stated to the Colombian Congress that he had a definite promise of $20,000,000 from the bankers under the letter of June 20, 1930, at a time when the bankers claim this was not true. It was pointed out to Mr. Lancaster that the bankers agreed to give the $20,000,000 provided President Olaya did certain specific things which he has since done. Mr. Lancaster telephoned the bank officials and they stated that they would not insist upon the commission of one-fourth of 1 percent (which, for a 90-day credit added to the 7 percent interest would make a total of 8 percent) provided the President should make some gesture toward meeting the amounts they are out for expenses. We should like to have your views on this and to know whether you think the President would be disposed to offer half of the ex * Local representative of the National City Bank. 19 Local representative of the First National Bank of Boston. 40 Counsel for the National City Bank. penses. We consider this to be a very small matter for the bankers to quibble over, and although they may eventually yield under pressure, yet we want you to know their views, and before going back at them to know whether you think President Olaya would be willing to settle the entire matter by some such offer. STIMSON 821.51/985: Telegram The Minister in Colombia (Caffery) to the Secretary of State [Paraphrase] BOGOTÁ, June 23, 1931-4 p. m. [Received 9:22 p. m.] 88. Your 45, June 22, 7 p. m. The position of President Olaya is that aside from carrying out the bankers' conditions he has carried out a constructive program worth a great many millions to American interests, such as the Catatumbo contract and the oil law, and he can show an extensive list of other valuable favors done. As I have tried to explain, he forced the Barco contract through Congress at great cost to himself ... I have never known the President to exhibit . . so much feeling as now over this new demand of the bankers immediately following the approval of that contract. I think this may be a test as to whether or not the President shall go on with his present policy of enthusiastic cooperation with the United States, thus far so amazingly successful. The dollars and cents have little to do with the matter although the President would certainly question the justice of his having to pay cable charges largely as a result of quibbling by bankers and the expenses of the resident representative of the National City Bank, or Jefferson . . . I think, therefore, that President Olaya would resent paying any part of these expenditures, especially as the knowledge of the payment could not be kept from the public. CAFFERY 821.51/988a: Telegram The Acting Secretary of State to the Minister in Colombia (Caffery) WASHINGTON, June 26, 1931-7 p. m. 47. Department advised this afternoon by Lancaster that the contract for the additional four million dollars will be signed on Monday and the money will be turned over to Colombia on Tuesday. At the 41 ❝ June 29. same time the outstanding credits will be renewed for 90 days at the same interest rate, namely 7 per cent and without the opening commission recently asked for. The bankers added that the Bank had received information from Bogotá that a satisfactory arrangement was being made regarding the payment of expenses but the Bank has no information regarding it. CASTLE 821.51/998: Telegram The Minister in Colombia (Caffery) to the Acting Secretary of State BOGOTÁ, July 1, 1931-5 p. m. [Received 9:09 p. m.] 91. Department's 47, June 26, 7 p. m. Four millions made available to the Government yesterday; actually in their hands today. Outstanding credits renewed for 90 days at 7 percent with the understanding that increased rate of interest or payment of expenses will be taken up again September 30. CAFFERY 821.51/1100a : Telegram The Secretary of State to the Minister in Colombia (Caffery) 42 [Paraphrase] WASHINGTON, October 2, 1931-2 p. m. 63. Mr. George Rublee 2 telephoned us from New York City and stated that yesterday the Federal Reserve was seriously considering granting credit to the Banco de la Republica but that now an alarming telegram has been sent to him by President Olaya to the effect that unless immediate assistance is received in the form of a $12,000,000 loan to the National Government to care for the foreign debt service payments of the Government and Departments in 1932 he will be unable to meet these. Under the circumstances, since it appears that credit to the Banco de la Republica may not save the situation or even prove constructive, the Federal Reserve is less inclined to grant the credit. Mr. Rublee desires to know whether any political developments have occurred to account for the latest move of President Olaya. STIMSON Financial Adviser of the Colombian Government in the United States. 821.51/1101: Telegram The Minister in Colombia (Caffery) to the Secretary of State BOGOTÁ, October 4, 1931-4 p. m. [Received October 5-1: 12 a. m.] 121. Department's 63, October 2, 2 p. m. In order to answer properly Rublee's question I must review happenings of the year: 43 At the time Olaya forced Congress approval Catatumbo contract (my despatch No. 2633 of May 23rd), oil law, issued oil decree, et cetera, et cetera, public believed (unwarrantedly of course) that as a result of Olaya's many successful efforts on behalf of American interests American help would be forthcoming for the already unfavorable economic situation existing here. Later on Olaya attempted to secure help from the Gulf Oil Company; appealed to the United Fruit Company; offered business to International Telephone and Telegraph Company, et cetera, et cetera, with object of securing funds to avoid moratoria but was refused. Then came the situation created by the cancellation and reduction of credits by New York banks. Finally at the suggestion of the Government's foreign bankers he proceeded recently to take certain drastic measures (some of which are now known to the Department). The reaction to these measures among the public in general has been that while they accept the necessary sacrifices they say they "do not desire to sacrifice themselves" in order to pay foreign debt services. The attitude of the public is exemplified by remark a colleague made to me that "the man in the street is saying that Olaya was deceived by the North Americans who did not keep the promises they made him at the time he was putting through the many laws and measures they wanted". Moreover, it is not possible to persuade the public that no such promises were made; meanwhile Olaya asks for quid pro quo it is impossible to give him. He now asks this (and this would be accepted by public opinion); a loan of at least $7,500,000 (guaranteed by specified revenues) solely to take care of the debt services of the National Government departments and municipalities for 6 months. He asserts that the measures taken on advice of Government's bankers will cause Government's revenues even with new taxes to fall to such an extent that Government will be unable to bear the burden of its debts until normal conditions are restored. He insists on declaring that the present situation has been brought about by the cancellation and reduction of commercial credits plus the failure of American entities to give him the assistance he asked of them: He asserts that had "the little help" he asked for been given him by American concerns during the past few months, the present difficulties " Not printed. could have been easily avoided; he feels that something could have been done by us. For the first time since I have been dealing with Olaya, he is not inclined to listen to reason: his private secretary tells me the President said to him that "his international policy has been a complete failure; he has been abandoned by the United States into the hands of his enemies; he has declared repeatedly there would be no moratorium and if now forced to a moratorium all the enemies of the United States will arise and taunt him: Thus far he has had the political situation in his hands: now he will probably lose it". CAFFERY 821.51/1101: Telegram The Secretary of State to the Minister in Colombia (Caffery) WASHINGTON, October 6, 1931-8 p. m. 65. Your 121, October 4, 4 p. m. It appears that President Olaya and Colombian public opinion are taking the view that the many praiseworthy and constructive measures taken by Olaya, both directly and indirectly benefiting American interests, constituted the execution by Colombia of its part of a sort of bargain with this Government and that now this Government is failing to carry out its part. The Department realizes that you well understand its position, but it appears advisable in view of the foregoing to state as a matter of record that while the Department has at all times extended to Olaya every assistance that it appropriately could and sincerely appreciates Olaya's great efforts to pull through the present world economic depression, at no time did it either directly or indirectly extend any sort of promise of a quid pro quo in the nature of financial assistance. This is clear to you and is the position the Department must maintain. (See Department's telegram No. 22, April 20, 6 p. m.,44 in this connection). The Department's efforts before the banking group last Spring were for the purpose of pointing out the necessity for the group to live up to its contract; these efforts were not designed to obtain an additional loan for Colombia as a reward for Olaya. Olaya apparently does not understand that not only can this Government not exert pressure on private banks but also that its relationship to the Federal Reserve system precludes it from exerting any pressure upon this independent institution. To all who might help the Department has strongly indicated its friendship with the Colombian Government and its appreciation of the strenuous efforts 44 Ante, p. 27. |