825.6374/1157: Telegram
The Ambassador in Chile (Culbertson) to the Secretary of State
[Received 1:25 p.m.]
69. Referring to Department’s telegram No. 21, April 5, 7 p.m.70 The President in his address opening the ordinary session of Congress said in defending suspension of the 60 peso charge that the Government should not collect a tax for private interests; that this suspension resulted in friendly observations from foreign governments in reply to which the Government maintained its view that it had no obligation to intervene in the collection of the charge and considered diplomatic interventions improper since there was no denial of justice and the interested parties could have had recourse to the courts. He then referred to the plan of reorganization as having been well received in the newspapers. He justified the action of the Government on the ground of imperious necessity adding, however, that a solution satisfactory for the interests affected was being sought. The President [Page 191] again supported the Government’s nitrate policy on the theory of the illegality of the basic Cosach laws.
By these statements of the President the Chilean Government has now publicly and deliberately rejected the representations made by the four Governments. Again it has violated a friendly understanding to leave the diplomatic situation in status quo until we could see whether an agreement can be reached between the Government and the private parties. Again the Government has taken a definite step toward making more effective the repudiation of its international obligation. Moreover, while the plan referred to by the President (see my despatch 144371) at one time offered a basis for a business solution the Minister of Finance is now taking the position that the industry should carry no fixed charge and that the bondholders must be content with a first lien on the profits, if any, of the sales corporation. The British issuing houses are disposed to accept this solution.… If the Minister of Finance is not now checked, the prior secured bonds will have a position little better than that of unsecured credits and the service will be subject to all the exigencies of Chilean politics, including even the possibility of the abolition of the sales corporation.
Since the Government has stated publicly and officially its stand on the diplomatic phase and has at the same time made it unmistakably clear that it has no intention of recognizing even in a modified form Government obligation in respect to the fixed charge I can see no further gain in delaying further our reply, indeed I can no longer assume the responsibility of recommending such delay. I believe that the American Government, if possible at the same time as the other three Governments, should make a definite reply to the communications of the Chilean Government and give publicity to its position thus definitely placing on record our position in regard to the principle involved. My British colleague has telegraphed his Government that he considers “it would be a mistake to leave the Chilean Government indefinitely in the position to suggest that we have accepted their position as set forth in their notes to us”.