740.00112A European War 1939/26961

The Chargé in Guatemala ( Drew ) to the Secretary of State

No. 3679

Sir: I have the honor to refer to the Department’s instruction No. 1550 of February 17 and telegram No. 83 of February 20.11 A preliminary reply was contained in the Legation’s telegram No. 100 of March 4, 1943, 3 p.m.12

The Department’s instruction referred to as well as other communications addressed to the Legation indicated that no satisfactory permanent solution of the problem presented by the disposition of coffee grown on Proclaimed List fincas can be reached until such time as the Guatemalan Government formulates a plan for eliminating [Page 349] Axis interest in these properties. The Minister for Foreign Affairs13 has on several occasions said quite definitely that the Government of Guatemala fully realizes the danger of permitting such a large portion of the national economy to fall into hands of any single nationality and that it is its firm intention to effect the nationalization of enemy alien properties. Dr. Salazar stated that he had given this matter serious study over a long period of time and as long ago as October 1942 had submitted to President Ubico a plan which he had prepared. He explained that only recently it had come to his attention that this document had been lost in the President’s office but indicated that arrangements will be made promptly to bring it to the President’s attention.

Licenciado Salazar explained that his proposal was for the Government to take over all enemy-owned property without, however, making direct compensation to the owners. In order to conform to the Constitutional prohibition on expropriation without compensation he proposed to set up against the German Government a claim for direct and indirect damages arising out of the war which would at least offset the actual value of the properties to be expropriated. He said that it was his hope that Guatemala would have this problem settled before the peace conference at the end of the war.

From conversations with the Foreign Minister and other Guatemalan officials it is my impression that the Government has not settled on any definite plan for the actual operation and administration of such properties. Several officials have expressed the opinion that the Government would not be competent to operate them although no satisfactory alternate plan has been mentioned.

It has been apparent from various conversations with the Foreign Minister that the problem of the disposition of the CAPCO14 properties, which, as the Department is aware, is now in the process of negotiation, is closely involved with the Government’s plan for nationalization of other enemy property. It is apparently the Government’s view that it will be necessary to set up some quasi-governmental agency to operate CAPCO properties with which the remaining properties can be integrated.

While there are reasonable expectations that the CAPCO problem will be settled in the near future the Foreign Minister has indicated [Page 350] clearly that the major nationalization plan will require considerable time to be placed in effect in view of the legal technicalities involved in transferring land titles. In a recent conversation he informed me that President Ubico had instructed him to take up with me the situation of the Proclaimed List coffee, pointing out that the Government was concerned with the revenue from the taxation involved as well as the continued operation by the intervention system. I assured the Minister that the problem would receive our sympathetic consideration and in response to his invitation I have informally requested him to obtain detailed information with regard to the status of the accounts of intervened fincas.

It is obvious that the proposed nationalization plan will be delayed for some time and in the meanwhile it is anticipated that we will be subjected to increasing pressure from the Government with regard to the disposition of Proclaimed List coffee. According to figures collected by the Commercial Attaché the production of coffee on non-Proclaimed List fincas during this crop year appears to be adequate to fill the present United States import coffee quota assigned to Guatemala. The present quota against which shipment can be made amounts to 784,000 quintales, after deducting the total carry-over shipped to the United States and held in Guatemala from the previous crop year amounting to 87,000 quintales. The current crop year is reliably estimated to exceed previous crop years by approximately 10%. If the crop estimates are borne out it therefore appears that no Proclaimed List coffee can move within this year’s quota.

As a stop-gap measure it has occurred to me that we might wish to suggest to the Guatemalan Government the possibility of providing by decree for the expropriation of all coffee and other products from Proclaimed List fincas until such time as adequate measures for their nationalization can be carried out. In this way the Guatemalan Government would obtain all income from the properties and the interest of the German owners in current production would be eliminated. Such a proposal on our part might well be accompanied by an offer to assist in arranging for the sale of 20% of the global amount of Proclaimed List coffee outside of the quota to an appropriate United States Government agency. By withholding action on our part on the remaining 80% of Proclaimed List coffee the Guatemalan Government would doubtless realize the necessity for expediting their consideration of the nationalization program. From a conversation which I have had with the Minister for Foreign Affairs I am inclined to believe that such a suggestion would be favorably received.

The situation as I visualize it may therefore be stated as follows:

The Guatemalan Government is determined to nationalize enemy alien properties, although this program may be subject to protracted delay.
No definite program will be adopted in any event untilthe current CAPCO negotiations have been disposed of.
Present estimates are that non-Proclaimed List coffee will be ample to fill Guatemala’s present United States coffee quota.
The Legation and the Department will be subject to constant pressure for the disposal outside of the quota of Proclaimed List coffee.
A temporary solution would be offered through immediate expropriation by the Guatemalan Government of all products of proclaimed coffee.
An offer from the United States to facilitate the disposal of say 20% of Proclaimed List coffee until adoption of a vesting procedure or nationalization decree might offer a possible solution.

The Legation will forward to the Department figures on the accounts of the owners of Proclaimed List fincas which have been requested through the Minister for Foreign Affairs as soon as received. In addition I hope to have an opportunity during the current CAPCO negotiations to obtain further clarification from the Foreign Minister of his views toward the Government program for the nationalization of enemy-owned property.

Respectfully yours,

Gerald A. Drew
  1. Latter not printed
  2. Not printed.
  3. Carlos Salazar.
  4. Central American Plantations Corporation, organized under the laws of Delaware. The Alien Property Custodian, acting in behalf of CAPCO, at this time was negotiating a contract, signed April 19, 1943, with the Guatemalan Government whereby all of the physical assets of the Corporation in Guatemala consisting primarily of coffee plantations and their equipment would be transferred to Guatemala. In return, Guatemala would assume certain indebtedness of the Corporation and grant to CAPCO a 30–year right to utilize one of the plantations for cinchona production. A majority of shares of CAPCO common stock were owned at this time, directly or indirectly, by nationals and residents of Germany.