840.51 Frozen Credits/9873

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

No. 3701

Sir: …

. . . . . . . . . . . . . .

Agricultural properties of Proclaimed List nationals producing coffee are now directly intervened through the medium of the Department of Intervened Fincas of the Central Bank. Inasmuch as the intervention of the Proclaimed List coffee fincas involves some 190 properties and in toto represents around 30 percent of the total exportable coffee crop, the magnitude of the operational aspect of the intervener system and its importance in the economy of the country becomes apparent.

Few industrial concerns figure on the Proclaimed List and as yet no Proclaimed List commercial establishments have been subjected to direct control or intervention by the Government.

While certain measures had been adopted as early as October of 1941, the basic Guatemalan restrictions aiming at control over the economic and financial operations of undesirable persons derive from Decree No. 2655 which was dated December 23, 1941 (published in Diario Oficial of January 2, 1942, and text transmitted with Despatch [Page 352] No. 2463 of January 23, 194215) generally known and hereafter referred to as the “Emergency Law”. Section 3, Articles 14 to 24 inclusive of this law establishes restrictions of an economic nature. Prohibited activities include all commercial and financial operations with enemy countries; commercial and financial transactions which occur within the country and in which blocked nationals might have an interest, except under Government license; commercial or financial operations and business transactions within the country involving individuals, groups or associations who injure or act inimically toward the defense of the Western Hemisphere. Domestic banks, except under specific license, cannot effect payments, transfers or withdrawals of funds if any of the countries with which Guatemala is at war, or a national of such countries, has an interest in said operations. The deposits, credits and current accounts of nationals of countries at war with Guatemala and of persons figuring in the Proclaimed List of Certain Blocked Nationals are frozen and blocked.

Blocked nationals and also Proclaimed List nationals are, however, permitted to exercise their habitual and ordinary civil occupations as long as they neither contravene the laws, regulations or ordinances of the Republic, nor engage in activities menacing the security of the nation or the integrity of its institutions. The Emergency Law further provides for the supervision, intervention and direct control over any commercial, industrial or agricultural enterprises owned by or administered by blocked or Proclaimed List nationals.

A person or group of any nationality acting as a cloak for a blocked national in any financial or commercial transaction connected with an importation or exportation will be considered as included in the effects of the Emergency Law and in the same status as a blocked national without prejudice to the Executive Power to confiscate the articles involved in such traffic.

The registration in the Registry of Deeds of any transaction involving the real estate or property rights of a blocked national is prohibited, excepting where the real property or property right is transferred by inheritance, legacy or grant causa-mortis, or by a court decision based on documental rights originating at least three months prior to the declaration of war. Notaries are forbidden to authorize documents or instruments respecting real property or property rights registered in the name of a blocked national without the specific sanction of the Executive Power.

[Here follows a chronological survey of the various economic and financial control measures promulgated by the Guatemalan Government.]

[Page 353]

In respect to the standards for the application of financial and economic controls within the American Republics, as set forth in Resolution No. 5,16 Guatemala has through its intervention of the coffee properties of Proclaimed List nationals, and in the collection of the special war tax assessed against the exported product of such fincas, in effect diverted the largest proportion of the profits that would ordinarily accrue to the Proclaimed List nationals who are subject to these controls. The Central Bank is currently setting aside 1.67 percent of the proceeds derived from the sale of Proclaimed List coffee, and this amount is blocked in the names of the Proclaimed List owners and a further deterrent toward the accumulation of sizeable amounts in the blocked accounts is the fact that in many cases withdrawals are permitted from these funds for the subsistence of the owners, in conformity with prevailing legislation. The percentage mentioned as set aside for blocking represents approximately 0.20 of a quetzal for each quintal of clean coffee sold.

In approaching the objective of eliminating from the economic life of the country the undesirable influence and activity of persons or entities whose activities are, or have been, inimical to the security of the Western Hemisphere, it will be observed that property rights of Proclaimed List nationals still vest in their original owners and no provision has been made whereby the Guatemalan Government may undertake to vest any of these properties. Commercial establishments of Proclaimed List nationals continue to operate and have not been intervened, although their funds are subject to the blocking procedure. The Government has, none-the-less, the power to liquidate inimical enterprises and the desirability of re-nationalizing these properties has been enunciated in the Central Bank’s official publication Revista de la Economía Nacional (No. 66), (Año VI, June 1942, pp. 12–16).

The influence of the German Colony in Guatemala has, notwithstanding the circumstances that titles have in but few instances been transferred to desirable persons, been definitely weakened under the interventor system. The agricultural properties which are operated under the interventor procedure are managed by an Administrador who is a direct employee of the Department of Intervened Fincas. This official resides on the property and is in addition to the Bank’s fiscal agent, the Interventor. Former German employees of the fincas have been dismissed and the properties are in reality directly operated by the Guatemalan Government through the Banco Central as respects coffee fincas, and through the Crédito Hipotecario Nacional for all other intervened properties. Since Guatemala’s declaration of war 278 enemy aliens have been deported, 333 Germans have been repatriated [Page 354] and at the present writing plans are under way for additional repatriations.

The policy of the Central Bank and the conduct of its interventor system is in the direction of expending as administration and maintenance charges the largest proportion of the proceeds derived from the sale of produce from the Proclaimed List coffee fincas so that in reality the blocked accounts are being kept at what may be considered a reasonable minimum. The condition of the fincas as a whole was not, according to the Central Bank, as good as was expected in view of the generally accepted hypothesis that Nazi-German efficiency in management and operation was superior to that of Guatemalan nationals. The Germans had not, it is claimed, kept their farms up to Guatemalan standards so that unexpected expenditures have been necessary to put the fincas in good shape.

In point of fact, the total amount of the funds blocked in the Central Bank in the name of blocked and particularly of Proclaimed List nationals, while such sums naturally increased from the proceeds derived from the 1941–42 coffee crop, have now diminished to what may be considered a reasonable minimum.

The problem now confronting Guatemala is the orderly disposal of the 1942–43 crop from these intervened Proclaimed List properties.

Respectfully yours,

For the Chargé d’Affaires ad interim:
Archibald R. Randolph

Acting Commercial Attaché
  1. Not printed.
  2. For text of Resolution No. 5, see Pan American Union, Final Act of the Inter-American Conference on Systems of Economic and Financial Control, p. 16.