Foreign Relations of the United States: Diplomatic Papers, 1944, The American Republics, Volume VII

811.20 Defense (M) Chile/11–2044

The Chilean Embassy to the Department of State

1. The Chilean Government has been advised, officially, by the Foreign Economic Administration, that the United States Commercial Company will not renew the existing contracts to purchase the copper production of two small smelting plants located at Chagres and Naltagua, Republic of Chile. The contracts will expire on January 31, 1945.

2. Because of their supplementary relation to other commercial operations; the sacrifices to Chile involved in engaging upon them; and the effect that their compliance bears toward the general economy of the country; as well as the social importance inherent in their very nature, these contracts should be judged in their multiple and different aspects, instead of receiving consideration as merely another commercial transaction.

3. The ores used at the Chagres and Naltagua smelters were absorbed in the past, almost entirely, by the Japanese market, through a system of tariff and price arrangements which were very advantageous to the producers. However, Chile in no way objected to suspending these transactions as soon as Japan became an aggressor of the United States, although she did not obtain, in so doing, the commercial advantages heretofore enjoyed. This fact justifies the opinion that the contracts entered into with the United States Commercial Company should be worked out in accordance with their own terms with respect to expiration dates, but on the basis of equity and reciprocal collaboration they should be renewed until the termination of the war with Japan, when world markets are reorganized, enabling Chile to find in those markets other prospects without detriment to her collaboration status with the United States.

4. The minerals smelted at the two small plants referred to above are of low copper content, and originate mainly from deposits located in sections of the country where there are no possibilities for other productive industries. Should the purchases of this copper be suspended, it would of necessity paralyze work in a large number of mines of low mineral content located in sections deprived of other sources of livelihood, which would cause the unemployment of 30.000 people, as there would be no other work to give them, and this would bring to an end what is almost the only activity of three provinces.

5. The expenditure which these purchases represent for the United States Commercial Company, as compared to the standard of prices which may be obtained from other sources of production, fluctuate around two million dollars, an insignificant sum compared to the huge expenditure which would be suffered by the Chilean Government as a result of the following problems: a) unemployment of 30.000 workmen and their relief; b) curtailment of all operations connected with the supply of tools, provisions, etc. etc. for the production of this copper, with the resulting losses to a substantial part of the population attending to these needs; c) diminution, small but not to be ignored, of our supply of foreign exchange; d) extinction of economic activity in extensive localities, where the maintenance of work in poor mines constitutes the only source of income.

6. Although the copper produced at the Chagres and Naltagua smelters represents only 3% of the total copper production of Chile, the fact that this percentage is owned entirely by domestic interests, and represents a considerable percentage in terms of work and occupation, must be taken into account. The lamentable effect on our people, should they find that the production of copper strictly Chilean owned would be paralyzed as a result of the termination of these contracts, whereas the copper production of foreign companies, which have their own smelting establishments in the United States, will obviously be maintained, could not be underestimated.

Our laboring masses have a civic culture and a consciousness of current events, which made it possible for them to declare themselves freely during the world conflict in favor of the democracies, and direct their feeling of sympathy toward the United States and other nations which have borne the heaviest burden of this war. For this reason it is extremely delicate to proceed adopting a measure which would affect in a grave manner precisely this very considerable part of the laboring masses. Seeing themselves forsaken by the United States the laboring masses might react in a spirit of disillusionment toward the democratic cause which they have helped even with personal sacrifices, very modest from the material viewpoint, but very significant from the moral viewpoint.

7. Chile has indicated the necessary steps for reorganizing her industry and adapting it to a different system than the one brought about by the war. The installation of a national smelter for minerals, with an electrolitic refinery, has been conscientiously studied, with a view to reduce the extent of cooperation required from the United States on the financial side of our copper operations. Nevertheless, for reasons deriving from the war itself, it has not been possible to carry out these projects, neither has it been possible, in other fields of activities, to prepare the transition from wartime to peacetime economy. These circumstances make it advisable to extend the contracts referred to for such length of time as the factors which are delaying the transformation of our economic activities continue to exist.

Washington, November 20, 1944.