825.6368/91: Telegram
The Secretary of State to the Ambassador in Chile (Culbertson)
Washington, February
23, 1932—noon.
9. Your despatches No. 1006, October 29, 1931; No. 1014, November 5; No. 1045, December 9; No. 1080, January 20, 1932; and telegram No. 136, November 5,60 regarding proposed petroleum monopoly.
The following represents our judgment here in connection with this situation.
[Page 506]The Department believes that you should discuss this matter with the Chilean Government informally, unless you believe the action unwise. In this discussion the following considerations are transmitted for your guidance:
- (1)
- Though the soundness of this monopoly from the point of view of yield to the Treasury and of benefit to the Chilean people seems distinctly open to question, the Department does not desire to discuss this phase of the matter even in principle with the Chilean authorities.
- (2)
- If the Chilean Government is absolutely determined to establish a monopoly, the American companies which may wish to compete, as an alternative to extinction, should have equal opportunity to present their proposals.
- (3)
- It holds however that the unwillingness of American companies to bid for this monopoly under the terms laid down in the law does not lessen their right to compensation if (a) such established companies are forbidden to continue operation or (and) (b) if their property is wholly or partly expropriated.
- (4)
- The amount of compensation should be equitable, but there seems to the Department not much use in attempting to argue out to the small details the question of whether compensation should cover good will and similar intangible assets, which question is undecided even in American practice.
- (5)
- In connection with this question of compensation, however, the Department is impressed with the fact that all promises of compensation no matter how legally drawn, would seem to have little actual value under existing circumstances. In view of the complete default of Chile on its external debt and the existing and prospective state of the Treasury as summarized in the statement of the new Chilean cabinet, conveyed in your despatch No. 1025 of November 19,61 how much in your judgment is any promise of compensation worth or how much can it become worth in reasonable time? In the light of this doubt, is the Chilean Government’s promise of compensation to be taken as much more than legal pretense made under emergency conditions? If your judgment accords with that of the Department, the Department has no objection to your conveying this thought to the Chilean authorities.
- (6)
- The Department is further inclined to believe this may not be an improper occasion to point out to the Chilean Government the American awareness of the fact that American interests in Chile have already suffered very grave losses, that they have been patient [Page 507] and considerate in understanding the circumstances, that the Chilean Government cannot expect them to regard with equanimity the further extension of these losses because of the action of the Chilean Government.
Stimson