810.5151 Williams Mission/45
The Chargé in Uruguay (Dominian) to the Secretary of State
[Received August 13.]
Sir: Referring to my despatch No. 673, of July 16, 1934, and No. 677, of July 20, 1934,16 relative to the call in Montevideo of Messrs. John H. Williams and Donald R. Heath, I have the honor to report that both of these gentlemen, accompanied by Dr. Eric Lamb of the Federal Reserve Bank, reached Montevideo on July 27th and left for Buenos Aires on the evening of the 28th.
I am enclosing herewith a copy of the schedule of their activities during their stay in this capital.17 The series of their conferences was initiated by a luncheon with the American Association of Uruguay, an association which acts as an American chamber of commerce in this city. The luncheon was attended by the members of the executive and commercial committees of the above-named association, and provided an opportunity for Dr. Williams to become acquainted with the viewpoints of the representatives of American interests operating in Uruguay. Throughout the luncheon Dr. Williams made a point of asking questions of the members present to familiarize himself with their views and desires.
[Page 657]The luncheon was followed by the presentation of the visitors to the Minister for Foreign Affairs at 2:30 p.m. I had arranged for this meeting to enable these gentlemen to pay their respects to the Minister, and also with the idea of providing for an exchange of views on the Uruguayan exchange situation between Dr. Williams and the Minister for Foreign Affairs, who is intimately acquainted with exchange developments in Uruguay and who has taken the lead, personally, in the exchange negotiations carried on between his country and several of the countries which provide the Uruguayan market with foreign exchange.
This call was followed immediately by a round table conference at the Ministry of Foreign Affairs. The Minister attended the conference in person together with the chief of the Commercial Section of the Ministry of Foreign Affairs, the Director of the Bank of Uruguay and representatives of American and Uruguayan interests. Consul General Leslie E. Reed, whom I had asked to accompany me to this meeting, was also present. The Uruguayan viewpoint on the exchange situation was submitted to Dr. Williams by the Minister for Foreign Affairs, supported by the representatives of Uruguayan interests who were in attendance, while the American views were presented by the manager of the local branch of the National City Bank, Mr. H. H. Whitman, who is also President of the American Association of Uruguay. Technical discussions and details of this conference will be incorporated in Dr. Williams’ analysis of the observations made on his trip.
The argument developed by the Minister for Foreign Affairs consisted in the statement that foreign exchange was becoming increasingly scarce in Uruguay as Uruguayan exports tended to decline, and that this scarcity of exchange was now accompanied by pressure on the part of European countries having favorable commercial balances in their trade with Uruguay for recovery of their respective exchange through Uruguayan purchases of their products. The Uruguayan Government was thus being forced into canalization of its foreign trade on a basis of purchasing from the countries which purchased from Uruguay. The Minister expressed himself as being opposed to this method of international trade but spoke of it as a case of force majeure at the present time, in order to prevent cessation of meat exports from Uruguay. He then gave voice to opinions which I have previously reported to the Department, namely, that foreign exchange would be provided mainly, under the Uruguayan exchange control system, to importers of the nationalities which purchased from Uruguay and that where exchange would be allotted to any one country in amounts representing percentages of the value of that country’s purchases of Uruguayan products, the same percentage would be attributed to other countries in order to prevent discrimination.
[Page 658]Throughout the conference it was apparent that the Uruguayan position was controlled almost exclusively by the fear of a possible cessation, or a curtailment, of its meat exports to the main purchasing countries. The Minister for Foreign Affairs stated several times that Uruguay was forced to adopt the exchange restrictions now being put into effect because of the insistence which countries like Great Britain, France, Germany and Italy were maintaining for the return of all exchange emanating from each one of them respectively.
In the course of this conference, Dr. Williams drew on his broad experience to summarize the Uruguayan situation and was able to convince the Minister for Foreign Affairs that a policy of restricting imports, although perfectly sound, might defeat its purpose if applied unwisely or in a manner which would prevent the pooling by Uruguay of foreign exchange flowing into the country so as to make use of the foreign currencies in the payment of its external obligations as well as in the best interests of the Uruguayan consumer. Dr. Williams spoke with authority, based on intimate knowledge of exchange conditions in various important countries of the world. I noticed that the Uruguayan gentlemen present at the round table conference, and in particular the Minister for Foreign Affairs, were greatly impressed by his statements.
Later in the evening, Dr. Williams had an opportunity of discussing further the Uruguayan exchange problem with the Minister for Foreign Affairs, as both met at the Legation as my guests for dinner.
On the 28th, Dr. Williams and his party met the Director of the Banco de la República Oriental del Uruguay, at the Bank’s offices, to discuss particular aspects of the country’s exchange problem and in order to obtain data regarding the present exchange situation. This meeting lasted an hour, and enabled Dr. Williams to obtain an insight into the practical working of the Uruguayan exchange control, which is exercised through the agency of the Banco de la República Oriental del Uruguay. The bank is also the Uruguayan correspondent of the Federal Reserve Bank.
The meeting at the Bank was followed by a courtesy call on the Minister of Finance. The Minister for Foreign Affairs kindly undertook to present the three visitors to his colleague and I accompanied them to the Ministry of Finance. There the Finance Minister, Señor Manini Rios, indicated that while Uruguayan finances were in favorable condition and the country enjoyed a balanced budget, it was nevertheless necessary to prevent a flow of foreign currency out of the country in excess of the amount brought in.
In the afternoon, the Minister for Foreign Affairs received Messrs. Williams, Heath and Lamb at his home, the opportunity being thus offered for further discussion of various aspects of the Uruguayan [Page 659] exchange situation. Dr. Williams’ report will contain the technical considerations which are, perforce, omitted from this despatch.
It is gratifying to find that I am able to report that the visit of Dr. Williams to Montevideo at this time may be considered as particularly fortunate. His profound knowledge of economics and his familiarity with foreign exchange problems created a favorable atmosphere around him whenever he found himself among Uruguayan officials and disposed them to listen attentively to his remarks. I was struck with the excellent impression he had created when we went to the Ministry of Finance, and I am in a position to substantiate this observation in the following manner. While our call at the Ministry of Finance was in progress I noted that an undertone conversation took place between the Minister for Foreign Affairs and the Minister of Finance, on ways and methods of enforcing exchange control in the course of which the Minister of Finance said to his colleague that they would be fortunate if they could find an advisor as competent as Dr. Williams, or—pointing to Messrs. Heath and Lamb—a young man of the caliber of these two men, in order to place him in charge of the exchange control system. These remarks, although not particularly intended for my ears gave me an opportunity later in the day to intimate discreetly to the Minister for Foreign Affairs that I would be happy to ascertain whether the services of a technical official of the Federal Reserve Bank would be available for a short period if he thought that the employment of such an experienced expert would be of advantage to the Banco de la República del Uruguay. His reply was that he personally favored the temporary employment, as advisor, of one of our trained banking officials, but he thought that the present political situation in the country would not permit employment of foreigners.
There is no doubt, however, that Dr. Williams’ statements on the exchange situation made a profound impression on the Minister for Foreign Affairs, as well as on the Director of the Bank of the Republic. In that respect his visit to Montevideo was an unqualified success.
Respectfully yours,