825.6374/1133: Telegram

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

53. The Minister for Foreign Affairs handed me today a 12-page memorandum in reply to our aide-mémoire transmitted in your telegram 19, March 23, 7 p.m. Like replies were handed to my three colleagues.

The Government denies any international obligation and declares that the order to suspend the 60 peso charge was not arbitrary. It argues that the parties, before resorting to diplomatic action, should [Page 171] have exhausted remedies in the courts. It ignores entirely the real questions at issue raised in our communication.

My conversation with the Minister as well as the definite statement in the memorandum confirms my fear that the Government has definitely decided to repudiate its obligations under decree law number 12. The significance of this decision will be evident when considered with the background furnished by my despatches. The fact is that Chile has decided to repudiate its promise to carry out its obligations under the international contracts providing for the Cosach bonds from which it has profited and under which rights of the bondholders have been acquired. Chile thus raises the fundamental issue of its right to invalidate the acts of previous governments. The Minister for Foreign Affairs, who visibly showed a regret that the matter had been taken out of his hands, called my attention to the last paragraph of the memorandum which he said he wrote. It reads:

“The Compañía de Salitre de Chile in liquidation has declared itself to be and continues disposed to consider with the greatest interest the proposals which interested individuals have made to it or may make in the future, in order to place the nitrate industry in a position which may best guarantee the legitimate interests of all.

The Government in its turn will be pleased to see that a satisfactory agreement in such sense may be reached.”

This pathetic gesture has a touch of irony which I fear the Minister did not see. As before, the Government appeals for cooperation after the fact and wishes to start cooperation again with the assumption that the interests will accept the losses imposed by force and continue to give positive aid. A definite plan of cooperation was to be submitted this evening but the American interests have now withdrawn it.

Although the Minister for Foreign Affairs said there would be no publicity I have good reason to believe that the Government, for the purpose of internal politics, will allow the substance of its reply to leak out. In this event I recommend publishing our communications in order that the public will not obtain a distorted view of the situation. Text and my comments by air mail Wednesday. Unless otherwise instructed will take no action pending Department’s instructions.

Let us keep before us that the challenge which the Chilean Government has thrown down to four foreign governments involves an issue larger than the interests in the nitrate industry. No government interested in maintaining the principles which govern the relations of states can fail to make its position unequivocally clear on the issue raised.

Culbertson