[Enclosure]
Copy of Typical Reply to Bondholder of Defaulted
Foreign Securities
Washington, February 21, 1936.
Sir: The receipt is acknowledged of your
letter dated February 12, 1936,1 requesting information concerning the action
which the Government of the United States has taken with regard to
the payment of obligations by the Governments of Chile and Colombia
on their respective external debts.
It is the long-established policy of this Government to consider
difficulties in regard to foreign securities as primarily matters
for negotiation and settlement between the parties directly in
interest, acting through agencies of their own. The Department of
State, within its function of protecting all American interests in
foreign countries, is glad to facilitate such discussions when it
appropriately can and to take such other action, usually informal,
as it finds proper and advisable in the varying circumstances to
assist in obtaining due consideration of the interests of American
investors.
In this connection, I may refer to the fact that the Administration
in the fall of 1933 encouraged the bringing into existence of the
Foreign Bondholders Protective Council,2 with a view to providing
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a disinterested and
nonprofit organization to protect the interests of the numerous and
scattered holders of defaulted foreign securities. The Council which
has offices at 90 Broad Street, New York, New York, functions
entirely independently of the Government and reference to it is made
without responsibility on the part of the Department.
With special reference to the Chilean debt situation, it may be
stated that during the past year the Council held conversations in
New York with the Chilean Special Financial Commission, which came
to New York to explain to American bondholders the scope of Chilean
Law No. 5580, of January 31, 1935, governing the service on the
external loans of that country. It is understood that the Council
has made representations to the Chilean Government in an effort to
obtain an equitable settlement of its dollar bonds in default.
Undoubtedly the Council would be glad to furnish you with
information regarding its recent efforts on behalf of American
holders of Chilean dollar bonds.3
With reference to the bonds of the Colombian Government, the
Department understands that preliminary studies are being made
looking toward negotiations for the adjustment of Colombia’s funded
external debt. You may wish to communicate directly with the Council
with a view to obtaining further information.4
With regard to your request for information concerning the future
outlook for economic and political conditions in Chile and Colombia,
I regret to state that the Department cannot undertake to make any
prediction with regard thereto.
Very truly yours,
For the Secretary of State:
Laurence Duggan
Chief,
Division of Latin American Affairs