825.51/1253: Telegram

The Secretary of State to the Ambassador in Chile (Bowers)

162. Your 220, September 16, 4 p.m. The Department has taken this question up with the Export-Import Bank whose officials state that they are at a loss to understand the reports you have received. They have received no complaint from the Fomento Corporation, the Chilean Embassy or the Minister of Fomento. Schnake30 and the other Chilean officials in Washington have appeared, on the contrary, to be satisfied with the cooperation of the Bank.

The Export-Import Bank received on September 13 the first application it has received so far for specific purchases under the credit. This application was submitted by the nitrates sales corporation office in New York on September 12, the same date on which it notified the Bank that its own corporate requirements had been fulfilled to permit it to act as the purchasing agent for the Fomento Corporation. The application was for purchase of approximately 656,000 dollars in agricultural machinery, and was formally approved by the Export-Import Bank on September 17, with the exception of only 6489 dollars worth of equipment of Canadian manufacture. The only present deterrent to the use of the credits for this purchase is the fact that the Fomento Corporation has not yet designated specific commercial banks in this country to act as agents in carrying out the routine banking procedure. To assist the Corporation in making a selection of such banks, the Export-Import Bank gave Schnake on August 23 a list of two or three times the necessary number of agent banks, and it is understood that Schnake sent this list immediately to Chile. The Export-Import Bank says that it will be able to complete its own arrangements with the banks that may be designated within two or three days after they are designated.

Perhaps the difficulties encountered by the Chilean officials arise out of their request for the establishment of an open acceptance credit of $3,000,000 with New York banks. Such a credit was not provided for nor contemplated in the agreement between the Fomento Corporation and the Export-Import Bank and it is the opinion of the Bank that since the agreement with the Corporation is based throughout on advances against specific purchases, any consideration of an open acceptance credit of this nature would require entirely new discussions with a view to revision of the agreement.

It is true that the Export-Import Bank has extended a credit of $500,000 to the Banco de la República del Paraguay which is not, however, [Page 687] an open acceptance credit, but a revolving fund against which the Paraguayan bank may draw upon approval of the Export-Import Bank, an entirely different type of arrangement that was provided for specifically in the terms of the Export-Import Bank agreement with the Paraguayan Bank.

Hull
  1. Oscar Schnake, Chilean Minister of Public Development (Fomento), on special mission in the United States.