825.85/170: Telegram

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

469. Your 783, April 29, 9 p.m.57 The Department is informed by the War Shipping Administration that their negotiations with CSAV59 for the three motorships are not progressing satisfactorily. It is the view of the WSA that the representatives of the Chilean Line are determined to drive a hard bargain on charter terms and price. While there is agreement in principle on the question of postwar replacement of the ships a departure from existing policies and arrangements by the WSA and American operators as well as arrangements existing between WSA and foreign shipping operators with [Page 867] respect to prices and charter terms would be involved in meeting the Chilean terms. WSA is not prepared to depart from such policies and arrangements in view of the fact that CSAV representatives are unwilling to guarantee the 15 knot speed which is the minimum required for Army transport service.

On April 28 the following alternative offers were made by WSA and were rejected by Subercaseaux:

Without providing for the charter of WSA vessels for temporary operation, the three ships would be purchased at the asking price of $6,600,000. The original cost of the Chilean ships was less than one million dollars each. The asking price is approximately $600,000 higher than the cost of three C−2 type vessels of equivalent depreciation.
The vessels to be purchased for $2,000,000 each and four vessels of hog island or similar type [provided?] for operation by CSAV under bareboat charter until replacement of ships purchased. For the first year the four vessels to be chartered at a rate of $1.10 per deadweight ton per month, every 6 months thereafter rate to be agreed upon. This rate compares with the rate of $2.75 for similar vessels chartered to American operators, and it is estimated by WSA that it would yield a profit on the four vessels of at least $1,000,000 a year. Marine and War Risk would be at charterers’ expense in dollars.

The WSA agreed in both propositions to work out through the Department a replacement agreement, since at the present time it has no statutory authority to build or sell vessels to foreign interests.

The representatives of the WSA who have been negotiating with the CSAV have reason to believe that their offer has not been presented to CSAV in Santiago and that the representatives here have acted on the assumption that WSA can be forced to meet their demands. WSA states that this is not possible since the ability of the ships to maintain a 15 knot speed is doubtful.

The Department would appreciate your comments as to any further developments.

  1. Not printed.
  2. Cia. Sud Americana de Vapores.