810.5151 Williams Mission/61

The Secretary of State to the Chargé in Uruguay (Dominian)

No. 287

Sir: There is transmitted herewith a copy of the section relating to Uruguay of the report of Dr. John H. Williams, of the Federal Reserve Bank of New York, of his mission of investigation of American foreign exchange problems in certain South American countries. Copies of the full report19 are being sent you under separate cover. These copies should be kept in the confidential files of the Legation and the Consulate General, and precaution should be taken to prevent any material in the report from reaching unauthorized persons.

You are requested, in accordance with the suggestion made on page 34 of the report,20 to investigate the complaint that the amount of exchange allocated by the Uruguayan Exchange Control for imports from the United States is less than it should be because exchange necessary for payment of petroleum products imported by American companies from South American producing areas is charged to the limited quota of exchange set aside by the control for imports of American origin. Should your investigation show this complaint to be founded, your report should be accompanied by an expression of your views as to the advisability of making representations.

You are also directed, in accordance with the suggestion contained on pages 35 and 36 of the report21 to inquire orally of the appropriate authorities of the Uruguayan Government as to the maturity of the new issue of amortizable obligations which it is understood will be offered to foreign holders of blocked credits in Uruguay and to point out informally, as being in Uruguay’s own interest, that their term should be as limited as possible. The Department realizes that it may be thought necessary to the Uruguayan program of orderly operation and eventual liberation of exchange control to remove the pressure on the exchanges of the present accumulation of frozen credits by spreading their transfer over a certain period of time, but any attempt to fund them into long term obligations would tend, it is believed, to defeat this object. It would, besides, inflict unjustified further hardships and losses on American holders of frozen credits in addition to those already suffered as a result of Uruguayan control of exchange, whereas, no restriction has been placed by this Government on remittances to Uruguay. American subscribers to the amortizable obligations previously issued by the Uruguayan Exchange Control have had no regular market or facilities for discounting them [Page 661] and if the proposed new issue should be of long term obligations, it would be difficult, if not impossible, to create a satisfactory market for their sale or discount under present conditions. It is anticipated that, rather than accept possibly unmarketable long term obligations, many holders of blocked balances would be forced to take the losses which would be incurred by transferring their credits through the free market.

The Department would appreciate receiving by air mail any comments or expression of views which you may care to make on the matters treated in the report. It would be helpful to the Department in its consideration of the exchange problem if the Legation, in connection with the Consul General in Montevideo, were to prepare a study of the balance of payments between Uruguay and the United States in 1933 and an advance estimate of the balance for 1934.

Very truly yours,

For the Secretary of State:
Sumner Welles
  1. Vol. iv, p. 393.
  2. Ibid., p. 420, first paragraph.
  3. Ibid., p. 421, fourth paragraph.