Foreign Relations of the United States, Diplomatic Papers, 1933, The American Republics, Volume V

825.6374/1178

The Ambassador in Chile (Culbertson) to the Acting Secretary of State

No. 1495

Santiago, July 5, 1933.
[Received July 13.]

Sir: I have the honor to transmit the 9th and 10th drafts⁷⁸ of the project of law for the reorganization of the Chilean nitrate industry.

Draft No. 9 is of interest as regards the change made in Article 30 after the American interests had protested against the special preference which this article established in the 8th draft. (See despatch No. 1490 of June 28, 1933⁷⁹). As indicated in my telegram No. 81, June 28, 6 P.M., I had been informed that Article 30 would be completely eliminated but apparently the best compromise possible was the elimination of the special preference in favor of the Bank of Chile and the Edwards Bank. As Article 30 in its present form places all bank creditors on the same footing it has been accepted by the American interests. The 10th draft revises the earlier provisions of Article 35, 36, and 37 relating to the internal reorganization of the Corporation. It contains nothing new affecting American interests.

The 10th draft was yesterday submitted by the Government to Congress together with a lengthy message, a copy of which is enclosed,⁸⁰ outlining the Government’s policies in reorganizing the nitrate industry. From the defensive character of the special message it is apparent that the Government anticipates difficulties in obtaining the passage of the measure in its present form. To make the project more palatable great emphasis is placed on the provisions of the bill destined to give the Government a fixed annual return from the nitrate industry. All indications are that the measure will encounter determined opposition in Congress and that the Left elements in particular will endeavor to oppose the project as a part of their policy to embarrass the Alessandri administration. It is not clear just what features’ of the measure will bear the brunt of the attack but it is to be expected that the bill will undergo some revision before it will be acceptable to the majority in Congress. On the eve of the presentation of the nitrate law President Alessandri’s troubles with Congress have been complicated by the revolt of the Radical Party against the President’s use of the extraordinary powers and against his failure to disband the Republican Militia. All three Radical members in the Cabinet have resigned and President Alessandri is faced with the problem of seeking the support of the Democratic elements or falling back on a government of the Conservatives backed by the Militia.

As of interest in connection with the project of law, I am transmitting an English translation of a cable sent by the Foreign Minister to the Chilean Ambassador in London⁷⁹ instructing him to explain to the British nitrate bankers the measures taken by the Government to protect the holders of the prior secured bonds. The telegram emphasizes the fact that the bonds now have the best possible guarantee under the circumstances and that these bonds remain as a first class obligation on the industry. The telegram is patently a bid by the Chilean Government for the support and cooperation of the English banking houses, having in mind the very positive views expressed on the subject of the 60 peso charge as a guarantee for the prior secured bonds by the British Government as reported in my telegram No. 74, June 2, 5 P.M.⁸¹

Respectfully yours,

W. S. Culbertson

[Enclosure—Translation]

Project of Law

(Tenth Draft—July 4, 1933)

I. Creation—Constitution—Administration—Object

Art. 1. Because the national interest so demands it, there is created a monopoly of Chilean nitrate and iodine in favor of the legal entity which is established by this Law under the name of “Chilean Nitrate and Iodine Sales Corporation” (Corporación de Ventas de Salitre y Yodo de Chile) and consequently the exportation of and trade in these products may be undertaken only by this Corporation.

Nitrate shall be understood to be any salt or mixture of salts containing more than 10% nitrate of soda, and iodine shall be understood to be any iodine product containing more than ⅕ of 1% of iodine, derived from the treatment in Chile of natural salts or of liquids or solids resulting from such treatment.

Art. 2. The Corporation shall be governed by this Law, and by the By-Laws which shall be issued by the President of the Republic and which must be published in the Diario Oficial and inscribed in the Register of Commerce of Santiago, within a period of 30 days from the date of promulgation of the present Law.

The Board of Directors of the Corporation may modify its By-Laws, with the approval of the President of the Republic. Any modification shall be inscribed in the Register of Commerce of Santiago and published in the Diario Oficial.

Art. 3. In order to participate in the sales of nitrate and iodine every producing enterprise must declare, in a notarial document, its adherence to the Corporation. This declaration shall be inscribed in the Register of Commerce of Santiago and, when this formality has been fulfilled, such declaring enterprise shall enjoy the rights and shall be subject to the obligations which under this law and the By-Laws correspond to the producing enterprises.

By virtue of adherence, these obligations and rights shall be contractual relations between the Corporation and the adherent enterprises and also between these among themselves.

Art. 4. For all the purposes of this law the 1st of July 1933 shall be considered as the date on which the Corporation shall commence its operations, even though the Corporation may not have been constituted on that date.

The Corporation is established for an indefinite period.

Its dissolution can only take place by resolution of its Board of Directors adopted with the concurring vote of six of the directors representing the industrialists and of the Fiscal directors and approved by a law. Said dissolution shall have no effect if the Corporation has not paid its obligations or reached an agreement with its creditors regarding the payment thereof, without prejudice to the provisions contained in Article 26.

Art. 5. The domicile of the Corporation shall be the City of Santiago. There may be established branches in Chile and abroad. The Board of Directors, with the approval of the President of the Republic, may move the domicile to the City of Valparaiso.

Art. 6. The Corporation shall be administered by a Board of Directors, The Board shall consist of twelve members; the President of the Corporation, three Directors who shall be appointed by the President of the Republic, and eight who shall be appointed by the industrialists in proportion to their sales quotas.

The President shall be a Chilean and shall be elected by the majority of the industrial directors, with the approval of the Fiscal Directors.

Art. 7. For those resolutions which require the favorable vote of the Fiscal Directors, this requisite will be considered as having been complied with if the resolution be carried with the affirmative vote of one of the Directors appointed by the President of the Republic or of all those who may have been present at the meeting, even though all were not present. Consequently the negative vote of one of the Fiscal Directors shall be sufficient so that this requisite shall not be considered as having been complied with.

Art. 8. The principal object of the Corporation shall be to acquire nitrate and iodine from the producing companies and to undertake the exportation, transportation, distribution and sale thereof. It may perform the acts and execute the contracts which may be necessary for the attainment of its objects, and contract every kind of obligations.

II. Purchase—Sales—Prices—Quotas—Sanctions

Art. 9. The Corporation shall be obligated to purchase from the producing enterprises the nitrate and iodine in Chile and abroad which may belong to them at July 1st, 1933, and the new production as from the same date, under the conditions stipulated in this Law, maintaining the preferred guaranties which Laws Nos. 5133 and 5185 establish.

The purchase of stocks abroad includes the shares of Corporations and the rights of the producing enterprises, representative of these stocks.

The adhering enterprises, while they have in their possession the nitrate and iodine, shall be considered as depositaries.⁸²

There may not be permitted actions of third parties against these products.

Neither can any action be taken regarding the prices of stocks nor on the profits which in accordance with the Law have a special destination.

Art. 10. The stocks of nitrate and iodine on July 1, 1933 shall have the following prices: For nitrate abroad, it shall be the amount of the obligations which are secured by these stocks and the payment of which shall be assumed by the Corporation; iodine abroad, eight shillings, 9.82 pence per kilo; nitrate in Chile three pounds sterling per ton, and iodine in Chile, five shillings, 10.55 pence per kilo.

The prices indicated for stocks of nitrate and iodine in Chile are free alongside ship in nitrate port (f. a. s.) and there shall be deducted from such prices all expenses and shrinkage which may arise in placing the nitrate and iodine alongside ship.

The price for new nitrate and iodine production shall be their industrial cost free alongside ship. This price shall be fixed annually for each producer by the Board of Directors of the Corporation after study of report from the Superintendency of Nitrate and with the concurring vote of the Fiscal Directors.

The term “industrial cost” shall be understood as all the expenses of the respective producing enterprises, including the necessary repairs, but without taking into account amortization of machinery, depletion of grounds, and interest or service of debts, all in accordance with regulations issued by the Board of Directors of the Corporation and approved by the President of the Republic.

To the industrial cost of the nitrate, there shall be added as part of the price, $1.50 U.S. Cy. per metric ton of nitrate. The payment of all or part of this additional amount to the producing enterprises shall be subordinated to the proviso that it shall not be necessary to increase by that amount the profits of the Corporation destined to the service of the bonds referred to in Article 26, until such service is completed.

In no case may the Corporation fix nor pay as cost price an amount in excess of the sales price, after deducting its expenses and obligations in the same year.

The payment of the price of the nitrate and iodine, from stocks as well as from new production, shall be made by the Corporation after the liquidation of the respective sales to third parties. The producing enterprises shall have no right to exercise legal action for the cancellation of the sales against the Corporation.

The Corporation may make advances to the producers for production.

Art. 11. The selling prices of nitrate and iodine shall be fixed by the Board with the concurring vote of the Fiscal Directors. The selling price may not be fixed without first insuring, with the difference between said selling price and the average purchase price paid, the service of the bonds referred to in Article 26. However by reason of the conditions of the market and in the same manner, the Board of Directors may fix a lower selling price.

Art. 12. The sales quotas of the producing enterprises shall be fixed by the Board of Directors with the concurring vote of the Fiscal Directors, following the report of the Superintendency of Nitrate. These quotas shall be fixed for periods of five years and shall be calculated on the basis of the productive capacity of the various oficinas at the maximum cost accepted by the Corporation for purchases. In order to gauge this capacity there shall be taken into consideration the reserves of each enterprise, only insofar as this may be necessary, for the corresponding period.

Producers starting operations, within any period, in new plants for the exploitation of lands that may not have been considered in the determination of existing quotas shall be entitled to a quota in accordance with their productive capacity on the bases indicated.

The quotas that may be assigned to the companies segregated during the course of such a period, shall be deducted from the quotas of the companies whence these enterprises originated.

The Board of Directors of the Corporation shall, with the concurring vote of the Fiscal Directors, issue the regulations in regard to the fixing of the quotas within the fundamental bases of this Law.

Art. 13. The Board of Directors may cancel, reduce or suspend the right to a quota of producers that do not deliver the quota corresponding to them, increasing pro rata the other quotas. The Board of Directors, may, with the concurring vote of the Fiscal Directors, suspend or reduce the quota of a producer in the event his cost price exceeds by over 20% the average price of the other producers, provided always that there shall not remain a difference of at least 20% from the sales price of the Corporation, after deducting its expenses.

The cancellation, reduction or suspension of quotas shall not affect the liquidation of stocks existing at the time of organization of the Corporation.

Art. 14. Notwithstanding the provisions of Article 12 the initial quotas shall continue in force during a period of seven years, commencing July 1, 1933 and shall be ⅓ of the total sales for Compañía de Salitre de Chile and ⅔ of the same total jointly for The Lautaro Nitrate Company Limited and for Compañía Salitrera Anglo-Chilena. The quotas corresponding during this period to other producers, in accordance with what may be determined pursuant to what is stipulated in Article 12, shall be deducted pro rata from the quotas of the others.

Art. 15. With the concurring vote of the Fiscal Directors, the Board of Directors may demand from the adhering enterprises that they distribute among the various nitrate zones the production necessary to satisfy their quotas, and, regarding the type of nitrate, that delivery be made in proportion to the requirements of the market.

Art. 16. From July 1, 1933 the quotas for the sale of iodine shall be the same as those which the respective producers may have for nitrate, and only those producing enterprises that have nitrate sales quotas in the Corporation may participate in sales of iodine.

Nevertheless the holders of stocks of iodine produced prior to July 1, 1929 and whose initial nitrate sales quota is not fixed in this Law, shall, until said stocks have been exhausted, be allowed an iodine quota in accordance with the provisions of Transitory Article 2 of the By-Laws of the Iodine Producers’ Association, approved by Law No. 4820.

The Iodine Producers’ Association shall be dissolved and liquidated as soon as its stocks have been transferred to the Corporation, which shall succeed the Association in its rights and obligations.

Art. 17. The stocks of nitrate on hand on June 30, 1933 shall be liquidated by selling from said stocks annually not less than 20% nor more than 33% of the total sales.

The Board of Directors may suspend the sale of these stocks or reduce the minimum of 20% in case the final provision of Article 11 should be applied, except in case the interested parties should agree with the Corporation on a reduction of the prices fixed for them by Article 10. While there remain debts pending in favor of the Banco Central de Chile payable with these stocks, the concurrence of this institution shall be sufficient for the reduction of prices.

The maximum of 33% may be exceeded by a resolution of the Board of Directors with the affirmative vote of the Fiscal Directors.

The sale of these stocks shall be included within the quotas of the producing enterprises, but there must be taken into account in the total sales from stocks a quota proportional to the stocks’ of each company, after the readjustment referred to in the first paragraph of Article 29.

Art. 18. The Board of Directors shall have the right to impose fines and apply penalties upon producers for non-fulfillment of the obligations provided in this Law, in the By-Laws, or by its own resolutions as provided in said By-Laws.

A copy of these resolutions of the Board, certified as to its authenticity by Notary, shall have executive effect.

III. Profits—Distribution Thereof—Taxation

Art. 19. The profits of the Corporation shall be the difference between the price of nitrate and iodine paid to the producers by the Corporation, as provided in Articles 10 and 17, and the selling prices obtained by the Corporation, after deducting its expenses and all other profits which it may obtain from its secondary activities.

Twenty-five per cent, of said profits shall correspond to the Fiscus as income tax from the nitrate and iodine industry, and shall be paid as earned.

The remaining 75% shall correspond to the producers.

Out of said 75% the Corporation shall pay preferentially the interest and amortization on the bonds referred to in Article 26.

Before making this payment there shall be separated from the profits available therefor, the part of such profits arising out of the sale of stocks of nitrate in Chile on July 1, 1933, which shall only be applied to such service to the extent that the balance of the available profits shall not suffice therefor.

The remainder, after service of the bonds, shall be delivered to the respective producers; but when they have received from this remainder, as profits of a nitrate year, a sum equal to the annual service on the bonds, from the excess, there shall be destined 30% for extraordinary amortization of the said bonds and 70% shall be delivered to the producers.

The profits shall be distributed among the producers pro rata according to their sales quotas, but after adjusting the price already paid to the producers by the Corporation in such manner that the total price per ton of nitrate and per kilo of iodine, whether from stocks or from new production, is the same for all. Any pending differences in any nitrate year on this account shall be adjusted in the subsequent years.

The provisions of this Article in respect of bond service shall apply to the profits of the entire nitrate industry, the sole exception being the profits derived from nitrate lands and nitrate plants not registered as of January 2, 1933 in the name of Compañía de Salitre de Chile, The Lautaro Nitrate Company, Limited or Compañía Salitrera Anglo-Chilena.

Art. 20. In consideration of the tax established in the preceding Article, there shall be exempt from any other tax, whether export, mobilization, income, sales, or any other tax, the operations and profits of the Corporation or of the producing enterprises adhering thereto, derived from the trade and exploitation of nitrate and iodine. This exemption includes taxes upon interest on obligations or upon quotas or dividends paid by the Corporation or the producing enterprises to their creditors, partners or shareholders.

Shut-down nitrate oficinas and their grounds, grounds without manufacturing plants, Fiscal concessions and port works not in use, shall be exempt from all real property taxes.

Art. 21. In order to guarantee the stability of the new system of taxation of the nitrate industry which shall be initiated by the Corporation, the President of the Republic shall execute contracts with the Corporation and with the producing enterprises wherein it shall be stipulated for a term of 40 years from July 1, 1933, that in the event of new legislation increasing the share of the Fiscus in the profits of the nitrate and iodine industry, or establishing new taxes which may make the taxes established in the preceding article more burdensome, the Fiscus shall pay, by way of production royalties, amounts equivalent to such increase and to such new taxes, such royalties to be paid preferentially out of the share of the Fiscus in the above-mentioned profits.

Art. 22. The industrial operations of the adhering producing enterprises not pertinent to the production and handling of nitrate and iodine, such as those arising from the exploitation of other substances contained in their grounds, the industrial by-products plants, mining activities, public railways, and others, shall be subject to the taxes corresponding to such activities pursuant to the general laws, for which purpose separate accounts shall be kept by them therefor, as provided in the regulations issued by the President of the Republic.

The producing enterprises which may be owners of public railways shall credit to them, debiting the industrial cost, the freight monies corresponding to their transported nitrate and iodine in accordance with the general tariffs approved by the President of the Republic.

IV. Liquidation with the Fiscus—Common Obligations of the Nitrate Industry

Art. 23. The Fiscus shall receive from the nitrate and iodine industry during the year 1933, the sum of $140,000,000 pesos. As part payment of this sum of $140,000,000 pesos, there will be considered the amounts received by the Fiscus, by way of export duties on nitrate and iodine, the share of the Fiscus in profits under operating contracts with nitrate enterprises, the Fiscal real property taxes, income taxes and indemnities for occupancy of Fiscal grounds paid by the nitrate enterprises, all during the present calendar year, and one-half of the 25% share of the Fiscus in the profits of the Corporation during the nitrate year beginning July 1, 1933.

The Corporation is hereby authorized to contract such obligations as may be necessary to complete the payment of said $140,000,000 pesos prior to December 31st next.

During the present calendar year, there shall be applied against such $140,000,000 pesos or to cancel any obligations contracted therefor by the Corporation, the profits of the Corporation corresponding to the industrialists.

If the profits destined to the payment of such obligations should not be sufficient, the sums which the Corporation must pay to the producing enterprises for their stocks of nitrate on hand in Chile, pursuant to the provisions of Articles 10, 17, and 19, shall be used for the payment thereof, after payment of the obligations referred to in Article 28.

In readjusting the position of the producing enterprises between themselves, these payments shall be taken into consideration so that each enterprise shall contribute in the proportion of the sales quota which corresponds to it.

Art. 24. In consideration of the provisions of Decree No. 1 of January 2, 1933, issued by the Ministry of Finance and of law No. 5133 of February 2, 1933, which recognized the nullity of legal non-existence of the Compañía de Salitre de Chile the reciprocal obligations arising out of the situation de facto as between the Fiscus and the said Company are terminated. Consequently the Treasurer General of the Republic shall destroy the certificates of bonds and shares received from Compañía de Salitre de Chile.

Art. 25. There are definitely and reciprocally cancelled all rights or actions for indemnity of occupation and exploitation of Fiscal lands and for contributions in arrears, including the sub-litis for periods prior to December 31, 1932, owing by Compañía de Salitre de Chile, The Lautaro Nitrate Company, Limited and Compañía Salitrera Anglo-Chilena and for taxes paid in excess or bonuses not paid by the Fiscus to the above companies.

Art. 26. The Corporation shall recognize as its own the so-called Prior Secured Bonds issued by Compañía de Salitre de Chile in accordance with the contracts dated February 28, 1931, but it shall only pay the service and amortization on those bonds, the holders of which shall accept the modifications established in this law and in the contracts which the Corporation may enter into with the respective Trustees or with the new Trustees that may be designated for their service, and renounce all rights arising from the balance of interest and amortization in arrears for the period prior to January 1, 1934, after distributing the funds in the hands of the Trustees.

All of the above shall be left on record in the bonds themselves or in those which may be issued in replacement thereof.

The Corporation shall also issue bonds with rights equal to those that will be recognized for said Prior Secured Bonds, in the amount of three million dollars, in cancellation of the loans for a like sum made through Compañía Salitrera Anglo-Chilena for the joint operations of this Company, of Compañía de Salitre de Chile, and of The Lautaro Nitrate Company, Limited during the period December, 1931 to March 1932.

The profits from the nitrate and iodine extracted from grounds that at January 2, 1933 were inscribed in the name of any of the said companies, or which may be produced in plants belonging to any one of the companies named on the same date, shall be subject to the payment of these bonds until their total cancellation, in the manner established in this law.

The service of these bonds shall be 6% per year on the nominal amount issued and shall accrue as from January 1st 1934. This 6% shall be applied to pay at the end of every six months the annual interest which shall be stipulated on the capital owing, and the balance to amortization without prejudice to the extraordinary amortization referred to in Article 19.

The Corporation is empowered to make with the Trustees of these bonds the respective contracts, stating therein the interest and their other terms and conditions and giving such guarantees as may be adequate for the service thereof, including the provision to deposit in the hands of the Trustees, as and when obtained, 75% of the profits of the Corporation resulting from nitrate and iodine subject to this obligation, until the service corresponding to each year and such balances as may remain owing from previous years shall have been completed within each year.

In case of dissolution of the Corporation before the cancellation of the bonds, these obligations shall be assumed by Compañía de Salitre de Chile in Liquidation, The Lautaro Nitrate Company, Limited and Compañía Salitrera Anglo-Chilena and their successors to the grounds and oficinas liable for such payment, who shall be obligated to make the corresponding deposit in the hands of the Trustees. These companies shall be party to the contracts entered into between the Corporation and the Trustees, binding themselves and their successors not to ship any nitrate and iodine subject to the above-mentioned obligation, without previously proving, in the manner to be set forth in the respective contract, the delivery of the quota to them corresponding on account of the service of these bonds in accordance with the bases set forth in the contract itself.

These obligations shall be considered part of any transfer which should be made of lands and oficinas subject to its payment, annotations being made in the margin of the corresponding inscription and in the Register of Mortgages.

Art. 27. The obligations represented at present by Secured Bonds issued by Compañía de Salitre de Chile in payment of debts or contributions in accordance with the contract of February 28, 1931 will be taken over, as of the date of organization of the Corporation, as private obligations, by the Companies from which they originated or by the companies succeeding them in the ownership of their assets, without the guaranties with which they were issued.

The holders of Prior Secured Bonds which were issued in payment of contributions or debts, simultaneously with a further amount of Secured Bonds, shall deliver to the Corporation, duly cancelled, their corresponding quotas of these Secured Bonds, at the time of making the acceptance and renouncement of the rights referred to in Article 26, unless such quota should have previously been delivered to the Corporation by the holders thereof.

The Corporation shall deliver certificates in exchange for the Secured Bonds returned to it, setting forth the amount, the Company from which they originated, and the person who made the delivery, and shall give notice to the Company to which the obligation corresponds, in accordance with the first paragraph of this Article, for the purpose of the recognition of the respective quota in favor of the person who may have delivered the bonds representative of such obligations.

Art. 28. The Corporation shall pay for account of Compañía de Salitre de Chile in Liquidation, of The Lautaro Nitrate Company, Limited and of Compañía Salitrera Anglo-Chilena the obligations contracted in favor of the Banco Central de Chile by said enterprises prior to the Corporation’s beginning operations. The Corporation shall make this payment, applying thereto until completion thereof, the value it must pay to said Companies for their stocks of nitrate in Chile as provided in Articles 10, 17, and 19, without prejudice to the readjustments as between themselves for the proportion of said obligations corresponding to each of them.

Art. 29. As of the date when the Corporation shall begin its operations, there shall be made a liquidation and readjustment of the situation between Compañía de Salitre de Chile, The Lautaro Nitrate Company, Limited and Compañía Salitrera Anglo-Chilena in order to establish the stocks of nitrate and iodine in Chile and the rights in stocks abroad which belong to each Company, taking into account the sales in excess of their respective quotas which may have been made in previous periods.

The balances which remain pending after this readjustment shall be covered, destining to them, after payment of the obligations referred to in Articles 23 and 28, the price which the Corporation must pay for stocks of nitrate in Chile in accordance with the provisions of Articles 10, 17 and 19.

These balances shall remain in the hands of the Corporation for account of the respective companies and at the corresponding rate of interest, while the Corporation needs to dispose of their values for its operations and in particular to effect the advances referred to in the final paragraph of Article 10.

Art. 30. The balance of prices and profits corresponding to the stocks of nitrate in Chile at July 1, 1933, which in accordance with Articles 10, 17 and 19 should be delivered to the producing companies after payment of the preferential obligations referred to in those articles and in Nos. 23, 28 and 29, shall be destined to be credited to the capital of unguaranteed obligations which they may recognize, originating from acceptance credits, promissory notes, drafts, and overdrafts granted for the production and operations of them or their predecessors.

V. Liquidation of Compañía de Salitre de Chile–General and Transitory Provisions

Art. 31. With the concurring vote of the Fiscal Directors, the Corporation shall be authorized to acquire the certificates of the public debt of Chile in foreign currency. The Fiscus shall receive, in payment of its participation in the Corporation, these certificates calculated at the price at which they were acquired, plus interest on this price which the Corporation may have incurred up to moment of payment.

Art. 32. The Corporation is hereby included among the organizations authorized to obtain credits in accordance with the provisions of Law No. 5185. These credits shall be considered as being within the quota set aside by this Law for Compañía de Salitre de Chile in Liquidation.

Art. 33. All questions arising between the Corporation and the adhering companies shall be decided by Arbitration Courts, constituted in the manner established in the By-Laws.

Art. 34. The President of the Republic is authorized to modify the powers and duties of the Nitrate Superintendency, in accordance with the obligations imposed upon him by the present Law and by the Regulations which may be subsequently enacted.

The enterprises shall furnish the Superintendency with any information it may solicit and will give the personnel of the Superintendency the necessary facilities for the examination of the books and for making any verifications whatever their nature. The enterprises shall be obliged to carry their principal books of account in Chile and in Spanish.

The President of the Republic, after hearing the Superintendency, shall be empowered to apply fines, up to 20,000 pesos, for violations of provisions of the present article.

The information gathered by the Superintendency shall be considered as strictly confidential.

Art. 35. The enterprises or companies who desire to withdraw the assets and liabilities which they may have contributed to Compañía de Salitre de Chile, may do so in accordance with the following provisions:

a) The requests for withdrawal shall be presented to the Liquidating Commission of Compañía de Salitre de Chile within the limited term of 30 days computed from 90 days after the date of publication, in the Diario ofecial, of the By-Laws of the Corporation. The said requests shall be brought to the knowledge of the creditors of the petitioner previous to the organization of the Company, and in order for them to be considered they must be accompanied by a guaranty which the Liquidating Commission in its discretion deems sufficient to insure compliance with all the obligations which the petitioner must assume on account of the withdrawal. If the Liquidating Commission by unanimity of its members should declare the guaranty offered as insufficient, and the said guaranty shall not be completed or improved in this manner and under the conditions which the Liquidating Commission may determine, within the period specified by it, the petition for withdrawal shall be considered as having never been presented.

b) The obligations contracted by the Compañía de Salitre de Chile shall affect the constituent companies withdrawing therefrom in the proportional part which the Liquidating Commission assigns to them. The fact of their withdrawal shall not alter the acts and contracts executed by the Liquidating Commission of Compañía de Salitre de Chile in conformity with the provisions of the law and of Law No. 5133, nor the guarantees established by the latter and by Law No. 5185 in favor of the credits obtained for the administration and liquidation of the Compañía de Salitre de Chile.

Art. 36. The Liquidating Commission of Compañía de Salitre de Chile is expressly authorized to sign all contracts and execute the necessary acts to liquidate the relations which have existed between Compañía de Salitre de Chile, The Lautaro Nitrate Company, Limited and Compañía Salitrera Anglo-Chilena, returning, in exchange for the corresponding ordinary shares of Compañía de Salitre de Chile, the shares of Compañía Salitrera Anglo-Chilena and the ordinary shares of The Lautaro Nitrate Company, Limited, said companies recognizing the obligations corresponding to them in accordance with the provisions of this Law and the provisions agreed to in the respective contracts.

Art. 37. The remaining assets of Compañía de Salitre de Chile in Liquidation after the withdrawal of the enterprises exercising the right granted them by Article 35, and after eliminating from such assets the ordinary shares of The Lautaro Nitrate Company, Limited and of Compañía Salitrera Anglo-Chilena, shall be distributed among its creditors, until completion of its credits, excepting the creditors in respect of the obligations corresponding to the Prior Secured Bonds, in such manner and proportion as may be determined by the Liquidating Commission, the obligations affecting the said assets being maintained in accordance with this Law.

This distribution must be approved by the above-mentioned creditors. For this purpose, the Liquidating Commission shall invite them to a general meeting which shall be held in Santiago 30 days after the notice convening said meeting, which shall be published twice in newspapers in Santiago, New York and London. The meeting shall be held with those creditors who may attend and the resolutions which may be adopted shall be binding on all the creditors if approved by a majority of 51% of the amount of the credits present. The balance remaining after the above-mentioned distribution shall be distributed among the shareholders in corresponding proportion.

In order to compute this majority the credits in foreign currency shall be taken at the official rate of exchange of the Banco Central de Chile.

Art. 38. In connection with the reconstruction of the nitrate industry, the enterprises adhering to the Corporation shall have power to issue preferred shares, shares without par value, debentures and obligations of every kind without special guaranty, secured with the rights corresponding to such enterprises against the Corporation, or with any other guaranty. There shall not be applicable to the issue of these bonds and debentures the provisions relating to their issuance, nor the provisions relating to security, established in Law 4657.

Art. 39. The enterprises adhering to the Corporation shall give preference to the products, fuel, manufactured articles, materials and merchandise of national production, conditions being equal to those of foreign products, landed in nitrate ports, after payment of custom’s duties.

Only in qualified cases and with the agreement of the Fiscal Directors in the Board of Directors of the Corporation given in the manner which the Regulations may determine, may the adherent enterprises acquire abroad the articles to which the preceding paragraph refers.

Art. 40. The term referred to in Article 8 of Law 5133 is extended to June 30, 1934.

Art. 41. The deeds and documents of organization of the Corporation or of new companies, for the transfer of properties, for the issuance of stocks and bonds and such other documents as it may be necessary to execute as part of the reconstruction of the nitrate industry, up to December 31, 1934, shall be exempt from the payment of stamp taxes. Nor shall any tax be paid, up to the same date, on the transfer of real and personal property whenever such transfer be made by reason of the reconstruction of the nitrate industry.

Art. 42. The Board of Directors of the Corporation shall be designated in the manner established in Article 6, after Compañía de Salitre de Chile in Liquidation, The Lautaro Nitrate Company, Limited and Compañía Salitrera Anglo-Chilena shall adhere to the Corporation as mentioned in Article 3. Meanwhile the Liquidating Commission of Compañía de Salitre de Chile shall have the representation of the Corporation as a provisional Board of Directors as from July 1, 1933.

Art. 43. The Liquidating Commission of Compañía de Salitre de Chile in representation of said Company shall adhere as stipulated in Article 3 within the term of 10 days after the adherence to the Corporation of The Lautaro Nitrate Company, Limited and Compañía Salitrera Anglo-Chilena. The said commission is expressly empowered to execute all contracts which may be necessary in order to carry out this Law.

Art. 44. The payments referred to in Article 23 shall not be considered as expenses of production of nitrate in Chile for the purpose of the provisions contained in Article 6 of Law 5107.

Art. 45. The words Asociación de Productores de Salitre de Chile are replaced by Corporation de Ventas de Salitre y Todo de Chile in the first paragraph of Article 39 of the Organic Decree-Law of the Banco Central de Chile No. 486, of August 21, 1925, amended by Decree-Law Nos. 575 of September 29, 1925 and 133 of April 30, 1931.

Art. 46. The Delegate appointed by the Banco Central to Compañía de Salitre de Chile in Liquidation by virtue of Article 20 of Law No. 5185 shall also be a delegate to the Sales Corporation with equal attributes.

Art. 47. This Law shall take effect from the day of its publication in the Diario Oficial.

78. Ninth draft not printed.
79. Not printed.
80. Message not printed.
79. Not printed.
81. Not printed.
82. File translation of this paragraph revised by the editor.