825.5151/132: Telegram

The Ambassador in Chile (Sevier) to the Acting Secretary of State

1. The following was left at the Foreign Office:

“Recently during the course of discussions concerning the question of exchange facilities the Foreign Office made the following tentative suggestions towards according the American Government satisfaction on exchange matters.

The Chilean Government, recognizing that its commerce and [omission] in the United States are not subject to any exchange control restrictions, would undertake to accord reciprocal treatment to the United States by lifting entirety all control or exchange restrictions with reference to genuine American interests in Chile. This would include the removal of these restrictions both as to exchange for the current needs of American commerce and for the repatriation of recognized American funds.

In view of the nature of the retirement funds of Americans the repayment of these funds would be subject to special treatment.

In order that the suggested solution may be placed before the Secretary of State may the Embassy be authorized to present this solution as a concrete proposal on the part of the Chilean Government?”

The Minister of Foreign Affairs authorized me yesterday to present this as a concrete proposal on the part of the Chilean Government.

The plan does not remove entirely the discriminatory effects on our commerce of Chile’s compensation agreements. Neither does it grant us the relatively small percentage of exchange at the preferential rate now obtained by countries with blocking agreements, but the door would not be closed to private agreements such as in Brazil.

However, the agreement does have the great merit of asserting the principle of trade free from exchange control and it is believed would constitute an important step towards breaking down compensation and exchange restrictions in Chile. Furthermore, it would eliminate the disadvantage inherent in any blocking arrangement aiming to accord [Page 2] us preferential exchange which can be obtained only at the expense of other American interests doing business in Chile. The proposed arrangement would be fair to all classes of American interests and would not later prejudice the movement of exchange should a settlement be reached in favor of American holders of Chilean bonds.

I have discussed this proposal with the Secretary. While he does not desire to go into technical details he approves the principle of the proposal as an important step looking towards the removal of trade barriers.

I feel that the proposal represents a sincere and courageous effort to give us satisfaction and that it is about the maximum we can hope to obtain. The advantages towards Chilean-American trade and relations far outweigh, in my opinion, the disadvantages and I recommend that it be accepted as a basis for an agreement.

Please instruct by cable.