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

No. 248

Sir: I have the honor to acknowledge the receipt of the Department’s instruction No. 93 of June 3, 193644 with which were enclosed copies of a memorandum setting forth our Government’s views regarding the exchange situation existing in Chile which was handed to the Chilean Ambassador in Washington.

In accordance with the Department’s wishes I handed a copy of this memorandum to the Minister for Foreign Affairs on the 19th instant.

The Minister did not read the memorandum in my presence but indicated that its contents were known to him and remarked that he had hoped that the contents of his note to me of the 10th instant (transmitted to the Department with my despatch No. 239 of June 13th) would have been found a satisfactory reply to the Department’s observations.

I said that this could hardly be the case as the memorandum deals with a long pending situation in the course of which the trade of the United States with Chile has been subjected to many discouragements; that this situation seems to be growing worse rather than better; and that in consideration of the fact that the attitude of the United States toward Chile has displayed invariable consideration for the commercial interests of that country, it is but natural that my Government should seek an adjustment which will assure a modicum of equable treatment for our commercial interests. Dr. Cruchaga said that the subject matter of the Department’s memorandum was now under consideration by his Government. He deplored my suggestion that should a remedy not be found for the trouble it might give rise, if allowed to continue indefinitely, to the necessity for some form of retaliatory action on the part of the United States, and expressed himself unable to conceive that Chile’s difficulties in the matter of Foreign exchange would lead to such an outcome.

I asked if any progress had been made toward a decision in the matter of the Department’s draft of a modus vivendi 45 which I had submitted to him on April 18, 1936, and if it had been shown to Señor Ross since his return. The Minister replied that he and Señor Ross found the Department’s proposals as to the stabilization of exchange very difficult to reach a decision over, but that otherwise the draft seemed to present no difficulties.

[Page 354]

I remarked that I had observed in the press of Santiago that the Foreign Office was giving consideration to commercial treaties with Great Britain and other countries and requested confirmation of this. Dr. Cruchaga replied that my information was correct and that the negotiations with Great Britain were proving excessively difficult for Chile. He remarked that the British were extremely exacting people to deal with in such matters and that he much preferred to negotiate with Americans. I said that I did not know whether or not I should take that as a compliment.

Incidentally, although the Minister agreed that much of Chile’s difficulty with Great Britain centered upon £he question of exchange, I have been unable so far to ascertain any pertinent facts respecting the details of the negotiations. As previously reported to the Department, I have been given to understand that they are being chiefly conducted in London.

I regret not being in a position as yet to advance more useful suggestions as to the best means of dealing with the existing exchange difficulties. The situation is exceedingly involved and is highly complicated by the effect upon it of the various compensation agreements, notably that with Germany.

The Commercial Attaché of the Embassy is now engaged upon an exhaustive study of the shortage of dollar exchange. Up to the present the results of his enquiries indicate a lamentable deficiency of exchange available to cover transactions with the United States.

Respectfully yours,

Hoffman Philip
  1. Not printed, but see memorandum dated May 29 to the Chilean Embassy, p. 347.
  2. See pp. 318 ff.