The Secretary of State to the Chargé in Bolivia ( McLaughlin )
The Secretary of State refers to the Embassy’s despatch no. 2887 of January 5, 19443 concerning the so-called “black market” in Bolivia.
While the number of black market transactions in the other American Republics varies from country to country, it is safe to say that a large number of remittances are regularly made in violation of exchange and other local laws. So common is the practice that some of the other American Republics have either come to recognize the black market as semi-legal or to wink at it. Furthermore, the surreptitious manner in which these transactions are effected often makes it difficult to ascertain the underlying purpose of the operation. Given the size of the problem and the difficulty of effectively dealing with it, it would not be practicable for the missions to attempt to supervise or control all black market operations as such. Aside from the impracticability of control, the Department desires to avoid the appearance of using its economic warfare sanctions to enforce the laws of the other American Republics.
Notwithstanding the foregoing, the Department is aware of the fact that black market channels furnish a facile medium for, making remittances in violation of this Government’s wartime controls. Probably a majority of the remittances in this hemisphere which are inimical to the war effort are channeled through the black market both for the purpose of avoiding official control and supervision and for the purpose of preserving the anonymity of the parties in interest. It is desirable and important, therefore, that an effort be made to discover those black market transactions which are in fact inimical to the war effort, as distinguished from those transactions which are merely in violation of local exchange controls.
As the first step towards the discovery of inimical black market transactions, it is desirable to identify those persons who are extensively engaged in black market operations in Bolivia. It would be proper, furthermore, to warn each of them that many transactions inimical to the war effort of the United Nations are effected through the black market; and that they will be expected to use care to avoid being used as a vehicle for remittances involving Proclaimed List nationals or otherwise violating United States wartime controls. In this connection, it is desirable to discourage the practice of accepting and dealing in dollar checks endorsed in blank and not bearing the [Page 508] endorsement of the parties to the transactions, in as much as this practice frequently serves to cloak the identity of undesirable persons. The Officer in Charge may, in his discretion, discreetly request the cooperation of black market operators and of banks and other financial institutions in reporting suspicious transactions which come to their knowledge.
To supplement the Embassy’s investigations the Officer in Charge may wish to forward to the Department, for transmission to Treasury, a list of suspicious black market operators who now use, or may in the future use, dollar facilities. Treasury has informed the Department that it is in a position to obtain factual information concerning the transactions of those dealers and brokers who maintain accounts in New York banks as well as dealers and operators whose names appear as endorsers on dollar financial instruments. This information can be furnished by Treasury either on an ad hoc or on a periodic basis.
To summarize, it may be said that the mere violation of local exchange laws does not, in itself, justify the use of sanctions. The test in each case should be whether a violation of the wartime controls of this Government (such as a transaction involving a Proclaimed List national) can be shown. Each such violation should be promptly reported to the Department together with your recommendation regarding what sanctions, if any, should be applied.
In view of the above, it is believed that a general program of requesting all black market operators to sign undertakings4 would be inadvisable. The standard form of undertaking may, however, be accepted on a selective basis in accordance with the policy outlined in the Department’s circular instruction of April 11, 1942.5