1940: Colombia

A sharp cleavage has developed within the Liberal Party, in power since 1930, the factions splitting over the question of reelection in 1942 of ex-President Alfonso López. Sr. López, who was President in 1934-38, is popular with the left wing of the Liberals and with the workers and peasants. The present Chief Executive, President Eduardo Santos, is associated with the right wing. The minority anti-López Liberals have made occasional political deals with the opposition Conservative Party, as in the selection this year of an anti-López President and Conservative Vice-President of the lower house. A similar split threatens the Conservatives, occasioned by a statement to the Senate of their leader, Laureano Gómez, that his party would consider a second election of López a declaration of civil war. Sr. Gómez's paper, El Siglo, has attacked the administration's foreign policy, which favors cooperation with the United States. Of more immediate concern to the Republic was the obstruction of the Washington coffee quota agreement (see EL SALVADOR) and the defense loan, both of which measures, however, were passed at the final session of Congress Dec. 16. The defense bill authorizes the organization of a National Defense Council and a loan of 30,000,000 pesos, plus an additional 20,000,000 if the government considers necessary. The problem of negotiating the loan remains.

In July the sweeping emergency powers granted President Santos in December 1939 expired, but three days before their expiration the government adopted a series of measures to strengthen the country financially and to stimulate the development of the nation's resources. The plan to regularize the national debt by refunding operations and permanently to reduce interest charges on the external debt would mean a 50 per cent reduction in contractual interest, from 6 to 3 per cent, on the direct dollar obligations of the Republic, which are only about one-third of the total dollar debt. The debt service provided represents only 3.4 per cent of the 1940 budget, which calculated to balance total budgetary receipts and expenditures at 91,626,690 pesos. The fact that no consideration is given to departmental, municipal and corporate bonds and the inadequacy of such discriminatory payments are the reasons advanced for the Foreign Bondholders' Protective Council's refusal to recommend the proposal to the holders of these bonds. It is a great improvement, however, over the Republic's previous nominal offer of only a fraction of one per cent. Moreover, so far as the economic aspects of the plan go, it looks to fundamental reforms in the nation's economy and government direction of Colombia's agricultural, pastoral and industrial development. It provides for easy credit facilities to farmers, an encouragement of crops diversification and cattle-raising, special attention to the cultivation of rubber, quinine and coconuts, and for means, it is hoped, to correct the foreign control of its petroleum and banana industries. Financial commitments by the government under the plan total 17,500,000 pesos, to be supplied from a 20,000,000 peso loan contracted with the Banco de la República, an operation, in turn, made possible by the $10,000,000 credit recently extended by the Export-Import Bank. This loan should make it possible to balance Colombia's international account without much loss in gold reserves. The Exchange Control Board reported a net foreign exchange loss of about $11,630,000 for the first half of 1940. It must be remembered that Colombian export values, decreased nearly 15 per cent as compared with 1939, must be considerably reduced in terms of actual returns to the country because petroleum, its second export, and banana and platinum shipments are largely the products of foreign capital.

The government has also issued a series of decrees reorganizing the coffee industry with a system of price controls and export licenses and an official organization known as the National Coffee Fund, which will operate with revenues obtained from two new taxes levied on the industry. The Washington coffee pact allots Colombia, the second largest coffee exporting country of Latin America, a quota of 1,079,000 bags outside the United States market; coffee exports to the United States will be limited to 3,150,000 bags. Too great a dependence on this single commodity is one of the weaknesses of the nation's economy, which is especially apparent in a period like the present of sharply reduced returns from coffee exports. This fact lends interest to a thorough analysis of Colombian agriculture by three United States technicians, to be presented to the Colombian government, which centers on the possibilities of Colombia as producer of tropical products not competitive with the United States.

Unofficial reports of the great increase in Nazi activities, especially in commercial propaganda, is of special significance to the United States in the case of this country, which is so strategically placed with respect to the Panama Canal. Colombia has taken action to nationalize, by 1942, all air lines operating in the Republic, including Scadta (Sociedad Colombo-Alemán de Transportes Aereos), pioneers in commercial aviation in Latin America. Under the name Avianca (Aerovias Nacionales de Colombia) it will be operated and owned cooperatively by Colombian and United States interests. In June the German pilots were dismissed. In a message to Congress July 20, President Santos reiterated a pledge that no attack or threat of attack against the Panama Canal would be permitted from Colombian territory, and declared that the country's foreign policy was based on cooperation with the United States, economic assistance being needed to maintain solidarity with the northern Republic.