Memorandum by the Chief of the Division of North and West Coast Affairs (Flack)34
Among the factors that need to be taken into consideration in connection with the opening of negotiations with the Peruvian Government for permanent rights at Talara are the following:[Page 1323]
1. Political. It has never been suggested to Peru that the United States has any intentions other than to abandon completely the Talara air base no later than six months after the termination of the war. The Peruvian public has found reason for reassurances on this point from time to time; and it is not impossible that the idea will meet with very unfavorable public reaction.
Political stability is in a state of crisis at the moment, with the administration of President Bustamante precariously balanced. The dominant popular force is APRA,35 traditionally an “anti-Yankee imperialism” party, (although it has followed a policy of supporting the United States during the war). The party appears to be poised to take over the Government. To inaugurate discussions at this time might well precipitate the crisis.
For this reason the idea of permanent occupation of Talara by the United States is apt to be politically “hotter” than usual. Therefore, we should not count too heavily on prompt favorable reaction from Peru.
2. Agreement for use of the Talara air base was signed April 24, 1942 by representatives of the War Department and Peruvian military authorities, to be in effect “during the time that the United States is engaged in the present war”. The Foreign Office transmitted official approval thereof in a Note to the American Embassy dated July 8, 1942.
3. The land on which the base is located is owned in fee simple by the International Petroleum Company, Ltd., a Canadian corporation. Moreover, the land is within a proven oil field, and the Company is anxious to regain it to carry on future drilling operations.
4. The proposed rental contract between the United States Government and the Company was never consummated. It was signed by the United States but not by the Company since it had not been able to obtain a written consent of the Peruvian Government. The contract provides for occupation of the land for six months after termination of the emergency and/or the war with the Axis countries.
5. Since the inter-government agreement stipulates that the Peruvian Government acquires the installations, et cetera, upon abandonment of the base by the U. S., the presumption is that Peru will expropriate. The oil company fears adequate compensation will not be forthcoming. In such case the question arises whether the Company has grounds, legal or moral, on which to look to the U. S. for remedy.
6. Ownership of the land complicates the situation. Since it concerns oil land, it will presumably cost a substantial sum of money either to expropriate it or to rent it. Conceivably Peru may be persuaded to execute a joint-occupancy agreement in the interest of common [Page 1324] defense, but it appears unlikely that the Peruvian Government could be persuaded to foot the bill. Therefore, it would seem that this Government must be prepared to pay the full cost of acquiring permanent land rights at Talara from the International Petroleum Company.