811.20 Defense (M) Chile/3–644
Memorandum From Paul F. Linz, Adviser on Raw Materials, Production, and Resources, to the Special Adviser on Supplies and Resources ( Taft )
The attached No. 396 of March 3, from Santiago,36 seems to me to be important. If the Chileans already feel that we are not cooperating, what will they do if at some later date we discontinue or sharply reduce our purchases of copper?
From a material standpoint, the only signs which the Chileans have of what they call lack of cooperation are as follows:
- 1.
- Nitrates. Having purchased a million tons for the crop year ending June 30, 1943, we are only buying 700,000 toils for the crop year ending June 30, 1944. It is questionable whether we need that much; in any case, substantially less than 700,000 tons would have been bought if the State Department had not brought its influence to bear on the interested procurement agencies.
- 2.
- Manganese. Chile having produced far in excess of the tonnage provided for in our purchase contracts because of the high prices which we pay (these prices were doubtless deliberately paid to stimulate production), we bailed out the Chileans by entering into a contract early in this year for an additional 40,000 tons so as to allow them to dispose of manganese already produced and to continue to produce for a few months more, thus enabling them to close the mines on a more orderly basis. This was done notwithstanding the fact that only a few thousand tons of the manganese purchased from Chile have been shipped because of lack of available steamers. At the time the latest contract was made, over 200,000 tons of manganese, paid for by Metals Reserve, were still in Chile. Since our position is eased on manganese, there is little likelihood that steamship priorities will be available for the movement of this tonnage, plus the additional 40,000, during the war.
- 3.
- Copper. Having increased our purchase price several times for high cost Chilean copper ores and concentrates until we were paying more than the equivalent of twenty cents for the copper, we have recently been negotiating to cut the price in slow stages. This has caused a tremendous hue and cry, notwithstanding that copper coming from these mines represents less than three per cent of the total copper we buy from Chile.
- 4.
- Gold Ores and Concentrates. We have continued to buy these, although were we to ship them under existing conditions of high freights and insurance, the cost of the gold would be more than $35 [Page 727] per ounce. They are, therefore, being stockpiled in Chile in the hope that after the war the lower shipping charges will result in their costing not much more than $35 an ounce. It probably will cost us somewhat more because storage charges in Chile automatically will raise our final cost.
Unless some broad stockpiling legislation is passed which carries with it the approval of continued purchases of low cost copper (which means the major portion of Chile’s copper), WPB at some point, probably during the present year, will in its directives reduce the quantity of copper which FEA may buy abroad. Whenever war ceases, either in Europe or the Far East, WPB of necessity, under its present powers, will cease to give any directives for copper purchases abroad. It will be seen from this that our relationship with Latin American countries will be greatly affected by whatever decision is made, to continue purchasing or discontinue purchasing materials once they are no longer needed for war purposes. This will be true not only in the case of Chile, but also Mexico, Bolivia, and Peru so far as minerals and metals are concerned.
- Not printed.↩