740.25112A/688
The Secretary of State to the Ambassador in Chile (Bowers)
The Secretary of State refers to the Embassy’s airgram no. A–196 of March 14, 194412 concerning dollar currency seized by the Chilean Government from Axis agents and to the Embassy’s despatches no. 9417 and no. 9441 of April 14 and April 17,13 respectively, and the Embassy’s airgram no. A–317 of April 2712 concerning the local financial and commercial controls in Chile.
The Department’s telegram no. 472 of April 22 requested the Embassy’s views concerning a proposed plan of approach with respect to the adoption of local controls in Chile. The Embassy’s airgram no. A–317 of April 27 states that the views of the Embassy, as outlined in despatches no. 9417 and no. 9441, appear to be in conformity with the Department’s suggestions in telegram no. 472. It is not entirely clear to the Department that the plan set forth in the Embassy’s despatches no. 9417 and no. 9441 is the same as that suggested by the Department in telegram no. 472. The Department’s suggestions in that telegram envisaged the following:
- 1.
- A general freezing decree conforming with Washington Resolution VI, which could be applied on an ad hoc basis.
- 2.
- Immediate application of the general freezing decree to Category I firms and individuals, as defined in enclosure no. 6 to the Embassy’s despatch no. 8862 of February 12, 1944.12
- 3.
- A decree prohibiting all unlicensed communications and dealings, direct or indirect, with Axis and Axis-occupied territory.
- 4.
- This Government would not be prepared to commit itself concerning a revision of the Proclaimed List for Chile until the foregoing three minimum requirements had actually been accomplished in fact.
- 5.
- This Government would be prepared to consider a revision of the Proclaimed List for Chile when additional controls such as the vesting, liquidation, and forced sale of Category I cases have been accomplished, the extent of such a revision being dependent upon the effectiveness of the elimination of Axis spearheads.
The British Ministry of Economic Warfare has informed the British Embassy at Washington that the suggestions contained in the Department’s telegram no. 472 are acceptable to it.14
The Embassy’s airgram no. A–317 indicates that the Embassy is currently discussing point no. 3 with the Chilean authorities and that the Embassy has submitted informally a program along the lines of point no. 5. The Department would appreciate the specific comments of the Embassy concerning the feasibility of approaching the Chilean authorities concerning points no. 1 and no. 2, including a statement whether insistence on point no. 4 might prove to be embarrassing to the Embassy in view of the informal presentation of the proposed revision of the Proclaimed List by the Embassy on March 30.
In the event that the Embassy should feel that negotiations with the Chilean authorities have proceeded to such a point that it would be difficult to ask for a freezing decree at this point, the Department believes that the United States currency seized by the Chilean Government from Axis agents might offer a suitable basis for approach. For your confidential information, the Treasury Department is prepared, upon recommendation from the Embassy, to release the currency in question from General Ruling no. 515 upon its receipt in the United States provided: (a) the Chilean Government has acquired good title to the currency by vesting; and (b) those persons from whom the currency was seized (and anyone claiming by, through, or under them) have been entirely divested of all interest in or claim to the currency. The Treasury Department, however, does not expect the Embassy to request the release of the currency until such time as it is satisfied that, as a result of receiving credit for the currency, the Chileans have effectively implemented, or will definitely implement, measures such as those referred to in the Embassy’s airgram no. 317, particularly the complete nationalization of Axis spearhead firms in Chile. The Treasury assumes that the Embassy will take the initiative in working out the best possible arrangement with the Chilean officials in exchange for the agreement of the Embassy to [Page 770] recommend release of this currency for the credit of the Chilean Government.
The Department believes that Treasury’s willingness to release this currency in exchange for such implementation of the Washington Resolutions as the Embassy may be able to obtain furnishes an excellent opportunity for the Embassy to approach the Chilean authorities informally with regard to the adoption of a general freezing decree and its immediate application to Category I cases and the adoption of general legislation providing for vesting, liquidation, and forced sale of Axis firms. The Department believes that the title requirements specified by Treasury could best be met by general legislation providing for vesting, liquidation, and forced sale of Axis firms which could be utilized both for the disposition of Category I firms and individuals (Axis spearheads) and for the vesting of the currency.
The Department would not be disposed to recommend that Treasury release the money in absence of: (a) the Embassy’s specific recommendation that the currency should be released; (b) a report from the Embassy concerning the feasibility of approaching the Chilean authorities concerning a general freezing decree and its immediate application to spearhead firms; (c) evidence that satisfactory progress has been made by the Chilean authorities in disposing of Axis spearhead firms; and (d) prohibition of unlicensed communications and transactions with Axis and Axis-occupied territory.
Pages 4 and 5 of the Embassy’s despatch no. 9441 of April 17, 1944 referred to the intervention of three leading agricultural enterprises in the south of Chile. It is assumed that the three enterprises referred to are Sociedad Industrial Kunstmann, S. A. of Valdivia, Sociedad Industrial Teofilo Grob of La Union, and Molino “Aguila” of Goecke & Wiesenborn of Puerto Montt. In this connection, reference is made to the monthly political reports for February and March from the Vice Consul at Valdivia, dated April 5 and 6, respectively.16 The Embassy is requested to comment on the statements in the two monthly reports to the effect that the intervention is working largely to the favor of the listed firms and that the satisfactory reorganization promised by the Chilean Government does not appear to be likely.