825.6374/1066: Telegram
The Chargé in Chile (Norweb) to the Secretary of State
[Received January 3—4:36 a.m.]
1. Decree signed today cancels decrees of incorporation of Cosach and throws the company into liquidation. The decree is preceded by an indictment of Cosach for violation of the letter and spirit of the basic law. In preparation is a message to Congress suggesting special liquidation proceedings.
Cruchaga43 called me to the Foreign Office this afternoon and explained that the liquidation of Cosach is essential for domestic politics and because the company is bankrupt. He said that until Congress decides upon the proposed special liquidation procedure the affairs of the company will be under the control of the liquidating committee provided for in the basic law. The question of its ultimate reorganization will be for Congress to determine.
Until the details and extent of the special message are known it is not possible to say how seriously foreign interests will be prejudiced. However the fact that this new move has been developed in secrecy and carried into effect precipitately and without consultation with the bankers or the company, has aroused apprehensions as to the good faith of the Government and the possibility of the eventual dissipation of the foreign capital invested.
It is apparent that much more is involved in present liquidation plan than was reported in my despatch 1294, November 3rd.44 The consensus of opinion of foreign interests is that the procedure now contemplated involves not only the liquidation of an over-extended position but also the actual destruction of the capital structure. Furthermore that it means the ignoring of previously contracted obligations and that since control of the situation passes out of their hands they will no longer be in a position to protect their proper interests.
[Page 155]Whelpley45 is cabling New York and London “two courses appear to be open: non-participating in so-called dissolution program, placing responsibility solely upon Government, leaving door open for diplomatic intervention which may be necessary later; or alternatively acquiescence and participation in dissolution through liquidation”.