398.254/2–2451

The Secretary of State to the Chilean Ambassador to the United States (Nieto del Río)1

The Secretary of State presents his compliments to His Excellency the Ambassador of Chile and has the honor to refer to his note No. 230/46 of February 24, 19512 which stated that the Chilean Ambassador had been designated to carry on conversations respecting problems concerning copper, and to the memorandum furnished by the Embassy under the date of February 1, 1951,2 which sets forth the position of the Chilean Government.

Pursuant to the conversations which took place during the period from February 27 to April 9 between representatives of the United States Government and representatives of the Chilean Government,3 the position of the United States Government with respect to the questions raised by Chile has been presented and the enclosed memorandum contains a statement of the understanding of the United States Government with regard to agreements reached by the two governments respecting problems concerning copper.

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It would be appreciated if the Chilean Government would inform the United States Government if the attached memorandum accurately reflects the understanding of the Chilean Government with respect to the problems discussed.

[Enclosure]

Memorandum

The United States Government concurs in the view expressed by the Chilean Government that the maintenance and increase of copper production in Chile is of primary importance. It is recognized that increased production can be achieved by expanded operations by the two large American companies and by enlarging the operations of existing smaller mines or by opening up certain mining properties not now in operation.

With regard to expansion of the operation of the larger companies it is understood that the Chilean Government will continue discussions with the Anaconda and Kennecott companies in order to reach an acceptable basis under which these companies can accelerate expansion programs and plan for additional investments leading to increased production. The United States Government is pleased with the reports that the discussions are progressing rapidly and that mutually satisfactory arrangements may be expected in the near future. Following agreement by the Chilean Government and the American companies the United States Government will assist to the fullest extent that the emergency permits in the export of essential equipment and supplies to carry out these plans. It is noted that the mining companies state that they do not contemplate the need for public financial assistance for carrying out their expansion programs.

With regard to smaller and medium-size mining properties in Chile, the United States is prepared to assist in efforts for sound increases in production by facilitating deliveries, within the general defense needs, of supplies and equipment or by considering the granting of loans to increase production, provided that such requests are based on reports submitted by competent engineers. The United States Government is prepared to provide engineers to help determine, together with operators and engineers in Chile, the feasibility of increasing production by enlarging present operations or by starting new ones.

The United States Government appreciates the Chilean Government’s natural desire to utilize reasonable quantities of copper produced by the American companies in Chile for export directly to countries other than the United States and for the manufacture in Chile of semi-finished and finished products both for domestic use and [Page 1278]for export. It is understood that in export sales of copper the Chilean Government does not propose to export copper in the form known as “palanquillas.” In regard to the quantity of copper to be utilized for the above mentioned purposes it is understood that the Chilean Government will impose a limit of not higher than 20 percent of the production of the Anaconda and Kennecott companies thus assuring to the United States continuous shipment of Chilean copper in quantities no lower than 80 percent of the production of said companies. It is also understood that the distribution of copper would be subject to any obligation Chile undertakes with respect to international allocation in the International Materials Conference. The Chilean Government appreciates the importance of copper to the economy of the United States, which at the present time is being geared to maximum defense production in effort to supply the free world with essential military and civilian goods. The Chilean Government stated its intention that the copper not shipped to the United States will be used by Chile or sold to other friendly countries only for their essential needs; that the Chilean Government will take the necessary measures to assure that such copper will not be re-exported; and that no sales will be made to countries which are potential enemies or satellites of potential enemies. The United States also was pleased to learn that Chile agreed to exchange information on the amount of copper which should be sold to other countries, particularly in the event that the diversion should be sufficient to interfere with the United States defense effort, and also to exchange information with the United States on the export of copper to third countries to facilitate the supply of essential requirements to such countries in the most expeditious manner.

The Chilean Government stated that it must receive additional dollars from the sale of copper in order to maintain economic stability and support its own efforts for participation in hemispheric defense. The United States Government therefore, in the light of the agreements reached with the Chilean Government and the latter Government’s continuing discussion with the copper companies regarding increased production and sale of Chilean copper, considers reasonable an increase of three cents per pound in the price of all Chilean copper sold to the United States, and understands that the announcement of such an increase will be arranged by the Chilean Government at such time as it determines. It is understood that prices to third countries will not be lower than the price for Chilean copper sold to the United States.

In the course of conversations between the representatives of the two governments it was brought out that a mutually satisfactory solution of the copper problem was related to Chile’s overall plans for continued economic development. The representatives of Chile described Chile’s immediate program of loans now being sought from the [Page 1279]Export-Import Bank for the purpose of bringing the production of the Huachipato steel mill up to full present capacity, and from the International Bank for Reconstruction and Development for the purpose of increasing the agricultural potential of the country through irrigation, land clearance and the purchase of agricultural machinery and increasing hydroelectric power, providing new and increased coal production, and establishing a wood-pulp and newsprint industry. The satisfactory execution of the Chilean plans for economic development should be of value in helping to bring about greater economic stability in Chile and diversification of industry and production. Within the framework of its world-wide commitments, the United States will continue to manifest its interest in the economic development of Chile and will continue to cooperate with the Government by maintaining a friendly attitude toward requests for technical assistance such as those received in the past for assistance in economic planning, low cost housing, health and sanitation and increased food supply.

While the Government of the United States feels that it is not practicable to seek a bilateral formula which will permit dollars obtained by Chile through the sale of copper to the United States to maintain a constant purchasing power in the United States, it is pointed out that the United States has instituted price controls and that these apply to goods exported from the United States to Chile. Under the principles agreed to in the Fourth Meeting of Consultation of Ministers of Foreign Affairs of American States, this Government believes there is ample provision for continued cooperation by the two Governments to help maintain and improve the Chilean economy and that, through consultation, problems of mutual interest may be fully discussed in order to arrive at a satisfactory solution.

The agreement with respect to the distribution of Chilean copper produced by the American companies and the price of Chilean copper to the United States as provided above may be subject to periodic review upon the initiative of either Government.4

  1. Department of State files do not indicate on which date the instant note and memorandum were handed to the Chilean Ambassador.
  2. Not printed.
  3. Not printed.
  4. For text of the Department of State’s press release concerning the negotiations which took place in Washington, dated May 7, 1951, see Department of State Bulletin, May 21, 1951, pp. 819–820.
  5. This memorandum was amended in a note from the Secretary of State to the Chilean Ambassador, dated May 1, 1951, which reads in part as follows: “In addition to the items already agreed to, it is understood that with respect to non-fabricated Chilean copper produced by the American companies and sold to countries other than the United States such sales will be made through the facilities of the producing companies and that arrangements for such sales will be worked out by the Chilean Government with the producing companies.” (825.2542/5–151) The Chilean Government indicated its approval of the memorandum and the amendment in two notes dated May 7, 1951 (308.254/5–751).