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

CH–20. Letter from the Officer in Charge of Chilean Affairs (Phillips) to the Ambassador in Chile (Howe)¹

Washington, April 8, 1959

Dear Mr. Ambassador:

I enclose two self-explanatory memoranda² concerning a recent proposal by the Office of Civilian and Defense Mobilization to sell some 128,000 tons of copper held in the Defense Production Act³ inventory.

I need hardly tell you that we were somewhat alarmed when we first heard of this proposal, particularly since we had gotten the idea that OCDM intended to move quickly and might do so without adequate consultation with other agencies of the U.S. Government, let alone the foreign governments which might be affected by this action. As a result of the meetings described in these memoranda, however, we believe that the situation is under control and that OCDM will not take any precipitous action.

Nevertheless, there is every reason to-believe that the Administration will move eventually to get rid of this copper. You may be sure that we will do our best to see that the Chileans are consulted and that the disposal plan will not operate to their disadvantage. In fact, if we do have a big copper strike in the U.S., the DPA copper could probably be sold, after settlement of the strike, without seriously disrupting the market. It is conceivable that such sales might actually benefit Chile if they helped to prevent another price runaway such as occurred in 1955–56 and which the copper producers would like to avoid if at all possible.

I am sending you these memoranda at this time merely to alert you to what is going on here. As you will note the whole matter is highly confidential and must not be discussed with anyone outside the Embassy, nor should any allusion to this letter be made in official communications. As and when OCDM comes up with a decision to sell and the sales procedures to be followed, we will expect to consult the Embassy formally as to the possible economic and political impact of the OCDM proposal on our relations with Chile.

It would be nice, of course, if a copper disposal program, when it comes, could somehow be related to a new suspension of the copper excise tax. Actually, in terms of assuring an adequate supply of copper, this would make a good deal of economic sense, and it undoubtedly would be highly agreeable to the Chileans. Unfortunately, industry opinion in the U.S. (including the brass industry) has not sufficiently jelled in favor of again removing the excise tax, and there is no common sentiment among the various interested U.S. agencies. Also, the interests and responsibilities of the agencies which might wish to see the excise tax removed do not necessarily coincide with those of OCDM, which is concerned primarily with the disposal of surplus stocks per se.

We will be in touch with you as soon as anything new develops on this subject. In the meantime, the Embassy might wish to give some thought to the ways in which we might seek to avoid any injury to Chile or any undue strain on our good relations in the event the OCDM proposal materializes.

I enclose some press items on the copper situation⁴ which you might find of interest.

Sincerely,

Robert M. Phillips

1. Source: Department of State, ARA/WST Files, Lot 62 D 31, “Copper.” Confidential. The source text is a carbon copy bearing Phillips’ typed name.
2. The referenced memoranda, dated respectively March 31 and April 2, 1959, recorded conversations between representatives of the Department of State and OCDM officials. They are not printed.
3. For text of the Defense Production Act of 1950, see 64 State 798.
4. Not printed.