The Ambassador in Chile (Bowers) to the Secretary of State

No. 12,525

Sir: I have the honor to bring to the attention of the Department the situation existing in Chile in connection with the distribution of American products by firms controlled or strongly influenced by persons having strong pro-German tendencies.

As the Department is aware, many commercial companies in Chile are still controlled by persons of German origin and with reputed [Page 778] pro-German tendencies. Many other large Chilean companies, controlled by native Chileans, have specialized for years in representing German firms and distributing German products. Naturally, the ties between such Chilean firms and their principals in Germany were very strong. The influence of both types of companies in the business life of Chile was, and still is, powerful and extensive. Most of the larger companies have national systems of distribution while some of the smaller local companies have long-established connections, and an excellent business reputation, in the areas where they operate.

Companies of the type referred to above may be divided into three categories:

Those which were placed on the Proclaimed List and which will be retained under the “hard core” policy;
Those which were placed on the Proclaimed List but subsequently removed; and
Those which were not placed on the Proclaimed List because of insufficient evidence of their pro-German activities.

Companies in the first category are not within the province of this despatch. They are under strict control and, so long as that control is continued, their activities will not be detrimental to the interests of the United States. Companies in the other two categories present an entirely different problem.

The problem presented by large companies controlled by native Chileans but with a history of close German associations is illustrated by the case of one of the largest machinery houses in Chile, S.A.C. Saavedra, Benard. This company was not on the Proclaimed List. Before the war, it represented a few American companies but its principal business relations were with some of the largest German machinery manufacturers. Over a period of years prior to the war the company acquired German technicians, many of whom are still employed. Most of its branches in southern Chile are today managed by persons of German extraction and employ many other persons of the same extraction. The company is financially strong, very well organized, and has an excellent business reputation throughout the country.

When the war began, Saavedra, Benard dropped its German connections and began to concentrate on its American lines.…

This company now represents thirteen American firms and has made tentative arrangements for the acquisition of at least nine additional American agencies. The general manager of the company, in conversation with officials of the Embassy, has avowed his complete disinterest in representing German products in the future and has indicated his desire to concentrate on the distribution of American products. Under present circumstances there is no reason to question [Page 779] the sincerity of his statements. However, it should not be overlooked that the increased business of this company, through its representation of American products, will directly benefit persons of German extraction who are still employed by the company, some of whom, as branch managers, occupy positions of considerable importance in various business communities, particularly in the south of Chile.

The company recently was high bidder for the blocked assets of the German firm of A.E.G. This recent acquisition will considerably increase its importance and activities.…

The foregoing comments concerning Saavedra, Benard could be repeated with respect to other companies in Chile, of equal or lesser importance, some of which have been on the Proclaimed List but have been removed therefrom.

The problem of pro-German, or previously pro-German firms, is not localized in Santiago or Valparaiso, although it exists there to a considerable extent. The problem assumes much more serious importance in the southern part of the country where the largest number of persons of German extraction, or with pro-German sympathies, reside.

According to reliable reports which have reached the Embassy, a large proportion of the German businessmen in southern Chile have endeavored, since the time when the defeat of Germany was a foregone conclusion, to make themselves as inconspicuous as possible. Many of them have, at least temporarily, divorced themselves from active business pursuits, and have even curtailed their social activities. Their efforts to be inconspicuous have appeared to be part of a preconceived plan. Remarks attributed to some of these persons strongly suggest that they are only awaiting an opportunity to resume their former important business activities. Some have been quoted as saying that they recognize that, at least for the time being, their ties with Germany and their opportunity to sell German merchandise have disappeared but that, within a comparatively short time, a large volume of American merchandise will enter the Chilean market and an opportunity will again be presented for them to engage actively in business in American lines. In other words, they are looking forward to the opportunity of using connections with American companies, or the proceeds derived from the distribution of American products, to re-establish themselves in their communities both with regard to their personal finances and to their business influence.

Despite the lack of tangible evidence of pro-Nazi sympathies and activities on the part of many of these individuals, there is no reason to believe that they have suddenly acquired a feeling of friendship for the United States or that, if the proper opportunity presented itself, that they would not again lend their sympathy and support to [Page 780] anti-American activities which might be fostered by German interests operating in Germany or elsewhere.

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Respectfully yours,

Claude G. Bowers