825.2542/3–1452

Memorandum of Conversation, by the Director of the Office of International Materials Policy (Brown)

secret

Subject:

  • Copper
  • Participants: Mr. Nieto del Río—Chilean Ambassador
  • Mr. Muller—Economic Counselor, Chilean Embassy
  • Mr. Wilson—Director of Defense Mobilization
  • Mr. BrownOMP

The meeting was arranged as a result of the Ambassador’s instructions from his government to continue discussions about the price of Chilean copper on an informal basis with Mr. Wilson if possible.

Mr. Wilson opened the meeting by reporting that the night before he had received the first good news about copper that he had had in some time. He had attended a meeting of a business advisory group at which many large copper consumers were represented. They had all told him that they were much less worried about copper than they had been and were getting ample supplies for their needs. Mr. Wilson pointed out the extent to which aluminum was becoming available and was being used in substitution for copper, either by directive of the Government or as a result of the user’s choice.

Mr. Muller pointed out that, nevertheless, copper was still in short supply and the United States representative in the IMC was actively pressing for large allocations for the United States.

Mr. Muller outlined the problems facing Chile, namely, that it was beginning to find difficulty in selling its 20 percent at 54 cents a pound, that it did not like to seem to be holding up friendly European countries for high prices, and that it would like to have a single price for copper at, say, 33½ cents. It seemed anomalous that the United [Page 671]States, the richest country in the world, should be paying the lowest price for its copper, and that poorer countries, which the United States was aiding financially, should be paying high prices for their copper.

Moreover, Mr. Muller said, it seemed unjust to the material-producing countries that the large industrial countries should extol the virtues of the law of supply and demand when supplies were plentiful and prices were low, but should rush in to impose price and other controls as soon as shortages developed. In his opinion, there could be no long-term solution of the problem of the material-producing countries, no solid foundation for a democracy in which the bad influence of demagogues could be counteracted, until some assurance of substantial and stable income from primary products could be given to the producing countries.

Mr. Muller appreciated the desire of the United States to keep stable prices. He recognized that this policy worked substantially to the benefit of Chile. He was not well enough aware of United States domestic procedures to be able to suggest exactly how the problem might be met, but the possibility occurred to him that the United States might buy Chilean copper at a higher price for its military requirements, keeping other supplies under control. This might be possible since military products did not enter into the general price structure.

Mr. Wilson said that he was impressed by what Mr. Muller had said and was appreciative of Chile’s problem. He did not see how the United States could possibly be justified in increasing the domestic price of copper in view of the profits currently being earned by the domestic copper producers. Moreover, he felt that inflation was one of the great enemies facing the United States and he did not want to see an increase in the price of copper which would necessarily have to be passed on through the general price structure. He thought the mechanical problem of allocating high-priced Chilean copper to military orders, scattered in 100,000 plants over the United States, would be almost insuperable.

Mr. Muller countered by pointing out that the amount of copper which would be imported from Chile would be less than half the United States military requirements as presented to the IMC and could certainly be taken up by a few of the major domestic consumers such as ordnance factories and certain large corporations.

Mr. Wilson pointed out how unhappy the United States was about the failure of Chile to enact the tax and exchange legislation which had been agreed with the companies a year ago. Mr. Muller and the Ambassador said they personally felt equally unhappy about it. Mr. Muller said that a satisfactory solution of the current problem would make it much easier for Chile to pass the law now. I pointed out that [Page 672]this was precisely what had been said by Chilean negotiators a year ago. Mr. Muller and the Ambassador accepted this point as valid.

Mr. Muller made it perfectly clear that no part of any increase in price which he was suggesting would go to the companies. He said that he was negotiating for the Chilean Government, not for the companies which were making good profits at present prices.

Mr. Muller emphasized the political difficulties faced by the Chilean Government in an election year, with four candidates running for president, each one trying to outdo the other in promises to the voters.

It was left that the matter would be discussed further and that if reporters should ask about the visit, we should say that the Chileans called to discuss with Mr. Wilson the possible effect of his recently announced proposals for expansion of aluminum production on copper.

After the Chileans left, I asked Mr. Wilson how he proposd to follow up on the matter. He said he hoped it could be stalled for ten days or two weeks, since very important decisions would have to be made in connection with steel that might affect the whole future of CMP. I said I thought that would be easy, but that there should be a genuine negotiation, headed by someone from Mr. Wilson’s office. Mr. Wilson inquired who we thought the negotiator should be. I said the best negotiator we had seen around in a long time was Mr. Fleischmann. Mr. Wilson said he would try to get him to do it and would let the Chileans know whom he had appointed by Tuesday or Wednesday of the following week. He said the negotiating team would include Mr. Larson and someone from State.1

I reminded Mr. Wilson of his agreement to take the companies into his confidence in any negotiation with the Chileans and to include them in the negotiation. Mr. Wilson said he did not think it would be necessary to bring the companies in at this stage.

  1. Director of the Office of International Materials Policy Brown was subsequently designated to represent the Department of State in the copper negotiations with Chilean representatives that were initiated in the latter part of March.