840.51 Frozen Credits/11301

The Ambassador in Uruguay (Dawson) to the Secretary of State

No. 3019

Sir: With reference to the Department’s undated instruction No. 976 (received by the Embassy on November 19, 1942) and the Embassy’s despatch no. 1858 of November 24, 1942,24 both of which relate to the Uruguayan Financial and Economic Controls, I have the honor to transmit a report25 on the present status of the Uruguayan controls in the light of the resolutions adopted by the Inter-American Conference on Systems of Economic and Financial Controls.26 Reference is also made to the Department’s circular telegram of April 7, 1942, 9 p.m. and to the Department’s airgram no. A–113 of November 9, 1942, 6 p.m.27 both of which request reports on the Uruguayan controls.

A report is being prepared on the operation of the Proclaimed List in Uruguay which will include comments on the extent to which [Page 775] particular persons and firms are being eliminated from the economic life of Uruguay as a result of their inclusion in the Proclaimed List. This question and other related Proclaimed List matters are, therefore, not discussed in the enclosed report. It may be stated generally, however, that the Proclaimed List has been very effective in Uruguay; that it enjoys the confidence and support of the Uruguayan people; and that signs of financial stress on those firms which are better able, from a financial standpoint, to ride out the storm are becoming more pronounced. Questions relating to the insurance field will likewise be discussed in a separate despatch. In the interest of brevity the Uruguayan laws relating to dollar currency control are omitted from the report because of the satisfactory nature of those controls, the only problem here being the existence of a black market of an unknown size.

It should be noted that the Committee for Political Defense of the Hemisphere has made a thorough study of the measures which have been taken by Uruguay (and certain other American Republics) to implement the resolutions passed by that Committee.28 The implementation of some of these resolutions, notably Resolution XI dealing with clandestine radio stations, Resolution XIX dealing with censorship, and Resolution XVII dealing with extortion payments, would automatically operate as direct or indirect implementations of one or more of the Washington Resolutions.29 To this extent, the Committee has, in the accomplishment of its own purposes, already emphasized to the Uruguayans certain inadequacies in their controls. (The text of the Uruguayan Constitution and of various Uruguayan laws appear in the Committee’s report of March 1943, entitled “Leyes y Reglamentos Relacionados con la Defensa Nacional Contra Actividades Subversivas”. An analysis of various Uruguayan laws in the light of certain resolutions of the Committee appears in Annex E of 1943 entitled “Memorandum sobre legislación y prácticas administrativas de acuerdo a los informes recogidos en la visita de consulta”. Both of these reports have been forwarded to the Department.)

With a few minor exceptions, the Uruguayan financial and economic controls (the May, 1940 freezing decree excepted) were put into effect after the Rio de Janeiro Conference30 and prior to the Washington Conference. This is significant in that it indicates that the Washington Conference has had no appreciable effect on the Uruguayan controls.

[Page 776]

The failure on Uruguay’s part to better implement the resolutions of the Washington Conference is due to a number of causes. One of the most important has been a reluctance to apply effective controls to Uruguayan nationals. Another is an apparent reluctance to apply controls which will seriously interfere with the operations within Uruguay of any person or firm (regardless of nationality and apart firm any consideration of importance of Uruguay’s economic life) because of the effect which such action might have on business generally and the consequent unemployment of Uruguayans through reduction of personnel, etc.

Another important cause has been the recent change of administration. As is pointed out in the Embassy’s despatch No. 1858 of November 24, 1942, there was a reluctance for political reasons to take any affirmative action in the preelection period up to November 29, 1942. Subsequent to the elections further delays have arisen from the fact that the Presidential appointments to key offices were only recently approved by the Congress.

Aside from the causes above mentioned, which are basically political in nature, it is believed that there is a general failure on the part of the Uruguayan public and on the part of many Government officials to appreciate the extent of Uruguay’s failure to implement the Washington Resolutions. This is probably due, in part at least, to the fact that the same importance is not accorded the Washington Resolutions as, for example, is accorded the Rio Resolutions. In particular fields, such as censorship, certain constitutional questions also exist.

The Embassy has consistently urged upon the appropriate Government officials the importance of adopting additional controls. (See the Embassy’s despatches No. 1550 of September 11, 1942, No. 1604 of September 19, 1942 and No. 2033 of January 12, 1943.)31 These efforts will, of course, be continued. Various officers of the Embassy have also from time to time discussed the matter on an informal basis with officials of the Bank of the Republic, In these discussions the Embassy’s cooperation has been offered particularly as regards explanations of the structure of the United States controls and their administration.

In an effort to further emphasize the inadequacies of the present laws, the Embassy, early in March of this year, prepared an analysis in Spanish of the present Uruguayan controls in the light of the Washington Resolutions and handed copies of this report to appropriate officials of the Bank of the Republic. The Bank later stated that it had no suggestions to offer. The report which was handed to the Bank is similar included, [Page 777] together with a brief statement of how the United States had implemented each resolution. Certain comments which appear in the enclosed English version on the administration of the controls and certain statistical matter were omitted in the Spanish copy.

As a further means of arousing interest in the controls, the Embassy proposes to distribute Spanish copies of the Washington Resolutions to various newspaper editors and other influential persons and to this end requests that about forty Spanish copies and ten English copies of the Resolutions be forwarded as soon as possible. It is suggested that about five of the Spanish copies be sent airmail and that the balance be sent by sea pouch. A mere reading of these resolutions will, it is believed, serve to indicate to the Uruguayans the extent of their failure up to this time to install adequate controls.

While the Embassy’s efforts have thus far not been followed by definite action on the part of the Government, they have achieved the purpose of keeping the matter continually before the appropriate officials and particularly before the officials of the Bank of the Republic. The following concrete results have been obtained:

In the latter part of 1942, the Embassy was advised that a tentative law had been drafted by the Bank of the Republic which allegedly complied with all of the Washington Resolutions, and that this draft had been passed to the Foreign Office for approval. Mr. Silveira Zorzi of the Bank, and probable author of the draft, stated last week that no action had as yet been taken regarding the proposed law but that he remained hopeful.

The Embassy has not had access to a copy of this draft and it is entirely possible that the Uruguayans will prefer to adopt additional controls without previous consultation with the Embassy. In this connection, it may be said that several months ago the Ambassador proposed that a committee be formed to study the matter of controls, and, at the same time, offered the Embassy’s cooperation in any way that might be helpful. (See the Embassy’s despatch No. 1604 of September 19, 1942). The suggestion as regards the formation of a committee was not favorably received by Dr. Guani.32

In the latter part of June, 1943 Dr. Alberto Dominguez Campora, recently appointed a director of the Bank of the Republic, stated that he had conferred with the Minister of the Interior33 and the President34 regarding the above mentioned draft; that both were of the opinion that the Washington Resolutions should be further implemented; that he had commenced work on the draft; and that he would soon be in a position to discuss the matter with the Embassy. Other officers of the bank have indicated that additional measures will [Page 778] probably be taken in the near future. While it is not possible to predict the fate of this new endeavor with any degree of certainty, the Department will be kept informed.

As the enclosed report will show, much remains to be done by Uruguay in the field of economic and financial controls. On the other hand some very important controls are already in effect, particularly as regards the vital matter of trade with, and the remission of funds to, enemy territory. Generally speaking, the most serious defect in the present laws is the lack of an effective control over internal transactions and property in Uruguay. While the need of additional controls to fill this gap is fully appreciated, as a practical matter this need is partially filled by the very satisfactory manner in which the Proclaimed List is operating in Uruguay. It should be pointed out, furthermore, that the administration of the present controls by the Bank of the Republic has been surprisingly good. And, needless to say, the bank’s cooperation in this and in other fields has been of great assistance to the Embassy in economic warfare matters.

One matter which has been of constant concern to the Embassy regarding control measures is the probability, if not the certainty, that regardless of the additional laws that may be passed by the Uruguayan Government, the same administrative efficiency to which we are accustomed in the United States may not be expected. While, as above pointed out, the bank of the Republic is efficiently administrated, the same technical skill and knowledge do not exist in other agencies, such as customs, which necessarily must be relied upon to make the controls effective.

Regarding the nature of the enclosed report it may be said, in conclusion, that the purpose was to present the controls as they are actually construed and administered by the Bank, as distinguished from how they should be construed, improved and administered. It is thought that the matters last mentioned are adequately covered in the Department’s above mentioned instruction No. 976 and the circular instruction of August 4, 1942 entitled “Measures Adopted by the Inter-American Conference on Systems of Economic and Financial Control” and the November 13, 1942 supplement thereto.35 It will also be noted that the texts of the controls are freely translated in the footnotes in an effort to achieve greater clarity and these translations differ somewhat from the more literal and technically precise translations forwarded in previous despatches. Since in some instances the translations are so free as to amount almost to a construction of the text, the translations are not enclosed in quotations.

Respectfully yours,

For the Ambassador:
Robert G. Glover

Commercial Attaché
  1. Neither printed.
  2. Not printed.
  3. For texts of the resolutions, see Pan American Union, Congress and Conference Series No. 39: Final Act of the Inter-American Conference on Systems of Economic and Financial Control (Pan American Union, Washington, 1942). For correspondence on this Conference, held in Washington June 30–July 10, 1942, see Foreign Relations, 1942, vol. v, pp. 58 ff.
  4. Neither printed.
  5. See Emergency Advisory Committee for Political Defense, Second Annual Report (Montevideo, 1944), pp. 107 ff.
  6. Resolutions of the Inter-American Conference on Systems of Economic and Financial Control.
  7. Third Meeting of the Foreign Ministers of the American Republics, held January 15–28, 1942; for correspondence, see Foreign Relations, 1942, vol. v pp. 6 ff.
  8. None printed.
  9. Alberto Guani, Vice President of Uruguay.
  10. Carbajal Victorica.
  11. Juan José Amezaga
  12. None printed.