811.20 Defense (M) Chile/1–2245

The Foreign Economic Administrator (Crowley) to the Assistant Secretaries of State ( Clayton and Rockefeller)

Gentlemen: This will supplement my letter to you of January 22, 1945, about the continued subsidization by the Foreign Economic Administration of sub-marginal Chilean copper.

While I appreciate the problems facing the Department of State in these matters, I would like to suggest that the function of this Administration in carrying out the operating responsibilities in transactions of this kind would be greatly facilitated if, instead of approaching the solution of such questions as an emergency situation and on a piece-meal and isolated basis, they could be handled on an integrated basis and dealt with in their relation to other phases of our economic relations with the particular country involved. I would like to propose that as soon as possible and before pressure is put on us in some other individual case by Chile or one of the other American republics for assistance through subsidization or other means, we sit down together and review the over-all situation in advance with a view to preparing ourselves for the problems likely to confront us.

For example, in the case of Chile, within the very near future this Government will have to reach a decision on the possible renewal [Page 792] of existing contracts for the purchase of nitrates, and the question of renewing our contract with the Andes Copper Company will also have to be examined. Both of these matters involve the payment of subsidies. Moreover—and this applies not only to Chile but to a number of the American republics—we shall have to resolve important questions of policy dealing with payment of over-due accounts for lend-lease aid furnished by this Government.

It is my firm belief that a decision such as the one involved in the sub-marginal Chilean copper case should not be made without first carefully considering the position of Chile in relation to the other American republics with respect to our procurement programs. We have drawn in varying degrees upon all of Latin America for raw materials and other assistance. The rewards and the sacrifices have varied greatly from country to country. Analysis of both shows that Chile is in a relatively favored position. In this sense, in so far as the bargaining power lies with us, I submit that we should not be hesitant about using such power when it is in the national interest of the United States to do so, indeed from a long range point of view it is frequently a disservice to the recipient country to treat these matters on an ad hoc basis.

It is readily demonstrable that Chile has benefited in a financial sense from our public purchase program to a higher degree than any of the other American republics. Total official United States purchases in Chile during the four and one-half years ended June 30th last were valued at $505,871,000. While we do not over-emphasize its importance, it is worth noting that on a per capita basis this represents an expenditure of over $100 as compared with an over-all figure of $10 per capita for Latin America as a whole. Purchases from Chile alone represented over 36% of total United States public purchases from all of Latin America. It might further be observed that total United States imports from Chile during 1943 were valued at $140,187,000, as against an average of $33,580,000 in 1936–1938. This increase of 317% should be compared with an increase of only 142% for Latin America as a whole for the same period. In the light of these facts I do not believe that we should assume a defensive attitude on the question of trimming down any procurement program not necessitated for reasons of supply; and would like to suggest for your consideration the possible desirability of advising Chile in a tactful manner of the relative position outlined above.

In a word, I favor an integrated over-all approach and the full and effective utilization of all bargaining elements available to us to the end that we may obtain the fullest measure of economic and political benefit possible. I shall look forward to receiving your comments.

Sincerely yours,

Leo T. Crowley