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

CH–24. Memorandum of Conversation, by the Officer in Charge of Chilean Affairs (Phillips)¹

Washington, October 23, 1959

SUBJECT

• Communist Chinese Offer to Buy Copper from Chile

PARTICIPANTS

• Assistant Secretary Rubottom, ARA
• Chilean Ambassador Walter Muller
• Mr. Jorge Burr, Minister-Counselor, Chilean Embassy
• Captain Jorge Swett, Naval Attaché, Chilean Embassy
• Robert M. Phillips, WST

Mr. Rubottom said we had been greatly concerned to learn from our Embassy in Santiago that Chile had received an offer from the Chinese Communists to buy 50,000 tons of copper wire and sheets and that the Chilean Government was thinking of permitting the sale of as much as 30,000 tons. Although the U.S. Government would not make formal objection to the proposed transaction, we believed Chile should be concerned with the impression likely to be created in the U.S. and other countries by the magnitude of this sale to the Chinese Communists. We were particularly disturbed to see Chile become apparently the primary target of Chinese Communist overtures in Latin America, and we considered that this might have serious political implications for Chile’s relations with the U.S. and other countries of the hemisphere.

Ambassador Muller said this was the first he had heard of this development and that he, too, was concerned over it. Nevertheless, he hoped we understood that the Government was facing a difficult internal political situation and could not afford to risk criticism that it was obstructing commercial transactions for political reasons. The Government was very much concerned with developing markets for Chile’s exports, and it realized that the presently favorable copper market would not last too long. In fact, in recent conversations with the New York representatives of the copper companies operating in Chile, the Ambassador had been given to understand that world production of copper next year would exceed demand by approximately 10%. It was for this reason that Chile was particularly interested in finding new markets for its copper.

Mr. Phillips said that, following the removal last year of strategic controls on copper, Communist China had been able to get all the copper it wanted, chiefly from the U.K. and West Germany. The switching of Communist China’s purchases to Chile would in no way affect world copper demand. The Chilean Government might ask itself whether there was any commercial reason for Communist China suddenly to offer to switch the bulk of its copper purchases to Chile. We were inclined to believe that this offer was largely or entirely motivated by political considerations. Mr. Rubottom pointed out that the sale of even 30,000 tons would represent in value considerably more than the total of Latin American exports to Communist China in 1958. Since we had made special efforts to assist the new Government of Chile, as one closely identified with our own principles, we would undoubtedly be called on—if this sale went through—to explain why the Chilean Government had apparently become so deeply involved with the Communist Chinese. Not only would this complicate relations between Chile and the U.S. but it would also weaken the opposition of other Latin American countries to the growth of Chinese Communist influence in this hemisphere. When he had been in Santiago in May, Mr. Rubottom had expressed to the Minister of Foreign Affairs, the Minister of Justice and others, our concern over the obvious campaign the Chinese Communists were waging to develop relations of all kinds with Chile.

Ambassador Muller said his Government was aware of the Communist bloc interest in Chile and that it was trying to deal realistically with this situation. He gave a brief resumé of his earlier conversation with Acting Assistant Secretary Snow concerning the Chilean Government’s proposal to send a trade commission to the bloc countries (see memcon August 26).² He also mentioned that Communist China had arranged to buy 10,000 tons of nitrate from Chile and that the Chilean Government had not received any indication that we might object to this. If 30,000 tons of copper seemed to us an excessive amount for Chile to sell to Communist China, what would we consider a reasonable amount?

Mr. Rubottom replied that it was not our purpose to try to tell the Chileans just how much copper they might reasonably sell to Communist China. We hoped they would realize that this was a sensitive political situation in which any sale might create a problem for them and for us. The Chilean Government should not be under any illusion that our China policy might be changing. As the Ambassador knew, the U.S. distinguished between Communist China and the European Soviet bloc. Even though the CPR and the USSR shared the same ultimate aim of Communist domination of the world, the CPR has been unique in its flagrant disregard of the principles of the United Nations, as most recently demonstrated by its actions in Tibet and other places.

A particularly sensitive aspect of the proposed transaction, Mr. Rubottom continued, was that our Export-Import Bank now had under consideration loan applications submitted by two of the three copper fabricating firms in Chile, and we understood that these firms would expect to participate in this sale. We hoped the Chilean Government would understand that it could be extremely embarrassing to all concerned if it became known that an agency of the U.S. Government was considering lending money to a foreign firm which would use U.S. funds to develop facilities for trading with Communist China while U.S firms are forbidden by law to engage in such trade.³

Mr. Phillips asked the Ambassador whether he had seen a study on copper prepared by W.R. Grace & Co. which was fairly optimistic concerning copper’s prospects over the next few years. The Ambassador said he knew of this study and hoped its optimism would prove to be justified, but the Chilean Government was worried primarily by the probability of a weak copper market in the particular year 1960.

(Mr. Burr called Mr. Phillips at home the morning of October 24, saying that he wished to verify one point in yesterday’s conversation before reporting by cable to the Chilean Foreign Ministry. The Embassy was particularly interested in knowing just how much copper the U.S. Government thought Chile might reasonably sell to Communist China if it did not sell the proposed 30,000 tons. Mr. Phillips said he thought that no official of the U.S. Government could or should attempt to set a quota for Chile’s possible copper sales to Communist China. The Department had no intention of reopening the question of international strategic controls on copper. The issue posed by the Chinese Communist offer we considered to be a political one, and, in this context, we hoped the Chilean Government realized that the less business it did with Communist China the better.)

(At a luncheon on October 26, Ambassador Muller told Mr. Rubottom that the Chilean Embassy had been instructed to inform us that we had nothing to worry about regarding the proposed sale. The Chilean Government intended to find the means of frustrating the proposed sale and was only concerned with doing this in a way which would not involve it in internal political difficulties or make it appear that the Government had acted under U.S. pressure. Mr. Burr also confirmed this in a later conversation with Mr. Phillips.)

1. Source: Department of State, Central Files, 825.2542/10–2359. Confidential.
2. Not found in Department of State files.
3. The Department subsequently informed the Export Import Bank that it saw no objections to approval of the loans to the copper fabricators. (Memorandum from Phillips to Rubottom, October 28, 1959, ARA/WST Files, Lot 62 D 31, “Credits-Eximbank”)