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

No. 187

Subject: Impasse in Chilean foreign debt negotiations

The Ambassador has the honor to refer to his confidential telegram No. 162 of March 16, 1948 on the above subject and to transmit herewith a copy and a translation of the confidential memorandum1 sent to the Minister of Foreign Affairs2 by the Minister of Finance.

The Foreign Minister, in discussing this matter with the Counselor of Embassy,3 stressed the fact that it would be difficult to obtain approval by the Chilean Congress of a maximum redemption period of less than 46 years. As the Minister of Finance pointed out in his memorandum, establishment of a maximum period of 36 years as requested by the Bondholders Protective Council could result in an imposition on Chile of terms of payment greater than the 4 per cent per annum actually agreed upon.

The Chilean Minister also stated that conditions were especially propitious at this time for securing congressional approval, a condition which had not existed in the immediate past. He asked, therefore, that every effort be made to arrive at an agreement which could be submitted promptly to the Chilean Congress.

Considering the shortage of dollar exchange in Chile at the present time, the large amounts of dollars which are required for foreign debt service and other foreign obligations of the Government, and the strenuous efforts being made by the Government of Chile to live within its foreign exchange income, the Embassy respectfully recommends that every effort be made to secure an acceptable long term agreement for the service and amortization of Chile’s external debt.4

  1. Neither printed.
  2. Germán Vergara Donoso.
  3. Edward G. Trueblood.
  4. In telegram 83 of March 19, 1948, 7 p. m., not printed, the Acting Secretary of State advised the Embassy in Santiago that the President of the Foreign Bondholders Protective Council had indicated acceptance of the Chilean position on debt extension (825.51/3–1648). In telegram 198, March 24, not printed, Ambassador Bowers indicated Chilean acceptance of the debt settlement (825.51 Bondholders/3–2448).