840.51 Frozen Credits/6460
The Ambassador in Chile (Bowers) to the Secretary of State
[Received May 25.]
Sir: I have the honor to report that on May 13, 1942, Mr. Stuart Petrie, a British official of the Compañía Sud Americana de Explosivos of Valparaiso, which is jointly owned by du Pont and Imperial Chemicals, called on an officer on my staff to inquire regarding the likelihood that his firm may be granted permission by the Exchange Control Commission to purchase dollars with which to remit profits accumulated to the credit of American stockholders.
Mr. Petrie was told that from all indications the exchange situation had greatly improved and would continue to improve as the result of large United States purchases of Chilean raw materials, especially copper, the increased return of dollars from copper because of the special 1¼ cent per pound tax, and the increasing difficulty experienced by Chile in making purchases in the United States as a consequence of the diversion of productive efforts to war needs.
In reply to a question as to what attitude he had found at the Exchange Control Commission, Mr. Petrie stated that Director Baltra had showed him a list of requests for dollar exchange on the part of importers the total of which was less than $1,000,000 and had stated that a few months ago importers’ requests for dollar exchange totalled about $8,000,000. Sr. Baltra made no promises but Mr. Petrie was encouraged to believe that before long the Commission expected that it would have considerable dollar balances available.
[Page 125]Mr. Petrie was told, in reply to his question, that to date the Embassy had not decided whether it would urge the Exchange Control Commission to release dollars for the transfer of profits in the near future, but that if such action were decided upon it would be only fair to present the demands of all Americans with frozen funds rather than urging the release of dollars in one or two cases.
It was observed that an individual concern might meet with greater success by relying on its own resources rather than by inclusion in a general request submitted on behalf of all firms wishing to transfer profits to the United States. Mr. Petrie remarked somewhat ruefully that he realized that this was so; some months ago, he stated, he had obtained permission from the Exchange Control Commission to purchase £30,000 to remit as profits to British stockholders; shortly thereafter the Exchange Control Commission made a large block release of pounds sterling for the liquidation of frozen British funds; Mr. Petrie had on this occasion requested that his firm be granted permission to purchase £25,000 but the permission granted was for only £15,000; when he complained to the Commission he was told that the reduction had been made at the request of the British Embassy which did not wish his firm to have any share in the block allotment since it had already received £30,000 while other firms were receiving only about half what they requested. Mr. Petrie stated that the profits accumulated for transfer to American stockholders totalled about 18 million pesos which at the 31 peso per dollar rate amounts to just under $600,000.
Early in January 1942, an official of the West India Oil Company (subsidiary of Standard Oil Company of New Jersey) informed the Embassy that his firm had accumulated about $500,000 dollars in profits which it wished to transfer to the United States as soon as possible.
The only other case which has come to the attention of the Embassy is that of the Chilean branch of the Ford Motor Company. On May 18, 1942, the Chilean manager, Sr. Matray, called and stated that Ford would like to transfer some 20 million pesos (just under $650,000 at the 31 peso per dollar rate) of accumulated profits, although it had in hand only about half this sum at the moment since the rest was in part being used as credits to distributors while a certain portion had already been transferred by the old dodge of overvaluing imports.
It is my opinion that the Embassy should not press the Exchange Control Commission to authorize American owned or controlled companies to purchase dollars for the transfer of accumulated profits until Chile has been able to build up considerable dollar balances in the United States, a situation which may develop in the next few months. [Page 126] In the meantime, of course, certain more active firms may obtain permission to purchase dollars for this purpose through their own efforts.
In this connection reference is made to article 17 of the draft law granting the President of the Republic authority to effect changes of a financial, economic and administrative character called for by emergencies arising as a result of the world conflict. This measure, the text of which was forwarded as an enclosure to my despatch No. 3201 of May 5, 1942,76 has been approved by the Senate and is now pending in the Chamber of Deputies. Article 17 authorizes the President of the Republic “to negotiate conditions with the object of assuring the return of profits and amortizations of new capital which is invested in the country in productive activities.” Article 18 grants similar authority with respect to capital invested in the iron, steel and related industries. In commenting on these articles in his address before the Senate (a translation of which was forwarded with the despatch under reference), Minister of Finance Matte stated that:
“The State cannot disinterest itself in the consequences which can be suffered by our economy because of the shortage of credit and the lack of capital. To a primordial obligation, farsighted and stimulating, correspond the provisions of articles 17 and 18 of the proposed law which the Senate is considering. In these, security and inducement to investment in Chile and in its productive activities are authorized for foreign capital.”
In an earlier section of his address discussing the progress amelioration of the foreign exchange situation Sr. Matte stated that:
“It should be noted that the total foreign money blocked in the country does not reach 5,000,000 dollars and naturally the amount must be declining progressively.”
The Embassy has not collected data in recent years on American blocked funds, especially profits, in Chile since there appeared to be no possibility that exchange existed for the unfreezing of such funds. Through clearing, most frozen funds of European nationals were liquidated prior to the war and, as mentioned above, under the payments agreement with Great Britain considerable amounts have been unfrozen during the war largely because of the inability of the British to supply Chile with the goods the latter would like to purchase.
There is a possibility that President Ríos and his Finance Minister may consider a considerable relaxation of foreign exchange controls especially if substantial dollar balances accumulate. Such a development would be of much greater importance than the unfreezing of two [Page 127] or three large accounts and indicates vigorous action to achieve the latter should not be taken at least for the moment.
Respectfully yours,
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