825.51/5–2946

The Ambassador in Chile ( Bowers ) to the Assistant Secretary of State ( Braden )

confidential

Dear Spruille: I was so shocked by the A.P. story published under flaring headlines on the first page of El Mercurio which seldom misses an opportunity, through a subordinate who was pro-Nazi throughout the war, to create prejudice against the United States, creating the impression that we are bringing pressure on the Chilean Government to compel it to abandon its oil projects or to take in the Standard Oil, that I telegraphed the Department immediately. I know of the proposition of the Standard Oil and personally think it fair and that it should be acceptable here. In fact, when first submitted, Oscar Schnake, Minister at that time, was in complete sympathy with it. But that is a matter for Chile to decide and not for us to dictate, especially under pressure of Standard Oil, which justly or unjustly as you well know is a red rag to the average South American. I have since learned from the A.P. representative here that the A.P. report was doctored to make it even more unpalatable to the Chileans. Even so, it appears that some one in the Export-Import Bank or elsewhere leaked about the Standard Oil proposition and this is most unfortunate.

I have just read a report of the Petroleum Attaché50 of my Embassy, located in Lima, in which I find the following:

Regarding the Standard Oil Company (New Jersey) proposal to develop Chilean oil reported in confidential airgram 28 from Santiago of January 24, 1946,51 Leonard McCollum, Director in charge of Jersey’s foreign operations, told the Petroleum Attaché earlier this month that his company saw no objection to Corporación de Fomento developing Chilean oil with Chilean capital but that he would object and the whole management of Standard would look with disfavor on an American Government loan to help Chile develop its oil resources [Page 631] in competition with American private enterprise which has gone on record as willing to do so.”

This apparently is a statement given to the Attaché by some stupid representative of the Standard Oil who does not realize that the days of Dollar Diplomacy are over, making way for the Good Neighbor Policy. The fact that Standard Oil has “no objection to Corporación de Fomento developing Chilean oil with Chilean capital” is most generous, but when its agent in Lima adds that it “would object and the whole management of Standard would look with disfavor on an American Government loan to help Chile develop its oil resources in competition with American private enterprise which has gone on record as willing to do so” smacks of the “good old days” which I am afraid are definitely gone. Of course, if Chile and Chilean capital can develop these, their own resources, it is their right under the Good Neighbor Policy.

I am not at all satisfied with the idea that the Petroleum Attaché of my Embassy dealing with vital matters within the jurisdiction of this Embassy should reach his own independent conclusions remote from the scene and send them, not to this Embassy which is responsible for our relations with this country, but directly on his own sole responsibility to the Department, merely sending us a copy. In my despatch No. 13,976 of May 16, 194652 we set forth our views as to this policy and I am more than ever of the opinion that the views set forth in the last paragraph of that despatch are sound and that such a policy should be adopted. The oil matter is one of great political importance and interest here and reports should go from here where we are better able to view it from every angle which certainly is impossible from Lima.

In view of the law here prohibiting the Government from joining with foreign capital in the development of the oil field, if such there is, I reiterate that it would be wise in our opinion to make a loan for further exploration. Should the field prove to have reserves in excess of Chile’s reasonable needs, I am convinced that Chile will be compelled to seek capital from some private company like the Standard Oil or a foreign bank and that the prohibitive law will be repealed to make this possible. But it would make it most difficult if the impression were created here that we are insisting that Chile take in Standard Oil as a condition for getting any help in the work of exploration. At the present juncture the less said publicly about Standard Oil the better.

Warmest regards.

Sincerely,

Claude G. Bowers
  1. Olaf F. Sundt.
  2. Not printed.
  3. Not printed.