103.9169/1604: Telegram

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

39. For Scheuer, FEA and USCC from Low and Lamb.

. . . . . . . . . . . . . .

We believe that instead of forcing on the Chileans the drastic cuts in copper and gold prices which you propose in the impending regular review of Schedule A, we should put the industry officially and definitely on notice that any time, by announcing that the prices must be revised downward but after a 6 months period, thus allowing Government and producers to plan an orderly reduction in operations. The production of small copper and gold mining industry is now only about 70% of what it was at time Overall Agreement was initiated in early 1942 and several of the larger companies in this group are just holding [Page 710] their own at present prices. In connection with above condition and the continuing rise in operating cost, it has been evident for several months that the representatives of the industry have been planning a strong case for increased copper prices at the semestral review of Schedule A.

There has been no interchange of ideas with Videla or Alvarez14 regarding how the orderly reduction might be best effected but from our knowledge of the situation we feel: (1) that the proposed changes in prices and specifications for antimony, lead, zinc, cobalt, molybdenum, tungsten, and probably mercury can be adopted effective February 1; (2) that no change should be effected in the prices for copper ores and concentrates and gold ores and concentrates at this revision; (3) that we should be authorized to extend the Overall Agreement to conclude definitely on January 31, 1945; (4) that in the foregoing proposed extension the prices of the original Overall Agreement for copper ores and concentrates be restored by two successive stages effective August 1, 1944 and November 1, 1944 which will remove the two increases respectively granted since the original Overall Agreement and original schedules were made effective on February 1, 1942. This final extension of the Overall Agreement would not include manganese which will be handled in accordance with telegram 4 of January 1 and the extension would be limited to copper and gold.

In considering this proposal FEA should understand that the question at stake is political and should not lose sight of the extremely vital low cost, large overall tonnage of copper representing Chile’s contribution to war effort. Since the question of Overall Agreement is now a delicate one closely tied to the state of our Government’s relations with Chile as evidenced by the Ambassador’s telegram, it will be indispensable for us to have in hand authority to make a proposal along the lines indicated before meetings for semestral review with full Chilean committee are initiated.

Please note the practical necessity for concluding negotiations well in advance of February 1 when revised specifications will apply to all deliveries subsequent to that date.

Bowers
  1. Pedro Alvarez, member of a governmental committee representing the small mining industry; official of the Chilean Nitrate Sales Corporation.