825.5151/629: Telegram

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

288. At the close of last week Finance Minister Pedregal extra officially informed representatives of the Embassy that an increasingly delicate financial situation and a prospective decline in customs revenue soon would require the Government to take definite steps to raise more income and obtain additional foreign exchange. He stated that official opinion in this connection was that a new arrangement would have to be made with respect to copper and consideration was being given to three proposals: namely,

Placing an export tax on copper. This proposal be [he] regarded as particularly dangerous as it had much political support and would meet with no opposition in Congress:
Requiring the copper companies to return a substantially larger percentage of the value of their exports. This could be accomplished by decree;
Creating a Chilean Government monopoly to purchase all copper and resell it to foreign buyers, the Government retaining the difference [Page 580] between the purchase and f.a.s.66 selling prices. This proposal be [he] declared has been given impetus by the Japanese Government whose diplomatic representative here has submitted to the Foreign Office a formal offer to purchase 100,000 tons of electrolytic copper at 14 cents per pound free alongside Chilean ports; payments to be made in the United States dollars and the buyer to provide shipping space.67

Pedregal confided that he was not in sympathy with any of these proposals but as some action was inevitable he favored an arrangement which would be acceptable to his Government, the United States Government and at the same time would leave Chilean copper in position to compete in world markets after the conclusion of the war. He therefore had in mind the negotiation of a 2-year agreement between the Government of Chile and the United States giving the latter an exclusive monopoly of all Chilean copper, including concentrates and ores, which it would purchase for resale in the United States and all other markets. In return therefor the Chilean Government would be designated the exclusive purchasing agent of the United States and receive for its services a fee of one to two cents a pound over prevailing prices for Chilean ports; the fee to be paid in dollars and the United States to provide shipping space. The agreement, it was intimated, also should contain a provision requiring the copper companies to establish in Chile a plant for the primary fabrication of copper products (bars, rods, sheets, plate wire, et cetera) to relieve Chile’s dependence on foreign markets for these items.

Turning to the question of iron and steel Pedregal stated that he proposed discussing an arrangement with Bethlehem Company which annually exports some 1,600,000 tons of high grade Chilean ore whereby that concern would supply Chile using its vessels which presently are arriving empty, with certain quantities of basic steel products (plates, sheets, bars, et cetera) of which he asserted there is an acute shortage.

Pedregal conveyed the impression that political elements were determined to agitate the question of Chile taking advantage of the world copper situation and that he is sincerely desirous of working out a plan which is sensible, not too drastic, not burdensome to copper companies, but which at the same time will satisfy the politicians, make available all the copper to the United States for defense and other purposes, and will give to Chile the additional revenue she requires.

Pedregal declared that his object in informing the Embassy was to acquaint it with the trend of official opinion with respect to copper and to obtain from the Department its reaction to his proposal which might [Page 581] serve as the basis of an agreement to be negotiated giving the United States a monopoly of all Chilean copper.

Pending receipt from the Department of comment on Pedregal’s proposal I am holding in abeyance any action on Department’s telegram 175, June 28, 8 p.m., regarding the offer of Metals Reserve Company.

  1. Free alongside ship.
  2. For the arrangement under which United States purchased copper from certain American Republics, see Foreign Relations, 1940, vol. ii, pp. 300 ff.