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

384. Telegram From the Chargé in Chile (Sanders) to the Department of State¹

Santiago, December 21, 1955—7 p.m.

354. Vassallo Under Secretary Foreign Ministry requested see me today with Minister Economy.² Vassallo came alone since Minister Economy delayed in Congress but said latter would see me tomorrow to confirm what Vassallo had to say.

Vassallo said that on his return from New York recently he had told President Ibanez very limited possibility of immediate and significant assistance direct from United States Government, IBRD EXIM Bank, Monetary Fund or Technical Assistance. Only possibility he saw was PL 480 agreement. Since his return to Chile this view had been strengthened by information concerning agreements with Argentina and Brazil for surplus commodities value $30 to $40 million and providing liberal repayment over 30–40 years.³ President had instructed him and Minister Economy discuss possibilities similar agreements for Chile.

Vassallo said Chile on threshold taking significant steps combat inflation and facing difficult transition period. Chile desperately needed help of kind it would receive under PL 480 to maintain low price for essential commodities and to ease exchange situation. Also peso proceeds surplus commodity loans and dollars saved would in part be used for public works to take up unemployment slack resulting austerity measures. Though Vassallo was not sure how far and how fast government would move in direction of free exchange he thought some important step in that direction was contemplated.

Vassallo said Argentina and Brazil have been given large amounts and on favorable terms and that Chile was in greater need than these countries, particularly in view of repercussions its proposed anti-inflationary program.

Priority items would be wheat, vegetable oil, cotton and powdered milk and secondarily forage seed and lard.

President wanted Vassallo travel immediately Washington discuss proposal with appropriate authorities. However, Vassallo had persuaded him wisdom of preparing ground. He inquired whether he could receive this week preliminary reaction proposed trip and possibility successful negotiations so that he might plan go Washington January 2 at latest.

Vassallo said that only President, Minister Economy and himself were aware this approach being made to United States and they planned to keep it on same restricted basis.⁴

Sanders

1. Source: Department of State, Central Files, 411.2541/12–2155. Confidential; Limited Distribution.
2. Oscar Herrera.
3. For documentation regarding these agreements, see Documents 178 ff. and 295 ff.
4. In telegram 268 to Santiago, December 23, the Department instructed the Embassy as follows: “You may inform Vassallo that Department observing with sympathetic interest Chile’s efforts find means combat inflation. We agree that P.L. 480 agreement would assist Chile in its stabilization efforts but nevertheless perceive no advantage his visiting U.S. at present since Embassy authorized proceed negotiate such agreement. You may state U.S. willing consider concrete proposals if Chileans desire modifications proposed agreement.” (Department of State, Central Files, 411.2541/12–2355)

   In telegram 363 from Santiago, December 26, Sanders reported that he had informed Carlos Vassallo that morning of the points made in telegram 268. Vassallo had replied that President Ibáñez was insistent that he go to Washington to present Chile’s case regarding the P.L. 480 negotiations on an informal basis. (Ibid., 411.2541/12–2655)