819.51/950: Telegram
The Chargé in Panama (Flexer) to the Secretary of State
[Received 8:45 p.m.]
104. Administration bill introduced without warning in the National Assembly provides for issue of 6,000,000 balboas “guarantee bonds” bearing interest at 3% maturing November 1, 1958 the proceeds to be devoted to the purchase of bonds of 1923 and 1928 external loans1 at prices not above par.
Sales would be only to designated institutions under a plan which in practical effect would amount to a forced loan to the Panaman Government by foreign banks, public utility, and oil companies for reduction of the interest rate upon the defaulted external loans. After providing that private banking or credit institutions may not receive deposits exceeding 50% of [by more than 50%]2 their investments in the Republic the bill stipulates that 20% of the total deposits of residents of the Republic shall be invested in guarantee bonds. Projects, utility, and oil companies would be required to invest not less than 10% of their capital or 50% of their sales during the past twelve months in these bonds.
The guarantee bonds would be exchangeable after six months for 1923 and 1928 external loan bonds acquired by the government with the proceeds of such compulsory investments but the external bonds would bear interest only at 3% from the date of exchange.
Interest on the guarantee bonds would be secured by the interest on bonds of external loans acquired by the government under the provisions of the bill and by 3% interest payment by the Banco National on the government’s deposit of any proceeds of sales of guarantee bonds not convertible into bonds of external loans.