840.51 Frozen Credits/11006

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

No. 3396

Sir: Reference is made to the Embassy’s despatches nos. 6923 of July 3, 194329 and 6939 of July 6, 1943, setting forth certain observations [Page 907] concerning Chilean control of Axis assets and the German, British and American post-war positions in Chile. Reference is particularly made to the request set forth in the penultimate paragraph of despatch no. 6939 of July 6, 1943 for the comment of the Department concerning the desirability, as an immediate objective, of requesting wholesale action by the Chilean Government looking to the liquidation or the nationalization of the several hundred Axis firms that have been listed as dangerous or non-essential.

The Department, as the Embassy is aware, has never taken the position that all firms on the Proclaimed List should be liquidated or nationalized. The criterion which has heretofore been followed is that only firms which are deemed “inherently bad” should be subjected to such treatment. The use of the phrase “inherently bad” is, of course, a broad generality, but it permits differentiation between, for instance, firms actually owned or controlled by interests in Germany, such as the subsidiaries of I. G. Farben, Siemens-Schuckert, et cetera, and firms which have merely cloaked for Axis firms or which have merely entered into undesirable contracts. The Department has also appreciated the necessity of treating each country as a separate problem and recognizing to the full the practical aspects of the local situation. In view of the facts that Chile has but recently broken off diplomatic relations with the Axis, that there is still a strong feeling in certain governmental circles that, if not pro-Axis, is at least neutral, and that certain important firms can be singled out as the spearheads of Nazi penetration into Chile, it might well be preferable to concentrate at this time upon the elimination of the more important firms on the Proclaimed List and not to request the liquidation or forced transfer of all listed firms, large or small, which may be deemed inherently bad. In this connection it is noted that in the classification of Proclaimed List enterprises in Chile set forth in the Embassy’s despatch no. 5687 of February 9, 194330 there are but twenty-one firms listed in category 3. The nationalization or forced transfer of these firms, together with other important firms to be liquidated, such as the German banks, A. E. G. Compania Sudamerikana de Electricidad, might therefore constitute a desirable primary objective.

It is further suggested that the Embassy study carefully the circular instruction31 which will shortly be sent to the missions in the American republics relating to the program for economic warfare matters recently formulated for Brazil. While this program is based, [Page 908] in the main, upon controls adopted by Brazil, it recognizes that to a large degree the objectives of this Government’s economic warfare policy are met by appropriate measures of liquidation, forced transfers or a reorganization of the spearheads of Axis penetration. While a program comparable to that set forth for Brazil certainly cannot as yet be adopted for Chile, the approach used in formulating such program does, it is believed, have a direct application in helping to meet the economic warfare problems presented therein.

The other suggestions in the despatches under reference relating to the adoption of an over-all economic warfare policy for Chile are presently under consideration in the Department, and it is hoped that a further communication on this subject will be forwarded in the near future.

Very truly yours,

For the Secretary of State:
Dean Acheson
  1. Not printed.
  2. Not printed.
  3. Not found in Department files. For correspondence on financial controls developed in Brazil, see pp. 742 ff.