611.2531/221: Telegram

The Chargé in Chile (Frost) to the Secretary of State

76. Department’s 48, November 9, noon. García as a result of three protracted interviews has approved proposals with regard to modus vivendi as outlined below. While these proposals have also been discussed and approved by two other members of the Comision de Tratados, they have still to be submitted to that body as a whole in its formal session on the afternoon of the 19th instant. The Embassy would appreciate the Department’s reactions in the meantime, in order to facilitate prompt discussions, presumably final, on the evening of the 19th or morning of the 20th. The date for exchange of ratifications of the Franco-Chilean treaty can be retarded until approximately the end of the month; but García is leaving for about a week’s absence in Buenos Aires on the 21st.

1. The following text is suggested for paragraph 3 in the modus vivendi:

  • “(a) The Government of Chile will take the steps necessary to abolish, as soon as its international economic position permits it to do so, the exchange control measures affecting the transfer of payments for articles the growth, produce or manufacture of the United States.
  • (b) Until such time the Government of Chile will avoid exchange control measures involving the use of exchange at rates higher than those which would be set by free supply and demand of the market.” [Page 415] For the Department’s information the discussion hinged on the phrase “as soon as possible” and on the word “undertakes.” The Embassy feels that the Chilean proposal is as satisfactory as can be secured. Clause (b) is definite in its terms and affords a greater measure of protection than the Embassy had hoped to secure.

2. García accepts paragraph 4 of the present modus vivendi draft with the addition of the proposal as to short frontier traffic furnished at the end of paragraph 3 of the Department’s telegram No. 48 cited above, but only on condition: that the Department agree to the pledge mentioned next below.

3. García proposes in addition to paragraph 7 of the present modus vivendi draft an eighth paragraph as follows:

“Both Governments undertake immediately to initiate negotiations for the conclusion, within the shortest possible time, of a treaty of commerce and navigation to regulate in definitive form the economic relations between the two countries.”

García would alternatively accept a stipulation to the effect that the new modus vivendi terminate within a set period of 6, 9 or 12 months, in order to render obligatory the conclusion of a general treaty before that time. The British modus vivendi as at present proposed provides for its termination and the completion of a general British-Chilean treaty by June 30, 1938. It may be explained that if a provision excluding adjacent countries from the operation of the modus vivendi could be inserted in paragraph 4, which García was informed is impracticable, he would be willing to waive either of the above alternative proposals.

4. Embassy believes that proposals for paragraphs 3 and 4 set forth above should be accepted, as well as final stipulation for immediate treaty negotiations.

Frost