611.25/2–2751

Policy Statement Prepared in the Department of State

secret

Chile

a. objectives

The basic US objective in Chile, as in the rest of Latin America, is to obtain Chile’s full and effective cooperation in our quest for freedom and international security. Chile’s effective cooperation depends upon the maintenance of reasonable governmental stability and the continuance of Chile’s present strong adherence to democratic principles. It is the objective of U.S. Government policy to strengthen [Page 1243]the idea both in the Chilean Government and among the Chilean people that the interests of the United States and Chile are fundamentally the same. We also strive to strengthen Chile’s existing disposition towards friendship for the United States and to curb the influence of political forces inimical to our broad international policies.

In view of its demonstrated willingness to cooperate, we must strive to make Chile able to carry out its role in the defense of the Hemisphere, and to further our own defense effort by insuring the availability on an increasing scale of Chile’s strategic natural resources, especially its copper.

It is also our objective to promote the economic development of the country and to foster conditions favorable to existing American interests as well as to the investment of additional capital.

b. policies

Friendly US connections have been established since the beginning of Chilean independence. At the present time, good relations with the United States are a predominant tenet in Chilean foreign affairs. Nevertheless, we must never lose sight of the political value of an “anti-US” or “anti-Yankee-imperialist” stand in Latin America, nor of the desire of small countries to be assertive about their sovereignty occasionally.

Partly due to its geographical location, Chile has developed a certain independence in foreign relations which reflects the strong individuality of the national character. The constitution of 1925 calls for a “presidential system” of government. In practice, however, there is a multiplicity of parties and a tendency to follow the pattern, uncommon in Latin America, of parliamentary government similar to that of France. In the absence of majority parties in Congress, the executive governs with the support of usually unstable coalitions which form and reform, necessitating frequent cabinet changes.

The Administration’s stand against Communism.

The present Administration in Chile has been zealous in its efforts to combat Communism. President Gabriel González Videla, early in his administration, broke with the Communists who had joined with his own powerful Radical Party and other left-of-center groups to support his election in 1946. After serious Communist-inspired strikes and disorders, he sponsored the outlawing of the Communist Party in Chile. In 1948, despite strong opposition from several non-Communist parties, the Government succeeded in enacting the “Defense of Democracy” law which drove the Communist Party underground, disenfranchised its members, and forbade their active participation in labor unions. As a result, direct Communist agitation has been considerably reduced and Communist influence, in general, has been weakened. [Page 1244]Nevertheless, the Communists have had some success in infiltrating other political parties and in regaining their influence in labor movements. They will attempt to exploit the prevailing labor dissatisfaction, strikes, and labor-exerted pressure on the government, which remain perennial features of the Chilean political scene.

The US has in no way inspired or instigated the Chilean Government’s anti-Communist program. While we do not necessarily advocate the outlawing of the Communist Party as the most effective way of combating Communism, we have expressed a view to the Chileans that every government should meet this threat in the manner it deems most appropriate.

Anti-American Factors.

The fact that a large segment of Chile’s industrial labor is employed by US-owned enterprises adds a degree of anti-US flavor to the ill will normally encountered as the cause or product of labor-management disputes. To counteract this, it is our policy in everyday diplomatic intercourse and through the Information and Education Program, to seek to dispel those latent complexes concerning “Yankee Imperialism” which are readily exploited by extremists of both Eight and Left, as well as by the personal ambition of individual politicians.

Chile has two right-wing groups which occasionally become the subject of embarrassment to the government. Until the end of World War II the Nazi movement was very strong in Chile among the large German population of the South, in schools, military circles, the press arid even the government. While this group is now dormant it may arise again some day as a very strong anti-American influence. There is also a right-wing pro-Perón movement which seems to be gaining supporters, although Chile is traditionally opposed to Argentina. A group of Congressmen paid homage to Perón during the celebration which took place in Buenos Aires in 1950. This group was censured by the Congress upon its return home and the leader of the unauthorized delegation, the President of the Chamber of Deputies, tendered his resignation as a result. However, General Carlos Ibañez,1 former dictator-president of Chile, selected Buenos Aires to announce his candidacy for the presidency in the election of 1952, apparently with the backing of the Peróns.

In spite of the existence of the groups mentioned above, anti-US feeling is now at a low level. In the past year the US has taken specific steps to foster this friendly feeling through the invitation extended to President Gonzalez Videla for his highly successful visit to the United States,2 by maintaining a sympathetic attitude on loans, when economically [Page 1245]sound, by supporting Chile’s efforts to purchase a tanker in the US, and by our successful support of Chile’s efforts to secure a place on the UN Commission for the Unification and Rehabilitation of Korea3 and to have the 1951 ECOSOC meeting take place in Santiago.4

Chilean Support for U.S. Global Policies.

We have encouraged Chile to participate actively in the United Nations and the Organization of American States. We consult with its representatives in formulating the tactics of our UN program and we urge its support for resolutions that we consider important. By voting our way, as it usually does, Chile contributes tangibly to the furtherance of our global foreign policy.

Hemisphere Defense.

For economic reasons the armed forces of Chile are small, but it is our policy to assist their development and training so that in time of war or emergency they can cooperate in hemispheric defense5 by carrying out their appropriate duties. While the details are now being worked out by the Inter-American Defense Board, it is likely that Chile will be requested to maintain order and security, insure continued shipment of vital raw materials, prevent damage to vital ports and other installations, and offer some protection for the Straits of Magellan.

At the present time the US has an Air Mission in Santiago and a Naval Mission in Valparaiso6 which seek to prepare the Chilean armed forces so that they can be integrated readily into joint plans for hemispheric defense. These Missions have been well received by the Chileans and the equipment and training of the armed forces are now oriented toward the US. Chile is anxious to modernize its military establishment, but its efforts in this direction have been hampered by a shortage of dollars for expenditures of this nature and by the scarcity of certain types of material in the United States, the preferred source of military supply. The Chilean Government is now negotiating to [Page 1246]procure two light cruisers from the US7 under the Military [Mutual] Defense Assistance Act8 as recently amended. These vessels, to be purchased at relatively low price, would considerably strengthen the Chilean fleet and the government has already set aside the dollars necessary to make payment. In 1950 Chile liquidated her outstanding indebtedness under the Lend-Lease agreement by a lump-sum payment of 15,000,000 pesos ($541,964).9

US-Chilean Financial Ties.

The Chilean economy is often said to be dependent on the US. This is so because of: 1) the considerable US private investments in Chilean mineral resources and industry; 2) the importance of the US market for Chilean exports; 3) Chile’s need for US manufactures; and 4) the dependence of Chile’s development program on loans granted or supported by the US Government. Consequently, economic matters are all important in Chile’s relations with us and they help us to achieve political aims.

Copper.

The most important single factor in our economic relations with the country is the Chilean copper industry, the production of which is exported largely to the United States. Roughly 95% of Chilean output is produced by wholly-owned subsidiaries of two U.S. firms (Anaconda and Kennecott).

These companies have long been subject to heavy and complex taxation. When there is a fiscal deficit, Chile tends to look to copper as a source of additional revenue. One form of taxation is application to the companies of the special exchange rate of 19.37 pesos per dollar for that portion of foreign exchange proceeds from copper exports which must be returned to Chile as representing local cost of production whereas all other exports are accorded rates ranging from 49 up to the free rate of about 70 pesos per dollar. Another tax, payable in dollars, consists of 50 percent on that portion of the copper price in excess of 13½ cents per pound. Not only are these taxes important for the governmental budget but they also are of great significance in the country’s annual foreign exchange budget.

The current acute copper shortage gives the Chilean Government an opportunity to seek increased revenues by additional taxes or by controlling the sale of copper in order to obtain increased profits from higher prices. Ministerial decrees already are required for exportation [Page 1247]of copper sold on any other basis than US dollars and very little additional action by the government would be needed to impose complete control on sales. Recently the copper companies were approached by a Chilean government official to turn over 20 percent of production “voluntarily” for sale by a Chilean government corporation. We hope that the copper companies will be able to avoid this by direct negotiation with the Chilean Government without the intervention of the US.10 Although it is our policy not to interfere in such matters unless national interests are threatened, the US Government may have to take a hand in this case if there is any likelihood that copper will thus be diverted from normal channels or if any action were taken by the Chilean Government which would result in reduced shipments to the US or other damage to our combined economic and defense efforts. Chile may try to use copper as a lever to obtain higher quotas of short materials such as cotton, the importation of which from the US is essential to the Chilean textile industry.

U.S. Excise Tax on Copper.

Of equal concern to the US-owned companies and the Chilean Government is the US excise tax on imported copper which was originally 4 cents per pound and was reduced by the GATT 11 in 1949 to 2 cents. The suspension of this tax since 1947 expired on July 1, 1950. Even if Congress provides for a further temporary suspension,12 the presence of the tax in our legislation is a source of recurring uneasiness for Chile as a possible cause for eventual curtailment of copper exports with consequent decline in employment, dollar resources and tax revenues. Since this type of curtailment occurred after World War II, the psychological factor in Chile’s attitude toward this tax is considerable. Imposition of the tax by the US is regarded as an unfriendly act and is constantly exploited by Communists and extremists of the right as a manifestation of US imperialistic selfishness.

The Executive branch of the US Government advocates continuation of the suspension of the tax, primarily because our domestic production of copper is insufficient for our needs. This position is also based on our [Page 1248]awareness of the political significance of the tax to US relations with Chile.

Sodium Nitrate.

Second only to the copper industry as a source of wealth is the older traditional mainstay and, also, the white elephant of Chilean economy, the production and exportation of natural sodium nitrate found in seemingly unlimited quantities in the desert of the North. This industry employs twice as many persons as the copper industry but provides a considerably smaller portion of foreign exchange and tax revenues. Over 65 percent of the output is owned by US interests (Guggenheim) but the marketing of nitrates is a monopoly of an agency of the Chilean Government which receives 25 percent of the profits.

This industry has long struggled with the competition of synthetic ammonia production which is again expanding all over the world. Notwithstanding the tremendous increase in world consumption of fertilizers during the last war, the Chilean product has maintained only its volume of sales, rather than its proportionate share of the US market and Chile now sells only 7½ percent of the world’s nitrates whereas it once sold as much as 65 percent of the total supply.

During the war the United States built and operated Army ordnance plants for the production of nitrogen. The Chilean Government was apprehensive that operation of these plants or their disposal at low prices after the war would constitute a subsidy for the US nitrogen industry to the detriment of Chile’s nitrate trade. In 1945, by an exchange of notes13 at the time of the Chapultepec conference,14 we promised Chile that the US Government would not continue to operate these plants beyond the period necessitated by the consequences of the war and further agreed to consult with Chile regarding the terms of disposal of these plants to private industry.15 Most of the ordnance plants have now been transferred to private industry under sale or lease arrangements and in every case, the Chilean Government has claimed that the disposal price was far below the commercial value of the plant and created unfair competition. On the other hand, US officials, in accordance with our policy in this respect, have repeatedly asserted that the terms of disposal of these plants were based on fair and reasonable commercial standards.

[Page 1249]

The Chilean Government has also expressed its concern at US financing through ECA, of synthetic ammonia production in ERP countries and at reports of possible US financing of plants in other countries, such as Spain. It is our policy to reply to the Chileans that these projects are undertaken on the basis of their own intrinsic economic soundness after full consideration of all factors involved in the world fertilizer trade including our interest in the welfare of the Chilean industry.

The nitrate producers, with the backing of the government, have taken preliminary steps toward seeking a loan in the US to modernize production methods in the northernmost province of Tarapacá. They hope to introduce the Guggenheim system now in use in Antofagasta and to make other improvements in production methods which will virtually eliminate the antiquated and inhuman Shanks method. It is US policy to encourage this type of modernization which lowers production costs, improves living standards and puts Chile in a better competitive position in the world market.

Economic Diversification Program.

While agriculture is still the economic activity of a large part of the working population of Chile, the economic well-being of the country depends mostly upon the export of copper and nitrate. To counteract this, the Government has pursued intensive efforts at industrialization and economic diversification during the past decade, and has had considerable success as exemplified by the establishment of several new industries, including a steel mill and a producing oil field. It is our policy to foster industrialization and the use of modern machinery in Chile, while at the same time urging balanced production, stabilization of the currency and caution to avoid over-extension.

The industrial development of Chile is being promoted largely through the Corporación de Fomento de la Producción, a government owned corporation established in 1939, with wide autonomous powers. The Corporation was created entirely upon Chilean initiative, originally to direct rehabilitation following the earthquake of 1939. It has since expanded its program to include general economic development.

The largest project thus far undertaken by Fomento is the $88,000,000 Huachipato steel mill at Concepción, financed by a $48 million Export-Import Bank credit for the purchase of equipment in the US.16 Production is based on domestic supplies of iron ore, limestone and domestic and imported US coking coal. It is our policy to support Chile in this significant industrial achievement and we also point to this particular project as an outstanding example of the benefits derived from US financial aid for economic development.

[Page 1250]

Through the Fomento Corporation, Chile has developed its recently discovered oil deposits in Tierra del Fuego, and has become an oil producing country this year. Storage facilities and a 45 -mile pipe line from the fields to a sheltered harbor have been built and the production of crude (over 2,000 barrels per day) is at present exported to Uruguay. The field and all facilities are owned and exploited by a Chilean Government entity, Empresa National de Petróleo. The first steps are being taken for the construction of a stabilization plant at the oil fields. Plans for a refinery near Valparaiso are still far from realization. Since the Chilean Government is committed to a policy of public ownership of oil fields and installations, participation by the large oil companies in the construction of a refinery is precluded. Chile has not formally requested a loan for the projected construction of an oil refinery. Should other Latin American countries receive loans for oil development purposes, Chile will probably request similar assistance. Under our present policy financial assistance in the form of Export-Import Bank loans for petroleum development is precluded. Since 1942, marketing of petroleum products in Chile has been regulated by an agreement among the Esso Standard Oil Company, Shell–Mex and the Cia de Petroleos de Chile (Copec). This agreement, which is implemented under government auspices, terminates at the end of 1951 but is automatically extendable for an additional three years unless one of the parties signifies a desire for its termination. This step was taken by the Esso Standard Oil Co. at the end of 1950 and is currently under negotiation looking toward a return to competitive marketing of petroleum products. This government, in accordance with its foreign economic policy, supports efforts to obtain the elimination of this agreement and in general encourages the development of competitive petroleum marketing.

Through another subsidiary, ENDESA (Empresa National de Electricidad), Fomento has expanded power output, with Export-Import Bank and IBRD financial assistance, by constructing hydroelectric installations to serve the Concepción area where the steel mill is located and where Fomento plans to establish nearly 20 industrial plants, including factories for agricultural machinery; building materials and chemicals. A new 30,000 kilowatt plant owned by a subsidiary of the American and Foreign Power Company has further increased the electric power of the Santiago–Valparaiso region and it is likely that rationing in this area will have ended completely by 1951.

The Chilean development plans also include an irrigation project, establishment of a wood pulp and newsprint mill, modernization of lumber enterprises, further expansion of electric power, modernization of the principal coal mines and further improvement of the railroads. Realization of these plans is dependent on the ability of the Chilean Government and private firms to obtain sizeable foreign financing. [Page 1251]Chile’s capacity to borrow in the US is now the subject of serious scrutiny because of the continued inflationary policies of the government and its failure to take corrective action leading to economic stabilization.

Growing Government Controls in the Economy.

In the last thorough reshuffle of the cabinet in March 1950, the Administration shifted from conservative economic policies to the more programmatic of the erstwhile opposition parties. The Government at present is committed to advanced social policies which make it prompt to respond to the clamors for wage increases, and reluctant to adopt effective anti-inflationary measures. Consequently, the demand for commodities, of which several basic ones are imported, continues to rise, while the industrialization program has as yet been unable to furnish a commensurate increase in national productivity adequate to satisfy either consumption at home or to meet trade imbalances abroad.

U.S. Concern Over Chile’s Financial Policies.

We intend to take every opportunity, within the framework of our policy of non-interference, to impress on Chilean representatives our belief in the desirability of effective measures aimed at achieving economic stability and sound financial practices. Chilean officials fervently hope that the US Government will not adopt a pessimistic view of further expansion of the Chilean economy and look to the Department of State for initial support in procuring financial assistance. It is our present policy to support Chilean applications for sound development projects but to dispel undue optimism with respect to further financial assistance in the absence of effective measures for stabilization and caution to avoid overexpansion.

Since the early 19th century, foreign loans and investments, first European then American, have played a very important part in the Chilean economy. This inflow of foreign capital reached a peak during 1925–29, but in 1929–32 Chile suffered a sharper relative decline in foreign trade than any other country in the world and with the resulting inability to meet service payments, the external debt went into default. Chile sought to escape from this predicament partly by establishing exchange control in 1931. By 1950 this control system had become one of the most complicated in the world and tends to make the government a hidden partner in all international business transactions.

Foreign enterprises with investments in Chile are permitted to transfer earnings and capital, but only on the basis of an agreement with the exchange-control authority, which specifies the rate at which capital may be amortized and the exchange rate or rates applicable to this particular industry. The combination of an inflationary economy and exchange control has permitted Chile to count on exchange profits [Page 1252]as a source of government revenue but at the same time it has lessened Chile’s chances of obtaining further financial commitments from abroad. The instability of the Chilean financial system is also aggravated by the fact that the budget and the economy in general are highly dependent on the export of its minerals which are subject to wide variations in price in the world market. The exchange rate is also manipulated by the government to increase or decrease the profits of a given industry or may be used as a form of subsidy. For example, in a recent effort to provide full employment in the northern provinces the President had the exchange rate for the nitrate industry raised from an average of less than 43 to 49.23 pesos to the dollar and thus provided greater profits and a better competitive position for the industry.

It is US policy to encourage Chile’s adherence to its commitments of January 1948 to the International Monetary Fund, which encompass internal anti-inflationary fiscal policies and eventual simplification of the present multiple exchange-rate system in favor of a single rate at a realistic level.17 The IMF conducted a financial study of Chile and submitted written recommendations to the government designed to halt the inflation and strengthen the financial structure. The US lends general support to these recommendations. Chile was one of the Geneva signatories to the General Agreement on Tariffs and Trade, and has participated in the second and third rounds of tariff negotiations held at Annecy and Torquay, respectively. It is U.S. policy to encourage Chile’s continued participation in the GATT, in line with the aspect of our economic foreign policy that is directed towards reducing artificial barriers to international trade.

Technical Assistance Programs.18

In addition to the general assistance to Chile in increasing its industrialization and diversifying its economy, the US has tried to help improve the standard of living of the country through technical assistance offered by the Institute for Inter-American Affairs (IIAA)19 and the Interdepartmental Committee for Scientific and Cultural Cooperation [Page 1253]operation (SCC).20 The health and sanitation; program of the IIAA, which has been in continuous operation since 1943, has involved construction of three tuberculosis sanatoria, operation of three health centers, the installation of numerous sewage systems and a program of rural sanitation. Assistance was also given to nurse training and to a health-education campaign. Under the new Point IV program technical assistance to Chile will be broadened by two new IIAA programs in food supply and vocational education. Also under consideration are a program for mass-produced low-cost housing and assistance in general economic planning and research.

Shipping and Aviation Policy.

It is our policy to encourage Chile to permit the principles of free competition to operate in the conduct of transportation services. However, since the end of the war, Chile, in common with some of the other American Republics, has shown increasing inclination to build up its merchant fleet through a system of preferences and discriminations intended to channel trade to its flag carriers. This attitude became a fixed policy in 1950 in pursuance of which the Chilean Government has taken steps to guarantee that 50% of the freight destined to Chile is handled in its national shipping companies. The 50% is achieved through the mechanism for issuing import permits, whereby the Chilean National Foreign Trade Council determines what flag ships are to be employed in the movement of freight. Following our repeated protests that this policy and the measures used to carry it out were discriminatory against US shipping, an acceptable agreement was reached last fall among the Chilean and US shipping lines involved.21 Other shipping lines have expressed apprehension over these arrangements and the Maritime Administration is holding hearings22 to determine if the arrangements violate the terms of the 1916 Shipping Act.23

In order to prevent its capital city from being bypassed on international trunk air routes, Chile very early adopted a policy of prohibiting overflights of Chilean territory. Although the US-Chilean air transport agreement of 194724 contains a provision covering the [Page 1254]right of transit as well as the right to non-stop points in Chile, that government has consistently maintained that transit rights were not granted separately but only in connection with the right to make traffic stops in Chilean territory. In view of the difference in interpretation, the US formally reserved the right to set forth its position at a later date. We are now considering initiating action to obtain clarification of this point in view of the desire of a US carrier, which has no traffic rights in Chile, to overfly Chilean territory on its trunk route to Argentina.

c. relations with other states

Chile has always played an important role in inter-American affairs. In recent years it has become one of the most active participants in inter-American organization, showing particular interest in international economic planning on behalf of underdeveloped countries. In general, in the Organization of American States Chile collaborates with the United States. Chile has ratified the Rio Treaty of Reciprocal Assistance.25

Chile is also very active in United Nations affairs and belongs to most of the specialized agencies. The Chilean delegation has sided firmly with the Western powers on all important issues. It formulated the protest in the Security Council against the Communist coup d’etat in Czechoslovakia in 194826 and actively opposed Soviet machinations in the General Assembly in 1950. The President strongly supports the US policy of containing Communism. It is our policy to encourage Chile to play an important role in the UN as one of the leading democracies of Latin America.

In Latin America Chile has served as a champion of democracy and has frequently expressed its opposition to authoritarian governments in the Western Hemisphere. Whenever a democratic government has been overthrown, Chile has shown its concern by postponing recognition of the new government. For example, it has endeavored to promote the growth of US and OAS sentiment against recognition of the governments established by force in Peru and Venezuela. The Chilean Government has openly criticized US application of Bogotá Resolution 3527 which proclaims the desirability of the continuity of diplomatic [Page 1255]relations among the American states. Despite the US position that recognition does not mean approval, the Chileans believe that concerted action to show disapproval of a regime set up by force would do much to discourage ambitious military groups.

With respect to these views, it is our policy to explain to Chilean officials that while it is one of our basic long-term policies to foster adherence to democratic principles in Latin America we do not wish to encourage any policies which would tend to divide the American republics into antagonistic groups according to the political ideologies of the several governments in power.

Chile has not yet established diplomatic relations with the Junta Government of Venezuela. In 1950 the Chilean Government requested the US to represent her interests in Caracas. Pleading a shortage of personnel, we refused, but one of the items considered in the formulation of a negative reply was the US desire that Chile and Venezuela reestablish relations.

Chile’s attitude toward Argentina is motivated by a conflict of interests. While feeling it advisable to maintain close economic relations with its eastern neighbor, Chileans resent Argentina’s ambitions to become dominant in southern South America and fear Argentina’s meddling in their internal affairs. In the opinion of many Chileans, President Perón of Argentina has long desired to acquire special economic advantages for Argentina in Chile and would encourage any group in Chile that might be willing to pursue a pro-Argentine policy. The US has tried to avoid entanglement in Chile-Argentine relations and has followed its policy of encouraging the growth of democracy both at home and abroad.

Bolivia and Peru find it difficult to forget that they lost extensive territories to Chile as a result of the War of the Pacific (1879–1883). Although Chile finds the military dictatorship in Peru distasteful, it has accorded recognition to the government and relations are correct though not cordial. In the case of Haya de la Torre28 Chilean sympathies are completely with Colombia. After the election of a pro-democratic administration in Bolivia in 1947,29 relations between Chile and Bolivia became most cordial and the President of Chile proclaimed his friendship for the Bolivian administration on the occasion of last year’s revolt and civil war instigated by Bolivian radicals with the alleged support of President Perón of Argentina.

[Page 1256]

The Government of Chile has unofficially indicated its willingness to cede to Bolivia a narrow strip of land adjacent to the Chile-Peru boundary, which would give Bolivia access to the sea. The cession would be combined with a three-nation irrigation and hydroelectric power development. Under the Chile-Peru boundary settlement of 1929, the consent of Peru to such a cession is required. Press announcements reporting high level discussion of this proposal have caused a good deal of debate and animosity in all three countries. Peruvian officials have indicated apprehension; a large segment of Chilean public opinion has expressed vehement opposition; and the Communists have denounced the project as an evil scheme of US imperialism, basing this propaganda on the fact that the President of Chile, during his visit to Washington in April 1950, had outlined the proposal to President Truman.

Chile established diplomatic relations with the USSR in 1946 but broke them in 1947 when President González Videla alleged that international Communism was responsible for the Chilean coal strike. In November 1950 Chile reestablished diplomatic relations with Yugoslavia by means of an exchange of notes which took place in New York City between the delegates of the two countries to the UN. In connection with the current Communist aggression in Korea,30 Chile has formally expressed her solidarity with the US and has declared to the UN that it recognizes its responsibility in upholding UN Charter31 principles.

Traditionally, Chile has had relatively strong ties with Western European countries. The bonds of ancestry, language, and religion long furnished a strong base for Chilean-Spanish relations, but Radical Party administrations, in power since 1938, have shown little friendliness toward the Franco32 Government.

For many years, the influence of French culture has been preeminent in Chilean higher education and cultural activities but, since World War II, US cultural influence has made considerable gains. For more than a hundred years close relations with Germany existed because of the achievements of German colonists in southern Chile, the influence of German technical assistance in the school system, and the training of the Chilean army by German officers. Ties with Italy have been close because of cultural affinities and also because of the Italian ancestry of certain prominent Chileans. A considerable number of British families settled in Chile and now form a bilingual Anglo-Chilean colony which exercises appreciable influence in the Santiago area through their schools and clubs, by participation in business, and [Page 1257]by their “way of life.” This group has been successful in avoiding the growth of anti-British feeling.

Commercial exchange with Europe is slowly reviving. Chile has entered into several trade agreements with European countries, mostly providing for the exchange of sodium nitrate for particular commodities. More normal commercial relations were recently established with Germany by the conclusion of a trade agreement which thinly disguises a large-scale barter arrangement. At the present time a growth of trade with Europe represents no threat to American interests and indeed may fit well into US policies for other areas which are the recipients of ECA and technical assistance.

Chile claims a sector of the Antarctic continent which includes the Palmer Peninsula and overlaps the Argentine and British claims. The Chilean Government and public attach considerable importance to this Antarctic claim and believe the area may some day have great geopolitical importance as well as strategic military value. The US, reserving its rights to make territorial claims, seeks condominium for the Antarctic in agreement with seven other interested countries. Chile and the US are seeking a common approach to a solution of the Antarctic problem.33

d. evaluation

The US has successfully sought Chilean support for its general program in the UN and in the OAS. On almost all important issues the two governments consult in advance and support mutually satisfactory positions. At home the Chileans have shown a devotion to democratic principles and have contained the extremist forces of the left and right without sacrificing any of the basic freedoms.

Although Chile was sympathetic to the Nazis in World War II, we believe that maximum cooperation from Chile in the event of another war or emergency is now assured. Its armed forces are available for immediate use in a regional security framework and to ensure continued production and shipment of copper and other strategic materials. The Chilean Government is already participating in a voluntary inspection system to prevent shipment of semi-processed copper to countries which are our potential enemies. If the threat of war increases, the armed forces and the economic resources of Chile will be available for integration in the over-all war effort of the US.

In general, the government’s development program has progressed satisfactorily but it has not yet reached the point where it has relieved the Chilean economy of its lopsided dependence on the prosperity of the copper and nitrate industries. Nor has industrialization reached the stage where it can effectively influence the constantly rising cost [Page 1258]of living or the chronic unbalance of Chile’s foreign-exchange budget. In future years the development of the economy will continue to be dependent oil foreign capital although stabilization of the currency and sound financial practices may eventually diminish this dependency.

In cultural fields the USIE program has been successful. The three Cultural Institutes and the active radio and motion-picture programs have helped develop a disposition of friendliness and understanding toward the US. It would be well to extend these programs to reach an even greater segment of the laboring and white-collar groups which are the targets of Communist and other anti-US propaganda.

Perhaps the smallest gains were made in the field of raising standards of living for the inhabitants of Chile. In common with other countries, Chile is in the grip of a vicious inflationary spiral which wipes out increases in wages almost as soon as they are granted. This has prevented large-scale progress in improvement of housing, provision of an adequate diet and improvement of educational and health standards. The 1951 expansion of assistance under Point IV, to include technical aid in low-cost housing construction, education, and food production, should prove to be effective in helping to achieve some of our objectives in Chile.

  1. Carlos Ibañez del Campo, President of Chile, 1927–1931.
  2. For information on President Gabriel González Videla’s visit to the United States during April and May 1950, and his discussions with President Truman, see editorial note printed in Foreign Relations, 1950, vol. ii, p. 785.
  3. For documentation on the establishment and work of the United Nations Commission for the Unification and Rehabilitation of Korea, see Foreign Relations, 1950, vol. vii, pp. 731 ff.
  4. Reference is to the Twelfth Session of the United Nations Economic and Social Council, which met at Santiago, February 20–March 21, 1951.
  5. For documentation on the policy of the United States with respect to hemisphere defense and related matters, see pp. 985 ff.
  6. On February 15, 1951, the United States and Chile had signed at Washington agreements providing for the establishment of a United States advisory air force mission in Santiago and for an advisory naval mission in Valparaiso; both agreements entered into force on February 15. For text of the Air Force Mission Agreement, see 2 UST 522, or TIAS No. 2201; for text of the Naval Mission Agreement, see 2 UST 535, or TIAS No. 2202. For an announcement concerning the agreements, see the Department of State Bulletin, March 26, 1951, p. 502.
  7. Chile had taken possession of the cruisers on January 25, 1951 (725.5621/1–2551). For documentation on the negotiations leading to the sale of the cruisers, see Foreign Relations, 1950, vol. i, pp. 599 ff.
  8. For text of the Mutual Defense Assistance Act (Public Law 329), approved October 6, 1949, see 63 Stat. 714; for text of the act’s amendment (Public Law 621), approved July 26, 1950, see 64 Stat. 373.
  9. For information on Chile’s liquidation of its Lend-Lease indebtedness, see-editorial note printed in Foreign Relations, 1950, vol. ii, p. 783.
  10. In late January 1951, Mr. William H. Hoover, President of the Anaconda Copper Mining Company, and Mr. Charles R. Cox, President of Kennecott Copper Corporation, met with President González Videla and other Chilean officials at Santiago to discuss current problems in the copper industry. These discussions proved inconclusive and were terminated on January 31. Shortly thereafter, the Chilean President announced that since most of the copper questions which concerned the companies and the government of Chile required a decision by the United States Government, he would name a commission to enter into conversations with United States representatives at Washington. Subsequently, he appointed Chilean Ambassador Felix Nieto del Río to head the so-called Chilean Copper Commission. Pertinent documents are in decimal file 825.2542.
  11. For text of the General Agreement on Tariffs and Trade (GATT), concluded at Geneva, October 30, 1947, and entered into force for the United States, January 1, 1948, see TIAS No. 1700, or 61 Stat. (pts. 5 and 6).
  12. H.R. 3336 provided for another suspension of the tax; it was approved as Public Law 38, May 22, 1951. For text, see 65 Stat. 44.
  13. The United States note, dated March 5, 1945, contains the agreement reached; it is printed in Foreign Relations, 1945, vol. ix, p. 795.
  14. Reference is to the Inter-American Conference on Problems of War and Peace (Chapultepec Conference), held at Mexico City, February 21–March 8, 1945. For documentation on the conference, see ibid., pp. 1 ff.
  15. In the fall of 1951, the Chilean Government was provided an opportunity to comment on the proposed lease worked out between the Department of the Army and the Mathieson Chemical Corporation for reactivation of the Morgantown Ordnance Works prior to the execution of the lease. Pertinent documents are in decimal file 825.2564.
  16. This credit was authorized on September 11, 1945.
  17. For documentation on the foreign exchange question in Chile in 1950, see Foreign Relations, 1950, vol. ii, pp. 783 ff.
  18. For documentation on the technical assistance policy of the United States toward the American Republics as a group, see pp. 1038 ff.
  19. The IIAA was established in March 1942, and became a United States Government corporation under the jurisdiction of the Secretary of State in 1947. Its purpose was to aid governments in the Western Hemisphere by promoting technical programs and projects for health, sanitation, and food supply; as of mid-1950 the IIAA operating in conjunction with the Technical Cooperation Administration (TCA) in Latin America. For background information on the IIAA, see the statement made by Assistant Secretary of State for Economic Affairs Willard L. Thorp before the Senate Foreign Relations Committee on June 10, 1949, printed in the Department of State Bulletin, June 19, 1949, pp. 795–797. For information on the activities of the IIAA and its relationship with TCA in 1950, see the editorial note in Foreign Relations, 1950, vol. ii, p. 679.
  20. This committee was officially in existence from May 1938 to October 1950; through it the Department of State sponsored certain assistance programs in Latin America related primarily to social services and health care.
  21. The shipping agreement signed October 30, 1950, at New York, consisted of pooling arrangements between Grace Line, Gulf and South American Steamship Company, and Compañía Sud Americana de Vapores (CSAV). For previous documentation on shipping matters, see Foreign Relations, 1950, vol. ii, pp. 793798.
  22. On May 14, 1951, the United States Federal Maritime Board dismissed a complaint against the pooling arrangements by the West Coast Shipping Line (911.5325/2–951), and on July 6, the Board formally approved the arrangements (911.5325/7–951).
  23. For text of the Shipping Act (Public Law 260), approved September 7, 1916, see 39 Stat. 728.
  24. For text of the Air Transport Agreement, concluded by an exchange of notes at Santiago, May 10, 1947, and entered into force December 30, 1948, see TIAS No. 1905, or 63 Stat. 3755.
  25. For text of the Inter-American Treaty of Reciprocal Assistance (Rio Treaty), opened for signature at Rio de Janeiro, September 2, 1947, and entered into force for the United States, December 3, 1948, see TIAS No. 1838, or 62 Stat. (pt. 2) 1681
  26. For documentation on United States policy with respect to the crisis in Czechoslovakia in 1948, see Foreign Relations, 1948, vol. iv, pp. 733 ff.; for documentation on the related subject of the United States attitude toward changes in the representation of Czechoslovakia at the United Nations, see ibid., vol. i, Part 1, pp. 167 ff.
  27. For text of this resolution, adopted by the Ninth International Conference of American States, held at Bogotá, Colombia, March 30–May 2, 1948, see the Final Act of the conference, printed in Annals of the Organization of American States, vol. 1, 1949, p. 135.
  28. Victor Raùl Haya de la Torre, principal leader of APRA in Peru, had taken political refuge in the Colombian Embassy in Lima in January, 1949. The Colombian Government’s refusal to turn him over to Peruvian authorities generated a legal and diplomatic controversy between the two countries. For previous documentation on United States interest in the so-called Haya de la Torre case, see Foreign Relations, 1949, vol. ii, pp. 772 ff. and ibid., 1950, vol. ii, pp. 994 ff.
  29. Reference is to the administration of Enrique Hertzog, President of Bolivia, 1947–1949.
  30. For documentation on this subject, see Foreign Relations, 1950, volume vii.
  31. For text of the Charter of the United Nations, signed at San Francisco, June 26, 1945, and entered into force for the United States, October 24, 1945, see Department of State Treaty Series (TS) 993, or 59 Stat. 1031.
  32. Francisco Franco Bahamonde, Spain’s Chief of State.
  33. For documentation on United States policy with regard to the Polar Regions, see vol. i, pp. 1715 ff.