840.51 Frozen Credits 21/49
The Secretary of State to the Ambassador in Colombia (Lane)
The Secretary of State refers to the Embassy’s despatch no. 3638 of April 21, 194412 suggesting that the Department prepare a memorandum suitable for presentation to the Minister of Foreign Affairs [Page 847] setting forth legal justification for the blocking of official Axis funds now deposited in the Banco Francés e Italiano, under the protection of the Spanish Minister, together with a brief summary of any precedents which may apply to the case.
A memorandum concerning the blocking of official Axis funds is enclosed herewith.12a The Department is of the opinion that the Colombian Government would be justified in blocking official Axis funds in accordance with the provisions of Resolution I of the Washington Conference even though such funds happen to be under the control of the representing power. The memorandum contains only the precedents of Mexico and the United States because the other countries have not as yet taken an unequivocal position with respect to the blocking of official funds.
There are two main objectives behind the provisions of Resolution I of the Washington Conference with regard to the blocking of official Axis funds and with regard to expenditure in the American Republics on behalf of the Axis nations. First, complete immobilization of official Axis funds in the American Republics necessitates the remittance of fresh funds, thus depriving the Axis nations of foreign exchange. Second, control of the manner in which Axis funds are to be disbursed in the American Republics prevents payments which might be inimical to hemispheric defense.
For your confidential information, the Department questions whether, in view of the accomplishments to date, a great many of the American republics will block funds in the hands of the representing power. Nevertheless, the Department believes that such blocking should be accomplished if only for the purpose of facilitating a control of expenditures.
Accordingly, the Embassy may use its discretion in the presentation of the enclosed memorandum in a note to the Colombian Government and may make such changes as it deems appropriate in the light of local conditions. If that Government only contemplates formal blocking in order to obtain adequate supervision, the enclosed memorandum would seem to be fully adequate. If, however, the Colombian Government is contemplating the complete immobilization of the funds in the hands of the Spanish Minister in order to force the German Government to supply fresh funds for its needs in Colombia, it may be admitted that the enclosed memorandum does not furnish strong precedents.
The Embassy will note that the United States did not insist on Strict dollar for dollar reciprocity itself. For the Embassy’s strictly confidential information, the reason for not insisting on such reciprocity was that the German Government objected to the blocking and the Swiss Government concurred in the German view. In order [Page 848] not to jeopardize the representation of our interests by the Swiss throughout the world, the United States agreed to the release of the official funds on condition that Germany should accept the Swiss franc clearing arrangement previously suggested by this Government for the payment of our expenses in Axis countries and the German expenses in the United States.