Memorandum of Conversation, by Mr. Edgar L. McGinnis, Division of North and West Coast Affairs

Participants: Mr. Cussen, Vice President, Compañia Chilena de Electricidad
Mr. Espy, Acting Chief of NWC
Mr. Webb, NWC
Mr. McGinnis, NWC

Mr. Cussen stated that he desired to furnish further information regarding the proposed financing of the expansion of the properties of the Compañia Chilena de Electricidad in Chile. He referred in this connection to his visit to see Mr. Armour on February 17 in the company of Mr. MacKenzie and Mr. Stafford.

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Mr. Cussen indicated that he had recently been conferring with Mr. Vergara of the Fomento Corporation and with officials of the International Bank. He stated that it had been decided that the Fomento Corporation would apply for an $11,000,000 loan which would be used for financing the dollar equipment purchases of his company. This loan application would be separate from the pending application by Fomento for $8,000,000 for expansion of Endesa1 properties. He said that Mr. Vergara would use his own judgment as to when the $11,000,000 application would be presented, but that probably it would be deferred until Fomento’s $8,000,000 application was out of the way.

Mr. Cussen explained that the loan application depended upon an agreement between his Company and the Chilean Government regarding the expansion plans of the Compañia Chilena de Electricidad. These plans, as had been brought out previously, involved the expenditure by South American Power Company (parent company of Chileña de Electricidad) of $25,000,000 over the next five years. However, before this investment is made, Mr. Cussen said that agreement would have to be reached whereby the Chilean Government would guarantee his firm remunerative rates for power and sufficient foreign exchange to meet its obligations for amortization, interest and dividend payments. He said that this agreement had not yet been worked out, but this point would have to be settled before the new investment would be undertaken.

Mr. Cussen repeated that he desired to bring this matter to the Department’s attention for purposes of information only, and that his visit did not involve any request for assistance.

In discussing equitable rates Mr. Cussen disclosed that his firm had currently under litigation its contract with the Chilean State Railways. He asserted that the Railways were paying for power from his Company at a ridiculously low rate under a 1921 contract and that consequently his Company was endeavoring to have the matter rectified through legal action. Payments by the Railways for power were considerably below costs of production, Mr. Cussen said. In this connection Mr. Cussen also brought out that the Santiago Street Railways had not paid his Company anything for power consumed since 1945. In conclusion, Mr. Cussen referred to the option held by the Chilean Government to purchase his Company’s properties before 1950 for about $52,000,000 (subject to adjustment for depreciation, etc.). The option was made in 1945 for a five-year period. Mr. Cussen stated that his Company’s properties were valued at that time at about $74,000,000. While Mr. Cussen did not definitely so state, it appears that he may be apprehensive that the Chilean Government might exercise this option if his Company does not proceed with its expansion program.

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Mr. Espy thanked Mr. Cussen for his courtesy in keeping the Department informed in this matter and said that the International Bank would doubtless consider Fomento’s loan applications in the light of Chile’s overall requirements and her ability to repay in dollars.

  1. Chilean Government’s hydroelectric power system.