FOREIGN RELATIONS, 19 4 2, VOLUME VI



estimated. Ultimate communication to Axis submarines and other
vessels of shipping movements may be cited as an instance.Y
  4. Although foreign exchange transactions are technically under
the supervision of an agency of the Chilean Government, questionable
operations appear to be so freely conducted that inimical firms and
individuals are able to carry on financial transactions with Axis
countries and occupied territories.
  These conditions, together with the continuance of diplomatic rela-
tions with the Axis powers, have the effect of facilitating the develop-
ment of subversive activities and the dissemination of inimical
propaganda in Chile.
  The net effect of these factors is a menace to hemispheric defense
which the Department and other interested agencies of this Govern-
ment have viewed with growing concern. Alone among the American
republics Chile has made no move to curb within her borders trading
and financial transactions harmful to hemispheric interests or to pre-
vent commercial intercourse with the Axis powers and at times has
taken steps affirmatively beneficial to the enemies of the other American
republics. In this latter connection there may be mentioned spe-
cifically the deliberate intervention of Chilean government agencies to
compel the delivery to Proclaimed List firms of materials essential to
their continued operation and also the numerous instances in which
difficulty has been placed in the way of diverting shipments from Pro-
claimed List consignees.
  The Department therefore agrees with the opinion expressed in your
despatch no. 3376 that the time has come to take up with the Chilean
Government the whole question of economic and financial control of
Axis activities in Chile and the related problem of cooperation with our
Proclaimed List policies, with specific reference to the implementation
of Resolutions V and XL of the Rio Conference.94  The time appears
to be especially propitious since your representations would follow
closely upon the recent Inter-American Conference on Systems of Eco-
nomic and Financial Control 95 at which a strong program was adopted
for dealing with Axis economic and financial activities in the American
republics. A circular instruction 96 outlining the results of this con-
ference is being sent to you concurrently with this instruction. Al-
though the Chilean delegate to this conference made a general reser-
vation to the resolutions which were adopted, such reservation stated
merely that the "recommendations do not alter the obligations devolv-
ing upon my country as a result of Recommendation V" of the Rio

9 For correspondence on efforts to, counteract espionage activities in Chile,
see
vol. v, pp. 186 ff. passim.
Department of State Bulletin, February 7, 1942, pp. 124 and 140.
   See vol. v, pp. 58 ff.
 " Dated August 4, 1942, ibid., p. 58.



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