740.00112 RP/3

The Secretary of State to the Diplomatic Representatives in the American Republics Except Argentina

Sirs: During the past years this Government has inaugurated many programs directed at implementation of economic warfare against the Axis in the American republics. One such program, which to some extent has overlapped the matter of Proclaimed List and related questions, has been the program for replacement of Axis economic interests throughout the other American republics. As you are aware, the objective of this program has been to encourage the development of local controls and by this method to cut off those spearheads of the Axis political-economic structure which have been responsible for espionage, sabotage, and other less spectacular but equally dangerous activities which characterized Axis operations in the years since the advent of Nazi power.

These spearheads of Axis economic power have most often been enterprises in fields where technical skill was necessary and where dependence upon German supplies was marked. Implementation of our campaign against these companies has therefore made it both necessary and desirable to offer technical assistance, managerial help and supplies from American companies, within the limits of the war effort. Further, the Third Meeting of the Ministers of Foreign Affairs at Rio de Janeiro9 and the Inter-American Conference on Systems of Economic and Financial Control at Washington10 have made it clear that the United States would assist the other American republics in the implementation of the local control measures which might be adopted, both by offering technical and managerial assistance and by making available certain financial assistance.

It has been recognized, however, that it would be highly undesirable to allow economic warfare to become economic penetration, and to substitute domination by the United States for domination by the Axis. It has been the Department’s consistent policy that the local controls should be used by the other American republics in such a [Page 1554] way as both to eliminate the Axis spearheads and to take advantage of the opportunity thus presented to establish nationalized industries which would be beneficial to the local economy and in which local nationals would have the greater interest. For this reason, the Department’s previous instructions have emphasized that American participation in the reorganization of these firms should be limited to a minority financial participation or a management fee contract. Moreover, consistent with this policy that economic warfare measures should not be used to achieve American domination of these industries, the Department has at all times discussed the general principles underlying the replacement program with other governments having an interest in the matter, particularly with the British.

In this connection, it has been recognized by all parties that implementation of economic warfare measures at the present time requires, to a large extent, the use of United States companies. It has been recognized that use of these companies does not imply any intention to bar desirable companies which are nationals of other countries. In recent discussions which have taken place in Washington between members of the British Embassy and officials of the Department, it has been stated to the Department that the Ministry of Economic Warfare is “in agreement with the general principles which they understand that the State Department are pursuing in carrying out the replacement of enemy firms in Latin America.”

It is highly desirable that this general agreement should be fostered by consultations between the representatives of the two governments on matters of mutual interest. It is, of course, understood that close consultation between American and British missions is presently the rule in all countries in connection with listing matters. It is understood, also, that replacement matters are closely related to and often directly grow out of the operations of the Proclaimed and Statutory Lists. The Department believes that such consultation between the American and the British missions on matters of replacement policy which are of mutual interest is desirable, and wishes to confirm the understanding on this matter which, it is believed, already exists.

It will be understood that such consultation need not affect the manner in which the purely commercial functions of the missions are presently carried out. Moreover, it is not intended that the missions should discuss matters of commercial arrangements with American companies arising out of replacement programs in such detail as to violate any confidences of American business concerns. Rather, such matters as general programs, the nature of the arrangements being made to insure a freely competitive market, and so forth, would be proper subjects for consultation.

[Page 1555]

The Department will be glad to receive such comments on the subject of this instruction as the missions may care to make.

Very truly yours,

For the Secretary of State:
Dean Acheson
  1. For correspondence concerning the Meeting, see ibid., 1942, vol. v, pp. 6 ff.; see also Pan American Union, Congress and Conference Series No. 36: Report on the Third Meeting of the Ministers of Foreign Affairs of the American Republics, Rio de Janeiro, January 15–28, 1942 (Washington, 1942).
  2. Concerning this Conference, held June 30–July 10, 1942, see Foreign Relations, 1942, vol. v, pp. 58 ff.; see also Pan American Union, Congress and Conference Series No. 39; Final Act of the Inter-American Conference on Systems of Economic and Financial Control (Washington, 1942).