852.50/6–1348: Telegram
The Chargé in Spain (Culbertson) to the Secretary of State
us urgent
niact
391. Deptel 348, June 11.1 Embassy believes following measures could be adopted by Spain to amend economic policy and eliminate objectionable practices:
- 1.
- Establishment valid exchange rate. This would allow Spanish products compete foreign competitive markets, provide exchange for needed imports, eliminate need of private and official resort to exchange black market and for use complicated and unsatisfactory trade machinery [Page 1038] such as combined account, and would attract return to Spain of substantial amounts of assets held abroad by Spaniards.
- 2.
- Amend policy on treatment foreign investment, removing present restrictions on: (a) limitation foreign capital and management participation Spanish industry to 25 percent; (b) transfer or local investment of profits.
- 3.
- Modify or limit state control, ownership, and operation economic enterprise so as to: (a) eliminate unfair state competition and encourage private enterprise; (b) restrict operations state holding company INI to original objective of fostering essential industry not realizable by private capital; (c) remove unproductive intervention of vertical syndicates; (d) abolish or at least limit substantially official intervention secondary distribution imports and discriminatory allocation domestic production.
- 4.
- Revise foreign trade policy to: (a) avoid uneconomic channelization through bilateral clearing; (b) provide equal treatment on transfers of profits and earnings; (c) correct discriminatory practices in issuance import licenses as between state and private entities, national and foreign entities, and as between countries of origin; (d) eliminate costly delays in licensing procedures; (e) abolish minimium price restrictions on exports.
- 5.
- Modify price control to: (a) allow prices to reflect true value of product; (b) terminate current misrepresentation of real costs of production and cost of living; (c) eliminate forced employment by private industry of black market to obtain raw materials which arises directly from discriminatory system of allocations.
- 6.
- Abolish miscellaneous uneconomic trade policies and practices such as: (a) employment of registration of patents and trademarks as a protective measure; (b) use of excessive export and import levies for subsidy purposes.
Above measures believed feasible. Spanish business, banking, and industry are opposed present economic policies regime including those above enumerated. However, in spite this opposition, Franco has taken no corrective measures and any changes definitely dependent on will of one man. Likewise, lucrative vested interests many Franco supporters sure prove stumbling block. Nevertheless, present day Spanish economic policy largely result of attempt cope with relative economic isolation plus certain official preference for controlled economy. If Franco can see way out of that isolation, corrective measures present policies quite possible. Embassy convinced, however, that such measures would have little likelihood success unless commercial, financial, industrial elements of country are effectively brought into both formulation and execution economic policy. Reforms, if adopted and executed by generally inept government administrators and executives operating without effective participation of those who know and understand the needs of Spain’s economy, could at best bring only mediocre results. Hence, effective incorporation of these elements in policy formulation is, without doubt, the most essential change required.
- Not printed.↩