Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

374. Memorandum of a Conversation Between President Ibáñez del Campo and the Ambassador in Chile (Beaulac), Santiago, January 26, 1955¹

Santiago , January 26, 1955

I told the President that, as he knew, my conversations in Washington had been interrupted by my mother-in-law’s illness and death, but that before returning to Chile I had already had very interesting conversations with persons high in our Government and wanted to give him my impressions. The President said he would be very glad to have them.

I said that, as seen from Washington, the Latin American panorama is very interesting. I said that it is evident that the countries where there is the greatest prosperity are where relative economic freedom exists, such as, Mexico, El Salvador, Costa Rica, Colombia, Peru and Uruguay. The countries that are having the greatest difficulty, especially with reference to availability of dollars, are the countries that have complicated machinery for government intervention in economic matters.

So far as Chile is concerned, Washington is convinced that the principal hope for solution of Chile’s economic problems rests in private investment.

It is clear that if the copper companies, for example, instead of producing some $250,000,000 a year for Chile should produce $500,000,000, then Chile’s urgent economic and social problems, and many of her political problems too, would be settled.

This result, in turn, can only be brought about through improved treatment to the copper companies. In other words, economic problems must receive economic solutions. No other solutions are possible.

For these reasons, I was encouraged by the progress that has been made in the Senate committee with reference to the copper bill,² and encouraged by the President’s own intervention, vis-à-vis, his Ministers, and, vis-à-vis, the Congress, with reference to the bill. The President’s attitude had confirmed the impression I had carried to Washington that he remained resolved to find solutions to the problems of the copper companies.

The President interrupted to say that it still looked like a long process to him. He was hoping that the bill would be approved before the Congress adjourned but if that was not possible, the Congress would have to deal with it in March.

I said I was hoping that the bill would be approved by the Congress before it adjourns, and I had the impression that there was a good possibility if the President maintained his present interest.

Referring to the copper bill, I said that the tax rate on copper would still be the highest in the world, and this would place Chile in a precarious position, particularly if copper prices should go down.

The President noted that a considerable reduction in taxes would result from the bill.

I said that whereas my Government was convinced that Chile’s urgent economic problems could be solved only with the cooperation of private capital, it still envisaged the possibility of cooperation with Chile by agencies of the United States Government and international agencies, such as the International Monetary Fund.

I recalled that the President of the Export-Import Bank³ had had certain conversations when he was down here looking to the possible financing of certain exports to Chile, and Chile had had discussions with the IMF concerning a drawing or a standby fund.

I said my Government was a little confused, of course, with reference to these matters because only a few days prior to my departure from Chile, the President had selected a new Cabinet. It was too early to judge the desires or intentions of that Cabinet. However, my Government was prepared to cooperate with the Government of Chile if requested to do so and if Chile created conditions which would make it possible to cooperate.

I recalled that meanwhile the Embassy had been prepared for the past week to sign an agreement with Chile for the exportation of $5,000,000 worth of agricultural products but the Chilean Government was delaying signature because it was not sure whether it was authorized to sign without advance Congressional approval. The President noted that the Government, as such, was not authorized to sign but that CORFO could sign. I did not pursue this subject. The President noted that $20,000,000 rather than $5,000,000 had been mentioned at first. I said that $5,000,000 was the amount agreed upon, but that it was possible that additional negotiations would take place later.

At this point, I recalled to the President that Under Secretary of State Herbert Hoover, Jr., had had interesting conversations with Finance Minister Jorge Prat in Rio de Janeiro on the subject of Chilean petroleum,⁴ and following his return to Santiago Mr. Prat had told Embassy officials that the Chilean Government would send a communication to the Embassy requesting that the Government of the United States give Chile expert help in drawing up adequate petroleum legislation. I said that no such request had been received, and I was wondering whether this was still Chile’s desire. I noted that I had talked to Mr. Hoover in Washington. I recalled that Mr. Hoover had brought in the first well in Chile’s history; that he knew the Chilean problem intimately; and that he had a great personal interest in Chile and was disposed to give Chile any assistance possible.

The President said that the petroleum legislation introduced in Congress was inadequate and he was going to withdraw it. He said that he, himself, had wanted a bill which would have reserved Magallanes for the ENAP and would have allowed foreign companies to explore and exploit in the rest of the country (the present bill does reserve Magallanes for the ENAP). He did not take this opportunity to request assistance from the United States.

I told the President that Mr. Roy Merritt, who is a petroleum expert and an old friend of mine, and who is Counselor to Under Secretary Hoover, is making a trip through this part of South America soon and, if the President so desired, I would ask him to come to Chile and I would bring him to see the President.⁵ The President said he would be delighted to talk to him.

I reminded the President that my interest in this matter arose out of the conversations that his Minister of Finance had had with Mr. Hoover, and that I was not trying to influence the President with reference to the attitude he should take toward Chile’s petroleum. The President said that he understood this and he would be glad to see Mr. Merritt.

The President said he had an item of news for me—that he was going to change his Ambassador in Washington. Jara would submit his resignation in a few days and he was going to name Jorge Silva whom he described as a competent man who had practically been brought up in the United States and was very fond of the United States. “We will see whether the Senate will confirm him,” he said.

1. Source: Department of State, Central Files, 825.00/2–2755. Confidential. Transmitted to the Department as an enclosure to despatch 524, January 27.
2. This bill, introduced in the Chilean Chamber of Deputies on March 3, 1954, was approved by the Senate on January 26, 1955, and the Congress as a whole on February 4. Drafted at a time when the competitive status of Chilean copper was threatened, the new law sought to correct that situation by safeguarding Chile’s share of the world markets. Despatch 567 from Santiago, February 8, summarized the chief provisions of the bill as well as the U.S. interest in it. (Ibid., 835.2542/2–855)
3. Glen E. Edgerton.
4. A memorandum of this conversation, which took place on December 2, 1954, is in Foreign Relations, 1952–1954, vol. iv, p. 755.
5. Documentation on Merritt’s Latin American trip is in Department of State Central File 110.4–ARA; his scheduled visit to Chile was later cancelled.