825.51/3–647: Telegram
The Ambassador in Chile ( Bowers ) to the Secretary of State
162. Vice President Joseph Cussen of Cía Chilena de Electricidad, Electric Bond and Share Subsidiary, has discussed with me at length problems affecting future this important US investment. He is convinced Chilean authorities have decided upon squeeze policy by refusing company increased rates to meet higher costs occasioned by inflation or any other form of relief on basis similar to procedure which forced company to sell Santiago street car system to govt after several years futile efforts to avoid such step.
[Page 528]Cussen says his fears strengthened by conversation Finance Minister Pico Canas inadvertently held with company director last week revealing squeeze policy which would discourage company and permit eventual acquisition properties by Fomento Corporation subsidiary “Endesa”. Company has publicly stated its willingness to sell out but Cussen believes any reasonable deal looking toward nationalization impossible because lack of funds and foreign exchange.
Cussen has furnished Embassy copies of five memoranda setting forth problems of company here and says New York office will supply copies to Department. He has given me these data for background purposes and has requested no immediate assistance from Embassy.
Department is of course aware of potential danger facing important American investment, especially at this time when Fomento Corp. seeks substantial loans for increased power production. Cussen points out that because Fomento Corp’s hydroelectric program is financed by Exim Bank loans his company could hardly undertake expansion its facilities. Hence possible electricity rationing this winter with ensuing public resentment for inadequate planning and service (see Embtel 897, October 856).
Embassy as yet unaware present status Exim Bank credits to Chile (Embtel 129, February 20 and Airgram A–51, February 457). Although I strongly favor proper and reasonable economic support to Chile I consider it paradoxical to finance competing or parallel activities here without due consideration of existing American investments in same field (Deptel 143, June 2, 194156). Clarification of Department’s policy toward such problems would be appreciated, particularly in connection Exim Bank and International Bank financing.