825.516/151: Telegram

The Ambassador in Chile (Culbertson) to the Secretary of State

93. The Central Bank has 10 directors under its old organic law: one appointed by the foreign banks, two by the national banks, one by the private shareholders, three by the Government and three by certain economic interests in the country.

A decree will be promulgated today by the Junta which modifies article 39 of the organic law to read as follows:

“Article 39. In addition to the seven directors mentioned in the preceding articles, the Executive shall appoint three directors who shall represent the productive activities of the country.

These three directors shall hold office for 3 years and can be reappointed indefinitely.”

This change means that the three directors appointed by the economic interests in Chile will hereafter be appointed by the Executive, that is, from now on there will be six instead of three directors appointed directly by the Executive. A second decree will be promulgated [Page 448]today appointing these six directors. Article 34 is also modified to change the designation of the appointing authority from “the President of the Republic “to “the Executive”; there are no other amendments.

However, under the organic law of the Central Bank the Government can receive no money from the Central Bank without the consent of eight directors.

Referring to questions in the Department’s telegram 37, June 15, 6 p.m., first, the operation of the Central Bank has not been interfered with by any acts of the revolutionary Junta, except for the decrees already reported, the legal status of which was explained in my telegram number 89,14 and except that the Junta in the first days of its existence obtained from the Central Bank 30,000,000 pesos without the authorization of the Board of Directors. This sum, however, had been authorized by two laws duly approved by the old Congress and would have been approved as a matter of routine had the Montero government continued in office.

Second. Present officers now act under the old laws of the bank and the new decree mentioned in paragraph 2 and are no more subject to instructions from the Junta than were the officers under the former government.

Third. The legal personality of the bank as it existed prior to June 3d has not been impaired by any acts of the revolutionary government except the above-mentioned change in the manner of electing directorate.

Fourth. Old Board of Directors did not resign (with the exception of the three Government directors whose resignations were accepted) but has remained inactive since June 3d and has not been consulted. New manager of the bank states that no case has arisen requiring action under the law by the Board of Directors. New board as defined in paragraph[s] 1 and 2 of this telegram will begin functioning tomorrow.

The situation at present is confused but one thing is clear: namely, that the Government is making an effort to change its policy of interference with the Central Bank and to maintain that institution under its old status.

Guaranty Trust has been in communication with Central Bank by cable and telephone. In one telegram it said “We cannot honor any instructions on behalf of Banco Central de Chile in the absence of satisfactory evidence regarding legal status of management and until we have satisfactory assurance that new government will honor obligations [Page 449]of last-recognized government”. With no property in Chile the Guaranty Trust can without injury to its interests refuse drawings, but in doing so at the present time it assumes a heavy responsibility. The issues before us in Chile are larger than those of a single bank.

Culbertson
  1. Dated June 14, 5 p.m., p. 445.