825.51/1138

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

No. 856

Sir: I have the honor to report that yesterday Señor Wachholtz, the Chilean Minister of Hacienda, who was a dinner guest in my home, took occasion late in the evening to bring up the question of his visit to Washington, a question which I had studiously avoided.

The Minister stated that he had received information to the effect that the Export-Import Bank still has substantial funds at its disposal, due to the fact that the Brazilian Government has not availed itself of the credits offered by the Bank. I replied that my personal impression has been that the Bank may still be in a position to grant moderate credits to Chile, although I have had no information to the effect that this was due to any non-implementation of our Brazilian undertakings. The Minister stated that the Corporations of Fomento and Reconstruction will desire credits for electrical machinery, road-making machinery, and agricultural machinery, possibly to the amount of 10 or 15 million dollars. He added that he has received offers of credits from Germany, and without intimating that he will refuse them nevertheless suggested that he prefers American credits in so far as feasible. He inquired whether any credits granted by the Export-Import Bank could be made direct to the two Corporations in question. I answered that in general the credits were granted to American export firms, but that it has not been my understanding that the granting of direct credits to the Corporations would be entirely impossible. He mentioned that he would not wish the credits to be granted to the Chilean Government (perhaps alluding to the Brazilian arrangements) but rather to the Corporations, so that the transaction would be a commercial one between the Bank and the Corporations. Finally he alluded once more to the possibilities for the conclusion of a trade agreement between Chile and the United States.

I am disposed to feel that, without the faintest solicitation on my part, Señor Wachholtz has thus more or less outlined the terms under which he would consider a visit to Washington to be generally advantageous. At the outset of our talk he mentioned that he has been feeling that the present time is not very propitious, either from the standpoint of Chilean internal politics or the standpoint of American internal politics, for negotiations, and from his remarks it was evident that he has given a good deal of attention to the situation in the United States. As these statements were merely prefatory to his further statements outlined in the preceding paragraph, it seems evident that they [Page 448] were intended principally to assume a tactical position before indicating the conditions which might render the Washington visit fruitful.

There would appear to be no doubt that the types of machinery specified by Señor Wachholtz will be needed here in the near future, and that they will be imported either from Germany or the United States. It seems not unlikely that imports will be made from both countries, and that the share which comes from the United States will be determined to a good extent by the granting or the withholding of Export-Import Bank credits. There are two motives which would impel the Minister to conclude contracts in the United States, (a) his belief that American machinery is on the whole superior, and (b) his desire to demonstrate to his countrymen that the present Chilean Government and the Corporations which it has created command confidence in the United States. The second motive is presumably much the stronger of the two. It may be added that Señor Wachholtz would probably be pleased by the personal prestige and honors incidental to a journey by him to Washington; and also that he is friendly to the United States and is by no means indifferent to the building up of amity and goodwill from genuinely patriotic and idealistic motives.

I must frankly state that his interest in the trade agreement seemed to be minor; although, as the Department is aware, in my own mind the trade agreement is more important from the standpoint of the general and permanent relations between the two countries. I have the impression that the considerations which render it important are less familiar to the Minister than are the considerations directly affecting the financial plans which he has sponsored for the economic upbuilding of Chile, although this is not the case with regard to the group of superior officers who have been for years associated with the Chilean Government and its problems, and which includes Señores García,52 Vigar,53 Goytia,54 Steegers,55 Vergara,56 and Guillermo Gazitúa.57

If the Department should decide that the Wachholtz visit is still desirable, after an examination of the terms which he has sketched, I should personally still be disposed strongly to urge that an attempt be made to reach the stage of announcing the intention to negotiate a trade agreement with Chile synchronously with any announcement which may be made respecting Export-Import Bank credits. The two announcements taken together would manifestly constitute an important event in Chilean-American relations, whereas the granting of [Page 449] credits alone, in the limited amounts which it is understood might be managed, could perhaps not very readily be presented to the public as of outstanding importance. It would moreover leave unsatisfied the group of informed and patriotic Chilean economic officials who continue to be earnestly preoccupied by the balance of payments between the two countries, and would thus be inconclusive.

… I have the impression that Señor Wachholtz is now so firmly entrenched in his position, and enjoys so thoroughly the confidence of President Aguirre, that he will expect and insist upon carrying through the negotiations personally rather than transferring them to Foreign Affairs Minister Ortega or any other official. If he is accompanied by Señores García and Goytia, as the latter has hinted tome is apt to be the case, there would seem to be no reason why a delegation headed by him could not negotiate fully as effectively as one headed by the Foreign Minister.

It need not be added that any expression of the Department’s views for the guidance of the Embassy would presumably be most helpful to Ambassador Bowers when the latter reaches Chile in the immediate future.

Respectfully yours,

Wesley Frost
  1. Desiderio García, Under Secretary for Commerce.
  2. Apparently Cayetano Vigar Fontecilla, Sub-Secretary for Commerce.
  3. Medardo Goytia, member of the Chilean Exchange Control Commission.
  4. Francisco Steegers, member of the Chilean Exchange Control Commission.
  5. Germán Vergara Donoso, Under Secretary for Foreign Affairs.
  6. Guillermo Gazitúa, Counselor of the Chilean Embassy in the United States, formerly an economist in the Ministry for Foreign Affairs.