313. Telegram 274015 From the Department of State to the Embassy in Peru1
274015. Subject: Marcona—Briefing Memorandum Sent to the Secretary by Assistant Secretary Rogers.
1. The following is a briefing memorandum sent to the Secretary by Assistant Secretary Rogers concerning Marcona:
Quote: Marcona: Last July’s sudden expropriation of the Marcona Corporation’s Peruvian mining subsidiary by the Velasco Government has had significant repercussions. It has cost its perpetrators dearly by contributing to the replacement of Velasco by Morales Bermudez. And it has brought us directly into the act. Morales Bermudez, who is eagerly seeking ways to reconcile Peru’s revolution with better relations with us, reinterpreted the expropriation decree to allow for payment of compensation. But the GOP and Marcona did not come close to agreement in their direct discussions. At their joint request, we first directly involved ourselves almost four weeks ago.
Last week, an interagency delegation headed by Albert Fishlow held a second round of discussions at both the technical and political level in Lima. These negotiations were particularly intense, and were dominated by the effort, responsive to the wishes of Foreign Minister de la Flor, to find a way for Peru to resume ore sales immediately. (Marcona, in an effort to protect its interests, has prevented shipments [Page 846] up to now.) With the consent of the company, two specific interim proposals were presented to the Peruvians. Both were ultimately rejected by the GOP, although the second came very close to acceptance, and may yet ring the bell.
Despite the apparent impasse, we believe we have accomplished three important things. We have:
—Clarified the parameters within which an acceptable settlement must be found. The Peruvians now know that they will not get off cheap, and are now thinking in the range of 30 million dollars or more (still far from Marcona’s present claim of 100 million dollars, but a great improvement). In addition, they have a clearer notion of the political and economic tradeoffs between an outright cash settlement that would eliminate Marcona from the Peruvian scene, as compared to a settlement involving an ongoing, though indirect, relationship with Marcona;
—Accelerated the internal audit process which, for Peruvian political reasons, will have to be completed before any settlement can be reached. (The previous head of the Peruvian state mining concern, who had opposed any settlement and therefore delayed accounting, has only recently been replaced; now there is no excuse, and indeed a stimulus to come to some preliminary result, in view of the December 7 or 8 date now set for the Peruvians to come to Washington.)
—Devised a scenario that should enable the playing out of the settlement process without a major U.S.-Peruvian confrontation. This scenario is based on Peruvian awareness that the U.S. must vote against any loan coming up in the International Financial Institutions and a willingness to refrain from bringing loans to a vote. It also depends upon sufficient progress in negotiations before mid-December, by which time we will have to decide on Peru’s continuing eligibility for GSP. Its success depends on our continuing to walk the fine line between being scrupulously unyielding without being threatening.
The next two weeks are critical. We have put the initiative back to Peru, and they know it. Our negotiators hope that Peru may yet accept some version of the interim proposals, which entails the resumption of shipments with a commitment to continued negotiations toward just compensation. This would re-establish some common interests between Marcona and Peru and would provide the flexibility which would make an ultimate settlement easier. End of quote.
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Summary: In a briefing memorandum to Kissinger, Rogers reported that even as a Marcona settlement seemed illusive, Peru and the United States had established a scenario to work towards a settlement.
Source: National Archives, RG 59, Central Foreign Policy File, D750403–0518. Confidential; Immediate. In a meeting on October 22, U.S. and Peruvian officials agreed that pursuing government-to-government talks would be the best way to resolve the Marcona dispute. (Telegram 8797 from Lima, October 23; ibid., D750369–0302) On November 11, U.S. and Peruvian officials discussed compensation, and Peruvian officials stated they desired an ore shipping and sales agreement. (Telegram 9371 from Lima, November 12; ibid., D750394–0370)
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