611.2531/60: Telegram

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

67. Referring to my despatch No. 1395, March 1st,20 I recommend that authorization be granted immediately to this Embassy to propose to the Chilean Government and, if accepted by it, to negotiate a convention including therein the following essentials:

(a)
Unconditional most-favored-nation treatment.
(b)
The maintenance for 3 years of sodium nitrate on the free list without quota or other restrictions.
(c)
The foreign exchange created by the sale of Chilean products or by other Chilean transactions in the United States to be made available for American commerce so long as Chile maintains exchange control. This provision to be made immediately effective.
(d)
The setting aside of a percentage of the Government’s income from the nitrate industry for American holders of Chilean bonds. Reference enclosure number 1, despatch number 1443, April 29th.21
(e)
An agreement to enter into an additional convention to extend the terms of this convention to other matters of mutual but less urgent interest.

I recommend the above convention since it seems a practical means by which a limited agreement can be reached on the matters in which each country is most keenly interested. My suggestion is based on the assumption that the broad powers extended to the President to adjust international economic relations would permit him to assume and make effective the necessary commitments. If these powers are not sufficiently broad, the convention can be submitted for ratification to the Senate and in the meantime the provision on releasing exchange can be made effective by an immediate exchange of notes. Presumably the mechanics of the convention would necessitate placing the control of Chilean imports to the United States in the hands of some suitable Government agency but not necessarily especially set up for this purpose. It will be essential to supplement the convention proper with a protocol to carry out its provisions. There seems to be more chance of putting through a convention of this kind at the present moment than heretofore. Unnecessary delay will result if we should endeavor to include in the first convention the copper duty in the United States, tariff rates in Chile, national treatment for [Page 123] American industry and similar matters. These, in my opinion, can be taken up with better effect later and embodied in an additional convention.

My German colleague informs me that his Government has banned all Chilean nitrate but is prepared to license 100,000 tons provided the proceeds are made available for German frozen credits. In spite of our dislike for blocking agreements we are losing heavily by virtue of the present situation in Chile under which European governments have obtained by force advantages for their nationals, whereas our conciliatory methods have resulted in injustices to our interests. The negotiation of the above-mentioned agreement, however, would still proceed on the basis of conciliation and offers us a way to obtain relief for our interests without the use of threats or reprisals.

We must face the fact that there will be some divergence of opinion among Americans with reference to the agreement herein proposed, namely, between interests concerned only with commerce, public utility companies unable to release their peso profits, copper and nitrate interests who feel that they are already carrying the burden of Chile’s exchange problems, and the banking and foreign debt interests. We have endeavored, however, to reduce the divergence of opinion to a minimum in the proposal which we are making and in our opinion the differences which at their solicitation must be put aside and the main objective of improving the position of American commerce and finance in Chile in relation to that of other countries must be given first place.

Culbertson
  1. Not printed; it conveyed the information that the Chilean Minister for Foreign Affairs had expressed a desire to begin discussions looking to the negotiation of a permanent commercial treaty between Chile and the United States (611.2531/55).
  2. Not printed; for text of memorandum transmitted with the despatch, see p. 187.