811.659/3–1748

The Secretary of State to the Chilean Ambassador (Nieto del Rio)

The Secretary of State presents his compliments to His Excellency the Ambassador of Chile and has the honor to acknowledge the receipt [Page 426]of the latter’s note No. 649/51 of March 17, 1948,1 setting forth the views of the Chilean Government concerning the terms of disposal of the Ozark Ordnance Works.

This Government has considered the view of the Chilean Government, and has reviewed carefully the pertinent data relative thereto. In this regard, the attention of the Ambassador is invited to the fact that the sum of $10,500,000 does not represent the total cost of the plant to the purchaser. The Department of State is advised by the War Assets Administration that the Lion Oil Company has expended more than $1,000,000 of its own funds to install graining facilities at the plant. Although the addition of the latter figure leaves the total cost of the purchase still below the figure regarded as the commercial value by the technical advisers of the Government of Chile, it does illustrate the many variables which complicate the calculations related to this entire subject, and which would have to be taken into full consideration in determining whether the terms of disposal are such as to create unfair competition.

The Ambassador will recall that the Secretary of State’s letter of March 5, 19452 said in essence that this Government would give due consideration to the effects upon Chile of the sale or lease of the plants, while at the same time protecting the interests of the United States Government. This Government has clearly and consistently declined from the outset, however, to agree that the letter of March 5, 1945 committed this Government to undertake a guarantee of the “effective security of the Chilean nitrate industry”. The views of the United States Government on this question were reiterated by the then Assistant Secretary of State W. L. Clayton at a meeting with the Ambassador of Chile on July 26, 1946.

As regards the interests of the United States Government in connection with disposal of the plants under consideration, the objectives of the Surplus Property Act3 require, among other things, that the War Assets Administration obtain for the United States Government, as nearly as possible, the fair value of surplus property, for the benefit of domestic taxpayers and to avoid creating unfair competition. This Government considers that the present period of very high demand for nitrogenous fertilizers is a favorable one for the sale of surplus synthetic ammonia plants, that the disposal terms of the Ozark plant are the best obtainable under existing circumstances, and that they do not constitute a subsidy to the buyer or give the latter unfair advantages over competitors. In the considered view of this Government, deferred disposal of these plants would be likely to involve terms less favorable from its standpoint.

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The Embassy’s note under reference asserts that the sale of the Ozark plant is a typical instance of a transaction which in the near future may create serious problems affecting the Chilean nitrate industry. The apprehension is expressed that the time may soon arrive when world overproduction of nitrogen is a reality. To the extent that this apprehension on the part of the Chilean Government may be borne out by the course of events, deferred disposal of the remaining surplus ammonia plants would appear more likely to involve terms less favorable from the standpoint of the Chilean Government than the present terms. Clearly, therefore, the interests of the two Governments in this connection are parallel.

With further reference to future prospects for the Chilean nitrate industry, it is understood that notwithstanding the apprehension expressed in the Embassy’s note under reference, officials of the industry are contemplating steps in the direction of expanding production facilities with an appreciable increase in output. This would appear to reflect a more optimistic attitude regarding the prospects of the Chilean nitrate industry than that expressed in the Embassy’s note.

In view of the foregoing considerations, and of the fact that officials of the Chilean Government were invited for consultation before disposal of the plant was completed, it is considered that the spirit and the letter of this Government’s statement of March 5, 1945 have been observed. The Secretary assures the Ambassador again that full and sympathetic consideration has been given to the views of the Chilean Government on this matter, and believes that the long course of friendly economic relations between the two countries is clear testimony to this Government’s continued interest in the welfare of the Chilean economy.

  1. Not printed.
  2. Foreign Relations, 1945, vol. ix, p. 795.
  3. 58 Stat. 765, approved October 3, 1944.