You will be pleased to hear of the successful arrangements for the settlement of commercial debts with Spain. Mr. Bull went to Madrid for these negotiations which were initiated by Mr. Maguire, our Trade Commissioner in Spain. Signature of the agreement by Mr. Bull and Sr. Martin Artajo, the Spanish Foreign Minister, took place on January 29th in Madrid.

The negotiations were conducted in a most friendly and cooperative atmosphere, and Mr. Bull seems to be quite pleased with his visit. He made it clear before he went that he would not deal with diplomatic or political questions, nor with the vexed question of Barcelona Traction. The only reference made to diplomatic representation or Barcelona Traction was after the conclusion of the agreement, when Sr. Martin Artajo, the Spanish Foreign Minister, remarked on the appointment of a Canadian Minister to Portugal and said he thought the time was propitious for Canada to normalize her relations with Spain. He said that if Canada had had an Ambassador in Madrid, the Barcelona case might have had a more favourable outcome.

I am enclosing a copy of our press announcement^? on this subject, together with the text of the agreement^? and the English translation. As you will note, the terms of the agreement are very satisfactory from our point of view, and conform broadly with what we were asking. The rate of exchange to be applied in the settlement of most of these debts is more favourable than any of the rates at present in use in current trade.

We are ourselves quite glad to see this matter settled so satisfactorily, especially since this has been a continuing problem for the past several years.

Yours faithfully,
C.M. ISBISTER

DEA/10527-40

In connection with the conversations held the last few days, I have the honour to express to you the agreement of the Spanish Government to the settlement of the commercial debts pending with Canada, for a total sum not exceeding $650,000 and in accordance with the following conditions:

1. "Commercial Arrears" for the purpose of this repayment arrangement will be those debts contracted by natural and juridical Spanish persons with Canadian firms as the result of imports into Spain, prior to July 18th, 1936, [1938?] of Canadian goods.

2. The Spanish debtors must justify with documents and in the usual way before the Spanish Institute of Foreign Exchange, before June 30th, 1952, the amount of their debts.

3. Settlement will be made in the following manner:

a) By release on the part of the Foreign Exchange Institute of the type of currency in which the debt is stipulated.

b) The rate of exchange to be applied by the Spanish Foreign Exchange Institute in those cases in which the debtors have made deposits in pesetas as guarantee, shall be that which served as a basis to make the deposit provided that it is not lower than the official rate at present in force. In most cases in which the rate of exchange of the guarantee deposit was lower than the present official rate, the latter will apply.

c) On such debts in which no deposits have been made, the rate of exchange to be applied will be fixed by the Spanish Foreign Exchange Institute according to the circumstances prevailing in each case. Although it is not possible to indicate at this time the actual rate at which these debts will be converted into dollars, efforts will be made so that the rate of exchange be such as to facilitate. the payment of the debts, consideration being given to the fact that the debtors have had the use of the money in the intervening years.

d) Those debts guaranteed by deposits in pesetas will be refunded immediately, and the liquidation of the remaining debts will be made at the rate of $25,000 per month as from the moment that the former have been paid up, but not later than June 30th, 1952.

4. Such applications as may be filed at the Spanish Foreign Institute exceeding $650,000 will have to be taken in consideration independently from this agreement.

I shall appreciate it if you will kindly express to me the conformity of the Canadian Government on the above.