825.51/10–3047
Memorandum of Conversation, by Mr. James H. Webb of the Division of North and West Coast Affairs
| Participants: | Mr. Ness—OFD |
| Mr. Mills—NWC | |
| Mr. Webb—NWC |
Mr. Ness stated that negotiations between Roberto Vergara and representatives of the Bondholders’ Protective Council had been going [Page 547] extremely well. Vergara was so encouraged that he cabled Minister of Finance Alessandri on Friday, October 24, requesting permission to sign the agreement on terms essentially the same as those outlined in Vergara’s proposal.
Unfortunately, Minister Alessandri was having his own troubles in Santiago as the result of passage by the legislature of a bill proposed to extinguish the Chilean 1947 budget deficit of some 2,000,000,000 pesos. The bill included, among several sources of revenue, a 20 percent increase in the extraordinary tax on copper exports. Alessandri, who had opposed this provision of the bill, felt that whatever difficulties had been anticipated in the attraction of American capital to investment in Chile would be greatly increased by the passage of this bill.
Mr. Ness, who said he was expecting a telephone call from Vergara at any moment, was doubtful that we could afford to offer too much encouragement in pushing the debt settlement, since a successful solution of that problem would not necessarily produce the ultimate objective, which was a loan from the International Bank. Mr. Ness pointed out that settlement of the debt was only one of several conditions, named by the International Bank as prerequisite to a loan, ranking in fact only fifth in a list of such conditions enumerated in a memorandum from John J. McCloy, President of the International Bank, to Secretary of the Treasury Snyder.
Mr. Mills pointed out that notwithstanding such low placement, he himself knew from conversations with International Bank officials that debt settlement was actually the first consideration in their minds. Mr. Mills recommended that Vergara be encouraged to proceed with the settlement if possible, taking up the problem of possible antagonism of the copper interests when that problem arose. Mr. Ness agreed to proceed on that basis.
In reply to a question from Mr. Ness, Mr. Mills stated he would be glad to give him full backing if there were any repercussions as a result of his urging Vergara to proceed with the debt settlement. If the copper companies should approach the Department regarding the increase in taxation in Chile, the problem could be considered separately, in the opinion of Mr. Mills.
(Note: Embassy Santiago’s telegram No. 851 of October 30, 1947,76 indicates that since the proposed export tax on copper is temporary, to operate only until December, little opposition is anticipated from the copper companies.)
- Not printed.↩