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

No. 1454

Sir: I have the honor to refer to my despatch No. 1429 of April 19, 1933,18 and to the Department’s instruction No. 1483 of April 3, 1933, approving the views which this Embassy has expressed to the Chilean Government on the subject of treatment for American commerce equivalent to that granted by Chile to certain other countries under the so-called compensation agreements. Following up former communications, I pressed for some action by addressing a letter on May 4th to the Minister for Foreign Affairs (enclosure No. 1).18 In a conference with Mr. Cruchaga, the Minister for Foreign Affairs, yesterday afternoon, the question of American credits was discussed. He stated that he had called a meeting of the Treaty Commission to meet on Friday and instructed that the first order of business would be the frozen credits of American citizens and companies in Chile, and means whereby they could be released in part at least on a basis similar to that granted to other foreign countries.

If nothing definite results promptly from the meetings of the Treaty Commission, I must emphasize the importance of affirmative action by the Department if we are to secure any relief for our frozen credits in Chile. This subject has been reported fully by this Embassy (including reports of the Commercial Attaché). Both in writing and orally I have urged upon the Chilean Government the justice of our request for treatment equivalent to that granted to France and other countries who have blocked Chilean exchange created by their purchases [Page 121] from Chile. This conciliatory attitude has not met with any responsiveness until yesterday, however, and it is too soon to say whether the reassuring attitude of Mr. Cruchaga will yield results.

Personally, I am opposed to the type of commercial policy represented by compensation or blocking agreements. However, if the Chilean Government is unwilling to comply with our reasonable requests we have no alternative but to seek some means of blocking for the benefit of our frozen credits such exchange as is created by purchases of Chilean goods in the United States. Presumably, this might be done by simple executive action under the broad powers which have been granted to the President by the Congress. While the new attitude being shown by Cruchaga leads me to hope that there is some chance that Chile may now be prepared to enter into a definite agreement which will accord us relief for our frozen credits, our experience for the last year or two in endeavoring to obtain satisfaction from the Chilean Government and the circumstances surrounding the negotiation of the French compensation agreement do not lead me to undue optimism. It is pertinent to recall in connection with the French agreement that the Chilean Government did not enter into this arrangement with France even under the pressure of threats of reprisals but only reluctantly signed the agreement after France had actually begun to refuse to license the imports of Chilean nitrate. Should our present conversations lead to nothing, I really feel that we should take some definite steps to bring relief to our business interests in Chile which have patiently endured the unreasonably restrictive policy pursued by the Chilean Government with regard to the liquidation of credits. These interests now see that other governments are giving some form of substantial protection to their nationals through compensation arrangements or agreements such as the one recently entered into between Argentina and Great Britain.19 Our nationals are now getting restive and quite understandably are pressing for similar measures of relief from our own Government. We may anticipate that if this situation drags on it may very pointedly be asked in Washington why our diplomacy is not as successful as that of other countries.

If I find a disposition on the part of the Chilean Government to discuss seriously an agreement which will be satisfactory to us I will telegraph my recommendations.

Respectfully yours,

W. S. Culbertson
  1. Not printed.
  2. Not printed.
  3. For correspondence regarding the Anglo-Argentine (Roca) Agreement, see vol. iv, pp. 722 ff.