840.51 Frozen Credits/9694a: Airgram

The Acting Secretary of State to the Ambassador in Venezuela (Corrigan)

A–418. The Venezuelan Embassy has informally requested the views of the Department on the contemplated forced conversion of Axis frozen assets in Venezuelan banks into Venezuelan Government bonds.

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The Department would appreciate having the Embassy’s comments on this proposal. Relevant considerations would seem to be (1) comparison of interest rates as between blocked accounts and bonds; (2) the necessity for financing the proposed bond issue through conversion of frozen assets; (3) the possibility that increased revenue to undesirables, even though blocked, would increase their willingness to finance undesirable activities with their free funds. From such information as the Department has available, it would seem that the genesis of this proposal may well be pressure brought on the Venezuelan Government by the owners of blocked accounts.

For the Embassy’s information, the Department interposed no objection to the forced conversion of blocked accounts in Costa Rica into Costa Rican Government bonds.