825.5151/201: Telegram

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

50. Department’s No. 41, June 1, 7 p.m. Insistence upon making the memorandum mentioned in the Department’s telegram 38, May 22, 7 p.m. part of the agreement of course will result automatically in breaking off negotiations along the present lines since it involves a commitment by the Chilean Government which it is not in a position to make. The liquidation of frozen credits at exchange rates no less favorable than those granted to the nationals of any other country can be obtained only by the conclusion of a compensation treaty which the Chilean Government has always been willing to do.

On the question of discrimination the Chilean position is that the agreement would do away with the de facto discrimination which we complain of as resulting from compensation treaties since much greater [Page 31] exchange would be available for our commerce than for that of countries held strictly within the limits of availabilities obtained through compensation.

As the Department was frankly informed in paragraph 4 my telegram No. 7, January 19, 4 p.m., and subsequent correspondence the proposed arrangement would not in itself provide for the liquidation of frozen credits at preferential rates. No further action will be taken pending receipt of the Department’s instructions.