633.116/91a

The Secretary of State to the Minister in Uruguay (Dawson)

No. 10

Sir: Your recent reports regarding the unsatisfactory situation of American trade with Uruguay clearly indicate the desirability of a freer exchange of information between the two Governments with a view to shedding more light on the current problem. There is accordingly enclosed a draft memorandum which you are requested to present to the Uruguayan Minister of Foreign Affairs, if you perceive no objection, indicating the desirability of the Government of Uruguay making known to this Government certain information regarding foreign exchange transactions. If you consider it preferable, you may take the matter up orally, using the attached draft memorandum for background purposes. Please report fully the attitude of the appropriate Uruguayan officials regarding this matter, together with your own views and recommendations.

Very truly yours,

For the Secretary of State:
Sumner Welles
[Enclosure]

Draft of a Memorandum To Be Presented to the Uruguayan Minister for Foreign Affairs

The serious situation which has confronted American trade with Uruguay during recent months has engaged the careful attention of [Page 945] the Government of the United States. The existing situation is so unsatisfactory that it is believed that every effort should be made to find a solution which will be mutually satisfactory to both Governments and which will further strengthen their commercial relations.

The point of view of the Government of the United States has been made known repeatedly to the appropriate authorities of the Government of Uruguay. It has been made clear that the United States is opposed to any type of discrimination affecting its trade with Uruguay (or any other country), whether such discrimination take the form of differential tariff rates, differential exchange rates, Or discriminatory allocation of quotas for imports or for the exchange to be used in payment of imports. On the contrary, the Government of the United States favors the most complete application of the principle of unconditional most-favored-nation treatment as applied to all forms of trade and payments control. As is well known, the conclusion of trade or payments agreements with foreign countries on a bilateral basis not only tends to reduce the total of world trade to the detriment of all countries, but also, as has been made apparent by the present situation in Uruguay, the existence of such agreements may have a very discriminatory effect on trade with other countries, such as the United States, not seeking to impose such restrictions. It was in recognition of these basic facts, which are well known to economists, that the Governments of the American Republics approved resolutions at both the Montevideo and Buenos Aires conferences condemning such harmful and discriminatory trade obstacles.

The Government of the United States is fully aware of the difficult situation in which the Government of Uruguay now finds itself as the result of the current decline, both in price and volume, of important Uruguayan exports, particularly wool. It is apparent that if there is not enough foreign exchange created by exports to satisfy all the demands of importers, some demands simply cannot be met under the present system of Uruguayan exchange control. It is equally apparent, however, that the distribution which has recently been made of the available foreign exchange has been highly inequitable and injurious to the important trade relations which have traditionally existed between Uruguay and the United States, and which it is hoped will grow stronger in the years to come. The reason advanced by the Government of Uruguay in its aide-mémoire of February 8, 1938 for its failure to allot exchange for the importation into Uruguay of merchandise from the United States is the alleged “unfavorable” balance of trade and payments of Uruguay with the United States. In that aide-mémoire it was said further that during the year 1937 exports of Uruguay to the United States created exchange amounting to £993,311, whereas exchange sold to cover imports amounted to £2,137,855.

[Page 946]

The figures quoted above referring to Uruguayan exports to and imports from the United States present a picture differing widely from that shown by the official Uruguayan customs statistics. According to the latter, in the year 1937 Uruguayan exports to the United States amounted to 13,865,788 pesos, while imports into Uruguay from the United States amounted to 10,896,744 pesos, leaving a balance “favorable” to Uruguay of 2,969,044 pesos. The obvious discrepancy between these two sets of figures renders it highly desirable to attempt to obtain a clearer and more accurate picture of the balance of trade and payments between the United States and Uruguay than it has hitherto been possible to obtain. For this purpose it would appear to be essential for both Governments to be in possession of all the facts and statistics bearing on this important subject. In view of the reliance placed by the Government of Uruguay on the statistics regarding foreign exchange maintained by the Bank of the Republic, it would be very helpful for this Government to benefit also by that same information in order that there may be no disagreement regarding the facts in the matter and in order that the finding of a mutually satisfactory solution to the problem may thereby be facilitated. Although the detailed information which would be most useful in this connection is of course best known to the appropriate officials of the Government of Uruguay and of the Bank of the Republic, it is assumed that the most helpful information would cover some or all of the following points:

1.
Total purchases and sales of controlled foreign exchange in 1936 and 1937 (and subsequently) corresponding to merchandise imports and exports to and from the principal trading countries, and also the grand totals for all countries.
2.
Purchases and sales of controlled foreign exchange for transactions other than merchandise imports or exports.
3.
Source of these figures.
4.
Information regarding purchases and sales of foreign exchange in the free market.
5.
Source of information regarding the destination of exports and the origin of imports corresponding to transactions in controlled exchange.
6.
Basis on which foreign exchange transactions are “credited” or “debited” to Uruguayan trade with any given country.

The Government of the United States is earnestly desirous of seeking a solution to the current difficulties confronting trade between Uruguay and the United States, and to that end is prepared to cooperate to the fullest extent. It believes that the joint endeavors of the two Governments to arrive at a satisfactory solution will be greatly facilitated by a frank and free exchange of all pertinent information. It earnestly hopes that the Government of Uruguay will approach the [Page 947] problem in the same spirit and will make known through official channels all information in its possession which might contribute to this end.