823.2542/10–2554
Memorandum by the Assistant Secretary of State for Inter-American Affairs ( Holland ) and the Assistant Secretary of State for Economic Affairs ( Waugh ) to the Under Secretary of State ( Hoover )1
Subject:
- Toquepala Project.
Problem:
Views to be expressed by the Department in the discussion of the Toquepala copper project in the NAC meeting of October 26.
Discussion:
The Department has continued to press for a favorable decision on the financing of the Toquepala project in Peru. It has stated that it would be very salutary if a large private investment offering substantial benefits to Peru could be begun. Peru, at a time when nationalistic feeling is rising in Latin America, has been outstanding in its treatment of foreign private investment and, in particular, has adopted a mining code unusually favorable to investments of that nature (Tab A2). It is [Page 1531] believed that the institution of such a development as Toquepala would create a favorable impression at the Rio Economic Conference.
At the time this project was considered by the Defense Mobilization Board, experts in that Agency reached a conclusion that the long-run benefits of a new source of supply of copper in this hemisphere would be of importance to the U.S. It would further diversify our sources of supply in this hemisphere and it would improve our bargaining position vis-à-vis Chile (Tab B).
The only real “limitation” upon the authority of the Bank to finance this project is that of avoiding competition with private capital. A corollary of this “limitation” is that the Bank should in its loans supplement and encourage private capital (Tab C). The present proposal of A.S.&R. contemplates the participation by other partners of $46 million, slightly less than the $50 million of equity capital being supplied by A.S.&R. (Tab D) An increase in the amount of equity capital to be supplied by other partners would place A.S.&R. in a minority position, which it wishes to avoid. The inclusion of Kennecott and Anaconda raises two additional problems for A.S.&R.: (1) both have interests in Chile which might make their participation unacceptable to the Peruvian Government and (2) a combination of such companies in this project may have anti-trust implications.
The Export-Import Bank is prepared to recommend a $90 million loan at 6% for this project. A.S.&R. has stated to both the Bank and Treasury that it would not wish to proceed with this project with less than $90 million of financial assistance from the Government. There are attached the most recent formal credit applications to the Bank by A.S.&R. and the minutes of the last NAC meeting on Toquepala attended by yourself, General Smith and others (Tabs E and F).
Recommendation:
That the Department support for reasons of foreign policy and long-run need for copper the proposed extension of $90 million of credit assistance to the Toquepala project by the Export-Import Bank.3