550.S1 Washington/640

Memorandum by Mr. Stuart E. Grummon, of the Division of Latin American Affairs, of a Conversation Between American Representatives and the Chilean Representative (Cohen)13
Conversation: Señor Benjamin Cohen
Mr. Livesey
Mr. John Wiley
Mr. Grummon

Señor Benjamin Cohen came in by appointment to hear a discussion of the matters already previously discussed with other foreign representatives [Page 518]preparatory to the London Economic Conference. Mr. Livesey outlined for Mr. Cohen’s information the major measures which the United States would like to see adopted at the Economic Conference with a view to remedying the present world depression. As in the other conferences, the need for currency stabilization, economizing of gold, appreciation in the value of silver by various measures, the abolition or mitigation of exchange controls, and other obstacles to international commerce and internal measures in the various countries, looking to a program of Government public works expenditures and the reduction of unemployment, were mentioned.

Mr. Cohen, in reply, said that he was authorized to state that Chile is in general agreement with the objectives listed in the Agenda for the Conference and with those specifically mentioned by Mr. Livesey. He said, however, that, for the present, Chile, on account of her internal situation and particularly present political conditions, is not in a position to take any action herself for the time being other than to lend her intelligent support at the Conference, as suggested by Mr. Livesey, in agreeing to general international measures that may be adopted looking to world recovery. Mr. Cohen talked at some length regarding the necessity for a settlement of the debt problem of Chile prior to taking up the question of the relaxation of the present strict measures of exchange control.14 He outlined the extremely difficult internal situation which now prevails in Chile and the necessity for his Government to proceed with the utmost caution in order to bring some order out of the present financial chaos in Chile by the reduction of expenses and the finding of sufficient new sources of revenue to balance the budget, without thereby provoking social disorders which are a constant menace. He mentioned particularly the navy, as though he felt that renewed difficulty might be expected from that quarter. He attempted to show that Chile’s debt, which, he admitted, was out of all reason and incurred on the whole for trivial purposes, had not given Chile very much in the way of ready cash to expend on constructive projects. He mentioned the sending of military missions abroad, the luxury of a 100 per cent gold coverage merely as a matter of national pride when Chile was borrowing funds abroad at higher interest rates than she was paid on her gold deposits held abroad; the purchase of luxurious motor-cars, and, in general, the payment of debts by further borrowings, which, he alleged, resulted in Chile’s obtaining actually only some 40,000,000 pesos in gold out of over 260,000,000 borrowed. Mr. Cohen mentioned in this connection that the Chilean Government, being of the opinion that something must be done about debts prior to any general financial rehabilitation [Page 519]of Chile, has, some months ago, provided by decree for the establishment of a collecting agency and, moreover, that the terms of organization of the recent Nitrate Sales Corporation provide for twenty-five per cent of the profits to be devoted to the rehabilitation of Chilean credit. He said that he hopes that the Chilean delegate to the London Conference will very early announce as an incentive to action of the same nature on the part of other countries similarly placed the resumption of some service on the foreign debt. This is in a line with the suggestion made to him by Mr. James Warburg which he telegraphed his Government.

Continuing his exposition, Mr. Livesey said that he appreciated the situation in which Chile has found itself during the past two or three years, but that Chile’s good-will and assistance at the Conference would be important even though Chile cannot take immediate internal measures in harmony with the views of the Conference. He mentioned that, of course, any world recovery which might result from the action at London would have an immediate favorable repercussion in Chile by raising prices of Chile’s principal export products. He mentioned the desire of this Government to proceed in due time to the conclusion of reciprocity treaties based on the unconditional most-favored-nation clause in the hope that a net-work of such treaties would assist materially in stimulating international trade. Mr. Cohen interposed that, of course, the Department was familiar with the Chilean policy of conditional most-favored-nation treaties with exceptions in favor of the nations of Latin America. A non-committal reply was given to Mr. Cohen to the effect that, to be sure, there would probably be reservations made by certain other countries to concluding such treaties under the unconditional most-favored-nation clause and that that was a subject which would doubtless come up at London. Mr. Livesey pointed out that, while we do not feel that multilateral treaties of this nature would be as useful as bilateral ones, we would, nevertheless, lend our support should that be the consensus of opinion at the Conference. He likewise mentioned the tariff truce at present in effect.

Mr. Cohen brought up the question of sanitary tariffs and said that, although it is of minor importance to Chile, nevertheless his Government is interested in as favorable a treatment as it is possible to obtain under our sanitary regulations. Mr. Livesey said, in reply, that that matter would also come up at London, and that he understood the Secretary to be in favor of an impartial review of the existing regulations with a view to assuring the strictly scientific basis thereof. Mr. Cohen stated parenthetically that, as a result of the recent visit to Chile of two American phytopathological experts, the Chilean Government has taken definite control measures in a line with their recommendations [Page 520]and that he plans shortly to send a report regarding this matter to the Department.

Mr. Cohen then requested information regarding present measures looking to currency stabilization. Mr. Livesey stated, in reply, that it had been decided that no formal arrangement would be made prior to the London Conference, but that already informal conversations were in progress and that, naturally, it would be to the advantage of every nation to have de facto stabilization as soon as feasible, which would probably assist the Conference in establishing de jure stabilization. Mr. Cohen stated, as of interest in connection with the currency problem and in line with the desire to take some action on silver, that the Chilean Government has today forbidden by decree the exportation of silver from Chile. The Government apparently hopes to accumulate a certain amount of the silver which is obtained in Chile as a by-product of the extraction of gold and copper.

After the discussion was at an end, Mr. Cohen asked Mr. Livesey personally and unofficially whether he was optimistic regarding the results to be expected from the London Conference. Mr. Livesey expressed his own optimism based on the real necessity of arriving at some definite relief measures and mentioned that the Lausanne Conference15 had been productive of extremely encouraging results after much more discouraging prospects than confront the London Conference. Mr. Cohen thereupon stated that he very much feared the selfishness of some of the big nations and expressed the apprehension that the Conference might be sabotaged by one of them. He seemed to have Germany or France or England in mind as he mentioned, apparently sincerely, his conviction that the American Government is inspired by a genuine idealism which he felt is warmly supported by the American people. He went on to say, as a personal expression of opinion, that, should the Conference fail, inevitably the United States and Latin America would have to come into closer relationship for their mutual advantage. He said that he would then look for the conclusion of reciprocal trade agreements between this country and all the countries of Latin America with the possible exception of Argentina; that the United States would gain largely by assuring itself of the Latin American market; that Latin America would need the assistance of the United States in the matter of credit facilities, and that a close cooperation of the central banks would also result. He spoke of Latin America as the greatest immediate potential world market today and said that he felt that the whole idea of a close cooperation between the [Page 521]United States and countries of Latin America might successfully be used as a club during the London Conference, should any of the great Powers endeavor to “sabotage” a world agreement. He felt that the United States delegation might well use a certain amount of pressure in support of disinterested world measures by intimating that, if the world conference should break down, the most constructive measures advocated thereat would be immediately put into effect on the American continent and that large European nations would be extremely apprehensive of such a development through fear for their own markets in Latin America. He emphasized the value which the united support of Latin America would have at the Conference.

  1. A second conversation was held on June 2, during which “no new ideas were developed.”
  2. For correspondence relating to the Chilean exchange control system, see vol. v, pp. 103 ff.
  3. For correspondence relating to the Lausanne Conference, June 16–July 9, 1932, see Foreign Relations, 1932, vol. i, pp. 636 ff.