Foreign Relations of the United States, 1946, The American Republics, Volume XI

825.6374/3–446

The Chilean Ambassador (Mora) to the Secretary of State

No. 434/79

The Ambassador of Chile presents his compliments to His Excellency The Secretary of State and has the honor to bring to his notice that the Government of Chile is most appreciative of the assurances contained in the note of the Department of State of October 22, 1945.³⁴

As the Secretary of State is aware, the basic objective of the Government of Chile is that the fertilizer plants belonging to the United States Government should not be turned over to third parties under such conditions which might give rise to problems capable of seriously affecting the future of nitrate exportations from Chile, especially in the event that the terms of the transfer should be such as to permit discriminatory and detrimental competition for the nitrate produced in Chile.

The Government of Chile is again most concerned with this matter, after a perusal of the following documents:

a) Report of the Surplus Property Board to the Congress, dated November 12, 1945, which as stated in the above referred to communication of the Department of State comes within one of the requirements of law whereby, without objection by the Congress, the synthetic ammonia plants built during the war for military purposes may be sold; while under the provisions of the Surplus Property Act,³⁵ they may be leased to third parties at any time for periods up to five years.

b) Supplement III of December 5, 1945, on the progress of the disposal of the synthetic ammonia plants, where a report is made that the Buckeye Ordnance Works, South Point, Ohio, was leased for ten months, until June 30, 1946, to the Atmospherical Nitrogen Company, a subsidiary of the Allied Chemical & Dye Corporation.

c) Regulation No. 10 of September 7, 1945 and Special Order No. 19,³⁶ of the same date, of the Surplus Property Board, in which regulations are promulgated governing the procedure to be followed in the disposal of the synthetic fertilizer plants.

d) The issue of the “Oil, Paint and Drug Reporter” of February 18, 1946, according to which an agreement has been reached for the lease of the Jayhawk plant to a private firm for a period of ten years, with the option of renewal for five years, at the end of this period.

The concern of the Government of Chile, upon being apprised of the preceding, derives from the rapid manner of the procedure, and the broad principles adopted by the Surplus Property Board to fix the sale or rental price of the plants in Regulation No. 10, Par. 8310.6.

This Regulation, which it is understood is now in effect, provides that the sale or lease price of the plants to third parties shall be determined “by taking into consideration all the proposals received and the use of the property most desirable in the light of the applicable objectives of the Act”, adding “it need not necessarily be the same as the fair value of the property determined in accordance with Special Order No. 19 of the Surplus Property Board”.

This Regulation appears to make it possible for the plants to be sold or leased to private parties on conditions which may create serious problems capable of affecting the future of exportations of nitrate from Chile and, besides, the terms of the transfer may be such as to bring about discriminatory and detrimental competition for Chilean produced nitrate.

It also appears that Regulation No. 10, referred to above, is not in keeping with the statement of the Department of State regarding the price to be applicable to the transfer of the plants, set forth in the note of October 22, 1945,³⁷ where it was stated that the Government of Chile could be assured that the policies formulated for the disposal of the plants would conform to the objectives specified in the law, and that a price would be fixed to yield as nearly as possible “the fair value of the surplus property”.

Thus, the Government of Chile could not refrain from voicing its concern when confronted with the fact that the lease of the synthetic ammonia plants, belonging to the Government of the United States, was taking place, to private firms and for periods of time which imply permanency, as would be the case referred to of the Jay hawk Plant.

In view of the traditional friendship which has existed between the United States and Chile, and considering the policy of economic and commercial collaboration sponsored by the United States at every Inter-American and World Conference, and the assurances given by the State Department to the Minister of Foreign Affairs of Chile in a letter dated March 5, 1945,³⁸ and confirmed in the note of the Department of State of October 22, 1945, the Government of Chile feels that it has a perfect right to insist upon the following:

1) That the transfer of the nitrogen plants to third parties shall be made strictly in conformity with the conditions established by the Surplus Property Board in Special Order No. 19 of September 7, 1945, which provides the manner of fixing “a fair sales price”.

2) That Paragraph 8310.6 of Regulation No. 10 of the Surplus Property Board, regarding transfer prices, shall not be applied because it does not take into account the fixation of “a fair value” of the property for its sale.

3) That it may be given the opportunity to become acquainted with the terms of transfer of these plants before any definite decision is made, in order that the Government of Chile may be enabled to express its point of view as to the effect which these transfers might have on the trade in Chilean nitrate.

Washington, March 4, 1946.

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Mora

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34. Not printed.
35. Approved October 3, 1944; 58 Stat. 765.
36. 10 Federal Register 11579 and 11582; the regulation and the order were effective September 11, 1945.
37. Not printed.
38. Foreign Relations, 1945, vol. ix, p. 795.