611.2531/158: Telegram

The Secretary of State to the Ambassador in Chile (Philip)

24. Your despatch No. 192 of April 25, 1936. The Department notes with interest that in your conversation with Señor Vergara he expressed the opinion that his Government may desire to propose some changes in the text of paragraph 4 of the draft modus vivendi. [Page 324] The Department will appreciate it if you will endeavor to obtain a reply as expeditiously as possible.

It is noted, however, that Señor Vergara expressed fear that such removal of exchange restrictions as have already taken place may have the effect of depreciating the peso to an extent which may prove most disadvantageous to foreign exporters to Chile as well as to the Chilean people.

We are not primarily concerned in connection with the proposed modus vivendi, with the value of the peso. Our important objectives are to preclude the sudden arbitrary imposition of exchange restrictions and delays which obstruct importation of the products affected, and to maintain the export draft and other exchange markets free for the use of importers who wish to purchase from countries which have not entered into clearing arrangements with Chile. We are concerned with the elimination of these restrictions because experience has shown that they have operated and do operate primarily to the disadvantage of American trade.

As you are aware, the Department is not impressed with the argument that removal of exchange restrictions would result in depreciating the peso to an extent disadvantageous to foreign exporters to Chile and the Chilean people. It is our view that the removal of exchange restrictions would as a general proposition cause trade to tend toward a more normal flow and thus be advantageous to exporters to Chile, as well as to Chilean importers and exporters and, of course, to the Chilean people.

You may express these views to proper Chilean authorities in any informal conversations you may have with them in respect of paragraph 4 of the proposed modus vivendi.

Also report as soon as possible the status of the American blocked funds,20 transfer of which the Minister of Finance promised to authorize just prior to his departure.

  1. See section concerning Chilean exchange restrictions, infra.