633.116/77
The Chargé in Uruguay (Reed) to
the Secretary of State
No. 173
Montevideo, February 10, 1938.
[Received
February 19.]
Sir: I have the honor to refer to my strictly
confidential despatch No. 162 of February 4, 1938,53 in regard to the virtual
prohibition of American imports resulting from the refusal to grant
import permits for American goods, in which was reported an interview
with the Minister of Foreign Affairs, in the course of which the
Minister stated that the problem was on the point of being settled in
accordance with the desires of the United States Government, and that
the President had given instructions to the Minister of Finance to take
measures to permit the resumption of importing from the United
States.
No confirmation of these statements was received from the Minister of
Foreign Affairs or noted from any action of the Exchange Control
Authorities. In the course of a casual interview with the Vice President
of the Bank of the Republic a few days later, that official informed me
that he knew of no plan for permitting the resumption of importing from
the United States. On February 9 there was received a note from the
Ministry, transmitting an Aide-Mémoire in regard
to the commerce between the United States and Uruguay (copy and
translation attached). The note stated that, should the United States
make additional purchases of Uruguayan goods at this time, it would be
possible to apply 80% of the exchange created thereby towards the
importation of American merchandise without considering the unfavorable
balance of payments in 1937. The Aide-Mémoire
contained a lengthy statement justifying the attitude and action of the
Uruguayan Government. As this communication appeared to be at complete
variance with the statements made to me by Dr. Espalter on February 3, I
called at the Ministry of Foreign Relations during the weekly diplomatic
audience today. I told the Minister that I had come to see him for the
last time in my capacity as Chargé d’affaires, and we exchanged a few
remarks about the approaching presentation of credentials by Minister
Dawson.
I then asked him if there was any news in regard to the quota and trade
situation. He inquired whether I had received any word directly from the
Bank of the Republic, saying that the matter was one with which the Bank
was principally concerned. I told him that I had not received any
communication from the Bank, but that yesterday I had received a note
signed by Señor Guillot,54
transmitting an Aide-Mémoire; that this Aide-Mémoire set forth the situation as it had
been explained by the Minister of Finance and officials of the
[Page 936]
Bank of the Republic, but
contained no solution of the present difficulties. I said I assumed that
this note was the one to which he had referred in our interview of
February 3rd, which amplified the Ministry’s note of January 27th, in
reply to my Aide-Mémoire of January 19.55 He said that such was the case, and that the
note had been prepared prior to our interview of February 3rd. He said
that it presented the actual situation, but that, notwithstanding its
terms, President Terra and the Government proposed to give special
consideration to the interests of the United States. He continued that
the method of solving the problem was under discussion between the
Ministry of Finance and the Bank of the Republic, and that it was
connected with the idea of obtaining credits from the United States to
cover American imports into Uruguay. He said that of course foreign
trade must be reciprocal, and repeated briefly some of the arguments
used by the Minister of Finance in support of bilateral balances of
trade, but modified these statements by the remark that special
arrangements would be made for the United States.
I told him that I was naturally very anxious to learn further details of
the projected arrangement for the relief of importers of American goods,
and expressed the hope that as soon as the plan became somewhat more
concrete this Legation would be informed. The Minister assured me that
the Legation would be informed just as soon as a definite decision was
taken, explaining that the discussion was still in progress.
The general situation has been slightly improved during the past ten days
by the attitude of the exchange control authorities in granting a
considerable number of import permits after receiving evidence that
exchange to pay for the goods in question had been acquired in the free
exchange market. This action was taken principally in connection with
automobiles, agricultural machinery and electrical equipment, including
refrigerators. However, the value of the Uruguayan peso fell about 15%
in the free market, and the General Manager of the Bank of the Republic
announced that in future the combined import quotas for goods paid for
by free exchange from all countries would be limited to a total of
£2,000 per day.
At present, therefore, there is no indication that a quota of official
(controlled) exchange will be granted for American goods.
In view of the statements of the Minister of Foreign Affairs reported in
my telegrams Nos. 7 of January 19, 1938, and 12 of February 3, 1938, I
am inclined to feel that the Minister of Foreign Affairs, in spite of
his desire to adjust the existing commercial difficulties with the
United States, lacks sufficient influence in the Government to secure
the adoption of the policy which he favors.
Respectfully yours,
[Page 937]
[Enclosure—Translation]
The Uruguayan Minister for Foreign Affairs
(Espalter) to the American
Chargé (Reed)
Montevideo, February 9, 1938.
Mr. Chargé d’affaires: With reference to
the note addressed to that Legation dated January 27th last,
relative to the importation of goods from the United States of
America, I am enclosing herewith an Aide-Mémoire containing information on the subject.
At the same time, I am pleased to express to you, Mr. Chargé
d’Affaires, that this Government is inspired by the best intentions
to satisfy the interests of the United States of America and
believes that if this country (the United States) would make new
purchases at the present time, it would be feasible to apply the
largest part thereof to the importation of American goods in an
important proportion of the amount thereof (80%), without
considering the unfavorable balance of payments of 1937.
I avail myself [etc.]
For the Minister:
Luis
Guillot
Director
General
[Subenclosure—Translation]
The Uruguayan Ministry for
Foreign Affairs to the American
Legation
Aide-Mémoire
The Government of Uruguay has pursued an extremely benevolent policy
with respect to the entry of merchandise of American origin, since
it gave it a protection which may be summarized in the following
points:
- 1)
- It applied thereto the most-favored-nation treatment, on
equal conditions.
- 2)
- In order to permit the importation thereof in the most
advantageous conditions, it granted to it advances of quotas
during the year 1937.
- 3)
- At the time when the scarcity of exchange was more acute,
Uruguay permitted the entry of all agricultural machinery,
implements, machinery in general and raw materials, all of
them of North American origin, under the protection of
controlled exchange, and in such volume, that it gave rise
to a protest from the countries with which there were
agreements and an available balance of exchange, on account
of not having received a treatment equal to that of the
United States.
- 4)
- While with respect to other countries severe restrictive
measures were applied to the extent of not permitting the
entry of articles necessary to industry and commerce,
Uruguay authorized the importation
[Page 938]
of automobiles which, although with
free exchange, from the point of view of American interests,
it (the free exchange) did not affect them whatever, since
the sellers received in dollars the value of their
shipments.
Uruguay is not to be blamed for the situation of its commerce with
the United States, since a brief analysis of the figures of
interchange will permit the confirmation of this assertion. In fact,
the United States in the year 1936 made purchases of Uruguayan
products in the amount of £2,700,000 while in the year 1937 such
purchases only amounted to £990,000. Uruguay, on the contrary,
intensified its acquisitions of American merchandise, since from
£1,270,000 registered for the year 1936, it rose to £2,138,000 in
the following year.
Uruguay found it necessary to adjust the importations from the United
States after having exhausted all the exchange originating from its
purchases, besides considerable quantities which belonged to other
countries. The reason for the present unbalanced condition lies, as
demonstrated by the foregoing figures, exclusively in the
considerable decrease of purchases on the part of the United States,
which was observed at the beginning of the year 1936, at which time
it stopped to acquire wool, besides other items in less
intensity.
On the other hand Uruguay has encouraged purchases in the United
States, incorporating even automobiles and other articles of a
sumptuary character within the quotas of controlled exchange.
The unbalanced condition is so pronounced that, notwithstanding the
extraordinary quotas fixed by the Bank of the Republic, there remain
in the Customhouse goods awaiting clearance amounting to
considerable figures.
If the United States believes it is assisted by reason in claiming
the entry of its merchandise notwithstanding the unbalanced
condition of the balance of payments, Uruguay would be invested with
the same rights to require that its products should be purchased in
a proportion equal to the purchases it makes in the United States, a
very just principle in commercial matters.
It may be pointed out that there is an error in the affirmation that
no advance of exchange was made for extraordinary quotas until
September 25, 1937, since previous to that date the unbalanced
conditions existed and, without publicly expressing it, the Bank of
the Republic fixed quotas on account of the exportations to be made
to the United States, which supposition was not confirmed by events,
since shipments suffered a vertical descent.
Uruguay finds itself in the practical possibility [impossibility?] of complying with the desires of the
Chargé d’affaires of the United States to take care of the
importations of that origin, since in order to do so it would have
to utilize exchange produced by exportations
[Page 939]
to other countries, who, with more reason,
would formulate their protest for the action of not permitting the
importation of their goods to the effect of which they had provided
the necessary foreign exchange, and which Uruguay would have
unjustly diverted in the benefit of countries which purchased
less.
This consideration amply justifies Uruguay’s conduct in the matter of
importations from countries which have no exchange available in the
interchange to form their quota. However, as stated before, the
restrictions have been much less severe with the United States,
since quotas have been recently fixed for the importation of
automobiles, electrical refrigerators, vacuum cleaners, and many
other articles which cannot be admitted as essential.
The policy of importations contemplated that they always originated
from countries with a quota, and establishes the refusal or a
negative resolution to the request, when the merchandise can be
purchased in countries which have a quota available.
However, Uruguay is obliged to admit importations from countries
without a quota, when such products are not susceptible of being
brought from countries with a quota provided they are essential for
industry, public consumption, or for the economic development of the
nation.
We give below the figures of commercial interchange and financial
movement up to December 1937.
| Balance in favor of
Uruguay from 1936 |
£784,752 |
| Exports for the year
1937 |
993,311 |
|
|
£1,778,063 |
| Exchange sold for imports |
£2,137,855 |
|
| Financial services |
907,543.8.0 |
3,045,398.8.0 |
| Exchange granted to the
United States in excess. |
£1,267,335.8.0 |
Furthermore, the Honorary Commission of Imports and Exchange granted
import permits with exchange not yet taken, in the approximate value
of £100,000.
