811.20 Defense (M) Chile/38b

The Secretary of State to the Ambassador in Chile (Bowers)

No. 749

The Secretary of State informs the Ambassador that while as yet the question does not appear to have arisen, it is likely that in the current negotiations for the acquisition of various strategic materials from Chile the point will be made by the Chilean Government that contracts existing as of the date of the agreement should be excepted from the export embargo prohibiting the export of the materials except to the United States and the other American republics. This question has, of course, arisen in several of the other purchase agreements which have been entered into with the other American republics. In the Brazilian agreement the matter was not as carefully considered as it should have been and the result was that existing contracts which had been registered in accordance with Brazilian practice were excepted from the embargo. The amount of existing contracts was not important in the Mexican agreement, and the question therefore did not arise. In Peru, however, the Department has insisted successfully on a complete embargo without exception of existing contracts except for minor amounts of two materials which were conceded as a matter of expediency. In the current Argentine negotiations Ambassador Armour has been requested to insist that no exception be made as to pre-existing agreements. It is suggested that if this question arises the following arguments may be used in resisting the request. First, the prohibition by the Chilean Government contained in the export embargo would not constitute a violation of the preexisting agreements but would merely be the intervention of the Government acting under its sovereign power so as to make impossible the performance of contracts entered into by private parties; secondly, that the United States export control system contains no exception of existing contracts.