811.20 Defense M (Chile)/12–1543
The Chief of the Metals and Minerals Branch, Foreign Economic Administration (Nitze), to the Special Adviser on Supplies and Resources (Taft)
Dear Mr. Taft: …
. . . . . . . . . . . . . .
- 4.
- From the standpoint of shipping, manganese from Chile is more difficult to handle than from any other source area. From the beginning of purchases of Chilean manganese under the Overall Agreement on February 1, 194284 up to the present, it has been possible to arrange for shipment of about 10,000 tons only. The balance of production has remained on stockpiles in Chilean ports. There is little reason to suppose that the situation in this respect will change appreciably during the coming year. Months ago when continued safety of Atlantic shipping was very much in doubt, the wisdom of building a Chilean stockpile was apparent. By the end of January 1944 a Chilean stockpile of a roughly 200,000 tons will have been built, and the urgency of the need for such a stockpile will have been sharply reduced.
- 5.
- Among all of the source areas for manganese, Chile now appears to be the least urgently required and the most logical area to commence curtailment.
In presenting for your consideration the problem of reducing Chilean manganese purchases, there are several points which we believe to be significant from the point of view of possible political repercussions:
Recent communications from our field staff and reports from the embassy at Santiago suggest that complete cessation of manganese purchases in Chile would cause notable hardship, including unemployment of at least 5,000 laborers.
Reports which have been received at this office, not only from our own field staff but also through several informal channels, indicate that the opinion is widely held in Chile that over-expansion of manganese production facilities in Chile is the result of direct encouragement [Page 702] by U. S. Government representatives. In this connection, we consider that some statements which have appeared in the Chilean press (for instance, that the rate of purchases has been curtailed without warning) are unjustified and extremely damaging to our relationships with Chile. Accordingly, for your information, we wish to place on record our understanding of the history of the manganese expansion and purchase program in Chile as it has operated under the Overall Agreement.
In 1940 at a time when the rate of Chilean manganese production was roughly 1,000 tons a month, many of the Chilean manganese mines were visited by Mr. Charles Will Wright who was representing the U. S. Bureau of Mines. It is our understanding that Mr. Wright spoke at that time of the relatively small proportion of U. S. manganese requirements secured from domestic sources and that he informally emphasized to the industry that ways and means of increasing manganese production in Chile should be considered.
During 1941 Chilean manganese production rose to 35,000 tons.
Late in 1941 and early 1942, the first Overall Agreement with Chile was under negotiation. At that time our representatives suggested a maximum ceiling of 100,000 tons for manganese purchases over a period of 18 months (66,000 tons per year). In spite of the fact that production facilities were not then available, the Chilean representatives urged for a considerably higher ceiling. The final form of the Overall Agreement was evidently a compromise committing us to the purchase of 120,000 tons over a period of 18 months (80,000 tons per year). Presumably this figure was acceptable to the representatives of both countries, and considering the circumstances of the negotiation the Chileans must have understood that the United States was unwilling to commit itself to the purchase of any greater amount at that time.
In spite of the limitations expressed in the Overall Agreement, it appears that the Chilean manganese industry expanded its production to such an extent that within the first year the question of an increased quota was repeatedly raised for consideration. All of these representations for an increased quota were consistently resisted throughout the period of the first agreement. Nevertheless, the Chilean manganese industry continued to increase its capacity.
During negotiation of the current extension of the Overall Agreement, the question of an increased quota for manganese was again raised by the Chileans and again resisted by the American representatives. The rate of purchase expressed in the renewed agreement was exactly as before—80,000 tons per year.
In spite of the very obvious warning given in the latest negotiation, [Page 703] it is our understanding that the Chilean industry continued to allow some of its latest expansion projects to go into production, thereby still further aggravating the situation. The result is that the full 80,000-ton quota for the year ending July 21, 1944 is expected to be complete early in January 1944.
In view of the hardship which is already being felt by the Chilean manganese industry because of impending curtailment, we would appreciate it if you would give us your recommendations as soon as possible. Should there be any way in which we can assist you in reaching a decision, please advise us.
Sincerely yours,
- For text of the notes exchanged with the Chilean Government on January 26, 1942, see depatch 2536, February 4, 1942, from Santiago, ibid., 1942, vol. vi, p. 48.↩