The Secretary of State to the Embassy in Chile 1
543. No distribution. For Amb. from Miller. Chil Amb saw Pres Truman this afternoon with Miller present. Nieto explained briefly background of cancellation agreement stressing unsatis sales 20 percent quota, bitter opposition to Gonzalez Videla, unstable econ situation and unpopularity copper agreement among all circles in Chile. He handed Pres memo2 which Nieto told Miller he had prepared on telephonic instrs Gonzalez Videla and which Nieto had admitted to Miller previously was extremely harsh and unfair. Memo contains virtual ultimatum that we buy copper at between 33 and 34 cents pound although it does open door to our purchase of all Chil production.
Pres Truman replied that Chile’s action had come as great surprise; that he had thought Chile our best friend in LA; and that he considered Gonzalez Videla his friend. He said that there had been no need for Chile denounce agreement since in any case it expired today [Page 681]under gentlemen’s agreement. Furthermore we were always ready work out any agreement with Chile that was in interests of two peoples. However, although he was willing order GSA pay fair price for copper, Pres said in strongest terms that he did not like to be coerced. He said in previous cases where fon suppliers had tried hold us up for high prices, such as case of rubber, fon suppliers had eventually come to disaster. We did not want any such thing happen to such good friend as Chile. He felt Chile’s action coupled with its failure to accord agreed treatment US cos re tax and exchange rates amounted virtually to confiscation and gravely prejudiced our vital investments in Venez oil and iron and other positions. He was surprised that at time when US was making great sacrifices prevent third World War at cost many US lives in Korea Chile cld not remain content with substantial subsidy for their copper over price paid to US domestic producers. He said his admin had been willing throughout our informal negots to listen to any fair proposal from Chile but that none had ever been put forward and we had been completely taken aback by Chile’s sudden action last Fri. He expressed astonishment that Pres of US shld be handed document such as memo Nieto gave him containing unfair inferences and constituting virtual ultimatum. He repeated that he was willing instr his assistants work our fair deal with Chile but, if negots were to be conducted on basis of ultimatum from Chile, Chile wld have to resort to its fate in free market.
After meeting Miller accompanied Nieto back his Emb where he expressed gratification that Pres had listened so long and carefully and had taken time to read and comment on memo. He expressed to Miller complete agreement with our position and said Chile had blundered in its handling copper starting with Novoa’s unrealistic fon exchange budget. He showed me numerous exchanges teles with FonOff in which his requests for instrs were always precise and explicit whereas FonOff messages were vague and contradictory. In tele sent just prior termination agreement, Nieto had asked that Muller be sent back to Washington to handle copper matters. He feels incompetent handle them.
We were relieved that Gonzalez Videla instructed Central Bank not to set floor price which action wld gravely prejudice possibility quick solution this matter. We will probably have meeting here Fri to determine course action which may take form of inviting Chiles begin discussions.
Foregoing report re Pres conversation with Nieto is primarily forur-info and Nieto making his own report to FonOff concurrently. You will of course treat with extreme confidence Nieto’s views re his Govt’s actions. Since this tele is marked no distribution pls do not refer to it by number in any reply.