We should not, however, consider anything settled in this case until it
is actually disposed of and covered by official communications.
Therefore, if you decide to await developments before taking further
diplomatic action, I hope it will at the same time be recognized that
the diplomatic question remains open and that, if it is not
satisfactorily disposed of later by a further reply of the Chilean
Government, the American Government has an obligation to record its
position in unequivocal terms with reference to the breach of an
international obligation by the Chilean Government.
[Subenclosure—Memorandum—Translation]69
Fundamental Bases of the Plan of Reconstruction
of the Nitrate Industry
(1) The Government, the Compañía de Salitre de Chile, the Lautaro
Nitrate Co. and the Compañía Anglo-Chilena are released from and
hereby liquidate the obligations which they have between themselves
in accordance with the following bases:
a) Juridical, commercial and financial
separation of Compañía de Salitre de Chile, the Lautaro and
Anglo-Chilena. Each one of said Companies shall recognize its
private debts, and the common stock of Lautaro and the stock of
Anglo-Chilena shall be exchanged for the common stock of Cosach
issued at the time of incorporation of these Companies.
b) Definite suppression of the payment of 60
pesos per ton in the customshouses of the Republic.
c) Delivery to the Government, as contribution
for the present calendar year, of the sum of 140,000,000 pesos. In
order to complete this sum, there shall be taken into consideration
the payments made to the Government or that shall be made on account
of export taxes and on account of the Government’s share in the new
Sales Corporation during the present year.
The Government is released from all obligation in favor of the
Compañía de Salitre de Chile, the Lautaro, and Anglo-Chilena on
delivery of lands, and the full dominion of the Government is
recognized over nitrate reserves existing as of the date when
Compañía de Salitre de Chile was organized. The Compañía de Salitre
de Chile, the Lautaro and the Anglo-Chilena renounce all claims
against the Government on account of taxes paid in excess or for any
other reason whatsoever.
[Page 188]
d) Return of the full amount of the secured
bonds which the Government has in its possession and renunciation by
the Government of credits or claims against the Compañía de Salitre
de Chile, the Lautaro, and the Anglo-Chilena on account of pending
operations up to this date, including profit balances guaranteed for
previous years, indemnity on account of exploitation of Government
lands in the Pedro de Valdivia plant, taxes in arrears and sub-litis.
e) The Government imposes on the nitrate
industry, beginning June 30, 1933, a 25% tax on the profits of the
Sales Corporation to which reference is made hereinafter and the
creation of which is an integral part of this plan.
f) It is expressly provided that the nitrate
companies shall not pay real property tax on shutdown oficinas or on Government concessions and
port facilities not in use; nor shall they pay profit tax on
interest paid by the nitrate industry or on dividends paid to their
shareholders.
g) The deeds or documents of incorporation of
the Companies, of transference of property, and others which it may
be necessary to execute as a part of the reconstruction of the
nitrate industry up to June 30, 1934, shall also be exempt from
stamp tax.
(2) As of July 1, 1933, a Sales Corporation shall be organized along
the following general lines:
a) The Sales Corporation shall be in charge of
all sales of nitrate, iodine and by-products of the nitrate
industry. The total amount of nitrate produced by all the nitrate
companies now in existence or which may be organized in the future,
shall be sold by such Corporation.
b) The Corporation shall be administered by a
Board on which the producers and the Government shall be
represented. The Government shall have the intervention necessary
for the supervision of its interests, maintenance of order within
the industry, and supervision of the fundamental interests of the
country connected with the industry.
c) For the purpose of the nitrate sales that
shall be made by the Sales Corporation, the following quotas are
fixed: ⅔ for the Compañía Lautaro and Anglo-Chilena and ⅓ for the
companies incorporated into the Compañía de salitre de Chile. These
enterprises shall agree among themselves as to the distribution
within their quotas of the amount of Shanks nitrate and Guggenheim
nitrate that shall be acquired in order to satisfy the requirements
of both products. The quotas that shall be granted to the
independent nitrate producers shall be deducted from those mentioned
above pro rata with the respective rights.
d) Nitrate stocks belonging to the different
companies which form the Compañía de Salitre de Chile, the Lautaro
and the Anglo-Chilena,
[Page 189]
shall be acquired by the Sales Corporation at the price of £3 per
ton f. a. s. (free alongside ship) and shall be paid for in
proportion with the sales.
Out of the price obtained in excess of £3 per ton, 25% shall be for
the benefit of the Government and 75% for the respective previous
owners.
While yearly sales remain under 1,000,000 tons, only 20% of the total
amount of sales shall correspond to stocks. When the sales exceed
1,000,000 tons per year, 33% of the excess of 1,000,000 tons shall
correspond to sales of stocks.
e) The Sales Corporation shall pay the
producers for the nitrate at the industrial cost price controlled by
the Government, and without any charge on account of debt services,
plus 1.50 dollars per ton of nitrate.
The difference between the price paid to the producers and the sales
price, upon deduction of the Corporation expenses, shall be
considered to be the profit of the nitrate industry and 25%
therefrom shall be the Government’s share. The remaining 75%, which
shall be considered as the profit of the Sales Corporation, shall be
distributed among the producers pro rata with their quota, after
service of the bonds referred to in the following paragraph.
f) The Sales Corporation shall be empowered to
issue bonds up to a total of 51,000,000 dollars which shall be
considered as a preferred charge. Forty-eight million (48,000,000)
dollars worth of these bonds shall be offered in exchange, at their
nominal value, for the total prior secured bonds issued at present.
When effecting the exchange of the prior secured bonds, such
industrialists as received them in payment of contributions of
Companies incorporated into Cosach, shall make the necessary
agreements so that the secured bonds received by them at the same
time shall be recognized as the private debts of the companies where
they originated.
The balance of 3,000,000 dollars shall be applied to the payment of
the 3,000,000 dollars furnished to the nitrate industry through the
Compañía Anglo-Chilena in December 1931, and appearing on the
balance-sheets.
g) The bonds referred to in the previous
paragraph shall be entitled to a fixed interest of 4% and an
amortization of 2%, the payment of this amortization being subject
to the ability of the industry to pay it. These bonds shall accrue
interest and amortization as from January 1, 1934.
The interest of the bonds shall be guaranteed by such amount as may
be deemed necessary for its service and the Sales Corporation shall
be obligated to deposit it in the hands of the Trustees for the new
bonds.
[Page 190]
h) Before the distribution of the remaining
profits is made to the producers after service of the bonds, the
Sales Corporation shall adjust the paid cost price by crediting to
the producers with the lowest cost the difference between that
figure and the one obtained by the producers with the highest
cost.
i) The Corporation may not make any payment to
the associated producers until the bonds issued by it have been
served. This provision does not affect the producers not connected
at the present moment with Cosach and the subsidiaries.
(3) The reorganization of the Cosach, Lautaro and Anglo-Chilena
Companies shall be made on the basis of a valuation of their
respective assets and the issue of bonds and stock to be distributed
among their creditors and shareholders in the equitable manner
mutually agreed upon among themselves.
The reorganization of Cosach does not exclude the segregation of some
of the incorporated companies in order to form private producing
enterprises, subject to the Sales Corporation and with a sales quota
within the total assigned to Cosach.
The administration of the producing Companies shall be in the hands
of the industrialists. The Government shall have the supervision
which it has over all the industries of the country.
Santiago, April 27, 1933.
