398.254/9–751

Memorandum of Conversation, by Mr. Milton Barall of the Office of South American Affairs

restricted

Subject: Chile’s position in the IMC—Copper, Lead and Zinc Committee

Participants: Manuel Trucco, Under Secretary for Foreign Affairs, Chile
Walter Muller, Chilean Representative, IMC
Mario Rodríguez, Minister Counselor, Embassy of Chile
Mr. Miller, Assistant Secretary of State
Mr. Willis Armstrong, OMP
Mr. Edmund Getzin, OMP
Mr. Barall, OSA

Señor Trucco stated that the purpose of his visit was to explain in advance, to the United States, the position Chile would take in the Copper, Lead and Zinc Committee of the IMC. He then handed Mr. Miller a copy of the paper1 which Chile had sent to the Chairman of the Committee and which presented the Chilean point of view as follows:

1.
Copper is of greater importance to Chile than to other countries since it is her principal means for making international payments, providing 65 percent of the total value of exports and being almost the sole source of dollars.
2.
In the last World War Chile lost tremendous revenue because it consented to fixed prices for copper.
3.
Despite this, Chile has already agreed to “freeze” 80 percent of her copper, which is shipped to the United States at low price.
4.
The 20 percent reserved for Chile is the only means available to the country to pay for imports whose price has been going up very rapidly.
5.
Under the proposed allocation the ceiling assigned to some of the nations to whom Chile now sells copper is much too small and in certain cases there is no quota at all.
6.
Chile reiterates its objection to fixed quotas and prices of some raw materials while other raw materials, machinery, agricultural products, etc., rise in a free market to high levels.

The statement ended by indicating that Chile could not participate in any international allocation of copper which would place in jeopardy her control of 20 percent of the production of the American companies.

Mr. Miller replied that the arguments advanced by Chile with respect to the importance of copper to the Chilean economy were well known to the United States and, indeed, were a paramount consideration in negotiating the copper agreement in the spring of this year. He explained that the United States felt Chile could participate in the proposal for allocation of copper for the fourth quarter of 1951 without losing any of the benefits of the copper agreement.

Mr. Miller and the others on the US side made the following observations:

1.
The allocation was for the fourth quarter only and in no way prejudiced any country’s position as to principles, methods or amounts in succeeding quarters.
2.
There was no obligation on the part of a supplying country to sell to a particular consuming country. Supplying countries would be obligated only to limit shipments to the ceiling established for the recipient country.
3.
The allocation placed no limit on the price which Chile might obtain for her copper. In the event seller and buyer could not agree on price and copper remained unsold the committee would reallocate any unsold portion.
4.
Chile had participated in the negotiation of this allocation for nearly six months and, although the basic principles were well known to the Chilean delegate, at no time had he raised any objection or reservation. This 11th hour change in position was particularly awkward since all countries had appeared to be in agreement and, if allocation for the fourth quarter were to be feasible, arrangements must be completed no later than September 15. Time did not permit a complete renegotiation.
5.
The United States placed great significance on a successful copper allocation because the material was so important to mutual defense and security that success or failure in this material might well determine the possibilities of success of the whole IMC concept.

Mr. Miller emphasized the temporary, experimental, nature of the present proposal and stated his belief that the difficulties which Chile anticipated could be ironed out within the IMC Committee, citing as an example the fact that Argentina had already indicated its intention of going before the Committee to seek a higher quota and that a means could be found to continue Chile’s lucrative sales to Argentina, Brazil and other countries within the allocation framework.

In reply to Mr. Miller’s query on the degree to which Chile had contracted to oversell to Argentina during the fourth quarter, Señor [Page 1287]Muller stated that deliveries to Argentina would exceed 8,000 tons for the fourth quarter, more than four times the ceiling on consumption allowed for that country, and that if Argentina wanted even more copper she could obtain it under the barter system worked out by the two countries, under which Chile obtained necessary meat and foodstuffs essential for the health and well-being of its people. Mr. Armstrong questioned Argentina’s using this copper and quoted from the copper agreement: “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”. Señor Muller quickly changed the subject.

After further discussion of all the above, it became apparent that there was no possibility of reconciling the Chilean and US points of view at this time. Trucco even went so far as to argue that the US would render inoperative the copper agreement by urging Chile to give up control of its 20 percent, this despite the sentence contained in the agreement, “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”, which was quoted to show him that international allocations had been provided for in that instrument. The Chilean representatives also argued that, while no price control was indicated in the present proposal, this item was already on the agenda for future discussion and, in any event, an allocation system always strengthened the position of the buyer and in the long run, would make it impossible for Chile to get $1200 a ton for the copper over which it exercised control. Without this extra income from copper, Chile’s economic situation would be extremely bad and she would have no way to defend herself against the constantly rising prices of imports.

Mr. Armstrong informed the Chileans that in US opinion the failure to achieve international control over copper would probably have serious repercussions for other commodities and that the entire IMC might now fail. In this event, world opinion would hold Chile responsible. The Chileans seemed rather surprised at the firm stand taken by US representatives at the meeting and made inquiries as to the final date for reaching a definite decision in the committee. They were informed that the committee had to complete its arrangements by the 15th of September at the latest.

In conclusion, the US pointed out that it could in no way agree with the position taken by Chile. Chile was again urged to seek a formula by which its needs for foreign exchange, recognized by the United States, could be reconciled to the allocation proposal. A trial period for one quarter was suggested.

  1. Not printed.