Foreign Relations of the United States Diplomatic Papers, 1934, The American Republics, Volume V

825.5151/227

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

[Extracts]

No. 211

Santiago, October 17, 1934.
[Received October 25.]

Sir: I have the honor to refer to this Embassy’s despatches Nos. 168 and 169 of August 14, 1934,²⁸ concerning the repayment of retirement funds of American citizens deposited in the Caja de Previsión de Empleados Particulares. …

. . . . . . . . . . . . . .

Under date of October 11, 1934, the proposal was incorporated in the Foreign Office’s Note No. 5768, a copy of which with translation is enclosed herewith. The Department will observe that the note is drafted in a very friendly spirit. …

. . . . . . . . . . . . . .

The Under Secretary for Foreign Affairs in interpreting this proposal stated that it included the three classes of American depositors: (1) those with deposits in American currency who have left Chile; (2) those with deposits in American currency who are still residing in Chile and whose funds are now payable; and (3) those with deposits in American currency who are still residing in Chile and whose funds are not yet payable. With respect to the first two classes, he stated that the necessary foreign exchange would be provided immediately for the transfer of these funds abroad. With regard to the third group, the exchange would be furnished when repayment of the funds becomes due.

. . . . . . . . . . . . . .

The proposal as it now stands represents a distinct gain from the status quo in the sense that up to the present Americans residing outside of Chile have been able to convert their dollar accounts into Chilean pesos only at the rate of 9.60 pesos or less to the dollar and, in order to transfer the proceeds thereof abroad, to reconvert into dollars at the current market or export draft rate of approximately 25 pesos or more to the dollar. This procedure meant a direct loss of 62% of their deposits. The terms of settlement now offered would permit Americans residing outside of Chile to receive in dollars 58% of their original deposits, or a loss of 42%.

The question now arises as to the attitude which the Embassy and the Department should take as regards this proposal. It is the opinion of the Embassy after taking into consideration the financial condition of the Caja, the intransigent attitude of the Minister of Finance and the inability of the Foreign Office to influence effectively the actions of the latter, that there is little use in carrying on further conversations regarding this matter in Santiago unless the American Government is willing to bring some pressure to bear. Should the American Government be willing to adopt any coercive measures it would of course be unwise for the American depositors to avail themselves of the proposal outlined above. However, should the Department be unable to see its way clear to do so two courses of action remain open: First, the Department can accept the proposal officially and consider the negotiations closed; second, the Department can refrain from answering the proposal and thus maintain the principle of insistence upon full repayment of the dollar accounts. However, in this case the Embassy should be permitted to notify individual depositors that they may liquidate their funds in accordance with the above proposal, and to add that if they fail to avail themselves of this opportunity no assurances can be given as to when any better terms might be available.

Considering this whole problem from the realistic rather than the legalistic point of view, it is the Embassy’s considered opinion that should our Government be unwilling to bring pressure to bear in order to obtain better terms, the wisest course of procedure for individual depositors to pursue would be to liquidate their accounts as rapidly as possible under the terms now offered.

. . . . . . . . . . . . . .

In view of the fact that the Embassy had suggested to the American depositors concerned who are urgently in need of their funds to withhold settlement with the Caja pending the outcome of the negotiations which have culminated in the present proposal of the Government of Chile, I have the honor to request that the Department communicate by telegraph its instructions in the premises to the end that the Embassy may advise the interested Americans as to what course they should take.

Respectfully yours,

For the Ambassador:

Robert M. Scotten

Counselor of Embassy

[Enclosure—Translation]

The Chilean Minister for Foreign Affairs (Cruchaga) to the American Ambassador (Sevier)

Santiago, October 11, 1934.

Mr. Ambassador: Many months back your Embassy was good enough to submit to the consideration of the Department under my direction the situation in which the American depositors in the Caja de Previsión de Empleados Particulares find themselves as a result of the legal provisions relating to the conversion of their deposits in American money into local currency.

I have given to the problem the importance which it deserves and I have endeavored to find a just solution for both parties. The position of the Caja de Empleados Particulares, unfortunately, does not permit it to make an extraordinary expenditure which would facilitate a satisfactory solution. The Government has had to take its part, very considerable, of the losses which are presumed indispensable for the settlement and it believes, in this way, it has responded to the always cordial spirit of the relations between Chile and the United States.

The Department does not deem it relevant to analyze again the reasons which determined the enactment of Law No. 5107 authorizing the conversion of the deposits. “Because the national interest requires it,” reads the said law, and undoubtedly the supreme necessity of living made indispensable the enactment of afflictive measures which affected nationals as well as foreigners. The economic and financial depression, whose effects Your Excellency is aware of, imposed sacrifices and restrictions of every kind unknown until then.

Therefore, without entering into the discussion of the juridical point of view and confirming what I had the honor of expressing verbally, it is a pleasure for me to inform Your Excellency that the Government is disposed to permit that the American depositors of the Caja who have or may have in the future in their accounts converted into local currency at the rate of exchange of the day on which the operation may be effected the funds which they deposited therein in dollars, transfer those funds abroad and, in order to make that transfer purchase foreign exchange at the same rate of exchange as the Central Bank of Chile acquires such in conformity with the contracts concluded with the copper producing companies.

It would be very pleasing to this Government to know that in this manner and by virtue of an effort which devolves in great part upon the Chilean Government, a problem is solved whose effects touch many American citizens.

Awaiting the reply which Your Excellency may be good enough to forward me, I avail myself [etc.]

Miguel Cruchaga

28. Despatch No. 169 not printed.