825.6363/3–2646
Memorandum of Conversation, by Mr. B. C. Brundage of the Division of North and West Coast Affairs
| Participants: | A–Br—Mr. Braden |
| Mr. Wright | |
| NWC Mr. Flack | |
| Mr. Wells | |
| Mr. Brundage | |
| ED Mr. Stenger | |
| Mr. Scanlan | |
| FN Mr. Corliss | |
| PED Mr. Pigott | |
| Mr. Townsend |
The meeting was called to establish clearly what the Department’s attitude should be in regard to the present Chilean request for an Eximbank credit of $5,000,000 for further petroleum exploitation in the Magallanes.
Mr. Stenger called attention to the fact that it was a United States outfit, the Livermore Corporation, doing the drilling. He added that as far as the purely commercial aspects of Chilean petroleum went, it would undoubtedly produce foreign exchange which could be used to service and retire any dollar credit.
Mr. Braden stated that this was all very true but that this Government stood for private enterprise, and that it was therefore fundamental—in order to follow a consistent policy—that we not encourage State trading abroad through public financing. In other words, he wouldn’t give the Chileans “a plugged nickel” on their oil. He added that when President Rios was here in Washington he made the statement to President Truman—in Mr. Braden’s presence—that, with the credit finally advanced on the steel mill, Chile wanted no more public loans from the United States and preferred to induce the investment of private foreign capital. Mr. Braden later told President Rios that, before Chile could expect any further favorable consideration from the United States on such types of aid, Chile must first put its financial house in order and repair its credit standing.42
Mr. Stenger then made the point that if private United States companies, such as Standard, entered the Chilean field, then this Government might expect eventually just such untoward developments as have taken place in Mexico and Bolivia—political friction, expropriation and diminished production. Mr. Wright replied that, in the [Page 626] Mexican case, the State petroleum monopoly, Pemex, has been losing money at the rate of about $20,000,000 per year (according to a recent statement by Ambassador Messersmith), which was a signpost pointing to the dangers of our helping to promote similar State monopolies.
Mr. Townsend brought out that, while the Eximbank had $5,500,000 invested in the exploitation of Bolivian petroleum by an agency of that nation, this particular credit had been used to bail Bolivia out of a bad situation during the early period of the war emergency and to insure the flow of strategic raw materials needed in that emergency. The Chileans could not cite this as an instance, therefore, where the United States Government had cut across its well-established policy lines.
The issue of hemispheric oil reserves was raised by Mr. Scanlan, who stated that it was his understanding that the Department of the Interior had recently drawn to the attention of the public the scantiness of our own reserves. Mr. Wright replied that he did not believe this issue was pertinent to the present discussion.
In regard to the Corporación de Fomento, which had discovered the well at Springhill in Tierra del Fuego, Mr. Townsend asked if United States had financed any of this. Mr. Stenger replied that $500,000 of United States money credited to the Fomento Corporation had been used for that specific purpose. Mr. Stenger added that if we completely shut the door in the face of the Chileans’ desire to finance their oil industry with United States public money, they might start waving the Act of Mexico City43 in our faces. Mr. Braden countered by quoting Article no. 8 of the Economic Charter of the Americas.44
“To promote the system of private enterprise in production which has characterized the economic development of the American Republics, to take appropriate steps to secure the encouragement of private enterprise and to remove as far as possible obstacles which retard or discourage economic growth and development.”
Mr. Stenger mentioned the probable political repercussions which such a rigorous stand might be expected to have, stating that, in his opinion, these might be considerable. Mr. Braden replied that unfavorable results were bound to result in either case, and that therefore he would take the decision which most clearly conformed to this Government’s principles.
Mr. Flack, in the light of his experience with petroleum production in Venezuela, concurred wholeheartedly with all of Mr. Braden’s statements.
[Page 627]It was finally decided at the meeting, therefore, that the Department’s attitude on this Chilean request for Eximbank financing of its oil industry should be a decided “no”.
- Far documentation on Chilean indebtedness, see pp. 591 ff.↩
- The Act of Chapultepec was Resolution VIII of the Mexico City Conference; for text, see Final Act of the Inter-American Conference on Problems of War and Peace, p. 40.↩
- Article 8 of the Economic Charter of the Americas was paragraph 8 of Resolution LI of the Mexico City Conference; for text, see ibid., p. 98.↩