As requested we attach a memorandum which describes the status of
negotiations with Chile on expropriation.
Status of Negotiations on Expropriation
Our Embassy has made numerous representations to the GOC concerning American firms
nationalized or intervened under the Allende government. Many of these firms have also
engaged in direct negotiation with the GOC or its entities.
Since December 1972, we have engaged in formal negotiations aimed at
reaching a settlement to the dispute arising out of the 1971 copper
nationalizations. Other nationalized American firms have been
mentioned only marginally in the course of these conversations. Four
bilateral sessions have been held, the latest in Washington August
16–17. We have sought Chilean agreement either to submit the dispute
to an expeditious binding third party arbitration or to utilize some
other means which would permit the GOC to pay compensation to the copper companies. The
constitutional amendment expropriating the companies and the
decision of the Special Copper Tribunal refusing to review Allende’s determination that the
companies owed excess profits exceeding book value are legal
obstacles for the Chileans.
The GOC has said in effect that it
could not pay compensation to the companies without additional
legislation and/or constitutional amendment, and has refused to
accept binding arbitration on the ground that such acceptance would
also require Congressional approval. Chile has asked that the
dispute be submitted to non-binding conciliation procedures under a
1914 bilateral treaty, but has been vague about how the results of
such procedure would be implemented internally. At the August
meeting Chile suggested a procedure by which (a) an international
panel would find that the proceedings of the Special Copper Tribunal
amounted to a denial of justice, and (b) the Tribunal would reopen
excess profits and other key issues, with the Chilean executive
committed to pay compensation if such a finding were rendered by the
Tribunal. The United States indicated its dissatisfaction with this
procedure, but it was agreed that prior to the next meeting we would
submit to Chile a list of questions concerning various aspects.
How We Have Dealt With Other Latin American
We have for the most part avoided formal involvement in negotiations.
However, our Embassies in Panama, Bolivia, Ecuador and Peru have
assisted various U.S. corporations in attempting to reach
settlements of expropriations or other takings of those governments.
In one instance, Bolivia, several American mining firms were able to
reach settlement agreements on nationalizations with the assistance
of the Embassy in 1972 after the Torres Government was succeeded by
the more moderate Banzer regime. In Peru, President Nixon’s Special Representative Jim
Greene has undertaken direct negotiations with the Peruvian
Government in an effort to resolve a number of outstanding
investment disputes there.
U.S. Economic Assistance Under Allende
No new A.I.D. loans were authorized; two approved but unsigned loans
amounting to $25 million were de-authorized. Some disbursements were
continued under signed loans, but all such loans had expired as of
June 31, 1973. The current pipeline is $15 million.
P.L. 480 Title II assistance, mainly to schoolchildren, continued; it
was phased down from about $6 million in FY 1971 to $2.5 million in FY 1973.
A.I.D. grant projects were phased out except for two people-to-people
activities in training and community development, and narcotics
Ex-Im Bank ceased new lending and insurance coverage and suspended
all disbursements in December 1971 after Chile announced a
moratorium on repayments to the U.S. and other creditors.
Two IDB loans amounting to $11.6
million were approved in January 1971. The U.S. voted for the
No other loans have been presented to the IDB or IBRD Executive
Boards. In August, 1973, at the request of the U.S. and other
creditor countries, the IBRD
agreed to put off consideration of two loan rollovers.