833.51/591: Telegram
The Secretary of State to the Chargé in Uruguay (Dominian)
31. Recently published press reports from London state that American interests in Uruguay are being jeopardized by foreign exchange negotiations now being conducted between that country and Great Britain in which Great Britain is insisting, with threat of compulsory action, that Uruguay allocate the greater part of its sterling exchange in settlement exclusively of all British long term obligations, British-Uruguayan trade necessities, and payment of dividends due on British investments in Uruguay. The report adds that this would prevent or seriously prejudice payment of American and other foreign obligations of Uruguay.
Please discuss this question with the Foreign Minister expressing our confidence that the Uruguayan Government will strongly resist any effort in case any is being made, to have it discriminate against American interests. So far as service on Uruguayan external obligations is concerned, you may recall that the present service on Uruguayan dollar bonds is made on a flat 3½% basis irrespective of the fact that some of the issues carry 8%, others 6%, and others 5%. This existing arrangement is understood to be made on the basis of treating all Uruguayan external obligations alike, but it ignores the fact that [Page 651] it gives the British full interest service (their bonds in great part drawing only 3½% interest) and gives American holders the disproportionate service indicated. Furthermore, it is worth recalling that Argentina in the Roca Agreement with Great Britain,13 while apparently accepting the principle that sterling exchange arising from the sale of Argentine products to Britain should be available for meeting applications for remittances from Argentina to Britain, nevertheless insisted that there should first be deducted from such exchange sums necessary to effect payment of service on Argentina’s public external debts, national, provincial and municipal, payable in countries other than Great Britain.
Cable report.