840.51 Frozen Credits/8882
The Secretary of State to the Ambassador in Bolivia (Boal)
The Secretary of State refers to the Embassy’s despatch no. 1089, dated January 7, 1943,20 and to the Department’s airgram A–251, dated January 18, 1943.
The position of the Department on the second proposal21 made in the Embassy’s despatch under reference with regard to controlling foreign exchange transactions by the Banco Central was set forth in the Department’s airgram A–251. The political difficulties involved in freezing the Banco Central’s accounts in this country are, as the Embassy notes, serious, and are regarded by the Department as insurmountable, at least until such time as a practicable program for replacing the Axis firms has been submitted to the Bolivian Government.
The first alternative proposed by the Embassy22 has been explored by officers of the Department and representatives of the Board of Economic Warfare, Metals Reserve and Treasury. A memorandum of [Page 583] conversation covering the discussion is enclosed23 for the information of the Ambassador and the files of the Embassy. As indicated therein, it was felt that this plan would in effect amount to freezing the Banco Central’s accounts, and was therefore open to the same objections on political grounds as direct freezing. Certain other practical objections were raised, as the Embassy will note, against using the metals contracts as a vehicle for implementing the Proclaimed List except as a last resort.
The Embassy’s attention is directed to the query as to the mechanism by which the mining companies finance their purchases of supplies in the Argentine. This point has never been checked, but if the Embassy is of the opinion that the companies may be trading with Proclaimed List firms in the Argentine, controls might be instituted on their dollar balances here.
The Embassy’s attention is also directed to the plan proposed by the Treasury which is outlined in the attached memorandum. The Embassy will note that this is a variation of the monitoring plan. Its chief advantage over freezing is that it would be handled by the New York bank without the appearance of direct governmental intervention, although the Central Bank would probably know that the Treasury Department was behind the action. It would not be proposed to do more than tie up the transaction while cables were exchanged, unless the Banco Central should reply that the Argentine pesos would be made available to Proclaimed List firms, without offering any justification, a contingency which seems extremely unlikely. It is the Department’s present position that this plan does not avoid the political difficulties inherent in any action directed at an agency of a friendly American government. In this connection, unless the Department were prepared to approve the freezing of the Central Bank’s accounts in the United States, (in the event that the Bolivian Government failed to cooperate in the development of a program to eliminate Proclaimed List firms in Bolivia) holding up such a transaction and then permitting it to go through, despite the existence of Proclaimed List interests, would probably be construed as a sign of weakness by the Bolivians and seriously hamper our ability to carry out many of this Government’s objectives in Bolivia. Nevertheless, the Department would appreciate the views of the Embassy as to whether, in the Embassy’s opinion, any real advantage would be gained by adopting tactics of nuisance at this time. Since Mr. Ramsey,24 who is fully aware of the Department’s views, is expected to leave for La Paz within the week, the Embassy may wish to delay its [Page 584] reply until such time as officers of the Embassy have had an opportunity to discuss the problem of foreign exchange with him.
- Not printed.↩
- The essence of this proposal was that “The Banco Central would be advised that in the future, in order to use its dollar accounts in the United States for the purchase of other foreign exchange (Argentine pesos, Chilean pesos, Peruvian soles, and so on), it would have to secure licenses from the Embassy.” (840.51 Frozen Credits/9183)↩
- This alternative was as follows: “The recommended plan would call for that portion of the payment by the Metals Reserve Company to the producers of minerals exported to the United States, which under Bolivian law must be turned over to the Banco Central as free foreign exchange, to be released by the Metals Reserve Company for the account of the Bank only upon signature by the Banco Central of an agreement that no portion of the amount involved would be made available for the purchase of Argentine currency or any other foreign currency without the express prior approval of the United States’ Treasury authorities in each instance.” (840.51 Frozen Credits/9183)↩
- Not printed.↩
- Henry C. Ramsey, Board of Economic Warfare, on detail to the Foreign Funds Control Division of the Department.↩