633.110/70
The Chargé in Uruguay (Reed) to the Secretary of State
[Received February 5.]
Sir: I have the honor to refer to my strictly confidential despatch No. 145 of January 20, 1938,51 reporting my interview with the Minister of Finance and subsequent delivery of a protest to the Minister of Foreign Affairs because of the stoppage of importation from the United States while goods of similar classes from other countries were permitted entry, and my telegram No. 9 of January 26 regarding the desirability of publicity for the representations made, and to report subsequent developments.
In accordance with the Department’s telegraphic instruction No. 4 of January 26, I saw the Minister of Foreign Affairs yesterday, January 27, and endeavored to impress upon him the seriousness of the situation and the desirability that the Uruguayan Government take prompt steps to terminate its discrimination against American trade. I pointed out that importation from the United States has been practically paralyzed for the past four months, that American goods valued by the Exchange Control Section of the Bank of the Republic at £1,500,000 are still detained in the Montevideo Customhouse, and that the usual flow of importation from the United States has been stopped, first by the refusal of import permits during the last three months of 1937, and later by the exclusion of the United States from the Bank’s list of countries with quotas. Reference was also made to the statement of the balance of payments between Uruguay and the United States for the year 1937 based on purchases and sales of foreign exchange during the year, which was presented by the Minister of Finance to explain the fact that no quota for the United States had been granted. Although it was not desired to discuss the figures shown, (since I understand [Page 930] that no balance of trade, however unfavorable, is considered by the Department as justifying the prohibition of imports), I mentioned that the American Chamber of Commerce in Uruguay was analyzing them, and that the Directors of the Chamber could not understand how such a large balance against Uruguay could be accumulated in the last quarter of 1937, since no so-called “advances” of exchange were made for the American quota till that of September 25th, and in the last quarter the only quota allotted had been the so-called “advance” of £250,000. Without entering into a discussion of the balance of payments, however, I stated that there was apparently no prospect of any importation from the United States for some months unless the present policy of the Uruguayan Government should be altered. I then pointed out that the gravity of the action of the Uruguayan Government in stopping importation from the United States for a period of many months required no emphasizing, adding, for the confidential information of the Minister, and in accordance with the Department’s instructions, that the unfavorable repercussions in the United States of the discriminatory policy of the Government of Uruguay in its treatment of American trade is beginning to embarrass the American Government in its efforts to strengthen commercial relations between Uruguay and the United States, and concluded by expressing the earnest hope that His Excellency’s Government would take prompt steps to terminate this prohibition of importations from the United States.
The Minister of Foreign Affairs made no comment on my representations, but stated that a reply had been drafted to my aide-mémoire of January 19,52 which would be received today. He did not indicate the nature of the reply. I handed him an aide-mémoire covering the statements which I had made (copy attached hereto), and he said that a copy would be referred to the Minister of Finance, as in the case of the aide-mémoire of January 19.
The note to which he referred has been received from the Ministry today, (copy and translation attached hereto). It merely states that my communication has been referred to the Ministry of Finance for consideration and that a telegram has been sent to the Uruguayan Legation in Washington giving the figures of the alleged unfavorable balance of exchange at the end of 1937, adding that it is desirable that these figures should be brought to the attention of the appropriate persons in order to obtain larger purchases by the United States (of Uruguayan goods).
In the hope of finding a practical solution of the problem created by the alleged lack of foreign exchange available for American goods, I have discussed the situation, not only with the Directors of the [Page 931] American Chamber of Commerce in Uruguay, but individually with the General Managers of the two American meat-packing companies established in Uruguay, Swift and Company and Armour and Company. Since animal products constitute about 85% of the total value of Uruguay’s exportation and most of these animal products are shipped by the packing plants, the important position occupied by these two firms is apparent. Their heads are members of the Government Commission on the Meat Trade, which has great weight in determining official policies which affect that trade, including, of course, exchange control. The General Manager of Armour and Company, Mr. C. M. Purviance, has been in Uruguay since the construction of the Armour plant, over 20 years ago, and enjoys great prestige in official, as well as business circles in this country. He has been giving the most serious consideration to the present situation, and yesterday called at the Legation to give me his ideas on the matter. In summary, he stated that, due to the fact that Uruguay had tied up its available foreign exchange by a series of trade agreements, he was unable to see any method by which the exchange created by the countries with trade agreements could be made available for American goods, except, of course, by possible direct negotiation between the United States and such countries, particularly Great Britain. He feels, however, that the only real solution is for the United States to facilitate the importation of canned beef from Uruguay. He stated that at the present time the high American duty and the low prices in the United States made that market increasingly unattractive, as compared with the markets of Europe and other parts of the world (Uruguay exports canned beef to some 70 different destinations). He presented me with a detailed statement of the cost of producing and marketing canned beef in the United Kingdom, as compared with the United States, which shows that approximately 30% more is realized on canned beef exported to the United Kingdom, and also that the import duty in the United Kingdom amounts to approximately 33 cents U. S. as compared with $1.08 in the United States. He declared that if by presidential action the import duty on canned beef from Uruguay could be reduced to somewhere near the British level, it would be possible to export an increased quantity which would compensate for the lack of wool shipments to the United States, which last year were valued at approximately $8,000,000. This amount would be of little importance in the United States, but of great importance to Uruguay, and such action would immediately do away with the present critical position of American trade and the possibility of economic friction with Uruguay, with its probably unfortunate effect on the excellent political relations with Latin America resulting from the “good neighbor” policy. He [Page 932] also suggested the possibility of permitting the importation of canned beef free of duty by the Government for consumption by the Civilian Conservation Corps and the unemployed.
A copy of Mr. Purviance’s statement of costs is transmitted herewith, as of possible interest.
Respectfully yours,