825.5045/11–1246
Memorandum of Conversation, by the Chief of the Division of North and West Coast Affairs (Wells) and Mr. Alexander Schnee of that Division
| Participants: | Mr. E. T. Stannard, President, Kennecott Copper Corporation |
| Mr. Laylin, Washington lawyer for Kennecott | |
| Mr. Spruille Braden, Assistant Secretary of State | |
| Mr. Briggs, ARA | |
| Mr. Schnee and Mr. Wells of NWC |
President of Kennecott feels that cumulative concessions to Chilean Government’s endeavoring to extricate itself from difficult political positions at the expense of the copper companies have placed Braden Copper Company in a tenuous economic position necessitating a clear-cut answer as to whether that Company will continue to be subject to such pressures; and inquires what further assistance can be expected from the Department, particularly in the event of intervention or expropriation by Chilean Government. In latter event, the Department will be requested to persuade European consumers that due consideration must be given the legitimate American interests in the producing company.
[Page 607]The purpose of Stannard’s visit was to review the strike situation up to the moment; and to inquire what further advice and assistance the Department could offer, particularly in the event of Chilean Government intervention or expropriation. The great concern of the Company has to do with broad principles and long-range prospects. In terms of dollars and cents, their best estimate is that settlement of all 14 points on union terms would just about equal the $2–3,000,000 profit anticipated on this year’s operations. However, of greater importance are the dangers inherent in the labor demands, many of which are outside the Chilean labor code, and some of which (for example, the demand that the Company provide clothes for employees) would lead to never-ending trouble. The whole history of the Company’s relations with the Government in Chile has been one of continuous appeasement, one concession after another on taxes and special exchange rates, and of government pressure for political convenience on one issue after another. He feels strongly that the time has come to end appeasement and to face the issue squarely on its economic merits.
The present situation, as reported by their Santiago manager, is that President González Videla has given the Company until 12 noon, today, to accept arbitration on all points. The only option is that of deciding whether there shall be 1, 2, or 3 arbitrators—in any case, the settlement, Stannard is convinced, will be made substantially on labor’s terms. The Company’s position is that the demands outside the labor code, and already labeled as unconstitutional by the decision of the Comptroller General, should not be subject to arbitration. Such action places the Company in a discriminatory position vis-à-vis industry as a whole; and makes the company a victim of political expediency (this time to save the President from difficulties with his Communist supporters).
Mr. Turton (Santiago Manager) is of the opinion that the Company has no choice but to give in and hope for the best. However, Stannard is of the firm opinion that the Company should accept arbitration only on the wage demands, leaving the other demands, which the Company deems unconstitutional, for subsequent discussion, if necessary. He feels the Company is faced with a crisis, and he would like to know (1) what further advice the State Department can offer, and (2) what the Department proposes to do if the Chilean Government intervenes or expropriates. He asked specifically whether, in case of expropriation, this Government would make representations to Great Britain, France, and other importers of Chilean copper, pointing out that the copper is the legitimate property of the Company and not of the Chilean Government. The Company lawyers [Page 608] already are considering the advisability of serving notice on importing companies.
Mr. Braden stated that in his opinion at this point this Government has done everything to assist that it properly can do; and that it is now up to the Company to make its decision on a business basis. Mr. Braden added that it would not be proper for him, as a government official, to advise the Company whether to accept or reject the Chilean proposal. Referring to the advice of several of his colleagues to accept the arbitration offer of President Gonzáles, Mr. Stannard inquired whether, if the Company agreed to arbitrate on all points and if the arbitration award substantially met the demands of the Communist union, the Department would use its influence to prevent the Chilean Government from drawing on credits established by the Eximbank. Mr. Braden reminded Mr. Stannard that the agreement to arbitration by a foreign company carried with it an implicit agreement to abide by the arbitration award. Thus the Braden Copper Company would not be in a position to protest after the award was made, and consequently the Department of State could not make representations either in Santiago or in Washington based upon injury stated to have been received by the company.
During the discussion, Mr. Stannard expressed himself strongly against the policy which this Government has followed in extending large Eximbank loans to Chile, and in acquiescing in the Chilean Government’s fiscal policy of milking the copper companies more and more for foreign exchange with which to service said loans. Mr. Braden assured Stannard that the Department is fully cognizant of the reciprocal responsibility of Chile toward United States interests and that our policy of cooperation with Chile in the future will take into account Chile’s performance in this respect.