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

No. 441

Sir: I have the honor to refer to the Department’s telegram No. 49 of August 13, 7 P.M., 1935, authorizing me to present to the Foreign Office the draft of the note enclosed with this Embassy’s despatch No. 432 [423] of July 31, 1935. The note in question was presented on August 14th. It bears the date August 13th. Mr. German Vergara, the Under Secretary who is in charge of exchange matters, read the note and commented on the fact that restrictions were now being imposed only on automobiles and radios. I replied that we were very glad to know that they were not to be continued with regard to the other articles referred to in our note and that I was sure that if the Foreign Office desired, permission could be obtained from the Department to excise from the note reference to the articles which were not now affected. Mr. Vergara stated that this was not necessary as the Foreign Office would reply to our note and in its reply would clear up this point. He added that he thought American commerce as a matter of fact received very good treatment in Chile, better for example than it was receiving at the hands of Germany, France and many other countries; that we were really satisfied with our situation in Chile as indicated by the fact that we had not hurried to press for a commercial treaty with Chile as it [we?] had done in the case of Haiti, Brazil and other countries. No very specific reply was made to this, since our position with regard to a commercial treaty with Chile has not crystallized. I merely stated that it was presumed that there were many other factors entering into the desirability of concluding a [Page 417] commercial treaty, other than the one referred to by the Under Secretary.

Adverting to the import restrictions under discussion, Mr. Vergara stated that he did not believe that they would be kept in effect for very long against special commodities, but that the government would find a way to save exchange availabilities through the application of more general measures. He added that in any case he did not feel that importers were suffering very greatly since, with the exception of the Ford Motor Company, they were financing purchases in the bootleg market and in his opinion could continue to do so with perfect impunity. Commenting on this point, it was pointed out that it was understood that in addition to the Ford Motor Company, the RCA–Victor Company and possibly other firms had refused to enter the bootleg market whose use certainly placed the importers in an anomalous position in view of the definite attitude taken by the Minister of Finance with regard to its illegality.

The Under Secretary then admitted that the question was giving the Foreign Office considerable trouble as the Germans as well as ourselves were making a rather vigorous protest with regard to these restrictive measures. The latter point was confirmed in a conversation which I had yesterday with Baron von Schoen, the German Minister, who informed me that Berlin was extremely annoyed at the restrictions on automobiles and that under instructions from his Government, he was making a vigorous oral protest about the situation. The German Government, he added, took the view that these restrictions were in direct violation of Chile’s treaty obligations under its compensation treaty with Germany.

Respectfully yours,

Winthrop R. Scott