825.00 Revolutions/157: Telegram
The Ambassador in Chile (Culbertson) to the Secretary of State
132. The Minister for Foreign Affairs today addressed the following note to the members of the Diplomatic Corps:
“I have the honor to inform Your Excellency that on June 4th last Mr. Juan Esteban Montero delivered the supreme power to a Junta of Government, in whose personnel later there were several changes until on the 8th instant two of its members resigned. The same day Mr. Carlos Dávila, who was the remaining member of the Junta referred to, took chargé of the Government of the country in the capacity of Provisional President of the Republic.
The Provisional President has organized his Cabinet which took oath yesterday as follows: (here follows list of the Cabinet)
The new Government, in carrying out the principles contained in its program of action, will respect its international obligations; it will insure domestic order and it will endeavor to strengthen the bonds of every kind which unite us with friendly countries. With the purpose of establishing normal conditions in the public administration, it has already taken the measures which will permit it to consult the will of the people on the first Sunday of October.
In communicating the foregoing to Your Excellency I beg to inform you that the Government hopes to continue with Your Excellency’s Government the cordial relations which have always existed between them.”
This communication affirms the conditions set forth in your telegram 25, June 6, 2 p.m., and if its declarations seem to you an adequate basis for recognition, I am content to see the step taken.
However, I feel that I should raise, not by way of argument but merely by way of suggestion, the question whether or not there are unusual elements in this situation which may require a more detailed [Page 461] declaration as a preliminary to recognition or which perhaps may require that our reply amplify our conception of the fulfillment of international obligations.
My understanding is that your policy is not to associate recognition with the particular type of government or political institution which a people may decide to adopt. Nevertheless Dávila’s declared intention is to adopt a Constitution which embodies the principles of socialism. Are you satisfied that a general assertion that foreign obligations will be respected covers adequately the attitude of a socialist republic toward expropriation and adequate compensation and existing rights and obligations? We have already laid down the principle that compensation in case American businesses are forced out of Chile by legislation must be effective, that is, in such a form that it may be transferred out of the country within a reasonable time. Pressed for money, this tendency of the Government will be to endeavor to pay with bonds or local currency which could not be made into foreign money. Moreover in the airmail today I am forwarding copy of decree law which authorizes the discount of promissory notes of 190,000,000 pesos by the Central Bank for agriculture, industry, mining, colonization and foreign commerce. Among other things the decree establishes an institute of foreign commerce whose activities may under the broad authorization extend to every phase of foreign commerce. Fifty-one percent of the stock is to be subscribed by the State and the law then adds:
“In order to operate through the Institute of Foreign Commerce it shall be necessary to be a shareholder in the institution.”
Other matters as the foreign debt, equality of commercial rights, and taxation may be affected by new socialist principles.
In case we should delay recognition I hope that we may have a common policy in this respect with Great Britain and possibly other states The new German Minister is here but has not presented his credentials).
I have gained the impression in my dealings thus far with the Dávila government that it will not be any more socialistic so far as foreign interests are concerned than was or would be a government of Conservatives. The governments with which I have had to deal since I have been in Chile have endeavored to obtain a maximum of advantage for the Government from American interests; that is they have taxed as much as the traffic would bear. Furthermore it was under the conservative Montero government that the Chilean Congress enacted the law establishing a monopoly of petroleum products.27 [Page 462] Constant trouble has been experienced by American concerns from the interpretations and decisions of the labor courts in which every presumption has been resolved in favor of labor against the foreign companies. The Dávila government will undoubtedly be increasingly socialistic with reference to Chilean interests. It is in this direction that its radicalism will develop contrasts more than in its relations with foreign interests. Our interests will continue to suffer but primarily because of economic conditions which would be the same under a rule by the old conservative oligarchy or under the rule of socialistic republic.
Although I have not received the communication, I have been assured by the Foreign Office that within a day or two I will be advised in writing that American deposits in foreign currency in Chilean banks will not be molested as provided for in the decree laws referred to in my despatch 1187, June 29th.28 I have regarded this measure as a test case and the Government’s decision, if put in writing, to respect foreign rights will be evidence so far as it goes that the Government intends to fulfill its international obligations.
The events of the last 6 weeks in Chile comment more effectively on the question of political stability than anything I could add. Various groups which I have referred to from time to time are still contending for power. The return of Ibañez threatened a political crisis but he again allowed himself to be dominated by some of his irresponsible friends and the reaction against him has checked enthusiasm and strengthened Dávila. Upon his return Ibañez’ friends (who were also friends of Dávila’s) deliberately asked Dávila to retire in favor of Ibañez. Dávila refused and told them frankly that if they were compelled they would have to fight. On the shifting scene of Chilean politics, dominated by personalities who change and even traffic in their loyalties overnight, it is frankly impossible to make any prophecies concerning political stability. The observations in my telegram 129, July 11, 4 p.m., still hold good.
I shall make no reply whatever to the Minister for Foreign Affairs until I have your instructions.