825.51/9–2745: Telegram

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

1237. As stated in my despatch 12599, August 10,73 I do not believe further credits should be granted to Chile on piecemeal basis (supplementing my telegraph 1225, September 26, 2 p.m.73) and unless detailed examination of each project establishes reproductive nature and creation of foreign exchange enabling additional debt service to be paid. Accounting methods here are so complicated that it is impossible to determine what percentage of national revenues could safely be applied to additional debt service.

[Page 822]

If Chile would put house in order, establish sounder administrative practices, eliminate superfluous costly expenditures, and work harder as a nation there might be potential basis for further external financing, but unless present downward trend is halted and sounder policies adopted Embassy feels that only justification for proposed public works loan would be for political and intangible considerations which only Dept. and other interested agencies there could evaluate.

If such considerations are deemed decisive I recommend that further extension of credits be made contingent on definitive agreement between the two Governments on following points:

Presentation of comprehensive overall plan by Chile indicating total credits required to accomplish program.
Elimination of objectionable exchange control practices.
Rationalization of entire external debt situation.
Improvement of budgetary methods and curtailment of governmental extravagance.
Negotiation of comprehensive trade agreement.75
Simultaneous public announcement in both countries of overall agreement arrived at.

  1. Not printed.
  2. Not printed.
  3. For documentation on trade matters, see pp. 824 ff.