833.5151/238
The Chargé in Uruguay (Dominian) to the Secretary of State
[Received November 5.]
Sir: Referring to the Department’s instruction no. 287 of October 5 requesting that an investigation be made of the complaint that the amount of exchange allocated by the Uruguayan exchange control for imports from the United States is less than it should be because exchange for petroleum products, imported by American companies from South American producing areas, is charged to the quota of exchange set aside by the exchange control authorities for imports of American origin, I have the honor to inform the Department that this complaint was the subject of discussion in 1933 and during the spring of 1934 between the Chairman of the Commerce Committee of the American Association of Uruguay, which association acts as the American Chamber of Commerce of Uruguay, and the Director of the Bank of the Republic which institution is vested with the control of exchange. According to figures compiled by the American Association of Uruguay on the basis of Uruguayan statistics, the American quota of exchange for 1933 includes the amount of $1,816,195 in payment of petroleum products practically no part of which was considered to have originated in the United States. This amount is part of a total of $10,441,019 allocated to the United States as dollar exchange in 1933 by the Uruguayan exchange officials.
In the course of the above mentioned discussion, the Bank justified its policy, of charging exchange given in payment of petroleum products handled by American companies in Uruguay to the United States exchange quota, on the ground that such products were handled, financed, transported and sold by American companies which, by engaging in the business, obtained the major part of the profit resulting from the operations.
It appears that during the first six months of 1934 the American oil companies operating in Uruguay received $702,000 at the official rate. Whether these companies will continue to receive exchange at [Page 663] the official rate is not known in view of the intention of the Government to restrict the granting of official exchange to Government purchases only. It is understood that the oil companies would be satisfied if they could continue obtaining exchange at the so-called compensated rate of exchange which is an intermediary rate between the official and the free rate and is worth slightly more than the latter. However, there is nothing to warrant belief in the continuation of the awarding of exchange at rates other than the free rate, as the present tendency of the Uruguayan exchange control office is to direct exchange transactions into the free market. If, eventually, the oil companies obtain exchange at the free rate only, the cost of oil products will increase in Uruguay.
The determination of the amount of that portion of exchange, in the quota allotted to American interests, which represents payment for oil derived from non-American territory, is stated to be complicated. It appears that the origin of the oil supplied to Uruguay by American companies varies from month to month according to the dictates of the commercial and economic convenience of the companies interested. The preliminary figures of exchange allotment by countries for the month of September, 1934, indicate that out of a total of $171,708.64 allotted to American exporters there was included about $94,000 for petroleum products. The quantity of petroleum emanating from fields in the United States included in that total is known only to the petroleum companies which do not give out their statistics or information as the particular phase of the exchange problem, considered in this despatch, is one in which they are not interested. It is not unlikely, however, that the Uruguayan customs statistics may contain data on the quantity of oil of non-American provenience imported by American companies.
The Texas Oil Company claims to be the only American oil company whose exports to Uruguay are of American origin. The other American oil companies appear satisfied with receiving dollar exchange for the total amount of their imports into Uruguay. Their business may be seriously jeopardized if they are unable to continue receiving dollar exchange for all the products they sell in Uruguay. The complaint that dollar exchange provided for oil products of non-American provenience is part of the quota assigned to the United States emanates from American exporters who do not deal in oil products. Their viewpoint differs from that of the oil companies, thus giving rise to two distinct, and possibly opposing, currents of ideas on the subject.
The difficulties inherent to the determination of the value of oil of strictly American origin may have been taken into account by the Commerce Committee of the American Association of Uruguay after [Page 664] its discussions last spring with the Bank of the Republic as the subject appears to have been dropped until the arrival of Dr. Williams in Montevideo last July. Neither does it appear to have been considered subsequently in the form of a formal complaint.
In view of the existence of apparently divergent viewpoints in the two groups of American exporters consisting respectively of exporters of oil and its products and of exporters of commodities other than petroleum products, and, moreover, in view of the possibility of the removal of exchange control indicated in my despatch No. 794 of October 17, 1934, it is submitted respectfully that representations be made only after formal complaint has been received at the Department or the Legation from legitimate importing interests, if conditions existing at the time of the receipt of such complaints warrant the representations being made without general prejudice to American interests.
Respectfully yours,