825.2542/5–252

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

confidential

Subject:

  • Chile Denounces Copper Agreement
  • Participants: Ambassador Félix Nieto del Río, Chilean Ambassador
  • Señor Mario Rodríguez, Counselor, Chilean Embassy
  • Senor Jorge Burr, Counselor, Chilean Embassy
  • Assistant Secretary Edward G. Miller
  • R. S. Atwood, Director, OSA
  • Mr. Barall, OSA

The Ambassador said he had received a telephone call from President González Videla this morning instructing him to see the President of the United States in order to inform him that the Chilean Government had reached a decision to denounce the copper agreement of 1951 and take full control of the sale of copper. (Presumably under the provisions of Law No. 10,255 of February 12, 1952.) The Ambassador explained that he knew President Truman was busy with important strikes and he, therefore, approached the State Department instead. He said the reasons for the decision of the Chilean Government, as explained to him by the President, were:

a.
The extreme danger in which the Government finds itself both politically and economically.
b.
A Foreign Exchange Budget for 1952 which is short by an anticipated $50 million because of the failure of Chile to get its price in sales of its 20 percent quota.
c.
Rising anti-US sentiment in Chile despite the efforts of the Government to keep it down. (At this point, Mr. Miller interjected the question, “What efforts?” He said he knew of no efforts on the part of the Chilean Government to combat anti-US feeling. The Ambassador was unable to reply.)
d.
The strike in the Anaconda mines which threatened to spread to the Kennecott mine, too.
e.
Chile’s inability to work out a satisfactory price arrangement with the United States in recent “informal” conversations.
f.
Chile’s desire to avoid the type of thing which developed in Bolivia.

The Ambassador said he had also been instructed to continue to negotiate with the United States (presumably about a new price for any part of the production of the American-owned mines which might be sold in the United States). He then said he had been instructed to ascertain and report on the US reaction to Chile’s decision.

Mr. Miller replied that the Ambassador could inform the President that the reaction in the United States was extremely bad, since denunciation of an agreement is a very strong measure. He expressed the opinion that unilateral action on the part of Chile to denounce the copper agreement and take control of all the copper produced by the American copper companies was exactly the thing that Lechín 1 was proposing to do in Bolivia. Mr. Miller said this would affect every aspect of our relations with Chile; that it would make it almost impossible to secure further investment of American private capital in Chile; it would strongly affect Chile’s credit position in the United States, which might not be able to grant any additional loans; that Chile’s action was against her own interest and would make her a residual supplier of copper at a time when production was increasing in other countries and aluminum was being developed as a substitute; that the US had agreed to a 3 cent increase in the price of copper in the 1951 agreement and abrogation of this agreement might drop the price back to 24½ cents; the United States had shown itself to be willing to discuss the price of copper or any other specific proposal made by the Chilean Government; that meetings had been arranged with the highest, officials in the government to discuss this problem, but Chile, not the United States, called off these talks; the US might have to use its stockpile; Chile was trying to throw the blame for its action on the United States but our hands were perfectly clean since we had lived up to the copper agreement and had shown our willingness to negotiate, whereas Chile had not lived up to its obligations under the agreement and had failed to pass the copper contract law. He added that he had been wondering if the entire purpose of the “informal” talks had been to try to throw the onus on the United States for the action that Chile proposed to take. With respect to the continuation of negotiations, Mr. Miller said “This would mean negotiating with a gun at our heads”. However, he added, as the representative of a sovereign nation, the Ambassador could see President [Page 679] Truman at any time and the Department could arrange for an appointment if he wished. The Ambassadóor said he would like to see the President next week if possible.

The Department officers asked when and how the agreement would be denounced. Ambassador Nieto did not know, but said that President González had told him over the phone that he was going to call in Ambassador Bowers today to inform him of the decision of the Chilean Government. When asked if the American companies had been notified, Nieto replied in the negative. The Ambassador tried to throw some responsibility for Chile’s action on the American companies for selling copper in Europe in competition with Chile’s 20 percent. The Department officers pointed out that, if 40,000 tons sold in Europe was enough to depress the market for Chile’s 20 percent, how much worse it would be for Chile when all of its copper becomes available in that market. It was strongly stated that US capital had been a major factor in building up Chile’s economy and that, in the long run, Chile’s denunciation of the agreement was not in her own best interest.

  1. Juan Lechín Oquendo, Bolivian Minister of Mines and Petroleum.