825.85/171: Telegram

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

829. Department’s 469, May 3, 7 p.m., my 783, April 29, 9 p.m.60 Smitmans61 again attacked proposed sale in open session claiming [Page 868] against national interest and contrary to article 26 of Emergency Law 7200, July 1942, and Decree 701, May 6, 1940. These provisions require presidential approval sales vessels Chilean registry. Smitmans again referred to spectacular recent rise CSAV shares from 130 to 180 pesos. He introduced measure to modify article 28 of Emergency Law by adding following: “While the present war continues, the sale or rental can only be authorized by law”.

From Assistant Manager Velasco CSAV today learned that, as WSA negotiators suspected, two alternative offers not referred to Santiago by Subercaseaux. Later Velasco stated he wished to review all correspondence to make sure this fact. Velasco stated that politically any agreement not providing for replacement vessels could not be accepted since President of Republic would not dare deprive Chile of tonnage. I believe this is correct.

I agree CSAV trying drive hard bargain and may have kicked up Congressional and newspaper objections deliberately.

Embassy hinted WSA discouraged by inconclusive nature negotiations and might decide abandon them altogether, especially view inability CSAV guarantee 15 knots S.S. Marie.

Three hours later Velasco urgently solicited continuation discussion with Carlos Vial participating.

Vial said misunderstanding speed since vessels made 18½ knots official trials and former average speed 16 knots. On Valparaiso−New Orleans run average only 14¾ knots in order save fuel depreciation.

Vial will phone Subercaseaux that WSA counter offer No. 1 impossible. No matter what price paid Chilean public and Government would not accept any agreement not providing for replacement tonnage.

No. 2. Vial said he and directors consider $6,640,000 fair price. He questioned price being $600,000 above current cost three C–2’s equivalent depreciation.

Vial exhibited April 7 letter Admiral Land64 to Subercaseaux which states WSA would pay fair reasonable price and suggests decision by impartial mixed commission if no agreement price. Vial stated agreement but before commission company’s asking price would be 6,990.000. He stated would not insist all value received be included in price. If it would be embarrassing for WSA to depart from fixed policy in order to meet this figure, arrangement could be made whereby CSAV would obtain $640,000 difference through increase 10% freight surcharge permitted company. Insisted this suggestion not be attributed to him. He feels higher freight rates would be just since [Page 869] travelling in convoy has reduced company’s trips from 22 to 15 or 16 per year.

Vial claims vessels offered at much less than current worth because hopes for good will of Maritime Commission and Export-Import Bank after war.…

  1. Latter not printed.
  2. Member of the House of Deputies.
  3. Rear Adm. Emory S. Land, War Shipping Administrator.