Foreign Relations of the United States, 1961–1963, American Republics; Cuba 1961–1962; Cuban Missile Crisis and Aftermath, Volumes X/XI/XII, Microfiche Supplement

34. Memorandum of conversation, December 11 among President Allessandri, President Kennedy, and other officials¹

Part II (of 5)

December 11, 1962, 4 p.m.

SUBJECT

• Problems and Importance of American Investment in Chile

PARTICIPANTS

• CHILE

  • President Alessandri
  • Foreign Minister Martinez
  • Finance Minister Mackenna
  • Senator Angel Faivovich
  • Ambassador Walter Muller
  • Budget Director Sergio Molina
  • Sr. Alfonso Echeverria (Interpreter)

• UNITED STATES

  • President Kennedy
  • Ambassador Charles Cole
  • Assistant Secretary Edwin Martin
  • Mr. Teodoro Moscoso, Coordinator, Alliance for Progress
  • Mr. Herbert May, ARA
  • Mr. Ralph Dungan, White House
  • Mr. Fernando Van Reigersberg, LS
  • Mr. Neil Seidenman, LS

President Kennedy assured President Alessandri that the United States has every desire to assist Chile’s progress, in cooperation with other countries and international agencies. The United States also is concerned that Chile makes maximum use of available help, in its economic and social development. While the United States is making every effort to obtain more funds for Latin America, we have heavy commitments elsewhere. It is hoped, therefore, that Western Europe will play a larger role in the future in aid to Latin America.

Another source of capital is private investment. While there are obvious political problems involving American copper companies in Chile, President Kennedy expressed the hope that Chile would maintain a climate which would encourage private capital.

President Alessandri replied that American investments, particularly in copper, warranted special consideration. The problem is not that these companies have reduced their investment, but whether they will see fit to increase investments. While he always had had due respect for private capital, such capital should adjust its interests to those of the country where it operates. Profit must not be the only consideration; the company’s activities must be consistent with the good of the community.

As much as President Alessandri desires an agreement with the copper companies for new investment, certain of their demands tend to obstruct such an agreement. President Alessandri thought, frankly, that President Kennedy and the Department of State should take particular note of the problem. The companies at present enjoy far more safeguards than under the Government of President Ibañez; there is a special law governing relations between the companies and the Government of Chile; and, there is the Copper Department.

President Alessandri said the companies now ask that he accept certain changes, which would amount to using his powers to reduce the regulatory powers of the Government of Chile. Such a proposal would be used by certain elements in the Congress as proof that Chile is a dependency of the United States. The companies are asking the government for a 20-year guarantee on taxes and insisting on a five-year amortization period. These requests can be exploited by Marxist opposition, to claim that the Alessandri administration is a tool of United States imperialism.

President Alessandri said he has every intention of meeting the requests of private investment, but uniting private interests with the public good. He commented that the situation of the American telephone company was another issue on which the Department of State was inaccurately informed. This, he said, could be discussed by members of his party, and also would be discussed with IT&T officials in New York.

President Alessandri said that the problem is to meet the needs of the companies, but in a way that will not make a political controversy detrimental to the company and Democracy. The problem is not only of money and must be considered from the political standpoint as well. He is not personally opposed to the requests of the American companies, but they are not practicable.

President Kennedy expressed his understanding of the political vulnerability of the American copper companies, and said that the United States Government could not afford to appear to endorse all their wishes. He emphasized his concern with capital flight in Latin America, noted the serious financial situation in Brazil, and repeated that some way must be found to induce the copper companies to reconsider their large investment plans. The precise way of reconciling the companies’ interests with the Government of Chile’s was, of course, a matter involving President Alessandri’s judgment. But, an environment must be created that will attract private capital to Chile.

President Alessandri said that no other administration has been so disposed as his, to meet the companies’ interests. However, the companies seem to increase their requests with every new guarantee given. His task is to persuade the companies to modify their demands within the framework of the legal guarantees they now have. President Alessandri again expressed his understanding of the importance of additional capital for Chile, but thought it would be highly useful for the companies to be made aware of the views of President Kennedy’s administration and of the Department of State on these questions; namely, that in view of the political problems, the companies should adjust their position. While Chile needs to apply every resource for development, there are political problems, and businessmen must be brought to see the need for considering that aspect. President Alessandri suggested the desirability of having the Department of State explain to the copper companies that the political problems cannot be ignored, and thought that once this was done, the prospects of an early solution would be enhanced.

President Kennedy replied that even in the United States, private capital often goes its own way, despite arguments about the national interest. We would like to see an increased flow of investment to Latin America, our interest not being that of Anaconda or any other company, but the good of Chile. Our aim is stability for Chile, and have tried to make these issues clear to the companies. The fact remains, however, that private capital is quite sensitive to conditions, preferring for example to go to Europe if investment there yields more than the 4% from United States bonds, and investment decisions are based on private interests. We can only hope that negotiations will persuade capital to remain in Chile. The Alliance for Progress is not for the benefit of the private companies, but is aimed at bringing economic development and preserving freedom. One way to do this is to stimulate private investment. Therefore, an effort should be made to convince the copper companies that they have a sound future in Chile.

President Alessandri again expressed his full agreement with such views, but added that he merely wanted to stress the origins of the existing problem. He and former Finance Minister Eduardo Figueroa had agreed to many of the requests of the companies, but he could not entertain hopes of congressional approval. Given the great need for investment in Chile, he was only desirous of obtaining a quick solution and was not concerned with questions of fractions of profits. However, he does need the support of the Chilean Congress, and must work with the Congress (for the sake of preserving democratic institutions) in seeking the best solution.

1. Problems and importance of American investment in Chile. Limited Official Use. 3 pp. Kennedy Library, National Security Files, Countries Series, Chile, January–June, 1963.