Office of the Historian

259. Memorandum From William J. Jorden of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

Washington, August 10, 1973.

SUBJECT

  • Possible Expropriation of US Mining Company in Colombia

You asked for a report on this matter.

The Problem

Ten days ago, the Colombian Minister of Mines (strongly anti-American) sent to the Senate a bill that would permit expropriation of the US-owned International Mining Company without cash compensation. If passed and put into effect, the action would trigger US sanctions. Under the Hickenlooper amendment, we would have to cut off aid to Colombia (approximately $85 million in FY 1973). The Gonzalez amendment would require us to vote against loans for Colombia in multilateral institutions.

Background

IMC has been operating gold mines in Colombia for 50 years. It owns the mines and there is no contractual agreement. In recent years, the company had been losing money and was actively seeking Colombian participation, private or public. Now, with world gold prices at record highs, the company is showing a profit. I gather the company is unpopular in the region where it operates. This may be because of company actions or merely because it is foreign-owned, extractive and paternalistic. In any event, the ill feeling against the company makes expropriation attractive politically.

In March, the Colombian Government made an offer for 51% interest in the company. It would have made no cash payment but would have given the company other advantages—new concessions, a higher [Page 694] level of profit remittances, assumption of debts, etc. The company said “no.” For its part, IMC wants payment not only for assets (some $2–4 million) but for gold still in the ground (estimated at $20 million).

Current State of Play

IMC-Colombian negotiations are continuing. There is some brinkmanship on both sides. The company knows that the Colombians will not want to risk the US sanctions that would probably follow expropriation. But the Government has a politically popular issue and it knows the company will not want to lose everything. Both company and Colombian officials seem privately confident that an acceptable agreement can be worked out. The proposed legislation is read by the company and by our Embassy as more of a “club” in the negotiating process than a precursor of likely action. What Colombia wants seems to be a joint venture with continued IMC management. The sticking point—for both parties—will be the price.

US Actions

We have been doing some quiet missionary work with other members of the Colombian Government, underlining the unfortunate effects on Colombia of precipitate action. The Finance Minister, President of the Central Bank, and others reportedly are deeply concerned (once they realized what was happening) and opposed to expropriation without some agreement acceptable to IMC. We have also called in the Ambassador here and conveyed our concern. He is close to President Pastrana and has undoubtedly passed the word along.

It now appears that cooler heads will prevail on this matter, but we must keep after it. Meantime, the company appears satisfied with the prospects and has asked for no US governmental intervention—though they are pleased with what we have done so far. Incidentally, the Colombian Government is proud of its past good record on investment disputes. The Colombians bargain hard—as they did on the recent Texaco and Mobil Oil cases—but have reached agreements in the past with the companies concerned.

Conclusion

This now seems to be moving in the right direction toward an eventual settlement. But the capacity of Latin Americans to cut off their noses to spite their faces is unbounded.

  1. Summary: Jorden informed Kissinger that the Embassy had told members of the Colombian Government that the expropriation of the International Mining Company would damage bilateral relations.

    Source: National Archives, Nixon Presidential Materials, NSC Files, Country Files, Box 779, Latin America, Colombia, Vol. 1, 1969–1970. Confidential. Sent for information. In an undated memorandum, Scowcroft informed Jorden that Kissinger wanted him to write a shorter memorandum for the President on IMC, which “emphasize[d] actions the U.S. Government is taking.” (Ibid.) On September 10, Jorden drafted the memorandum for Kissinger, which informed the President that Embassy officials had spoken to the Ministers of Finance, Mines, and President of the Central Bank. Scowcroft wrote on the covering memorandum, “HAK does not wish to forward [to the President]. BS.” (Ibid.)

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