825.10/12–2650
The Assistant Secretary of State for Inter-American Affairs (Miller) to the Ambassador in Chile (Bowers)
informal
Dear Ambassador Bowsers: [Here follows a discussion of several social and personal matters.]
I am giving a dinner party on Friday night for the Chilean Ambassador and his wife and stepdaughter. During recent months I have been pleased to note on the part of Nieto real expressions of friendship and of appreciation for what we are doing. He is even appreciative of our efforts in losing causes such as the tanker deal and the copper tax.1 I would think that our relations with the Chilean Embassy are about as good as I have ever seen them. If you have a convenient opportunity in the near future, I wish that you would tell President Gonzalez informally the substance of the foregoing and assure him that one of my new year’s resolutions will be to proceed with all enthusiasm to work for constantly improved relations between our two countries.
We had a momentary scare in connection with the proposed transfer of the cruisers, but that has blown over and everything is now proceeding normally. I believe that the House and Senate Committees were probably not exceeding their prerogatives in inquiring into the question of whether the new situation in the Far East necessitated a reexamination of the transfer of so many vessels to South America.2 However that may be, the Navy has responded with decisiveness.
[Page 799]Our main headache at the moment at this end in relations with Chile has to do with the visit of German Picó.3 For several months we have been plagued with a jurisdictional dispute between the International Bank and the Export-Import Bank in relation to loam operations in general. The substance of the difficulty is in brief that there is no line of demarcation as between the functions of the two banks so that there is in effect competition between them for business. The International Bank has recently been pressing for a resolution of this difference along the lines of a NAC determination that the International Bank shall be the chosen instrument for development loans and that the Export-Import Bank should be limited in its operations to the servicing of projects which it has already financed in the past (such as the Chilean steel mill), plus projects in which the United States has a special strategic interest. On the other hand, the Export-Import Bank considers that it has a mandate from Congress to operate generally in the development field and will not agree to any such limitation of its functions, as Mr. Black has suggested.
A complicating factor is that the International Bank tends to be more conservative than the Eximbank and, in particular, its policy is not to make loans to countries who are in difficulty with the Monetary Fund. This last point poses a real dilemma to the U.S. Government, since the International Bank and Fund are the results of our initiative and it would naturally cause a very bad impression with those institutions if we permitted the Eximbank to make loans to a country after the International Bank had refused to make the loan for a reason of principle, such as the status of that country’s relations with the Fund.
This whole question has now come to a head very acutely with both Brazil4 and Chile. In the case of Chile, the International Bank has, in substance, proposed to us that they would propose to Chile their willingness to go ahead with a long-term investment program of quite sizeable proportions, provided that Chile would fully implement the recommendations of the International Monetary Fund with reference to fiscal and financial reforms. At the same time, we understand that when Stambaugh and Bell of the Eximbank5 were in Chile, they talked to Picó and Vergara6 about a similar program of their own involving approximately $100,000,000 in new loans to Chile.
To add one more even more difficult complication to the picture, our whole lending program has become considerably confused as the result [Page 800] of the new war production program, which will seriously curtail materials available for export for any purpose. Willard Thorp and I had a talk with Bill Martin7 of the Treasury last week about this whole thing, and we suggested that we try to get ourselves in a position so that Picó would not have to go back empty-handed. We may possibly be able to get both of the banks to agree on some specific loans on an ad hoc basis, possibly including expansion of the steel mill8 on the part of the Eximbank and the coal and lumber projects on the part of the International Bank.
I will naturally follow this whole problem with great interest.
Sincerely yours,
- The Policy Statement for Chile of February 27, 1951, commented in part regarding this tax: “The Executive branch of the U.S. Government advocates continuation of the suspension of the tax, primarily because our domestic production of copper is insufficient for our needs. This position is also based on our awareness of the political significance of the tax to U.S. relations with Chile.” (611.25/2–2751)↩
- Reference here is to questions regarding ship sales raised by the House and Senate Armed Services Committees. Information on the general policy of ship sales to the American Republics is scheduled for publication in volume i.↩
- Executive Vice President of the Corporación de Fomento de la Producción, an organ of the Chilean Government.↩
- For documentation on the jurisdictional dispute between the two banks as regards Brazil, see pp. 760–782, passim.↩
- Lynn U. Stambaugh, Director, and Bernard R. Bell, Chief of the Economics Division.↩
- Roberto Vergara, President of the Corporación de Fomento de la Producción.↩
- Willard L. Thorp, Assistant Secretary of State for Economic Affairs, and William McChesney Martin, Assistant Secretary of the Treasury and U.S. Executive Director of the IBRD.↩
- The Huachipato works at Conception.↩