825.6363/3–1446
The Vice President of the Standard Oil Company of New Jersey (Suman) to the Assistant Secretary of State for American Republic Affairs (Braden)
Dear Mr. Braden: As I mentioned in the pleasant conversation which I had with you last week, Standard Oil Company Chile, S.A.C. (one of our wholly-owned subsidiaries) has been marketing petroleum products in Chile for many years. During all this period Standard of Chile has sought to enlarge the base of its activities in Chile to include the search for petroleum in that country and, if such search proved successful, to follow it up with the construction of local refining facilities. However, Chilean law has made it impossible for Standard of Chile even to start upon such a program.
Recently Corporación de Fomento de la Producción (Chilean government company) has discovered petroleum at Springhill, Tierra del Fuego. The Corporación is, quitely rightly, very proud of this achievement; the first petroleum discovery in Chile. Nevertheless I [Page 624] feel it only fair to suggest that this discovery might have been made much sooner had a system of free enterprise been permitted in the business.
Standard of Chile has congratulated the Nation and the Corporación upon this accomplishment and has renewed its previous expressions of desire to participate in the exploration for and development of petroleum resources and of refining within Chile upon any sound commercial basis. Copies of recent letters on this subject sent by Standard of Chile to Pedro E. Alfonso, recently retired Minister of Economics and Commerce, to Carlos Arriagada, present Minister of Economics and Commerce, and to Oscar Gajardo, Executive Vice President of the Corporación, are enclosed for your information.39 To date we have no advice that any reply to these letters has been received.
Information coming to us through the press and other channels indicates that the Corporación plans to approach our Export-Import Bank for a substantial loan to enable it to develop its Tierra del Fuego discovery and otherwise to develop petroleum production and refining in Chile. As you will have noted from the foregoing, private capital is available to do this job, provided satisfactory commercial terms can be negotiated.
I appreciate, of course, that, despite the availability of private capital, whether public funds should be loaned for such purposes by the Bank is for decision by it.40 In reaching a decision the Bank naturally would have to consider all factors, including, but certainly not limited to, the effect of such a loan upon the American petroleum companies. However, I do want to express the personal view that such a loan would not only be of irreparable harm to the American petroleum companies but also might well have an adverse effect upon all the Department has been and is doing by the promotion of agreements such as the Chapultepec Declarations,41 the proposals for an International Trade Organization and other similar measures; all designed to promote the free flow of international trade and investment unhampered by extremes of nationalism.
Thanking you for your interest in this and our many other Latin-American problems, I am
Sincerely,