811.20 (D) Regulations/2776: Telegram

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

175. On the assumption that the export control legislation, referred to in the Embassy’s despatch no. 1554 of June 9,62 will be enacted in the near future, the Metals Reserve Company63 has formulated an offer to acquire all of the exportable surplus of Chilean copper ores and concentrates (excluding copper in the form of metal all of which is handled by American companies), manganese, mercury, antimony, molybdenum, lead concentrates, and cobalt except that portion of these products which is sold to private interests in the United States or to other Latin American republics which have established systems of export control paralleling the export control system of the United States. The form of the Metals Reserve offer (except as hereafter specified with respect to cobalt) would be to purchase a certain specified amount of each of the aforementioned materials which amount would be slightly in excess of the Chilean production of these materials. The offer would thus be in substance to acquire the entire Chilean production of each material. Any amounts purchased by the private trade in the United States would be credited against this obligation of the Metals Reserve Company, The agreement would be for 1 year with a clause stating that it is the intention of the parties to negotiate at the end of the year with a view to the renewal of the agreement for a further period of 1 year. The prices would be negotiated in detail once the principle of the agreement were accepted by the Chilean authorities. During the life of the agreement, the export of the products subject to the agreement would be prohibited except to the United States and to other American republics having export control systems parallel to that of the United States.

In view of shipping difficulties, it may be that the copper ores and concentrates will have to be stockpiled in Chile at least for some time. It is believed that shipping space can be provided for the manganese, antimony, mercury, molybdenum and lead concentrates.

It is understood from your despatch no. 1543 of June 762 that no cobalt will be produced during the forthcoming year but that it would be desirable that Metals Reserve offer to assist in providing a competent engineer to be placed in charge of production and, if such [Page 579] engineer so recommends, to provide some financial assistance to accelerate the improvement program. Metals Reserve Company is disposed in principle to assist in this way provided that the Chilean Government will impose an export embargo on cobalt for a period of 3 years, thus in effect nullifying the purchase option which was referred to in the Embassy’s despatch. The financial assistance might take the form of an advance payment on the entire production for a period of 18 months after the mine comes into substantial production, which event will take place, it is understood, in about 18 months from the present date.

Mercury could be handled in the same way as manganese and the other metals first mentioned, the only difference being that the price would presumably be negotiated by Metals Reserve directly with the Compania Minera Punitaqui instead of with the Chilean Government.

You are requested to discuss this offer of the Metals Reserve Company with the Chilean authorities and to telegraph the Department whether the proposal of Metals Reserve Company is acceptable in principle. If it is, Metals Reserve Company is willing to designate a representative to act on its behalf in assisting you with the negotiations as soon as the legislation has been enacted authorizing export control.

  1. Not printed.
  2. A purchasing agency of the Reconstruction Finance Corporation operating under the Federal Loan Agency.
  3. Not printed.