825.6352/4–2849

Memorandum by Mr. Bainbridge C. Davis of the Division of North and West Coast Affairs to the Director of the Office of American Republic Affairs (Daniels)

confidential

With reference to Santiago’s Telegram No. 212 of April 28 (copy attached1), there is also attached a copy of a memorandum of conversation between Chilean Ambassador and Mr. Thorp which I attended on April 27.2 The Ambassador intimated the same possibility of increased taxes on copper to offset the falling price which President Gonzalez Videla indicated to Ambassador Bowers. Mr. Thorp referred [Page 592] to the favorable atmosphere which had recently been created for foreign investment in Chile and the confidence shown by the Anaconda Company in scheduling large investments in its copper mines. He expressed the hope that Chile would consider carefully the importance of not taking steps which would interfere with these favorable developments.

I believe that the Chilean Government realizes that we are not in a position to prevent a decline in the price of copper, whether this would be desirable from a world-wide point of view or not. On the other hand, the Chilean Government has taken the position that the copper companies are to blame for this decline and both President Gonzalez Videla and Ambassador Nieto have referred to the fact that each company is accusing the other of having started it. In order that we may have an opportunity to discuss the entire problem with the companies, I have suggested to Mr. Nichols of IR3 that he arrange a meeting in the Department with representatives of Anaconda and Kennecott.

I believe that the important thing at the moment is to help the Chileans realize that while the decline in the price of copper is unfortunate from the point of view of their economy, it is particularly important that they not undertake short-sighted, short-term solutions which will react adversely upon the development of their economy as a whole, particularly at a time when we are endeavoring to facilitate United States technological and financial assistance. I shall consult with others in the Department in drafting a reply along this line to Ambassador Bowers.

  1. Not printed. In the telegram, Ambassador Bowers reported that President Gonzalez Videla had warned him that Chile faced an enormous loss in revenue should copper prices decline, posing an economic threat to Chile of the utmost gravity (825.6352/4–2849).
  2. Memorandum of conversation not printed; Willard Thorp was Assistant Secretary of State for Economic Affairs.
  3. Clarence W. Nichols, Assistant Chief of the International Resources Division.