Foreign Relations of the United States: Diplomatic Papers, 1942, The American Republics, Volume VI

825.6374/1462

The Chilean Ambassador (Michels) to the Secretary of State

Memorandum

Due to late developments in the Far East, the possibilities for sales of Chilean nitrate during the next few years have been reduced still further, which will affect Chile’s economy to a greater extent.

To avoid a more extensive depression in the near future, and to prevent a tremendous crisis in Chile after the war because of the excessive production of nitrogen throughout the world, Chile would like to have the cooperation of the United States,⁷¹ which might be based on the following considerations:

a) An agreement, for the duration of the present state of war, to furnish the means of transportation which will make possible the sale of 700,000 metric tons of nitrate per annum here;

b) That all the plants last constructed or which will be constructed, for the purpose of national defense, by the Government of the United States, directly or indirectly, shall be operated, after the war, in an indispensable proportion, and exclusively for the purpose of national defense.

c) The Government of the United States will keep Chilean nitrate of soda on the “free list”, both during and after the war. Neither will any import duty be imposed nor systems of quotas or licenses on imports be applied, nor any other restrictions be adopted which may limit imports of this product.

d) The Government of the United States, as a policy of cooperation in the maintenance of the market for Chilean nitrate of soda on the Continent, will not in the future extend any credit facilities to finance plants for the production of synthetic nitrate in other Latin American countries.

e) Elimination of regulations adopted by the United States that give preference to national products for industrial governmental uses.

After considering the situation in this country and the special conditions imposed by the war, the possibility is suggested for the discussion of an agreement, which should be satisfactory for Chile, on the following lines:

1. During the present state of war the Government of the United States will devote all the production of nitrogen made in the plants recently built, under construction, or hereafter to be constructed under the war program, to the manufacture of war materials; will consider as of first necessity for agriculture, and to fill out the needs of defense, the importation of nitrate of soda from Chile; and will make special endeavours to provide transportation for Chilean nitrate of soda in amounts which will not be less than the deliveries to the United States during the last few years.

2. The Government of the United States will retain the ownership of all nitrogen plants already constructed or that may be constructed in the future for national defense purposes, and will not definitely decide what their final use will be until after the end of the war. In arriving at the necessary decisions they will take into consideration the agreements of cooperation and good neighbour policy reached at the Inter-American Conferences, and will properly weigh the effect that such decisions might have on Chile’s economy. The Government of the United States will invite the Government of Chile to discuss this matter before determining the future use of these nitrogen plants.

3. The Government of the United States will keep Chilean nitrate of soda on the “free list”, both during and after the war. Neither will any import duty be imposed nor systems of quotas or licenses on imports be applied, nor any other restrictions be adopted which may limit imports of this product.

4. The Government of the United States, as a policy of cooperation in the maintenance of the market for Chilean nitrate of soda on the Continent, will not in the future extend any credit facilities to finance plants for the production of synthetic nitrate in other Latin American countries.

5. Elimination of regulations adopted by the United States that give preference to national products for governmental industrial uses.

Washington , 1 April 1942.

71. The Under Secretary of State was said to have assured the Ambassador and Florencio García, manager of the Chilean Nitrate and Iodine Sales Corporation, that the United States did not wish to harm the economy of any small country, and that after the war it would be necessary for Chile and the United States to consider the nitrate question.