825.6374/1083: Telegram
The Ambassador in Chile ( Culbertson ) to the Secretary of State
[Received 10:25 p.m.]
19. For the President and the Secretary of State. It was evident to me on my return to Chile that American interests in the nitrate industry were confronted by a serious situation. A small group of men now in power were deliberately planning to liquidate the nitrate industry on a basis which would be profitable to them and which would sacrifice certain American interests. The attitude of the Government had not been responsive and the Minister of Finance had not only refused to reveal his plan of liquidation but had even declined to discuss the matter with representatives of American interests.
I immediately had several informal talks with the President, the Minister for Foreign Affairs and the Minister of Finance which are reported in my despatch No. 1365, January 25th.49 In these conversations I avoided the discussion of issues and insisted that the important thing was a conference between the Government and American interests. In his conversation with me the Minister of Finance gave friendly assurances and a conference was definitely fixed for Saturday of this week. I emphasized that the purpose of this conference should be a frank disclosure of the Government’s position in order that the American interests could determine whether a basis existed for cooperation. I asked in particular that in the meantime no steps should be taken which would be prejudicial to or alter private rights without the consent of those concerned.
In today’s press a draft law was published which was sent yesterday to Congress by the Minister of Finance. A copy of this law will be furnished the Department from New York. It proceeds on the theory that the decree law appointing the Cosach liquidators terminated the security of the 60 peso charge. It thereupon proposes to restore this charge for 1 year, servicing with the proceeds only the bonds sold for cash (presumably the prior secured “A” bonds) and advancing to pro rata participation in this service the Government’s “B” bonds which were junior, thus completely ignoring Cosach A and B bonds issued in acquisition of property totalling some 44 million dollars.
I talked with the Minister of Foreign Affairs this afternoon and emphasized the violation of contractual rights involved in the proposal, adding I felt it was a breach of good faith to propose such a law when a conference was pending which we hoped would give some basis of cooperation between the Government and private interests. The Foreign [Page 160] Minister said he would confer immediately with the Minister of Finance and I indicated that since the Minister of Foreign Affairs was leaving tomorrow I expected that if the Finance Minister will take action to make any conciliatory move he would consult directly with me.
In conclusion I must emphasize that the time has come when we must make formal representations. In my opinion the Chilean Government needs to be impressed with the fact that we are prepared to take a definite stand in the protection of our interests.
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