611.5231/1075: Telegram

The Ambassador in Spain ( Bowers ) to the Secretary of State

2. Department’s telegram No. 2, January 4, 3 p.m. Anglo-Spanish payments agreement signed January 6.14 Agreement provides that all proceeds from Spanish exports to England will be deposited in sterling account with special London office to be applied against deferred and future English credits arising from English exports and normal reexports to Spain as well as from freight charges, insurance, dividends, royalties, profits, et cetera. Full text is being forwarded to the Department in the pouch today.

Provisions of above and French financial agreements may be expected to limit available dollar exchange to amount of Spanish exports to us until such time as present French and English arrears have been liquidated.

Latest available figures showing total of Spain’s invisible balance of payments cover year 1933 and were forwarded by Commercial Attaché to Finance Division on July 26, 1935. However, any increase in invisible receipts has probably been more than offset by increase in adverse trade balance from 148,000,000 gold pesetas during the first 10 months of 1933 to 239,000,000 gold pesetas in the same period 1935.

In an interview today with the Under Secretary of State he told me that Spain was forced to conclude exchange agreements with France and England to save her two best markets. He promised to urge our position with the Exchange Control Board and expressed conviction that conclusion of our agreement will greatly improve whole situation. He insisted that exchange agreements with England and France will not further delay dollar payments and implied that with signature of our trade agreement we will get exchange insurance and exchange certificate “b”. Local American banker is of the opinion that such insurance would satisfy our exporters.

I believe that signature of our agreement would strengthen our position in connection with exchange problem as “fair and equitable treatment” would apparently entitle us to demand that insurance and exchange certificate “b” be extended to imports from the United States. Moreover, proposed exchange clause providing for denunciation of agreement, in case of discrimination, could be used as a club in our efforts to obtain increased dollar exchange allotments.

  1. League of Nations Treaty Series, vol. clxvi, p. 283.