The Ambassador in Chile (Culbertson) to the Secretary of State
[Received March 9.]
Sir: With reference to the Embassy’s despatch No. 1330 of December 7, 1932,12 reporting on progress made with respect to the problem of foreign currency deposits in the banks in Chile and the agreement reached for the release of these deposits in certain individual cases, I have the honor to state that following the inauguration of the Alessandri Government difficulties developed in carrying out the agreement in question. Two causes were responsible for this situation: first, an attempt upon the part of certain banking institutions to revive the obligatory conversion provisions of Law No. 5107; and second, the more critical financial situation in Chile which has obliged the Government to give every possible consideration to the suggestions or demands of the banking institutions. It has therefore been necessary to review with the Foreign Office and the Minister of Hacienda the entire question of bank deposits, and I have the honor to report that the Minister of Hacienda has declared that he will authorize the release of “small” deposits in banks which make no objection to their release, but that in the case of “larger” deposits further consideration will be necessary.
This arrangement is much more satisfactory than the statement would appear to indicate. In other words it means that in the case of actual necessity of small depositors it will be possible to obtain the [Page 116] release of their funds. The first practical application of this understanding has been successful in the case of Miss Sarah Adams which was taken up in my Note No. 952 of January 31, 193313 (Enclosure No. 2, despatch No. 1374, February 7, 1933). Under date of February 24, 1933, the Minister for Foreign Affairs informed me that the Commission of International Exchange had authorized Miss Adams to withdraw her deposit amounting to $937.58. Arrangements are now being made with the appropriate authorities to the end that other individual Americans may withdraw their deposits.
With regard to deposits which it might be difficult to classify in the foregoing category, effective relief is being obtained through the authorizations of the Control Commission to use these deposits for the payment of new importations. Several Americans doing business in Chile have taken advantage of this procedure and have thus indirectly obtained the release of their deposits.
The most difficult problem has been in the case of the one large American deposit, the Compañía Sud Americana de Explosivos, a Du Pont subsidiary, the composition of which deposit was reported in detail in my despatch No. 1189 of July 6, 1932.14 For some time it did not seem possible to make a satisfactory disposition of this account in view of the size of the deposit which made it a temptation to the banks and the Government. However, following the recommendation made in my despatch No. 1282 of October 10, 1932,14 arrangements were initiated and are now being concluded for the gradual release of this deposit. The first transaction concluded is the sale of approximately $272,000 dollars of Chilean copper by the Braden Copper Company to the Imperial Chemicals, Ltd., the payment for which will be made from the deposit of the Compañía Sud Americana de Explosivos. Only two conditions have been imposed by the Control Commission both of which have been accepted by the interested parties. The first is that the $272,000 will be released in partial payments as required by the Braden Copper Company, and the second that the entire amount must be used prior to April 15th. I am informed that the copper company has availed itself of $75,000 to date, and that the entire amount will be used before the date of expiration, whether required or not, under guarantee of the Imperial Chemicals against any possible loss by the copper company in case of a further depreciation in the value of the peso.
With regard to the balance of this deposit, approximately $285,000 dollars, I have the honor to report that the Manager of the Du Pont subsidiary is now negotiating with the Control Commission to obtain authorization to apply the balance of the account for purchases of [Page 117] sodium sulphate (salt cake) and possibly further purchases of copper. I understand that the Manager anticipates that these negotiations will terminate successfully. However, further difficulty can be expected especially since some of the funds of the Compañía Sud Americana de Explosivos consist of sterling deposits in British banks which might resist their release.
It will be observed from the foregoing that this vexatious and long-standing problem is now rapidly being solved and that it can be anticipated that its irritating effects upon our relations with Chile may soon be eliminated.