833.5151/288

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

No. 988

Sir: In continuation of the Legation’s despatch No. 982, of February 21, 1935,17 in which I informed the Department that a meeting had been called for the purpose of enabling complaints of the American importers on the subject of exchange to be discussed with representatives of the Government, I have the honor to report that the meeting was held yesterday in the office of the Minister of Finance in the presence of this official and that of the Minister for Foreign Affairs. I attended the meeting with the President of the American Association of Uruguay and the Chairman of the Commerce Committee of the Association, which section is the equivalent of an American Chamber of Commerce in this city pending the organization of an American Chamber of Commerce, which is now being undertaken. Representatives of the American packing companies operating in Uruguay were also present, as well as two delegates of the cattlemen’s association, who, although not particularly interested in the question of the complaints made by American importers regarding the vexations created by the present exchange regulations, had been invited to attend by the Minister for Foreign Affairs, who desired to show them that he was doing everything in his power to help their interests in the trade of Uruguay with the United States. I may add that my [Page 963] own presence at this meeting was largely determined by the knowledge that the two Ministers above named were to be present and that I confined myself to the role of an observer throughout the meeting.

As representative of American exporters, the Chairman of the Commerce Committee of the American Association of Uruguay presented the grievances of the importers of American products relative to their inability to secure dollar exchange when they applied for it. He pointed out that in many instances the exchange officials refused the granting of dollar exchange without giving any reason for their refusals beyond the statement that no dollar exchange was available and that, occasionally, they had suggested that applicants for dollar exchange purchase sterling exchange or marks and make their purchases in Great Britain or Germany.

The Minister of Finance himself replied to these grievances, stating that Uruguay found itself, economically and financially, in a situation which prevented its exchange officials from conceding dollar exchange unless dollars were available in the Bank of the Republic as a result of purchases of Uruguayan goods by importers in the United States. He pointed out that in past years the dollar exchange granted to American exporters had exceeded the value of purchases of Uruguayan products made in the United States, and that it was only by converting exchange from other countries into dollars that the American demands had been met. Such a diversion of exchange of non-American origin to American interests was possible, he stated, as long as European countries had not insisted on the total return of exchange derived from their purchases of Uruguayan products. However, during 1934, he stated, the pressure from the European countries for the return of their exchange had increased, and that this insistence had been finally embodied in commercial agreements which, however provisional in character, nevertheless prevented Uruguay from applying any non-American exchange to purchases of dollar exchange made on behalf of American interests. He foresaw that this situation would last for some time yet, and stated that it was impossible to create dollar exchange in Uruguay except through American purchases of Uruguayan products. He read statistics compiled by the Bank of the Republic, which indicated that payments for dollar exchange sent to the United States from Uruguay in 1934 had attained the value of some 9,000,000 pesos, while American purchases of Uruguayan products had not exceeded 7,300,000 pesos. An unfavorable balance of some 1,700,000 pesos thus resulted for Uruguay, to which, he stated, it was necessary to add about 2,000,000 pesos required annually for the payment of debt service on Uruguayan bonds held in the United States. He claimed that if this total of 4,000,000 pesos could be provided in the form of increased purchases of Uruguayan products by [Page 964] importers in the United States, the present exchange situation would improve materially, as far as American interests were concerned, and he believed that the American demand for dollar exchange would be covered by means of the balancing of the payments between the two countries.

The Minister for Foreign Affairs then inquired of the representatives of the packing plants whether they foresaw favorable prospects for an increase in exports of Uruguayan meat to the United States in 1935, in order to wipe out the 4,000,000 pesos deficit. The packers’ reply was that exports of canned meats from Uruguay to the United States had increased considerably toward the end of 1934 and that this increase appeared to be maintaining itself at present, but that they did not think that the progression would continue indefinitely. On the other hand, they stated that they had begun to export hides and lard to the United States in larger amounts than formerly, and that they believed that the prospects of a substantial increase of these two commodities were favorable, so that a portion of the 4,000,000 pesos necessary for the balance of payments between Uruguay and the United States would probably be forthcoming through these new exports.

This statement by the representative of the packing plants was very satisfactory to the delegates of the cattle interests who were present. The Uruguayans present were also pleased at the offer made by the Chairman of the Commerce Committee of the American Association to recommend that duties on meat be lowered by fifty percent in the United States.

In making this statement, the Chairman of the Commerce Committee also laid stress on the necessity of creating a favorable atmosphere for any negotiations which might eventually be undertaken in Washington preliminary to the conclusion of a reciprocal trade agreement with Uruguay. He pointed out that a bad impression had been created as a result of the refusal, in many instances, of the exchange officials to grant dollar exchange to importers of American products, and while the Commerce Committee of the American Association understood and appreciated the difficulties of the Uruguayan economic and financial situation, these difficulties were generally unknown in the United States. Thus, the action of exchange officials in denying exchange to American importers might result in its being considered as antagonism to American interests.

It was evident from the statements made by the Minister of Finance, and with which the Minister for Foreign Affairs acquiesced, that [Page 965] whatever dollar exchange reached Uruguay would have to cover all forms of dollar payments to be made in the country. The Minister of Finance stressed the necessity of covering interest service charges on Uruguayan bonds held under American ownership, as well as of providing the amounts required by the amortization of the bonds issued in payment of frozen credits, through the dollar exchange available in Uruguay as a result of American purchases of Uruguayan products.

It is the contention of local American interests that the debiting of interest service payments and of charges arising out of bond amortization, both of which are charges to which the Government of Uruguay obligated itself in former years, to dollar exchange accruing from commercial transactions, is an unfair burden to be imposed on the American export trade. This viewpoint, the validity of which appears incontrovertible, was set forth during the meeting by the Chairman of the Commerce Committee of the American Association of Uruguay.

It was evident also, from the manner in which the Ministers of Foreign Affairs and of Finance expressed themselves, throughout the meeting, that the prospects of securing dollar exchange in larger amounts by American interests were unfavorable unless a greater amount of dollar exchange could be made to flow into Uruguay. This appears to be possible only through increasing purchases of Uruguayan products by American interests.

My impression, therefore, of the results of this first meeting is that while it will be difficult to remove the vexations of which importers of American products complain, the coming together of American and Uruguayan interests in the above-reported manner to discuss means of eliminating vexations arising as a result of the application of Uruguayan restrictive trade measures, may eventually lead to a happy solution of the problem. There appears to be no reason to doubt the good faith of the Uruguayan Government officials in the matter of granting exchange to American interests, and I believe that they prefer to see their countrymen deal with the United States if possible, because of the confidence they have in the permanent character of the export trade of Uruguay to our country.

The meeting is to be followed by others at which representatives of American exporters and exchange officials will continue their conversations in an effort to prevent difficulties due to the exchange situation.

Respectfully yours,

Leon Dominian
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