811.20 Defense (M) Chile/1b: Telegram

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

292. The Under Secretary discussed current phases of relations between Chile and the United States with the Chilean Ambassador yesterday, with particular reference to the copper situation and the electric company matter.

Mr. Welles pointed out that the price to be paid for Chilean copper by the Metals Reserve Company had formed the subject of lengthy and exhaustive discussions over a period of weeks and that on August 23 a solution was reached which seemed acceptable to the Chilean Ambassador and the basis of which was the abandonment by the Chilean Government of current proposals for an export tax on copper. Mr. Welles said that he had learned with great surprise that, on August 26, the Chilean Government had presented to the Congress an export tax proposal. He referred generally in this connection to the considerations which have already been made known to you.

Mr. Welles also discussed with the Ambassador the electric power company matter. He stated that of course the question of Government ownership or operation is one which only the Chilean Government can determine, but that the fundamental fact with which the two Governments are currently faced is that Chile is in no position to offer adequate compensation for the properties.

Mr. Welles concluded that this Government has gone out of its way to cooperate with the Chilean Government in every way and that it is therefore particularly unfortunate for this Government to be confronted with the steps which the Chilean Government apparently contemplates taking against the legitimate interests of United States investors in Chile. Mr. Welles said that, even the knowledge that such steps are being contemplated has a tendency to destroy confidence in Chile and Chilean credit and naturally to dampen the desire of this Government to continue cooperating with Chile, to say nothing of the adverse effect upon any possible flow of private capital.

Please discuss these matters yourself with the Foreign Minister at once along the same lines, and make it clear that continued cooperation between Chile and the United States must necessarily be bilateral and not unilateral.