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

No. 69

Sir: With reference to the third point of this Embassy’s Memorandum on the granting of exchange facilities to American commerce which was submitted to the Chilean Foreign Office under date of February [Page 16] 20, 1934,6 in accordance with the Department’s telegram No. 21 of February 17, 2 p.m., 1934, I have the honor to transmit herewith for the information and consideration of the Department, a copy of a report entitled “The Liquidation of American Frozen Credits,”6 prepared by Merwin L. Bohan, Commercial Attaché, and Edward J. Sparks, III, Secretary of Embassy. This report was prepared with the idea of furnishing the Department with all available information on the frozen credit aspect of the exchange problem and of making concrete suggestions as to possible bases for the negotiation of a private arrangement for a more equitable solution of this particular phase of the general problem.

The report discusses the desirability, as well as the possibility, of negotiating and concluding a private arrangement for the liquidation of American credits frozen in Chile at an agreed rate of exchange more favorable than the rate obtaining in the export draft or unofficial markets. Four possible methods are suggested for providing the necessary foreign exchange. The most acceptable arrangement, however, appears to be the repayment by those holding credits of the peso advances made to the nitrate industry by the Central Bank of Chile, and the deposit to the account of the creditors at fixed intervals by the Nitrate Sales Corporation of the corresponding foreign exchange. The report also discusses the paramount question which would arise in any negotiations of this nature, namely, the rate of exchange at which conversions would be made, and suggests certain bases which might serve for negotiating and determining an equitable rate for conversion. The conclusion is reached that if these negotiations are to be attended with success, they should be initiated immediately and that at least an agreement on principle should be reached before the general arrangement now being discussed by the Embassy with the Chilean authorities is formally concluded.

Respectfully yours,

Hal Sevier
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