825.51/1136: Telegram
The Secretary of State to the Chargé in Chile (Frost)
108. Your 127, August 24, 1 p.m. As you are aware the activities of the Export-Import Bank are severely restricted as a result of the failure of the House of Representatives to consider a bill including a provision which would have increased the lending power of the Bank. Nevertheless, the Export-Import Bank has indicated that it is prepared to consider the extension of credits of up to $5,000,000 to facilitate exports during the next 6 months of American equipment urgently required by the Chilean development program. Under the present circumstances the Export-Import Bank is not in a position to undertake any commitments beyond this amount, but it would, of course, consider further credits if its lending functions were increased at some subsequent date.
The operation would take the form of facilitating the financing of specific exports by American concerns, and would in no sense be a “direct” credit which would place freely disposable funds in the hands of the Chilean authorities. There would be no objection to sales of American products to the Corporation of Fomento, but it would be assumed that this was a governmental agency. The mechanism would probably be a discounting by the Export-Import Bank, with or without partial or full recourse, of notes received by American exporters from the Chilean purchaser. It is assumed that provision would be made for amortizing the notes out of the proceeds of the new copper and other revenues.
It will be necessary for this Government to have full information as to what materials and equipment would be included in the $5,000,000 amount, and the relation of these specific requests to the whole Chilean development program. It is assumed that first purchases will be for the most urgent purposes.
The rate of interest on such credits of 8 years is a matter for discussion with the Chilean authorities. The rate of interest for similar arrangements with other countries has been set at 5 percent. There is at present some discussion of moderate reduction in this rate, but a rate of three percent appears to be out of the question.
Regarding your inquiry concerning a visit by the Minister of Finance to Washington, this Government has already invited Wachholtz to come to this country, and will be pleased to receive him.
[Page 451]Extensive informal preliminary discussions regarding a trade agreement are taking place between members of the Department and the Chilean Counselor of Embassy. Information regarding this phase of possible discussions with the Minister of Finance will be made available to you shortly.