811.20 Defense (M) Chile/39: Telegram

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

407. This Government is desirous of increasing its copper supplies. The Anaconda Company has informed the Federal Loan Agency that with a new capital expenditure of about $5,000,000 it can within a relatively brief period increase its production at the Chuquicamata mine about 25,000 tons annually. This would be of genuine importance in our defense program.

However, before the Anaconda Company can undertake this new investment, it seeks assurance, and it seems to the Department to be justified in its wish, as regards the tax treatment of the American copper companies in Chile. This makes it desirable that this outstanding question is settled as soon as feasible and on terms that are not excessive.

Second, the Anaconda Company believes that after the war emergency it will have no market for the increased production resulting from the new investment. It compares this new investment with that which many companies are undertaking in the United States to increase production for emergency defense purposes. It therefore requests the Chilean Government to consider according to it on this new investment the same treatment accorded by American tax laws, to wit, the privilege to amortize it at the rate of 20 percent a year. This also seems to the Department a reasonable request.

Would you please discuss this matter at once with the Chilean Government with a view towards clearing a way for this new investment and of getting a prompt and satisfactory settlement of the tax question which is creating prolonged uncertainty.

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Contemporaneously, the Department is urging upon the Federal Loan Agency an increase in the price they are paying for all the copper that they may buy from Chilean production to 11¾ cents f.a.s. New York (which is the equivalent of the present United States price of 12 cents per pound Connecticut River Valley delivery). There is a good chance that the Federal Loan Agency can be persuaded to make this price increase at the same time these other matters are settled. This would of course bring further increases in Chilean tax revenues.