The Chargé in Uruguay ( Chapin ) to the Secretary of State

No. 939

Sir: I have the honor to refer to a voluntary report of March 2865 from this office and to the Department’s instruction No. 192 of December 18, 194066 with regard to the Rio Negro Hydroelectric Project in Uruguay and to transmit herewith for the Department’s information a copy of a note, dated May 5, 1941,67 with its enclosure65 which were received on May 5 from the Uruguayan Minister for Foreign Affairs.

At Dr. Guani’s instance, I called at the Foreign Office yesterday and discussed with him this request of the Uruguayan Government for our assistance in making available one hydroelectric unit and equipment for the Rio Negro Hydroelectric Project. In view of the Department’s instruction under reference which endorsed the observation made by Minister Wilson in his despatch No. 672 of November 19, 1940,65 I told Dr. Guani that, while I would be delighted to transmit this request to the Department, I felt that there was certain other information which my Government would need before it could give full consideration to the Uruguayan request.

This information, I said, covered the following points:

Indication of the firm or firms in the United States from which it was proposed to acquire the desired material.
Whether the purchase of material was to be made by the German syndicate or by the Uruguayan Government itself.
If the purchases were to be made by the Uruguayan Government, would the material be transferred to the German syndicate for installation and control.
In other words, could the Uruguayan Government give assurances that the proposed purchases would be treated as a separate contract for its own account and remain under its own control completely separate and independent of the basic contract between the Uruguayan Government and the German syndicate.
That it is taken for granted that there would be no difficulty with respect to exchange as it might affect the general import trade from the United States in view of the large balances of dollar exchange now available in Uruguay.

In conclusion, I pointed out to Dr. Guani that, while I knew that the Government of the United States was always disposed and even anxious to tender its cooperation to the Uruguayan Government [Page 596] with respect to a project of such importance to the country when it might be undertaken by the Uruguayan Government itself, I did not feel that my Government would be disposed to assist in any project which might help German firms to maintain their position in Uruguay, since this would be tantamount to aiding directly totalitarian agencies which might later work against the best interests of our two countries.

Dr. Guani said that he felt that the considerations which I had advanced were quite understandable and entirely reasonable, and in my presence he telephoned the director of the Rione (Rio Negro Project Administration)69 and put to him confidentially the first four of the points set forth above. While I naturally could hear but Dr. Guani’s part of the conversation, it was very evident that the Administration had not given any thought to the political aspects of its requests. I inferred that the Administration had rather ingenuously taken for granted that the United States Government would be willing to export the desired material even though it were to be turned over to the German engineers and technical men now at work on the Project.

Dr. Guani, upon terminating his telephone conversation, said that he would call a meeting of all the interested Uruguayan Government officials for this morning at eleven o’clock, since he felt that he must explain the situation personally to the Rione Administration and to the Minister of Public Works. He added that he himself felt that the original contract with the German syndicate had been a very unfavorable one for Uruguay, and that, in view of the manifest impossibility of the German syndicate to carry out its contract at the present time, he felt that whatever the provisions of the contract, the Uruguayan Government had the right to insist upon its cancellation. He emphasized the importance of the Project for the economy of the country, and said that the continued delay was a source of serious prejudice to Uruguay. He inquired whether, in the event that the contract were entirely cancelled, it might be possible to obtain a loan from the Export-Import Bank to complete the Project. I replied that, while I did not know what the obligations of the Export-Import Bank were at the moment, and, while of course I could not speak without consulting the Department, I believed that I could say as my personal opinion that our Government would be glad to give sympathetic consideration to such a request for assistance for Uruguay, provided we had assurances that the German interests had been definitely eliminated from the Project.

When I left, Dr. Guani said that he would call me immediately after the meeting and give me the answers to the points which I had [Page 597] raised with him, so that they might be included in a despatch for the airmail pouch leaving today. This he has not done, and it may be assumed that he has encountered temporary difficulties in obtaining the desired assurances with respect to the ultimate destination and control of the material which the Rione desires to purchase in the United States.

Respectfully yours,

Selden Chapin
  1. Not printed.
  2. Foreign Relations, 1940, vol. v, p. 1174.
  3. Supra.
  4. Not printed.
  5. Not printed.
  6. Luis Giorgi.