635. Memorandum of Conversation1 2
SUBJECT:
- World Bank and the IPC Case
PARTICIPANTS:
- Mr. Gerald Alter, Director, South American Department, IBRD
- Mr. John Hugh Crimmins, Deputy Assistant Secretary, Bureau of Inter-American Affairs
Mr. Alter called me this morning to pass on three basic points:
1. He wanted to confirm the accuracy of observations he had made to me about two weeks ago concerning the breakdown of the quiet negotiations on IPC. He said that further checking had convinced him that the Peruvian Government had passed word back to the Treasury that it could not take public, explicit actions on the stock purchases involved but had to have time in order to handle the settlement in a piecemeal fashion. According to Alter, the GOP negotiators had declared that specifically they had to have the stock transaction carried out through third parties in order to obscure the basic nature of the deal. Alter indicated that “this side” (Treasury) had refused to moderate its insistence on an explicit purchase of the stock of IPC by Southern Peru. Alter said that this breakdown had occurred about eight weeks ago, well before the publicity on the deal.
2. Alter stated that Carlos Santistevan, the IBRD Alternate Director for Peru, had told him, on instructions from Finance Minister Morales Bermudez, that (a) an overt solution was absolutely out of the question; but (b) the GOP was still prepared to proceed on a covert basis. I asked Mr. Alter whether he considered this latter point to be cosmetic and simply designed to facilitate Peruvian dealings with the Bank, or real. Mr. Alter replied that he was convinced that it was real. He went on, moreover, to say that Santistevan was seeing Treasury Assistant Secretary [Page 2] Hennessy today to make these points.
3. Mr. Alter said that he wanted me to know that he was making a recommendation to IBRD President McNamara that the Bank regard the progress in covert arrangements as progress (in terms to the Bank’s standard on unresolved investment disputes). Alter explained that his basic point was that if Peru was willing to proceed with covert arrangements and someone else was unwilling to proceed except on an overt basis, there was still progress. He asked me for my comments. I told him that it would be improper for me to comment on an internal IBRD matter but that I had noted his line of argumentation.
(JHC Comment) Apart from the significance of this information for the urgent decisions which the USG must reach on the Peruvian issue, it is imperative, I believe, that the Department take a more direct role in further discussions with the GOP on a possible IPC settlement, given the great political importance, not only for US-Peruvian relations, of the issues involved.
- Source: National Archives, RG 59, Deputy Assistant Secretary, Subject and Country Files: Lot 73 D 353, Peru–IPC Case. Confidential; Exdis. Drafted by Crimmins. Copies sent to Irwin, Samuels, Meyer, Weintraub, Feldman, and Lancaster.↩
- Gerald Alter stated that negotiations on the International Petroleum Company had broken down and concluded that while an overt solution was not possible, behind-the-scenes negotiations could be efficacious. Crimmins urged the Department of State to take a more direct role in the IPC discussions.↩