710.Consultation (3)B/109a

The Secretary of State to Diplomatic Representatives in the American Republics

Sirs: The Inter-American Conference on Systems of Economic and Financial Control met in Washington, D. C. from June 30, 1942 to July 10, 1942. That Conference, called pursuant to Resolution VI adopted at the Third Meeting of the Ministers of Foreign Affairs held at Rio de Janeiro in January of this year,1 was attended by representatives of each of the American Republics. All the representatives considered the Conference a most successful one. There was a free and open discussion of economic and financial controls resulting in the passing of eight Resolutions which are to serve as standards for the American Republics in the establishment and administration of their controls.

There are being transmitted under separate cover three copies of the final act2 of this Conference both in English and in the language of the country to which you are accredited and copies of the speeches made by the Honorable Sumner Welles, Chairman of the Inter-American Economic Advisory Committee, and by the Honorable Edward H. Foley, Jr., the United States delegate to the Conference.3 It is suggested that the Resolutions which were adopted be examined carefully and that there should be included in your periodical reports on the administration of freezing controls in the country to which you are accredited a full description of the progress which is being made by the government thereof toward effectuating each of those Resolutions.

There are also being transmitted under separate cover three copies of a handbook which was prepared by the Treasury Department out-lining [Page 59]the wartime financial and property controls in the United States.4 Copies of that document have been given to each of the representatives of the other American Republics at the Conference. It is expected that the officers in each mission who are responsible for the work on freezing, alien property controls, and the Proclaimed List will familiarize themselves with the contents of this document. Each Resolution should be carefully studied in connection with the subject matter on the particular topic in the handbook.

This Government regards the Conference as having been very successful, bearing in mind the limited role which any conference of this nature can play in contributing to the ultimate objectives. The work done both at the formal sessions of the Conference and at the numerous informal meetings with the representatives of the other governments has, it is believed, clarified for all concerned what should be the ultimate objectives of any successful program. The steps which this Government has taken to carry out these objectives have been fully presented, and many of the problems which the other governments are facing have been fully discussed. If the Resolutions which were adopted at the Conference are actually carried out in the same spirit in which they were, at least from all outward appearance, adopted at the Conference, this phase of our program of economic warfare can be regarded as being highly successful. It is fully realized however that the work done at the Conference is, from a broad point of view, only the beginning and that the biggest part of the job lies ahead. The effective carrying out of these Resolutions by the governments of the American Republics is the step which really counts. In this connection the importance of the role which the officers in the field, who are working on these matters in our diplomatic and consular missions, can play cannot be overemphasized. These officers should keep in close contact with the local freezing control authorities of the respective Republic concerned, consulting with them on the various problems which will arise and furnishing them with ideas as to the steps to take. Except where special circumstances dictate otherwise, those phases of the program envisaged by the Resolutions, which the respective Republic concerned has not effectively carried out, should be called to the attention of the local authorities; and the Department should be kept currently informed as to the progress being made in this connection.

There follows a comment on each of the Resolutions for your guidance.

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I

Financial and Commercial Transactions With Aggressor Nations and Nations Dominated by Them

This Resolution is aimed at completely cutting off all financial and commercial transactions between the nations of the Western Hemisphere and the Axis and Axis dominated countries. The Resolution provides for the effective immobilization of all funds, securities, and any property of any nature whatsoever which is now held or is subsequently acquired in an American Republic for the account of a person or firm residing or situated in the Axis or Axis dominated countries. Provision is made for complete cessation of trade between the American Republics and the Axis and Axis dominated countries.

An individual or firm resident or situated within an American Republic cannot initiate instructions or orders for putting through financial or commercial transactions in Axis or Axis dominated countries. Financial and commercial transactions cannot be effected in one of the American Republics pursuant to instructions given directly or indirectly by a person within the Axis or Axis dominated countries. Thus, instructions or orders given by a person in the Axis or Axis dominated countries relative to use or disposition of his property or funds cannot be carried out in the American Republic where such property or funds are situated. Similarly, the execution of the orders or instructions of a person within an American Republic acting under a power of attorney from a person or firm in the Axis or Axis dominated countries, concerning the use or disposition of any property whatsoever belonging to the donor of the power is contrary to the provisions of Resolution I.

However, for your information this Government has not construed Resolution I in such a way as to prevent attorneys-in-fact from effecting transactions under powers of attorney in accordance with certain general licenses when such powers were received in this country prior to the effective date of blocking of the country of the donor and when no current or future communication directly or indirectly with Axis or Axis dominated countries is involved. For example, pursuant to General License No. 45 a bank acting under such a power of attorney can sell on a national exchange, securities held in a blocked account in the name of the owner provided that the proceeds of such sale are placed in a blocked account in the name of the owner and provided that such transaction does not involve any current or future communication direct or indirect with enemy territory as defined in General Ruling No. II.5 Of course the other terms and conditions of that General License would have to be complied with.

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The examples appearing on page 8 of the above-mentioned handbook on the “Administration of the Wartime Financial and Property Controls of the United States Government” demonstrate some of the transactions covered by Resolution I.

Two types of remittances are excepted from the prohibitions of the Resolution. The first of the excepted remittances is one by the government of an American Republic to an Axis or Axis dominated country for such purposes as (1) living expenses of the citizens of such American Republic who may be in Axis territory, or (2) the expenses of representing the governmental interests of such American Republic in the Axis or Axis dominated countries, such as the care and safeguarding of the property of the government of the American Republic in the Axis territory. Such remittance must be made directly by the Government of the American Republic involved, or, as in most cases where diplomatic relations have been severed, it may be made through the government representing the interests of the respective American Republic in the Axis or Axis dominated country.

A second type of excepted remittance is one which the governments of each of the American Republics may authorize (1) for living expenses of the citizens of Axis or Axis dominated nations residing within such American Republic or (2) for expenses of representing the governmental interests of the Axis or Axis dominated nations in the American Republic involved, such as the care and safeguarding of property belonging to such government.

Attention is directed to the provision that none of the excepted remittances from the Axis or Axis dominated countries may be made from blocked funds except in those cases where there is an effective reciprocal agreement between the American Republic involved and the Axis or Axis dominated countries. Thus, if the Government of Japan has blocked funds in Peru, (or in any other American Republic), those funds cannot be used for living expenses of Japanese citizens in Peru. However, if Peru has blocked funds in Japan and Japan agrees and does permit the use of such funds for living expenses of Peruvian citizens in Japan, Peru could, consistent with the Resolution, agree to permit the use of a similar amount of the blocked funds of the Japanese Government for necessary living expenses of Japanese citizens in Peru.

That phase of the program concerning the severance of commercial and financial relations with the Axis and Axis dominated countries is one which is very clearly defined both in Resolution V6 adopted at the Third Meeting of the Ministers of Foreign Affairs at Rio de Janeiro in January of this year, and in the subject Resolution. Accordingly, every transaction engaged in contrary to the purposes and [Page 62]provisions of such Resolutions coming to the attention of the missions should promptly be called to the attention of the government involved unless circumstances make such a procedure unfeasible.

II

Financial and Commercial Transactions With Countries Outside the Western Hemisphere

This Resolution relates to financial and commercial transactions with neutral countries outside the Western Hemisphere. The Resolution requires the other American Republics to supervise “adequately” property and funds within their boundaries belonging to countries outside the Western Hemisphere, and their nationals, which have not severed commercial and financial relations with the Axis. The latter of course excludes nations at war with the Axis. Under this provision each of the American Republics should take steps to locate and identify such property and prevent its use in any way that would benefit the Axis. The governments of the other American Republics should take action to assure that persons and firms within their boundaries do not engage in financial and commercial transactions for the benefit of the Axis nations with persons and firms in neutral nations. This prevents all exportations to and importations from the neutral countries as well as remittances to or from such countries if any of these transactions are of benefit directly or indirectly to the Axis or Axis dominated countries.

Furthermore, in fulfillment of the Resolution the governments of the American Republics are to prevent all financial and commercial transactions with persons or firms in the neutral countries who are known to be engaged in activities inimical to the security of the hemisphere. In this connection, you might discreetly point out to the local freezing control authorities that the Proclaimed List for the countries outside the Western Hemisphere is one means of determining those persons known to be engaged in inimical activities. However, in carrying out this provision, the other American Republics should use all other information available to them.

In connection with the requirements of the subject Resolution, you should carefully study the measures which this Government is taking, vis-à-vis, the various areas outside the Western Hemisphere as described in the above-mentioned handbook on page 9 and following.

This Government through freezing control and export control has exercised great caution to determine that the neutral nations outside the Western Hemisphere are not used as channels for Axis trade, financing and communications. In addition to the supervision of trade and commercial transactions with the four European neutral countries through general licenses based upon assurances by those [Page 63]governments that transactions effected pursuant to such general licenses will not benefit the Axis directly or indirectly, this Government has used export control and the Proclaimed List of Certain Blocked Nationals to determine that individuals who are known to be acting for the benefit of the Axis countries have no commercial or financial relations with persons and firms residing or situated in the United States. In general the criteria which this Government has used in determining whether specific export trade transactions will be permitted are the following: (1) that goods or merchandise exported to the neutral involved will not be re-exported to the Axis or Axis dominated countries; (2) that goods or merchandise exported to the neutral involved is not a substitute for goods or merchandise in the neutral country which can be exported to the Axis or Axis dominated countries; (3) that the goods or merchandise exported does not benefit that phase of the economy of the neutral involved which is being used for the benefit of the Axis war effort. While it may be argued that all export trade to the European neutrals benefits the Axis countries, this Government is not prepared to take such a position at this time and does not wish to press that position with the other American Republics in connection with the subject Resolution.

Through freezing control and export control this Government has stopped all trade with unoccupied France, and financial transactions are permitted only when it is clear that the Axis will not benefit in any way. This Government through export control supervises trade transactions with those neutral countries outside Europe and the Western Hemisphere, and freezing control licenses are required for financial and commercial transactions with those countries when there is an interest of a blocked national or a person whose name appears on the Proclaimed List of Certain Blocked Nationals.

The steps which this Government has taken should not necessarily be construed as meaning that such steps are regarded as compliance with Resolution II. It may be that more drastic steps will be required as events develop. It is hoped that as a minimum the other American Republics as soon as possible will take the necessary steps designed to achieve the results which have been achieved by this Government. Some of those governments may be in a position to take more drastic steps even at this time, and as time passes, it is probable that pursuant to the broad scope of the subject Resolution all of the American Republics may have to take more drastic steps to curtail the benefits which the Axis and Axis dominated countries may derive through trade between the neutral countries outside the Western Hemisphere and the American Republics.

Your attention is directed to the phrase “endeavoring not to cause unnecessary damage to neutral nations” appearing in the first paragraph [Page 64]of the recommendation. That phrase was inserted at the suggestion of the delegation from Chile to cover essential transactions with Spain. It is the hope of this Government that the phrase will not be interpreted in such a manner as to prevent effective action being taken.

III

Transactions Among the American Republics

Paragraph (a) provides for the establishment of an interchange of information with respect to financial and commercial transactions carried on between two different American Republics and in which persons engaged in activity inimical to the security of the hemisphere are involved, or in which one of the persons involved in the transaction is acting for a person outside the Western Hemisphere, in order that each American Republic can prevent such transactions within its jurisdiction. This provision contemplates that the American Republics will effectuate policies similar to the one followed by this Government in connection with the Proclaimed List and it is hoped that the other American Republics will use our Proclaimed List as one means of preventing such international transactions. Thus the program is made more effective by having an international control to prevent such transactions in addition to local controls and in establishing a means of detecting such transactions where one person within the American Republics is acting as a cloak for an individual or firm outside the Western Hemisphere. As illustrations, if A who is residing in Chile and who is not engaged in any sort of inimical activity seeks to remit funds to B in Brazil who is known to be engaged in inimical activity through a bank in Uruguay, Uruguay in fulfillment of the Resolution, as well as Chile, is obligated to prevent the transaction. Similarly, if A in Chile should seek to remit to B in Brazil who is acting for a person outside the Western Hemisphere and this fact is known to Brazil, Brazil is obligated to prevent the transaction. Of course in either case the local controls of Brazil should be sufficient. However, by the international controls the entire program is strengthened and the laxity of controls in any particular country is guarded against by the international controls.

The efficacy of this Resolution depends upon the extent to which each mission pursues the policy of interchanging information with the local government concerned. The importance of this Resolution and of the interchange of information provisions cannot be overemphasized. Pursuant to this Resolution we may eventually be able through such interchange of information to ascertain the true ownership of assets held in this country by firms in the other American Republics as cloaks for principals outside the Western Hemisphere and the true ownership of the assets of Panamanian holding companies, [Page 65]etc. The Axis Powers in preparing for their attempt at world conquest have cloaked their funds and property in the names of individuals and firms located in the Western Hemisphere and have planned to carry on financial and commercial transactions to further the Axis war effort through these cloaks. They have done their work well and the problem of ascertaining the true ownership of assets is a difficult one. However, if the wholehearted cooperation of the government to which you are accredited can be obtained in the free exchange of information concerning cloaking activities and the ownership of assets, such can be uncovered and stopped. However, if the United States and the other American Republics are left to determine this matter by acting independently, the prevention of cloaking and the discovery of the true ownership of certain assets is most difficult if not impossible in many cases.

If the spirit and provisions of paragraph (b) are carried out, transactions involving the monetary unit of an American Republic undertaken by persons or firms in countries outside the Western Hemisphere which have not severed financial and commercial relations with the Axis can only be effected through the controls of the American Republic whose monetary unit is involved. Thus, the other American Republics are required to prevent transactions in dollars undertaken by persons or firms located in such nations outside the Western Hemisphere unless that transaction is undertaken through a bank in the United States. Effecting such transactions through the branch of a United States bank located in one of the other American Republics is not a compliance with the Resolution.

The following examples show some of the transactions comprehended by the Resolution: (a) An Argentine bank is holding dollars in New York in an account in its name but actually for the account of a firm in Switzerland; (b) A Brazilian bank has a dollar account on its books in Brazil for a firm in France; (c) An Argentine bank has an obligation to a French firm, which although not expressed directly in dollars is linked in one form or the other to the dollar (and probably covered by dollar deposits in a New York bank in the name of the Argentine bank). If the spirit and provisions of Resolution III are carried out, transactions in the dollar accounts in (a) and (b) could only be effected pursuant to the United States freezing control since they would have to be effected through a United States bank and such bank is to be furnished with a report sufficient to establish the nature of the transaction. Example (c) goes a step further and probably should not be pressed with the local authorities at this time. However, such transactions coming to your attention should promptly be reported to the Department.

Paragraph (c) includes the all important category of cases in which a person in an American Republic seeks to avoid the local [Page 66]controls by using the financial and commercial facilities of another American Republic whose controls are not as strict as those of his own country to effect a financial or commercial transaction with a person or firm residing or situated in a country outside the Western Hemisphere which has not severed commercial and financial relations with the Axis. For the purpose of illustration, assume that Argentina has not taken adequate measures to effectuate Resolution II or that the Argentine controls effectuating that Resolution are not as strict as those of Brazil. X, who resides in Brazil, intends to remit funds to Y in Switzerland. Brazil refuses to license the transaction, whereupon X transfers his funds to an Argentine bank and seeks to remit such funds to Y in Switzerland. Notwithstanding that Argentina might permit persons resident in Argentina to effect such a remittance, it is obligated under this Resolution to prevent the remittance unless the Brazilian authorities expressly give their consent. Likewise if A in Switzerland remits to B in Argentina who has instructions to remit to C in Bolivia, notwithstanding the policy of Argentina concerning such transaction, if Resolution III is fulfilled, Argentina is obligated to prevent the transaction unless the Bolivian authorities expressly give their consent. The same is true of trade transactions. Thus paragraph (c) of Resolution III, if fulfilled, prevents persons within the American Republics avoiding their local controls by using the commercial and financial facilities of the American Republic whose controls are weakest.

Another type of case included within the provisions of paragraph (c) is a transaction in which a firm in the United States is involved with a Brazilian concern. With the knowledge of the Brazilian concern and the Brazilian authorities, but without the knowledge of the United States firm, a French firm is also interested in the transaction. Brazil should prevent the transaction unless the United States freezing control authorities, with full knowledge of the facts, give their approval.

IV

Control of Movement and Transfer of Securities

This Resolution is directed toward preventing transactions in securities in the American Republics which may benefit the Axis. As you know, the Nazis obtained considerable quantities of securities from the invaded countries and have attempted to use these looted securities to obtain exchange for the purpose of furthering their war effort. To guard against this, all securities imported into the American Republics from points outside the Western Hemisphere are to be blocked until it is definitely established that the Axis, Axis dominated countries, or individuals or firms within such countries have [Page 67]not had an interest in such securities since the beginning of the present emergency, i. e., September 1, 1939.

Paragraph (a) refers to securities which are being imported and the phrase “directly or indirectly” would make the provision applicable to securities imported into Colombia from Venezuela if those securities had been imported into Venezuela from nations outside the Western Hemisphere since September 1, 1939. Except for such situations, the Resolution does not obligate the American Republics to take measures to subject securities which have been imported in the past to precautionary blocking except that non-bearer securities imported after September 1, 1939, may, in the discretion of the government involved, be subjected to such precautionary blocking. The Resolution recommends that necessary supervisory measures be taken in order to prevent transactions of any nature relating to securities located outside the Western Hemisphere, if such transaction will benefit a person within Axis or Axis dominated countries. Unless this provision is rigidly enforced, a way is left open for the Axis to acquire badly needed foreign exchange for its war effort. The Axis could sell looted securities located in Switzerland to a person in Argentina and thus acquire free Argentine pesos which it could convert into whatever currency was most needed at the time to obtain materials for the Axis war machine. It is known that the neutrals are being used in this manner.

Paragraph (c) recommends that the American Republics take the measures necessary to determine whether the Axis or Axis dominated countries, or persons resident therein, have any interest in securities issued or payable in any of the American Republics. This paragraph was inserted at the suggestion of the Mexican delegation. As originally drafted the Mexican delegation intended that each American Republic should require a registration with its diplomatic and consular offices of all securities issued or payable in such American Republic, together with the presentation of evidence to prove that no individual or firm within the Axis or Axis dominated countries had any interest in such securities. In view of the enormous amounts of securities issued or payable in the United States, this would have placed an impossible administrative task on this Government. Accordingly, the phrase “or adopt any other appropriate measures” was added and the paragraph otherwise changed to its present form.

As originally drafted this Resolution covered other situations, such as the effective blocking of securities in which individuals or firms in the Axis and Axis dominated countries had an interest; the prevention of transactions effected within the American Republics in securities, such as sale, hypothecation, etc., pursuant to instructions [Page 68]from Axis or Axis dominated territory; and provisions preventing persons within the Axis or Axis dominated countries from exercising any rights in connection with securities issued or payable within any American Republic (including that of voting at meetings). The Resolution was passed in its present form and without certain of the provisions contained in the original draft on the theory that such provisions were covered by Resolutions I, II and VI. Accordingly, you should bear in mind such Resolutions in addition to the subject Resolution in so far as transactions in securities, security interests, dividends, coupons, etc. are concerned.

V

Standards for the Application of Financial and Economic Controls Within the American Republics

The Resolution recommends that the economic and financial controls have as one objective the control of property and transactions of all persons within the American Republics who are known to be engaged in activity inimical to the security of the hemisphere. Many of the American Republics which have adopted controls have applied those controls upon the basis of nationality. It is well known that many of the persons in the Western Hemisphere, who are engaged in activity on behalf of the Axis nations, have acquired the citizenship of one of the American Republics. Furthermore, there are many persons in the American Republics who are citizens of the Axis countries but whose loyalty to the country in which they reside is unquestioned. Accordingly, it is highly desirable that the financial and property controls be directed against the individuals and firms who are known to be engaged in inimical activity rather than to attempt to control the activities of individuals and firms on the basis of nationality when there is nothing to indicate that many of them are engaged in inimical activity.

The Resolution provides that when the controls are directed against those who are known to be engaged in inimical activity, the object of the controls shall be the elimination of the undesirable activity and influence of such individuals and firms from the economic life of the country involved. In this connection, it is pointed out that, while such controls will not have as their express objective the permanent elimination of such individuals and firms from the economic life of these countries, the measures which are required to eliminate their undesirable influence from the economic life of the American Republics during the time of the present emergency will, in many cases, necessarily be such as to eliminate them permanently.

No specific reference was made to the “Proclaimed List of Certain Blocked Nationals” in any of the Resolutions. It was felt that any [Page 69]reference to the Proclaimed List in such Resolutions might open the way for attack on that list and for requests for deletions on the basis that local controls had been instituted. The Department and the Treasury Department were of opinion that any problems relating to the Proclaimed List could best be settled by bilateral rather than multilateral discussion. It is possible, however, that as the other Republics institute controls and subject firms appearing on the Proclaimed List to such controls, requests will be made by the governments involved for the deletion of the controlled firms from the list. Such requests should promptly be transmitted to the Department, together with your recommendation and the facts necessary to make a determination as to the effectiveness of the local control in each particular case. In this connection your attention is directed to the relevant discussion herein concerning Resolution VII.

VI

Standards of Effective Blocking

Obviously, control measures are meaningless if they do nothing more than block certain funds and release those funds at the request of the owners or allow the use of such funds to the benefit of the owners. Accordingly, it is most important that this Resolution be carried out in all respects. The blocking measures will necessarily include all cash, securities, income or other assets of any other kind.

Your attention is directed to the fact that the proceeds of sale or liquidation of undesirable firms must be effectively blocked. In the absence of such controls, little if anything will be accomplished in this area.

Under paragraph 3 of such Resolution the American Republics are in agreement that blocked assets may not be disposed of without the authorization of the government involved and any attempt to dispose of them or to transfer them without such authorization is null and void. One of the purposes of this provision is to prevent blocked individuals from selling their blocked assets to a person who is willing to take the chance of their eventually being unblocked and paying free funds to the blocked person for such assets. Also, this provision is an effective measure for the enforcement of financial and property control laws and decrees.

Paragraph 4 provides that all blocked cash or securities are to be deposited in the central bank, approved banks or appropriate organizations designated by the government involved. The purpose of this provision is to tighten the blocking controls and have certain designated institutions carrying the blocked accounts rather than having every individual or firm carrying blocked accounts on its books or otherwise for blocked individuals.

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Careful examination should be made to determine the manner in which the government to which you are accredited allows the withdrawal of blocked assets. No withdrawal should be permitted under the terms of the recommendation if it would benefit the Axis either directly or indirectly in any way. Obviously, blocking does not mean that there may be no withdrawals or that individuals subjected to such control measures may not be allowed funds for minimum living expenses. However, pursuant to the recommendation, they may receive for this purpose only such funds as are essential to the subsistence of the blocked individual and that of his family. The recommendation contemplates that the governments of each of the American Republics will set maximum periodical amounts and that no authorizations for living expenses will exceed such amounts.

VII

Control of Business Enterprises

This Resolution is directed at the business enterprises which are acting against the political and economic independence or security of the American Republics. The business enterprises which fall in this category are to be determined by the government of the American Republic involved. However, as provided in Resolution VIII, it is contemplated that there will be a free exchange of information on this and other matters. Thus, if you have facts that a business enterprise is engaged in inimical activity, such facts should be made available to the appropriate local authorities. Likewise, if this Government through censorship, reports from other missions, etc., obtains information indicating that a firm resident or situated in the country to which you are accredited is engaged in some sort of inimical activity, that information will be forwarded to you in order that you may bring it to the attention of the appropriate authorities. In such cases, you will, of course, follow the situation and keep the Department fully informed.

The Resolution provides that business enterprises which are acting against the political and economic independence or security of the American Republics shall be the object of forced transfer or total liquidation or if, in the opinion of the government concerned, this is not convenient, then the purposes of the Resolution are to be carried out through means of blocking, occupation or intervention. The term “forced transfer” includes vesting, i. e., transfer to the government.

The delegations of the United States and of certain other countries would have preferred a Resolution requiring: (a) the vesting of all businesses essential to the economy of the particular country which act in the interests of the Axis; (b) the liquidation of all non-essential [Page 71]firms which so act; and (c) the reorganization, through intervention or otherwise, of firms which are only partially bad or which have been subjected to control for trading reasons, etc. However, some of the other delegations took the position that in view of the fact that forced sales of Axis properties are cited in Resolution V adopted at the Third Meeting of the Ministers of Foreign Affairs, as one alternative method of procedure with respect to essential enterprises, the recommendations in the subject Resolution for the handling of such firms must also be stated in the alternative. However, in the actual drafting of the Resolution, it was possible to obtain agreement on emphasizing the methods of liquidation and vesting which are set forth as the general rule to be followed. In deciding upon the desirability of intervening in the management of Axis controlled firms instead of subjecting them to the forced transfer procedure, it should be borne in mind that in cases of firms owned or controlled from enemy territory and firms owned by persons engaged in inimical activity, wherever resident, this Government is not in general prepared to accept intervention as a basis for their deletion from the Proclaimed List. In such cases, the device of forced transfer, including vesting (or liquidation) would therefore be more desirable to all parties concerned.

Paragraph (b) of the subject Resolution provides for the removal of undesirable employees from firms which are engaged in inimical activities. Under the law of some of the American Republics, persons so removed would be entitled to severance payments. Pursuant to the terms of the Resolution, such payments would be blocked. It is possible that there will be cases where undesirable employees cannot be replaced immediately, in which case it will be necessary that they be kept in the employ of the firms subjected to the measures outlined above. However, it is emphasized that such retention should only be of a temporary character. In such cases, salaries and other remuneration of those so temporarily employed shall be supervised in such a manner as to comply with the terms of this Resolution. It is felt that such salaries and other remuneration can only be adequately supervised by blocking according to Resolution VI.

Paragraph (c) provides that contracts contrary to the purposes of the Resolution, (such as patent agreements, etc. with German firms like I. G. Farben) entered into by individuals and firms comprehended within the Resolution shall be rescinded and such of those firms holding contracts or concessions for the exploitation of natural resources, public services, such as lands, mines, water rights, transportation and such, may also be rescinded. This provision might be construed so as to require the American Republics to protect firms and individuals who refuse to comply with contracts entered into with firms subsequently [Page 72]found to be engaged in inimical activity and thus subjected to control.

Many of the firms comprehended by the provisions of this Resolution will no doubt be subjected to forced sale. The proceeds accruing from such sale are to be blocked according to Resolution VI, and the same is true in connection with income accruing from intervened or supervised businesses. Of course where a firm is subjected to total liquidation, the proceeds of the liquidation will be subjected to blocking as set forth in Resolution VI.

Paragraph (e) provides that properties comprehended in the terms of this Resolution can only be sold or transferred to nationals of the country involved or to juridical persons formed by them. It is important to note that under the terms of this paragraph a person, real or juridical, whose property is subject to the provisions of this Resolution and the transfer of which is forced, cannot have any direct or indirect participation in the transaction, such as in the selection of buyers, etc. Accordingly, it is important that each mission investigate each such transaction and where it appears that the buyers of the properties comprehended in the terms of the Resolution are such as are likely to be friendly, now or later, with the Axis interests or those individuals whose interests have been taken over, such facts should be brought to the attention of the appropriate local authorities and promptly reported to the Department.

It is probable that some of the other American Republics may need financial assistance in the form of loans from this Government to the government of the American Republic involved in order to carry out an effective program along the lines of the subject Resolution. For your confidential information, it is expected that this Government will be able to render such assistance where necessary.

VIII

Reciprocal Cooperation Among the American Republics

This Resolution provides for reciprocal cooperation among the American Republics in carrying out Resolutions V and VI adopted by the Third Meeting of the Ministers of Foreign Affairs of the American Republics, the recommendations adopted at the Inter-American Conference on Systems of Economic and Financial Control, and measures which have been or may be taken by the governments of the American Republics. Pursuant to this recommendation, it is envisaged that there will be close cooperation between this Government and each of the other American Republics, and among the other American Republics concerning the actions which each has taken to implement its financial and property controls as stated above. If this [Page 73]Government is in possession of information which indicates that a transaction which is contrary to the purposes and provisions of any of the above Resolutions is being attempted in the country to which you are accredited, such information will be forwarded to you in order that you may bring it to the attention of the appropriate local authorities. You should indicate to the local authorities that, in the event that they are in possession of information which would be of benefit to this Government in enforcing its financial and property controls, such information should be given you for transmission to the Department. Similarly, the local government should be encouraged to exchange information with the governments of the other American Republics.

It is suggested that each mission promptly communicate to the Department any questions concerning any of the provisions of the Resolutions which are not clarified by the subject instruction in order that circular reply may be made.

Very truly yours,

For the Secretary of State:
Dean Acheson
  1. For correspondence concerning this Meeting, see pp. 6 ff.; for text of Resolution VI, see Department of State Bulletin, February 7, 1942, p. 125.
  2. Pan American Union, Congress and Conference Series No. 39: Final Act of the Inter-American Conference on Systems of Economic and Financial Control (Washington, 1942).
  3. For texts of speeches, see Pan American Union, Congress and Conference Series No. 40: Proceedings of the Inter-American Conference on Systems of Economic and Financial Control (Washington, 1942), pp. 91, 96, and 99.
  4. For information concerning wartime financial and property controls, see Inter-American Conference on Systems of Economic and Financial Control, Administration of the Wartime Financial and Property Controls of the United States Government (Washington, 1942), and Documents Relating to Wartime Financial and Property Controls of the United States Government (Washington, 1942).
  5. For text, see Documents Relating to Wartime Financial and Property Controls.
  6. For text, see Documents Relating to Wartime Financial and Property Controls.
  7. Department of State Bulletin, February 7, 1942, p. 124.