811.20 (D) Regulations/3941: Telegram

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

360. Department’s cable No. 175 of June 28. Upon its receipt of the proposal of the Metals Reserve Corporation communicated to the Chilean Government on July 9,71 the Foreign Office has handed me a note verbale which in translation reads as follows:

“The Embassy of the United States of America has been good enough to communicate to the Ministry of Foreign Relations a proposal of the Metals Reserve Corporation for the purchase of all of the exportable production of Chile’s ores and concentrates of copper, manganese, cobalt, molybdenum, concentrate of lead and cobalt, with the exception of that portion of said production which is sold to private interests in the United States or to those other Latin American Republics which may have established systems of export control analogous to that which is applied in the United States.

The Ministry of Foreign Relations has the honor to inform the Embassy of the United States that the Chilean Government accepts in principle said proposal and is ready to initiate by means of its competent technical organisms the negotiation of an agreement with the Metals Reserve Corporation.

The Chilean Government proposes that the purchases of the Metals Reserve Corporation also be extended to the gold ores and concentrates which the American Smelting Company used to acquire and whose high silica content is useful to the North American smelters.

In the opinion of the Department, the agreement in reference should be based on the negotiation of contracts to export to the United States with all the important producers and organizations at present purchasing and exporting minerals, on the following terms:

To assure the delivery of all the minerals which may be available, the contracts should stipulate amount in excess of those actually being produced.
The contracts should be concluded for a period of 3 years on the basis of fixed purchase prices.
The value of the minerals should be paid for upon delivery of same at Chilean port, and loading charges and freight should be for the account of the purchaser.

The before mentioned terms would tend to assure the exclusive sale of the minerals to the United States since the conclusion of contracts with all producers, for amounts in excess of the ordinary production and for appreciable periods of time, will practically exclude any other eventual purchaser.

Considering that the establishment in the country of a minerals smelter would have the advantage, among others, of reducing the need for shipping space between Chile and the United States the Chilean [Page 584] Government desires in addition that priority and authorization to export from the United States be granted for the necessary machinery and installations for the National Minerals Smelter of Paipote, the order for which is now pending the decision of the American Government.

The Chilean Government believes also that the development and improvement of Chilean mineral production would be of mutual benefit to the industries of both countries and in this sense it would like the Export and Import Bank to grant credits, either directly to the producers or to the Fomento Corporation,72 for the mechanization of mines, installation of concentrating plants, construction of highways, the acquisition of transportation equipment, et cetera.”

In view of this acceptance in principle and as I believe there is reasonable prospect of concluding contracts at this time for the purchase of the exportable production of some, particularly copper ores and concentrates and manganese, if not all the several classes of minerals produced in Chile, I approve the Metals Reserve Corporation immediately instructing its representative to communicate with the Embassy for the purpose of carrying out negotiations as soon as possible.

Once purchase contracts have been concluded for any class or classes of mineral products, Chile may be expected to restrict their export only to the United States and those other American Republics having systems of export control. It is unlikely that Chile can be prevailed on to impose export restrictions prior to the conclusion of such contracts.

I am of the opinion that the Government will not insist too strongly on the Paipote smelter proposition were it to endanger reaching an agreement and I believe the desired financial aid can be limited to facilities—credits or possibly advance payments against future production—for the development only of manganese properties.

The British Embassy advises that it is uninstructed in the matter of wool purchases mentioned in the Department’s telegram 233.73

  1. Not printed; the Embassy’s note of July 9 was based on Department’s telegram No. 175 of June 28, p. 578.
  2. Corporación de Fomento de la Producción, a Chilean Government corporation.
  3. July 25, 11 p.m., p. 582.