Memorandum by the Assistant Chief, Division of Economic Security Controls (Mann), to the Director, Office of American Republic Affairs (Briggs)

The Lend-Lease Agreement with Uruguay, dated January 13, 1942, recites that the US “proposes” to transfer arms and munitions having a total value of about $17,000,000. The Agreement recites, however, that the United States “reserves the right at any time to suspend, defer, or stop deliveries whenever, in the opinion of the President of the United States of America, further deliveries are not consistent with the needs of the defense of the United States of America or the Western Hemisphere.”
The Uruguayan Embassy’s note dated September 17, 1945 (attached)60 correctly states that Uruguay has received war materials whose total value is approximately $6,785,000 and has paid approximately $5,200,000 which, under the terms of the contract, amounts to an overpayment of approximately $2,086,525. (The exact figures are unknown since our latest totals stop at May 31, 1945. LP61 expects, however, to receive from FEA62 in the next day or so a fresh report which will bring the figures down to August 31, 1945.)
An interim reply was made to this note on October 18, 1945 (also attached).60
According to LP the overpayment resulted from Uruguay’s policy of paying strictly according to the schedule set out in the contract without regard to actual deliveries. Article II of the contract clearly provides that if the US is unable to complete deliveries according to the schedule set out in the contract “the payments to be made by the Oriental Republic of Uruguay would be reduced in the same proportion.” According to LP, in July 1945 our Embassy in Montevideo called the Uruguayan Foreign Office’s attention to the fact that overpayments had been made and the Foreign Office elected to leave the money in the United States. (It is possible that these July conversations did not cover the full story since FEA apparently delayed in informing the Department of certain payments which had been made by Uruguay.)
There is no question but that the US owes Uruguay approximately $2,000,000. Present information is that this money is earmarked in a special account and presumably the entire sum can be returned to Uruguay although final payment will necessarily have to be delayed pending final settlement of accounts and compliance with the necessary formalities for obtaining a release of such money.
The Uruguayans, however, suggest in their October 16 [17] note that the balance of the war materials be furnished promptly under Lend-Lease. The answer to this suggestion must be that it is no longer possible for this Government to furnish any material to any government under Lend-Lease. I believe this was recently made clear in a circular instruction or telegram which stated, however, that the US hoped that alternative arrangements could be worked out (i.e. sale of surplus property).63
The alternative suggestion of the Uruguayans is that they be furnished war materials having a value of $4,547,780 as originally contemplated in the Lend-Lease Agreement in satisfaction of our $2,000,000 debt. This will also be impossible since it will be necessary to work out a new agreement which presumably will not be based on the same percentages as the old Lend-Lease Agreement was.
In sum, the Uruguayans have the option of requesting a refund equal to the amount which they have overpaid under the Lend-Lease Agreement or of leaving such overpayment in the US with a view to paying for surplus property which may be released to Uruguay and for such other uses as they may wish to make of it.
Our actions have apparently been in strict accordance with the terms of the contract and with our ability to deliver Lend-Lease material. LP states that most of the other American republics have only received about 50% of the material stipulated in the various Lend-Lease Agreements and that Brazil is the only country which has received substantially more than that percentage.
LP will draft an appropriate reply as soon as possible. There is some advantage in waiting a couple more days in order to have FEA’s latest figures.
  1. Not printed.
  2. Division of Lend-Lease and Surplus War Property Affairs.
  3. Foreign Economic Administration.
  4. Not printed.
  5. See bracketed note, p. 1380.