149. Editorial Note

In addition to the expropriation by the Government of Peru of the assets of the International Petroleum Company, U.S. officials were faced with the prospect of expropriation of U.S. private copper companies [Page 385]operating in Chile. In a May 4, 1969, letter to President Nixon, President Eduardo Frei of Chile wrote that he would soon present an austere economic program for Chile to try to control inflation and revive a depressed agriculture resulting from a severe drought the previous year. While expressing his desire for continued good relations with the United States, he warned: “To present this plan and to exclude from these sacrifices the copper producing companies is politically and morally impossible.” (National Archives, RG 59, S/S Files: Lot 72 D 320, Chile: Frei to Nixon) President Frei informed the U.S. Ambassador in Santiago, Edward M. Korry, that he had to make changes in two areas of the 1967 agreements which would affect two U.S. companies, Kennecott and Anaconda: link the tax rate to the price of copper instead of a 53-54 percent rate regardless of the price, and “Chileanize” Anaconda, which was still entirely U.S.-owned, either by getting Anaconda to sell some of its stock to Chile or, if necessary, by expropriation. (Memorandum from Kissinger to President Nixon, May 6; National Archives, Nixon Presidential Materials, NSC Files, Country Files-Latin America, Chile, Volume I 1969, Box 773) Because Kennecott was already 51 percent-owned by the Government of Chile, it was not a candidate for expropriation.

President Frei informed the American copper companies of his goals on May 9. (Memorandum from Vaky to Kissinger, May 19; ibid.) Intense negotiations began on June 2 and concluded with an agreement with Anaconda on June 26. Although the negotiations were conducted directly between the Chilean Government and the companies, Ambassador Korry played an important role in mediating between the parties. In effect, the parties worked out a formula by which Chile would buy the entire company. The details of the agreement and its implications for future U.S.-Chilean relations as well as for prospects for expropriation initiatives by other countries were spelled out in a memorandum (with enclosures) from Department of State Acting Executive Secretary John P. Walsh to Kissinger, July 1. (Ibid.)

The Chilean elections in September 1970 brought to power the Socialist candidate, Salvador Allende, who had pledged during the campaign to submit legislation to the Chilean Congress covering nationalization of the major copper producers in Chile. In the following months, Nixon administration officials considered a broad range of political, diplomatic, and economic responses to prevent the consolidation of the Allende government, to try to limit its ability to implement policies contrary to U.S. and hemisphere interests, and at the same time to avoid precipitous actions that might allow the Allende government to rally support or blame the United States. The economic pressures against Chile included ending or cutting back further the U.S. Government’s bilateral loans, as well as its financial assistance or guarantees for U.S. private [Page 386]investment, and persuading international lending institutions to limit financial assistance. Because copper accounted for about 80 percent of Chile’s foreign exchange earnings, measures were also considered that might affect the marketing of Chilean copper. As Allende sought enabling legislation and constitutional amendments from the Chilean legislature to nationalize major industries, especially the American-owned copper mines, Nixon administration officials agreed that if expropriation occurred without just compensation, the United States would use the 6-month waiting period in the Hickenlooper Amendment to explore prospects for working out settlements. When Chile seemed receptive to some kind of pragmatic compromise with the copper companies, the Nixon administration avoided a direct confrontation with the Allende government and approved or deferred some loans and FMS credits instead of cancelling them.

A July 16, 1971, amendment to the Chilean Constitution effectively nationalized the three largest copper companies in Chile (Anaconda, Kennecott, and Cerro), and the Government of Chile announced on October 10, 1971, that there would be no compensation for Anaconda and Kennecott and only $13 million for Cerro. Meanwhile, President Nixon had issued National Security Decision Memorandum 136 on October 8 ( Document 169), which set forth the administration’s expropriation policy. The Nixon administration intensified its economic pressures on the Allende government: when Chile stopped paying its foreign debts, most of which were owed to U.S. companies or the U.S. Government, and sought multilateral rescheduling of them, the administration took a hard line that would include Chile’s prompt and adequate compensation for its expropriation of U.S. properties.

U.S.-Chilean relations were further complicated when Allende announced on April 18, 1972, that he would send legislation to the Chilean legislature requesting the nationalization of the International Telephone and Telecommunications Company (ITT). On the following day a multilateral rescheduling agreement between Chile and its creditors was reached in Paris. As 1972 ended, the Allende government faced serious economic dislocation and political instability. The Nixon administration was still considering whether to sign the rescheduling accord; and its policymakers were engaged in bilateral talks with Chilean representatives, with the U.S. side emphasizing debt repudiation and compensation for expropriated property and the Chilean representatives stressing access to U.S. and U.S.-influenced financing. A national interest waiver announced by Secretary of State Rogers on November 17, 1972, allowed the U.S. Government to remain engaged with the Chileans pending resolution of the issues.

Documentation on the Chilean situation is in the National Archives, Nixon Presidential Materials, NSC Files, Agency Files, [Page 387]Treasury, Box 290; ibid., Country Files-Latin America, Chile, Boxes 773-778; ibid., Subject Files, Box 336; ibid., RG 59, Central Files 1970-73, AID (US)(CHILE), POL CHILE-US, and POL 1 CHILE-US; ibid., S/S Files: Lot 72 D 320, Chile; ibid., S/S Files: Lot 80 D 212, NSSM 97; ibid., S/S Files: Lot 73 D 288, NSC Files, NSC Miscellaneous Memos, NSC Meetings, SRG Meetings, and SRG Miscellaneous Memoranda; ibid., S/S Files: Lot 83 D 305, NSDM 93; National Security Council, Secretariat, NSC and SRG Meetings, Boxes 86 and 119; and Washington National Records Center, Department of the Treasury, Secretary’s Memos: FRC 56 74 A 17; ibid., Files of Under Secretary Volcker: FRC 56 79 A 15, Latin America, and NAC; and ibid., Agency for International Development, AID Administrator’s Files: FRC 286 75 A 13.