825.5151/134: Telegram

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

14. Your No. 7, January 19, 4.00 p.m. Department still does not feel itself in possession of a sufficiently systematic analysis of Chilean trade relationships and commitments to measure the results of the Chilean proposal. Inasmuch as the Chilean Government by its control of foreign exchange is alone in a position to interpret quantitatively its recent proposal you will please request the appropriate Chilean authorities to supply you with official estimates for 1933 of the totals below-mentioned, in order that this Government may be in a position adequately to judge the value of the Chilean proposal to American interests: [Page 8]

Total exchange created by Chile’s exports and otherwise, including the total amount segregated for various national interests under compensation agreements;
Amounts so segregated;
Amount to which persons desiring to make transfers to the United States would have access on a free competitive basis.

At the same time you may convey the Department’s opinion that a solution might be found if Chile would decide to divide foreign countries into two classes: (1) Countries which would look for their exchange solely to compensation agreements; (2) countries which would derive their exchange solely from the free market. In accordance with this idea, would the Chilean Government agree that access to the free exchange market would under its proposal be available only to countries in the second category? Otherwise it would appear that countries having compensation arrangements would not only be definitely assured certain quantities of exchange under those arrangements, but also would be in a position to compete for exchange available in the free market, largely supplied by sales of Chilean goods to the United States. On the other hand those wishing to make transfers to the United States not only would have no definite assurance through compensation agreements but would have to compete even in the free market with countries which do have such agreements. The Department is loath to believe that such can be the intention of the Chilean Government. Please discuss this point further with it.

In the Department’s judgment the importance to the American trade interest of the American owned nitrate enterprises in Chile should not be overestimated, since contrary to the usual tendency of such companies to purchase in the United States the proceeds from nitrate sales under the compensation agreements are being used to finance imports from countries other than the United States.