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ORIGIN ARA-10
INFO OCT-01 ISO-00 EB-07 OES-06 INR-07 IGA-02 SS-15 SP-02
L-03 /053 R
DRAFTED BY ARA/ECP:LPETERS:JD
APPROVED BY ARA:HSHLAUDEMAN
ARA:MR.GRUNWALD
EB/IFD/ODA:FTHOMAS
LA/MRSD:BUPTON (DRAFT)
ARA/ECP:JO'MAHONY (DRAFT)
--------------------- 003764
R 252157Z NOV 76
FM SECSTATE WASHDC
TO AMEMBASSY MONTEVIDEO
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STADIS//////////////////////////
TO THE AMBASSADOR FROM ASSISTANT SECRETARY SHLAUDEMAN
E.O11652: N/A
TAGS:EFIN, EGEN, UY
SUBJECT:IDB FISHERIES DEVELOPMENT LOAN FOR URUGUAY
REF: MONTEVIDEO 4521
1. I APPRECIATE YOUR CONCERN OVER THIS SITUATION AND HOPE
THE FOLLOWING INFORMATION WILL BE OF ASSISTANCE.
2. THE DIFFICULTY WITH THE LOAN IS A TECHNICAL MATTER CON-
CERNING THE USE OF FSO FOR COMMERCIAL FISHING DEVELOPMENT.
THE URUGUAYAN REQUEST DIFFERS FROM THE COSTA RICAN AND
PANAMANIAN PROJECTS IN THAT THE URUGUAYAN PROJECT IS CLEARLY
AIMED AT LARGER SCALE COMMERCIAL FISHING, WHILE THE OTHER
TWO INVOLVED SMALL ARTISAN FISHERIES PROJECTS. THE DIFFER-
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ENCE HERE IS ONE OF SCALE AND COMMERCIAL VIABILITY.
3. THE FSO PORTION OF THE COSTA RICA FISHERIES LOAN FINAN-
CED PURCHASE OF BOATS BY A FISHERY COOPERATIVE COMPOSED OF
MEMBERS EARNING APPROXIMATELY DOLLARS 500 PER YEAR, AS WELL
AS CONSTRUCTION OF PORT INFRASTRUCTURE TO BE PRIMARILY USED
BY COOPERATIVE MEMBERS.
THE PANAMA FSO LOAN FINANCED PURCHASE OF BOATS, EQUIP-
MENT AND THE CONSTRUCTION OF ON-SHORE FALITIES TO BE
USED BY MEMBERS OF NINE FISHERY COOPERATIVES WHOSE MEMBERS
EARN AN AVERAGE ANNUAL INCOME OF DOLLARS 400.
THE URUGUAY PROGRAM WOULD PROVIDE LOANS OF BETWEEN
DOLLARS 200,000 AND DOLLARS 800,000 TO COMMERCIAL, IN MOST
CASES, EXPORT-ORIENTED, FIRMS AND WOULD CONSTRUCT INFRA-
STRUCTURE INTENDED PRIMARILY FOR THESE FIRMS' USE.
4. IT IS NOT UNUSUAL FOR THE IDB ITSELF OR THE USG TO
OPPOSE FSO FINANCING FOR PROJECTS ON THE GROUNDS OF POTEN-
TIAL COMMERCIAL VIABILITY. A 1973 BOLIVIAN PETROLEUM
REFINERY PROJECT AND A 1974 COSTA RICAN HYDROELECTRIC PROJ-
ECT WERE CHANGED FROM FSO TO OC FUNDING BECAUSE THE USG
FOUND THE PROJECTS TO HAVE SUBSTANTIAL REVENUE-GENERATING
POTENTIAL. BANK MANAGEMENT REDUCED THE FSO CONTENT OF A
1975 GUATEMALA HYDROELECTRIC PROJECT BECAUSE OF THE
POTENTIAL PROFITABILITY OF THE ENTERPRISE.
5. TREASURY HAS TAKEN A STRONG POSITION THAT NO FSO FIN-
ANCING SHOULD BE AVAILABLE FOR A PROJECT WHICH HAS SUCH
CLEAR POSSIBILITIES OF COMMERCIAL PROFITABILITY. THERE IS
NO POSSIBILITY OF SECURING 50-50 FSO FINANCING. WE WILL,
HOWEVER, ATTEMPT TO CONVINCE TREASURY THAT THE 3 MILLION
DOLLARS SLATED FOR PORT IMPROVEMENTS SHOULD BE FINANCED
FROM FSO. WE ARE NOT HOPEFUL OF SUCCESS EVEN ON THAT. I
WILL SEE THAT YOU ARE KEPT ADVISED OF ANY DEVELOPMENTS.
6. URUGUAYAN AMBASSADOR PEREZ CALDAS MET WITH JOE
GRUNWALD ON MONDAY. THE SITUATION WAS EXPLAINED TO HIM
AND THE POINT MADE CLEARLY THAT THIS IS A TECHNICAL RATHER
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THAN A POLITICAL PROBLEM. HE UNDERSTOOD AND SEEMED TO
ACCEPT THE EXPLANATION. I AM CONFIDENT THAT YOU CAN
MAKE THE SAME POINT THERE WITH SUFFICIENT EFFECT TO HEAD
OFF ANY SUSPICIONS THAT POLITICAL PROBLEMS ARE INVOLVED
IN THIS MATTER. ROBINSON
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