The Ambassador in Costa Rica (Des Portes) to the Secretary of State
[Received July 12—2 p.m.]
A–776. Reference the Department’s A–518, June 24. Following, receipt of the above airgram, a conference was held with Minister Tinoco at which he was informed in substance that our Government regarded the funds as Axis funds, that it was not inclined to accept the dollars for release in the United States unless the equivalent in colones should be effectively blocked here, and that it was not disposed to make any further concessions to the Spanish Minister.
While the Spanish Minister has never denied the true ownership of the funds, he has been careful to avoid express recognition of that fact. He has implicitly admitted their Italian Government ownership, however, by entering into negotiations with the Costa Rican Government for the blocking of the funds and requesting permission to make payments to Italian subjects. This argument has been pointed out to the Minister of Finance, whose attention has also repeatedly been called to the provisions of Resolution I of the Washington Conference (see my airgram A–678, June 1, 1943) and to Articles 5 and 11 of the Costa Rican Law No. 126  of December 12, 1942, which provide, respectively, that subsistence payments to enemy nationals are not to be made out of funds within the country and that funds of enemy governments are to be “frozen” by the Junta de Custodia.
The Embassy wishes to make the following observations with respect to the points raised in the Department’s airgram above-mentioned:
- While the Junta de Custodia is undoubtedly the agency best qualified to exercise supervision over the funds, it is not believed necessary to insist that the funds be brought under Junta control, provided effective blocking can be otherwise secured. To press for control by the Junta might unnecessarily delay and hamper negotiations, since the Spanish Minister is reluctant to follow this course and the Costa Rican Government appears disposed to accede to his wishes in this respect. Although the point has not been made, it is believed that the real reason for the Spanish Minister’s objections to the Junta is his fear that the provisions of local law which call for investment of “frozen” funds in Costa Rican Defense Bonds would be applied to the funds in question if they should come under Junta control. As an appropriate alternative, the funds could be (a) blocked under the direct control of the Minister of Finance; (b) blocked under the control of the Superintendent of Banks, or (c) blocked by written voluntary agreement between the bank and the Spanish Minister.
- It is unlikely that the Spanish Minister could be induced to permit the funds to be subjected to the direct control of the Junta even if payments of $200 per month should be authorized for the reasons above stated. While this Embassy has asked for a list of the indigent [Page 111] Italian subjects to whom payments would be made, such a list has not yet been presented. It is not believed that there are enough persons in this category to justify the expenditure of that amount, and in any event, this Embassy does not believe it advisable to accede to the Spanish Minister’s wishes in this respect, since such expenditures are in derogation of Inter-American commitments at the Washington Conference. As a maximum concession, it is believed that payments no greater than 300 colones per month in toto could be authorized, in view of the insignificant proportion this would bear to the total amount, but even this concession should be made only if the negotiations would be otherwise jeopardized.
- It is not known when the Spanish Minister will depart from Costa Rica. He has announced that he has been tentatively assigned to Valparaiso, Chile, to occupy the post of Consul General, and that he is to be succeeded by the present Spanish Minister in Venezuela, but he has not yet received definite orders from his Government. The information contained in my telegram No. 485 of June 17,35 was based on a statement made by Minister Tinoco to the effect that the Spanish Minister’s departure was imminent. Whether or not the Costa Rican Government would be more inclined to take effective action against the funds after such an event is a moot question, but the man who has been mentioned as the Spanish Minister’s successor is known to be an ardent Falangista and might prove more difficult than the incumbent.
- It is being very clearly pointed out to the Costa Rican Government and to the Spanish Minister that the dollars are likely to be worthless to the latter unless the procedure already accepted by the U. S. Government is followed. (a) Refusal to accept the proposition of the Spanish Minister will therefore probably compel him to back down. (b) To defer decision until after the departure of the Spanish Minister is not believed advisable since the date of such departure is uncertain and considerable delay may intervene.
- While the circulation of dollar currency is prohibited in Costa Rica, the Banco de Costa Rica has indicated that said provision is interpreted in the sense of the use of dollar currency; for the payment of goods or services, and that the Banco de Costa Rica would still be bound, if the Spanish Minister should attempt to withdraw the funds from the bank, to make payment. On the other hand, he is not likely to attempt to take such funds out of Costa Rica, firstly, because he knows that the funds are “marked” and could easily be traced; secondly, because he has informally promised the Costa Rican Government that he would not do so, and he would be considered morally bound; and thirdly, because this Embassy would feel justified in making strong representations to the Costa Rican Government in such an event.
- The Embassy considers it advisable that the Spanish Minister’s present proposal should be turned down, and is of the opinion that the interests of both Costa Rica and the United States with respect to the funds in question will best be served by a determined stand on the part of our Government to prevent encashment of the dollars unless compliance with the terms of Resolution I of the Washington Conference is secured.