811.20 Defense (M) Chile/5–2945

The Assistant Secretary of State ( Clayton ) to the Executive Vice President of the United States Commercial Company ( Scheuer )

My Dear Mr. Scheuer: Thank you for your letter of May 29 dealing with the Chilean ore and concentrates purchase program and the recent contracts made thereunder.

It is our understanding that the United States Commercial Company has committed itself to purchase copper from other high-cost producers in Chile and other foreign countries for the quarter ended September 30, 1945. Furthermore, we are informed that the contract with the Andes Copper Company calls for a price of about 14½ȼ per pound of recoverable electrolytic copper, varying with the cost of production. We are not fully informed as to the equivalent cost per pound of copper paid to the small producers under the Chilean ore and concentrates purchase contracts, but limited data indicate that the price is perhaps somewhat lower than that paid Andes under the latest contract.

We feel that it would be both impolitic and unbusinesslike for this Government to cease purchasing copper from small Chilean-operated enterprises in Chile, while continuing to purchase similar materials from an American-owned enterprise operating in Chile, at perhaps higher prices. Consequently we suggest:

As to copper ores and concentrates, United States Commercial Company enter into a commitment to purchase until September 30, 1945, the pro-rata quantities of copper ores and concentrates stipulated in the present agreement at a price equivalent to that paid under the present contract or to the price paid Andes Copper Mining Company under its third quarter contract, whichever is lower.
That any future commitments, which may be deemed advisable in light of United States import requirements, be made on the basis of substantially equal prices as between Andes and the small Chilean producers.
That purchases of gold ores and concentrates be discontinued as of July 31, 1945, the expiration date of the present contract, unless your agency deems it advisable to make purchases to facilitate the economical operation of the Chagres smelter in connection with the smelting of copper ores and concentrates.

Sincerely yours,

W. L. Clayton