The Ambassador in Chile (Philip) to the Secretary of State
[Received April 7.]
Sir: I have the honor to refer to my despatch No. 103 of February 12, and to previous correspondence regarding the restrictions placed upon American trade through the operation of Law No. 510730 placing control upon foreign exchange. I am now pleased to report that the commercial banks in Chile have been authorized to conduct exchange operations in the free market, or the so-called “black market”.
This authorization has been extended by means of Circular No. 211 of March 23, 1936, which bears the signature of the Vice President of the Exchange Control Commission, the Superintendent of Banks [Page 332] and the President of the Banco Central, and a copy and translation31 of which are transmitted herewith.
It has long been the contention of this Embassy in its dealings with the Chilean authorities that no real economic necessity existed for maintaining the restrictions on the utilization of free market exchange; in fact, the Chilean officials themselves have on several occasions admitted to members of the Embassy that this contention is true and have often made the assertion that the Government tacitly recognized the right of individuals and firms to utilize the free market for their exchange operations. These verbal assurances, however, were proved of little value in a strictly legal sense as was shown recently by the serious difficulties encountered by the American-owned Compañía Chilena de Electricidad.
As reported to the Department in my cable message No. 14 of January 23, 6 p.m., the Minister of Hacienda promised verbally that facilities for the liquidation of American funds then awaiting transfer, and of which I had furnished him a list of those known to the Embassy, would be facilitated prior to his departure for France. Although such action was not forthcoming when promised, it is a matter of considerable gratification that this free market exchange finally is made available legally to those in the United States carrying on business with Chile.
It is probably impossible to estimate with any degree of accuracy the amount of exchange available in the free market or to forecast what effect the enclosed circular will have upon importations of American merchandise to Chile as well as upon the liquidation of our blocked credits. For the moment, therefore, I can only report that it appears to be a definite step in the right direction from our point of view. I understand that a detailed analysis of the attached circular will be prepared by the Commercial Attaché in a report to the Department of Commerce at an early date.
I beg to transmit herewith a copy and translation of the first press announcement31 which has come to my notice relative to the above mentioned circular—from El Imparcial of the 30th instant.
There has existed in certain governmental quarters a very strong opposition to action tending to the establishing of free market exchange. This, I understand, is chiefly due to the belief that such a step will lead to exchange speculation and currency depreciation over which the Government will have lost control.
In connection with the general subject of the difficulties encountered by American trade in securing exchange, I believe it is worthwhile to add at this time that although the promise which Sr. Ross made to [Page 333] me regarding the removal of the exchange ruling requiring the presentation of shipping documents before authorization is granted by the Exchange Control Commission for export draft exchange (page 3, paragraph 2, despatch No. 87 of January 24, 193632), has not been carried out as yet, nevertheless definite assurances have been given to me by the Minister of Foreign Affairs and Acting Minister of Hacienda, that he would insist upon such action, and recently assurances have been given to a member of the Embassy by the Under Secretary for Foreign Affairs that this restriction will be removed in the very near future. It would appear that not only the Foreign Office but the Ministry of Finance itself is desirous of carrying out Sr. Ross’ promise, but that Sr. Urrejola, the head of the Exchange Control Commission, has been interposing every possible objection and obstacle to the removal of the restriction in question.