Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

825.2542/3–1854

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

secret

[Washington,] March 18, 1954.

Subject:

• 1. Purchase of Chilean Copper
• 2. Brazilian Wheat Barter

• Participants: U—General Smith
• Dr. Flemming—Director, Office of Defense Mobilization
• Mr. Kendall—General Counsel, Office of Defense Mobilization
• Mr. Wormser—Assistant Secretary, Interior Department
• E—Mr. Kalijarvi
• OMP—Mr. Evans

1. Purchase of Chilean Copper.

The Under Secretary opened the discussion by referring to a “ticker” item to the effect that the Chilean Cabinet had announced its intention of selling copper to the Soviet bloc. He then read aloud the telegrams¹ from Santiago which gave the text of the Chilean Cabinet announcement and which left a clear implication of the intention to explore the possibility of sales behind the iron curtain. One aspect of the Chilean Cabinet statement to which the Under Secretary, Dr. Flemming and Mr. Wormser attached particular importance was the indication that the Chilean Government would not permit the American companies in Chile to reduce their production. The Under Secretary pointed out that if this had the effect of continuing to pile up surplus copper stocks in Chile, part of the purpose of the proposed purchase would be defeated.

There was some discussion as to whether the Chilean Cabinet’s action required any reconsideration of the United States Cabinet decision to purchase 100,000 tons of copper. It was agreed that this was not necessary, since the United States Cabinet decision was clearly conditional upon the Chileans giving satisfactory assurances with respect to East–West trade.

Dr. Flemming then indicated that his purpose in requesting the meeting had been to discuss the worry that Mr. Wormser and others had as to the possible market effect of the purchase, and he suggested that some of the risk might be removed if we were to spread the purchase of the copper over a period of several months. Mr. Kalijarvi pointed out that the question of market effect had been discussed in the Defense Mobilization Board and presumably was also a consideration before the Cabinet at the time it made its decision. The decision was made in spite of any danger that might be involved. Mr. Evans asked Dr. Flemming what he had in mind in connection with a gradual purchase. Dr. Flemming indicated that purchases would be on the basis of market price at the time of delivery, and that this would reduce the total price to the United States Government if the market should fall after our initial purchase. Mr. Evans pointed out that it had been contemplated throughout the negotiations that Chile would be able to make prompt delivery of the entire 100,000 tons, and that the kind of arrangement suggested would be considered by the Chileans to represent bad faith on the part of the United States and would probably do more harm to our relations than no purchase at all. The Under Secretary said that this was his view, and Dr. Flemming agreed that he found the arguments persuasive.

The conclusion was that Ambassador Beaulac should be informed that we would take no action concerning the purchase or notification to the Chileans pending the Ambassador’s further analysis and a statement from him as to whether authority to tell the Chileans of the decision to purchase would be helpful in obtaining the desired East–West trade assurances. The Under Secretary also said the Ambassador would be informed of the concern which was felt here about a cutback in United States production if this cutback were not matched by a similar reduction in Chile.²

[Here follows discussion of proposed barter of surplus wheat for Brazilian monazite.]

1. Not printed.
2. In telegram 265, to Santiago, dated Mar. 24, 1954, the Department instructed Ambassador Beaulac to inform President Ibáñez that the U.S. decision to purchase 100,000 tons of Chilean copper was contingent upon assurances from Chile that it would (1) reverse or interpret favorably the Cabinet statement concerning the sale of accumulated copper stocks to Soviet bloc countries, (2) institute the IC/DV system, and (3) not prevent the copper companies from making reasonable decreases in production (825.2542/3–2454).