433.116/7–1751: Airgram
The Secretary of State to the Embassy in Uruguay
A–18. A proposal to establish a temporary surcharge of pesos 0.55 per dollar on the sale of foreign exchange for automobile imports on a quota-free basis during a limited period was submitted to the IMF by Uruguay as reported in your telegram no. 29 of July 17.1 Uruguay stated that the proposal was not connected with the country’s balance of payments, which is favorable, but resulted from disequilibrium between receipts and sales of exchange at a particular level in the multiple rate structure. The Bank of the Republic has an excess of exchange from exports at the rate of pesos 2.35 per dollar and desired to dispose of part of it by sales for imports at the 1.90 rate but to offset the loss by the profit from sales of exchange at pesos 3.00 per dollar for automobile imports.
The Fund did not favor establishment of an additional exchange rate merely for the purpose of earning a profit in one segment of the multiple rate system, especially when the Uruguayan payments position is favorable. The Executive Board of the IMF, in a meeting on July 27, took the following action in which the proposal was not approved:
“The Fund views with satisfaction the general relaxation of import restrictions that the Uruguayan authorities have undertaken since mid 1950. The present proposal contemplates extending this relaxation temporarily to automobile imports, and the Fund does not wish to discourage a move in this direction. The Fund also appreciates the effort of the Uruguayan authorities to explain fully and precisely the reason for the proposed changes in the exchange system. However, in [Page 1618] view of the greatly improved balance of payments position of Uruguay the Fund does not consider it appropriate to approve, even temporarily, the proposed increase in the number of rates in the Uruguayan multiple rate system or the proposed widening of the spread between the highest and lowest rates. The Fund considers it necessary to continue consultation looking toward the simplification and, ultimately, the unification of exchange rates.”
- Not printed.↩