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

No. 1021

Sir: I have the honor to refer to my telegram No. 294, 5 p.m. of December 4, 1940, and to transmit a copy of the note verbale, and a [Page 692] translation thereof, which the Foreign Minister handed me this morning on the suspension of the retirement of the foreign debt. There also is transmitted a copy, and a translation, of Decree No. 375336 providing for the suspension of the retirement of the foreign debt.

As indicated in my telegram No. 296, 5 p.m. of today’s date, the Foreign Minister stated that the Government’s action was “embarrassing”, but he insisted it was forced by circumstances. He also was emphatic in declaring that the suspension only was temporary, that the resumption of the retirement of the foreign debt would be undertaken just as soon as conditions permit, and that interest payments on the external bonds shall continue to be made in the manner followed until the present.

Respectfully yours,

Claude G. Bowers

The Chilean Ministry for Foreign Affairs to the American Embassy

Note Verbale

The Ministry for Foreign Affairs presents its compliments to the Embassy of the United States of America and has the honor to inform it of the following:

The grave circumstances which arose in our country due to the catastrophe of January 24, 1939,37 which destroyed numerous cities and affected the agricultural and industrial production of a vast and rich region of the national territory, made necessary the issuance of a law for the reconstruction of the devasted zone, to repair the damage and to strengthen the economic structure of the nation. One of the measures taken by the National Congress to this end was the authorization conferred on the President of the Republic to make use of the resources referred to in Article 1 of Law No. 5580 of January 31, 1935; namely, to suspend the redemption of foreign debt bonds, so that these funds may be applied to the requirements of Reconstruction and Development Law No. 6334, until such time as these funds might be replaced through the contraction of loans, or through funds made available by the strengthening of national economy.

Up to the present, Chile has faithfully met the obligations of its foreign debt and had made an effort, likewise, not to use the authorization which permitted the use of funds destined to the redemption of that debt for reconstruction and assistance to the devastated zone and for the development of its economy. But the fact that it has not obtained [Page 693] the necessary amount through loans required to maintain its economy,—which was affected by the catastrophe mentioned above—,together with the general conditions arising from the present European conflict, have obligated its Government to decide to suspend transitorily the redemption of foreign debt bonds, though the provisions of Law No. 5580—which refer to the funds allotted for interest service on said bonds, a service which shall be continued in the uniform manner followed until the present,—shall subsist in their entirety.

So that the Embassy may be duly informed, the Ministry for Foreign Affairs has the honor to enclose a copy of Finance Decree No. 3753, which embodies the above.

The Ministry for Foreign Affairs trusts that the Government of the United States of America will understand and appreciate the just motives, arising from the domestic and international economic circumstances indicated, which have led the Government of Chile to make the decision herein stated. Furthermore, it reiterates that this decision shall endure only as long as circumstances warrant it, and shall be applied only until the efforts of the Government to contract abroad one or more loans, and the sustained endeavor of the Nation to better its economic progress, permit a return to the complete operation of Law No. 5580.

The Ministry for Foreign Affairs avails itself [etc.]

Santiago, December [5], 1940.

  1. Not attached to file copy of despatch.
  2. An earthquake.