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

No. 95

Sir: I have the honor to refer to my despatch No. 86 of April 11, 1934, and to report the following developments.

Continuing its policy of encouraging the transfer of American frozen credits, the Ministry of Hacienda arranged last week with the Control Commission for the transfer of certain American funds on deposit with the National City Bank. These deposits represented accounts with the Bank and drafts which had been collected in pesos which heretofore could not be legally transferred. In all, approximately 470,000 dollars worth of transfers were effected at the rate of 25 pesos to the dollar. It had been expected that about a million dollars would be moved, but the Minister of Finance did not wish to send the rate of exchange too high and therefore closed down on further transfers for the time being. It is planned, however, to continue to effect these transfers as exchange becomes available through the returns made from the sale of nitrate or from other sources.

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While the Chilean Government has offered the same facilities to British interests, up to now practically no British funds have been repatriated. As has been pointed out, the difficulty is largely due to the fact that their frozen credits are not in as liquid condition as are the American credits. Furthermore, they represent in great part debts owed by Chileans to British firms and the Chilean debtors are unwilling to purchase the necessary funds at open market rates. The British Embassy states that it is anticipated that about a million pesos will be transferred within the next few days. From the diplomatic angle no progress on the part of the British appears to have been made. They still hope to effect a satisfactory agreement through an exchange of notes which will include provisions offering a solution to their problem of making their Chilean debtors pay sterling debts in effective sterling exchange.

With the exception of obtaining adequate relief for Americans who have retirement funds with the Caja de Previsión de Empleados Particulares, the de facto situation of exchange seems satisfactory from our point of view. Enough exchange is available to purchase such American goods as can be sold and as long as the present policy of the Chilean Government continues, American frozen credits are being slowly liquidated. At least, if the de facto situation is not entirely satisfactory to us neither is it to compensation countries. In a recent conversation, Count de Sartiges, the French Minister here, stated that he was very dissatisfied with the way the French compensation treaty12 was working out and that he felt that the American approach to the problem was sounder than the French; that the opportunity for the sale of French merchandise to Chile was greatly restricted due to the compensation treaty. As France bullied Chile into the compensation treaty there is a certain poetic justice in laments of the French Minister.

Respectfully yours,

Hal Sevier
  1. Signed November 11, 1932, Journal Officiel de la République Française, November 22, 1932, p. 12164.