710 Consultation (3)A/9–1944
The Secretary of State to the Ambassador in Uruguay (Dawson)
The Secretary of State refers to the Embassy’s despatch no. 4188 of April 10, 1944,4 and to previous correspondence relating to Uruguayan financial and economic controls.
The apparent approach of the end of hostilities in Europe has emphasized the necessity for prompt action with regard to the program for the expropriation, forced sale, or liquidation of the spearheads of Axis penetration in the other American Republics. The nationalization of these spearheads continues to be regarded as an important long-range objective of our economic warfare program in this hemisphere.
Axis Spearhead Firms
The term “spearhead” is in general understood to include (a) those firms which are owned and controlled from Germany and Japan and (b) a few other firms of foreign and local nationality, whose past activities have demonstrated that they are part and parcel of the Axis military machine. While no hard and fast definition can be set, the following comments may be helpful to the Embassy in selecting the firms in Uruguay which should be regarded as spearhead in character.
An effort should be made to keep the list as small as possible consistent with the over-all objective referred to.
There have been some discussions with regard to the use of Italian overseas assets for co-belligerent purposes. It would appear desirable to obviate as far as possible the provision by Allied Governments of dollars or sterling to finance co-belligerent activities which might be financed by Italian-owned assets abroad. Because of these and related questions it has been decided that the missions should not (for the time being, at least) continue to urge the expropriation, forced sale, or liquidation of those firms which are owned from Italy; and that, on the other hand, neither should the missions discourage such action in those cases where the local Governments desire to nationalize Italian branches. Although not entirely owned from Italy, the same decision has been reached with respect to the Banco Frances y Italiano.
[Page 1636]Subject to the above comments, it would seem that the list of names presented to Señor Serrato on March 1, 1944 (Embassy’s despatch no. 4006 of March 2, 1944) is an excellent selection.
Non-Spearhead Firms
The great majority of Proclaimed List nationals are not spearhead in character. It is clear that it is neither necessary nor desirable to attempt the permanent elimination of the influence and activities of this group of Proclaimed List nationals except in so far as this may result normally from Proclaimed List sanctions.
The Over-All Plan
Consistent with the different long-range objectives with respect to the spearhead and non-spearhead Proclaimed List nationals, the Interdepartmental Committee on the Proclaimed List devised what is commonly referred to as the “over-all” plan. In substance this plan is that the Committee is prepared to delete a substantial number of names from the list in any American Republic in exchange for the expropriation, forced sale, or liquidation of Axis spearheads. This plan, which is now a policy, has several advantages. In the first place, it provides a workable basis for the reduction (and eventual withdrawal) of the Proclaimed List as soon as the principal objective is accomplished and the need for a complete “wartime” list no longer exists. Secondly, the plan is equitable for it gives recognition to those countries which have cooperated most in eliminating Axis influence within their own borders. In this connection, it may be observed that the policy is justified on the ground that the over-all danger in a particular country is reduced to the extent to which spearheads are eliminated, thus making possible the deletion of a large number of cases which, under other circumstances, would have to be retained on the list. Thirdly, it provides a uniform and nondiscriminatory basis for reduction of the list. Lastly, it offers an opportunity to encourage the other American Republics to proceed with their nationalization programs by offering a quid pro quo.
It has recently been determined that the continuation of the Proclaimed List will be necessary in the period following the cessation of organized resistance in Europe; and, as an appendage to that decision, it has also been decided to continue the “over-all” plan for the reduction and withdrawal of the list in the post-surrender period. It has not been decided for what length of time it will be necessary to postpone the complete withdrawal of the list from all countries in this hemisphere. A circular telegram5 explaining these decisions and containing the text of a proposed public statement to be issued simultaneously by the United States and British Governments will [Page 1637] shortly be forwarded to Uruguay and to other American Republics. This circular telegram should be read with, and as a part of, this instruction. The proposed public statement will contain a paragraph substantially as follows:
“While the list will be maintained during the transitional period from war to peace time conditions wherever the remnants of Axis activity require, it is contemplated that the complete or virtual withdrawal of the list will be possible at an early date with respect to those countries where adequate controls have been established and Axis spearhead firms have been eliminated.”
It should particularly be noted that the inevitable result of the public statement (the “over-all” plan) will be the continuation, in the post-hostilities period, of the Proclaimed List in more or less its present form in certain American Republics which have not carried out an effective nationalization program; on the other hand, the list will be virtually or completely withdrawn from other American Republics which have carried out such a program. The extent to which the carrying out of this policy will affect Uruguay can best be determined by a brief summary of the progress which has already been made by the other American Republics in eliminating Axis spearheads. Such a summary is also pertinent to the doubts expressed by Señor Serrato (Embassy’s despatch no. 4006 of March 2, 1944) concerning the controls of other American Republics.
Progress in the Other American Republics
With the exception of Cuba and the Dominican Republic all of the other American Republics which are at war with the Axis (Bolivia, Brazil, Costa Rica, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua and Panama) have laws providing for the expropriation, forced sale, or liquidation of spearhead firms. Cuba is in the peculiar position of having no firms which are spearhead in character so that a control through its Alien Property Custodian is most satisfactory; the Dominican Republic has laws providing for the liquidation of inimical firms. The programs for the elimination of spearheads in all these countries are in various stages of development but it may be said that progress has been made in all of them and that the program has been virtually completed in several countries.
It has been suggested that Uruguay is not at war and that its problems are more analogous to those American Republics which are similarly situated. Into this category fall Argentina, Chile, Colombia (which has declared a state of belligerency with the Axis), Ecuador, Paraguay, Peru, and Venezuela. Of these only in Argentina and Paraguay has there been a failure to adopt laws providing for the expropriation, forced sale, or liquidation of Axis spearheads. While the nationalization laws in some of these countries are numerous, [Page 1638] copies of the principal laws of each of these countries are enclosed. A review of them may be of help to the Embassy in any discussions with the Uruguayans on the status of the Uruguayan controls.
As may be expected, the extent to which these laws have been applied to concrete cases varies from country to country.
Ecuador is an excellent example of what has already been accomplished under the “over-all” plan. The Proclaimed List for that Republic recently had a total of 422 names. The elimination of Axis spearheads has progressed to the point where it has already been possible to delete 84 names. It is anticipated that an additional 180 names can soon be deleted on the basis of progress already made, making a total of 264. Thus it is probable that the List in Ecuador will soon contain only 158 names; and it is anticipated that still further progress will be made in the not distant future toward reducing this number.
In Peru a large number of firms have been subjected to expropriation, forced sale, or liquidation proceedings including such important firms as:
- Banco Alemán Transatlántico
- Ostern y Cía.
- Ferrostaal A.G.
- Cía. General de Anilinas S.A.
A list of spearhead firms in Peru was recently delivered to the appropriate authorities and there is good reason to believe additional progress will be made soon. The initiation of group deletions on the basis of progress already made is currently under consideration in the Department.
Chile severed its diplomatic relations with the Axis and initiated its programs at a relatively recent date. Its progress toward the replacement of Axis firms has, however, been gratifying. The following firms are some of those which have been subjected to expropriation, forced sale, or liquidation laws:
- Cía. de Seguros La Mannheimer
- Cía. de Seguros Aachen y Munich
- Albingia Versicherungs A.G.
- Nord-Deutsche Versicherungs Gesellschaft
- Allianz & Stuttgarten Verein V.A.G.
- Banco Alemán Transatlántico
- Banco Germánico de la América del Sud
- Dauelsberg y Cía.
- Greiner y Cía., Ltda.
- Sindicato Condor Ltda.
- Deutsche Lufthansa A.G.
- Nord Deutscher Lloyd
- Mitsubishi S.K.
- Sociedad Anónima Comercial Mitsubishi
- Mitsui & Company
- Nippon Trade Agency
- Nippon Yusen Kaisha “NYK line”
- Comercial Chilena—Oriental Ltda. Soc.
- Casa Itoh Ltda.
- Transportes Maritimas S.A.
- “Italmar” S.A. de Empresas Maritimas
- Agencia Marítima Kosmos
- Compañía Comercial Taibo, S.A.
In addition, various other firms have been subjected to intervention, including Staudt y Cía., with the question of ultimate disposition to be made of the intervened companies reserved for some time in the near future. On the basis of this progress, in the last supplement to the Proclaimed List for Chile no new additions were made (except two token additions already included in the list for Peru) and 76 names were deleted. It is anticipated that in the forthcoming supplement approximately 75 additional names will be deleted, and that it will be possible to continue to make group deletions with each new supplement.
Venezuela has expropriated only one spearhead firm, namely Gran Ferrocarril de Venezuela, which has an appraised value of 7,500,000 bolivares. Despatch no. 6393 of August 22, 1944 from the Embassy at Caracas,6 which encloses a copy of a memorandum presented to the Minister of Finance, summarizes the present prospect for early progress in the replacement program there. A copy of this despatch and memorandum are enclosed herewith. This memorandum is, in general, in the same form as memoranda presented to the appropriate officials of other American Republics recently and may be of some help to the Embassy in formulating a method of approach to the Uruguayans.
Colombia has only recently passed its expropriation law and it is still too soon to estimate what progress will be made under it. The law is, however, unique in that it fixes a time table for completion of each of the steps required to complete the proceedings after the specification by the Attorney General of the firms to be affected. The appropriate Colombian authorities have indicated that they are now in a position to proceed swiftly with a comprehensive program.
Uruguayan Expropriation Laws
It will be seen from the foregoing that with the sole exceptions of Argentina and Paraguay, Uruguay is the only American Republic which has not formulated concrete plans for the expropriation, forced sale, or liquidation of Axis spearheads; and that the great majority of the other Republics have already made substantial progress in the program. As a result, it seems probable that, unless the necessary [Page 1640] steps are taken soon, Uruguay will be one of the few countries in the hemisphere where a substantial reduction or withdrawal of the Proclaimed List will not be possible following the cessation of organized resistance in Europe. In view of Uruguay’s known democratic traditions and her leadership in many phases of the current political and economic warfare programs, it would seem desirable to prevent this anomaly if it is possible to do so. In any event it seems desirable to inform the Uruguayans in the premises so as to avoid possible future misunderstandings.
The Officer in Charge is accordingly authorized, in his discretion, to inform the appropriate officials of Uruguay’s comparative failure to adopt effective measures to eliminate the influence of Axis spearhead firms; and to suggest that such failure, if continued, will, in accordance with the public statement referred to above, necessarily postpone the time when it will be possible to withdraw the Proclaimed List for Uruguay. It may also be pointed out that the systematic reduction of the List is already under way in some of the Republics; and that prompt action on Uruguay’s part is necessary if similar reductions are to be made in the List for Uruguay. The systematic reduction of the List is, of course, regarded as the first step toward virtual or complete withdrawal of the List.
The Officer in Charge is requested to forward his appraisal of current political factors which bear on the possibility of Uruguay taking the desired action, together with a report of the result of his discussions with the appropriate authorities.7