The Secretary of State to the Ambassador in Chile (Philip)
Sir: There is transmitted a memorandum of a conversation22 between an officer of the Department and Mr. Edgar W. Smith, Vice [Page 325] President of the General Motors Export Company, with reference to the exchange restrictions imposed by the Chilean Government on imports of automobiles, tires and parts.
In connection with this complaint, and with reference to report No. 161 dated November 19, 1935, from the American Commercial Attaché in Santiago,22a you are authorized to seek an interview with the Minister for Foreign Affairs,23 and, in your discretion, with the Minister for Finance,24 and communicate, informally, the concern with which this Government views the fact that liquidation of American blocked funds in Chile continues to be suspended, and that although the exchange restrictions on imports of American automobiles and other products were announced as temporary, they are still being applied.
You may state that this Government realizes the trade and exchange difficulties which confront Chile, but suggests the desirability of an announcement of a systematic plan or schedule for liquidation of American commercial credits blocked by exchange control measures. Some accounts have been awaiting transfer since 1931 with no definite prospects of liquidation. American interests affected by these measures have not failed to point out that other countries have now liquidated, or are systematically liquidating, arrears in exchange accumulated in the earlier years of the depression.
As regards the present exchange restrictions on such typical American export products as automobiles and radios, this Government does not desire to interfere in Chile’s efforts to solve its trade and exchange problems in its own way, as long as such efforts do not result in discrimination to legitimate American trade interests. In pursuance of this policy of cooperation, this Government has never resorted to defensive measures, as have certain other countries, when artificial exchange and import control was applied to their trade, believing that the practice of such measures operates to delay recovery from the depression in international trade from which practically all countries suffer.
You may state, however, that because such artificial control measures are injurious to international trade, especially when, as in this case, their application is prolonged beyond a brief emergency period, this Government ventures to inquire whether the Chilean Government as a solution of its present exchange problems is contemplating removing restrictive control on any foreign exchange available for trade with the United States and other countries which do not practice exchange control or compensation against Chilean trade. Such a [Page 326] system would be more nearly in reciprocity to the action of this Government, which has never applied restrictions to remittances to Chile.
Very truly yours,