811.20 Defense (M) Chile/2–345

The Assistant Secretary of State ( Rockefeller ) to the Foreign Economic Administrator ( Crowley )

Dear Mr. Crowley: Your letter of February third in answer to ours of January twenty-second [19?] is much appreciated and we are delighted with the suggestion which you make to the effect that our purchase program with the other American republics should be handled on an integrated basis and dealt with in relation to the other phases of our economic relations with the particular countries involved. This is particularly important from the political point of view, and, in order that we may take full advantage of your thought in this connection, the Department has already secured from the Foreign Economic Administration detailed information from which to prepare statements giving the full picture concerning each country. These statements include analysis of all of the purchase contracts with full data year by year as to price, quantity, percentage of production relating to national income, as well as the detail of the provisions of the existing contracts, their termination dates and recommendations as to their extension. This material will be of value to both the Foreign Economic Administration and the Department in developing the over-all programs you recommend.

This will go a long way in removing uncertainties and improving relations with these various countries. Naturally, our whole objective is to represent the best interests of the United States in all such negotiations. However, in determining the best interests, we must always do so from the broadest point of view of long-term relations. The fact that we have increased our purchases so substantially from Chile, while it has been an asset during the war period, makes the termination all the more difficult and serious from their point of view, as it will leave them without markets for the tremendous volume of exports on which they depend, not only for employment but for its foreign exchange with which to buy imports. Therefore our wartime buying is a mixed blessing as far as they are concerned.

Chile, of all of the major South American countries, is suffering one of the greatest degrees of inflation in its history. This is due to the very large dollar balances which have been built up by our purchase program. Very careful plans will have to be developed if the Chilean economy is successfully to withstand the current inflationary trend and the shock of deflation, which is bound to come sooner or later.

While it is important to “bargain,” as you put it, in connection with individual purchases, I think we should not lose sight of the fact that [Page 794] our relations with these countries with regard to the war effort are the relations of nations fighting side by side and that we are shortly to meet together to work out and plan for the future, on the basis of mutual trust and confidence, policies and programs which will reflect the best interests of all.

Sincerely,

Nelson A. Rockefeller