740.34112A/42
The Ambassador in Paraguay (Frost) to the Secretary of State
[Received February 15.]
Sir: I have the honor to refer to previous despatches regarding the position of the Paraguayan Government as regards the recognition of the Proclaimed List, and to make particular reference to the Embassy’s Confidential Despatch No. 1726 of January 13, 1944,51 in which it was noted that this subject had again been explored with the new Minister of Industry and Commerce, Dr. Juan Felix Morales. In Despatch No. 1726 it was reported that the Minister had promised that his Ministry, as well as the Department of Distribution, which is responsible for the issuance of buying orders for materials under ration [Page 1480] control, would not grant such buying orders to firms or individuals on the Proclaimed List when the commodities involved included petroleum products or other material received from the United States, or tires and tubes imported from Brazil.
Since the verbal conversation with the Minister of Industry and ‘Commerce there has been abundant informal evidence that his undertaking has been put into force and that efforts are being made to prevent the issuance of buying orders to firms and individuals on the Proclaimed List when the material involved has originated in the United States or represents stocks which are under the control of American agencies in the foreign field. Apart from the Government’s verbal undertaking, the Embassy has informed the more important local exporters that they themselves must assume some responsibility for the distribution of their imports, and, on the whole, cooperation has been very helpful. As a case in point, on January 17th the Department of Distribution issued a purchase order drawn on the West India Oil Company for an amount of 600 liters of kerosene in favor of the so-called Price Control Commission of Ybytymi. On the surface this order would appear to have been perfectly in keeping with the restrictive understanding regarding petroleum products. However, as the Department probably knows, the area of Ybytymi is the section where the Japanese colony, La Colmena, is located. Furthermore, the purchase order was actually delivered to Mr. Kishi, the representative of the La Colmena Company in Asunción.
The Japanese colony in Paraguay was not recommended for the Proclaimed List by the Embassy but was rather intervened by the Paraguayan Government as a result of prolonged negotiations between the Embassy and the competent Paraguayan authorities. The importance of the colony to the country’s economy is such that it was not believed practical to list the colony in an attempt to prevent any imported materials reaching that organization. The plan set up presumed that the colony would be intervened and that the Government’s Agriculture Bank would assume the responsibility for all control measures over the colony including its finances as well as the purchase of its produce and the provision of any materials required by the colony.
Upon the discovery of the issuance of the buying order for kerosene referred to previously, this matter was discussed with the Department of Distribution of the Ministry of Industry and Commerce as well as the Administrator of the Agricultural Bank of Paraguay. The Embassy took the position that while it did not desire to deny completely the delivery of kerosene to the colony it was felt that the kerosene should be delivered to the branch of the Agricultural Bank in that area and that its distribution and control should be in the hands of [Page 1481] that institution. This proposal was agreed to and is now in the course of being arranged.
Due to the rather dominant position occupied by the Agriculture Bank throughout the country, not only as one of the few sources of farm credits, but also as the sales channel of much agricultural equipment and the maintenance agency of the Government’s guaranteed price program, the question of the recognition of the Proclaimed List has at various times been discussed at length with the bank’s administrator, Mr. Francisco Ferrario, whom the Department may recall was in the United States during the latter part of the year 1942, as a guest of the Coordinator’s Office.52 Mr. Ferrario, since he assumed charge of the Agricultural Bank, has been most cooperative and the Embassy has always felt confident that he was doing everything within his power and influence to comply with this mission’s requests. Probably one of the most heartening and encouraging developments along this line occurred on February 1 while a representative of the Embassy called at Mr. Ferrario’s office on a routine matter. At that time Mr. Ferrario delivered a signed and sealed copy of a circular letter written by the Agriculture Bank of Paraguay on January 26, 1944, to all of its branches and correspondents throughout the country. In this circular communication, which is identified as No. 3/14, it was stated that “for your information and knowledge we wish to inform you that all departments of this institution must absolutely abstain from making purchases from commercial firms included in the ‘Black List’ or to have with these firms commercial dealings of any type”.
While this letter from the Agricultural Bank does not necessarily presume official recognition of the Proclaimed List, it is believed significant that the bank, which is a Government operated institution, has gone as far as it has. While there are practically no firms or individuals on the Proclaimed List who are located in the rural areas of the country, it is thought that this announcement may have a discouraging effect upon those parties who have previously dealt with the well-known organization of Staudt & Company (PL) which previously was an important exporter of hides and skins, petit-grain oil and similar products. Furthermore, this instruction should obviate the possibility of Proclaimed List firms or individuals obtaining any part of the cement manufactured in Uruguay for the requirements of the economy of this country, regardless of how essential the utilization may be. This cement is periodically delivered to the Agriculture Bank in Asunción which completely controls its distribution and sale. Purchases of this cement are made on the basis of buying orders by the Department of Distribution, and while through either error or carelessness, buying orders may be issued from time to [Page 1482] time to Listed firms by that Department, it would appear very probable that the sales’ staff of the Agricultural Bank will note this mistake before actual delivery has been made.
In line with the circular letter of the Agricultural Bank, the Embassy plans to make available for distribution to the bank’s branches and correspondents, copies of the Proclaimed List. If this distribution of the list is successful it will certainly be a major step forward and will undoubtedly make the rural areas of the country increasingly aware of the List and its significance.
Respectfully yours,