611.2531/140a: Telegram

The Secretary of State to the Chargé in Chile (Scotten)

41. Department is informed by W. R. Grace and Company that International Machinery Company at Santiago has been trying to sell mill equipment and motor to Melon Cement Company; that the Minister of Finance has apparently made inquiries of the cement company regarding the value of the equipment they might import from Denmark, presumably with a view to compensating such purchases by nitrate sales through a special arrangement; and that if such a special arrangement should be consummated the sale of American machinery would be diverted to Denmark. This reported compensation deal would appear to have the effect of making it more advantageous for the cement company to purchase its requirements in Denmark than in the United States, due to the greater facilities and more advantageous rates afforded by the Chilean Government in making available the necessary foreign exchange for covering the purchases.

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You are instructed to make discreet inquiries and report to the Department fully by telegraph, submitting your views as to whether or not in this specific case there exist sufficient grounds for this Government to protest against discriminatory treatment of American commerce by the Chilean Government.

The Department believes that American exporters in general should receive most-favored-nation treatment in foreign exchange allocations and rates as well as in tariff treatment. If such treatment is not in fact accorded by the Chilean Government, the Department contemplates instructing you to protest formally to the Chilean foreign office. With this in mind, you are instructed to submit an airmail report setting forth what bases, if any, exist for making such representations.