Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

CH–14. Telegram from the Acting Secretary of State to the Embassy in Chile¹

Washington, December 10, 1958, 6:21 p.m.

230. Embtel 225.²

Dept disturbed VIAL allegation GOC officials claim U.S. insists on 1100 before willing consider assistance³ and approves your energetic clarification including statement importance we attach to GOC fulfillment commitments to IMF.⁴ Believe you might make similar clarification to officials who may have been source of VIAL’s Misinformation if you consider advisable. It is precisely to avoid direct involvement heated political situations such as that now current in Chile that U.S. consistently refrains from advising other governments on specific internal economic stabilization measures including exchange rates and instead urges them consult and reach agreement with competent international agencies.

Would appreciate more details on agreement with Anaconda on exchange rate windfall which sounds like disturbing proposal return to discriminatory rate treatment for Gran Mineria which existed prior new deal copper law.⁵

Herter

1. Source: Department of State, Central Files, 825.00/12–958. Confidential. Drafted and signed by Siracusa.
2. The referenced telegram, from Santiago, December 9, 1958, reported that the Embassy was informed that Alessandri’s nationwide radio address on December 10 would emphasize the chaotic condition of government finances, the need to seek financial assistance, and the necessity of a realistic exchange rate. (825.00/12–958)
3. Reference is to the statement of Senator Carlos Vial Espantoso, Director of the Central Bank and spearhead of the opposition on the exchange rate program, which was also reported in telegram 225.
4. The International Monetary Fund had just completed its fourth mission to Chile that year. The mission, which arrived on November 10 and worked through the week of November 24, inquired into the reasons behind Chile’s non-compliance with monetary and exchange commitments made conditional to renewal of the Stand-by Arrangement of April 1958, which called for the establishment of a realistic banking exchange rate by the end of 1958, and suggested measures which the new government might be willing to take to restore Chile’s eligibility to draw against the Fund’s resources. Documentation relating to the IMF missions is located in decimal files 824.10 and 398.13.
5. Telegram 233 from Santiago, December 12, 1958, stated that Howe had conveyed the message to Vial. It also reported on the agreement with Anaconda to forego savings in production costs from peso devaluation, stating that the Finance Minister had assured Anaconda officials that this would not mean a return to descriminatory exchange rate treatment of large mining companies, but was expedient to enable the Government of Chile to show the public that the copper companies were not reaping large windfall profits from exchange devaluation. (825.10/12–1258) A detailed explanation of the windfall profits agreement is contained in a memorandum of conversation between company officials and State Department representatives, transmitted to the Department under cover of despatch 628 from Santiago, December 18, 1958. (825.10/12–1858)