Foreign Relations of the United States, 1947, The American Republics, Volume VIII

825.50/5–2247

Memorandum of Conversation, by Messrs. Edgar L. McGinnis and Burr C. Brundage of the Division of North and West Coast Affairs

confidential

[Washington,] May 22, 1947.

Subject: Report of Pedregal Economic Mission

Participants:	Señor Guillermo del Pedregal, head of the Chilean Economic Mission
	Señor Victor Santa Cruz and Señor Flavian Levine, members of the Mission
	Señor Roberto Vergara, Chilean Fomento Corporation
	Assistant Secretary Thorp
	Mr. Brundage—NWC
	Mr. McGinnis—NWC
	Mr. Cady—ED

. . . . . . .

Mr. Santa Cruz, spokesman for the Chilean group, explained that prior to departing for Chile on May 24 he desired to review the activities of the Chilean Mission in this country and to pay a farewell call on Mr. Thorp. He itemized the results of the Mission as follows:

(1) Copper—The Mission conferred at length with representatives of the copper companies in New York and arrived at a statement of principles which was satisfactory to the copper companies.^* Chile would abolish the copper dollar and permit the companies to purchase exchange at the regular rate of 31 pesos to the dollar. The various taxes and charges on copper production would be consolidated into one income tax so that the firms would know exactly where they stood. The profits of the copper companies after payment of taxes would be divided with one portion employed by the companies for dividends, etc., and the other would be required to be invested in Chile. While substantial agreement had been arrived at, further and conclusive discussions would be held in Chile on these matters, and, in fact, company representatives are already in Chile. The Mission appeared to be very satisfied with the copper conversations.

(2) Debt—The Mission had met with no success. Conversations were held with Mr. Rogers, President of the Foreign Bondholders Protective Council, wherein the two parties were unable to reach a satisfactory agreement. The Chileans said that they were able to pay on their external debt (sterling and dollars) between $7,000,000 and $8,000,000 per annum. They did not wish to make an agreement now which Chile could not live up to in the long run, thereby precipitating another default. They preferred to arrive at a modest settlement which would be within Chile’s economic means to fulfill. Mr. Rogers was firm in insisting that the FBPC would not accept less than 3% interest and 1% amortization. The Mission stated that this would be impossible within the sum which Chile could afford to set aside for debt purposes. Chile would either have to offer less than 3% interest or scale down the face value of the outstanding bonds in order to stay within this figure.

(3) International Bank Loan ($40,000,000)—The Mission was told by Bank officials that they could not consider Chile’s application until Chile had arrived at a settlement of its foreign obligations with the FBPC. The Chilean Mission was taken aback by this categorical statement. They insisted that since the Bank was established for the purpose of making rehabilitation loans the Bank should not insist that applicants come to them with their financial houses completely in order. In fact, they said, loans should be made for the very purpose of assisting foreign countries to reestablish their credit rather than insisting that their credit be first established before a loan would be made. They referred, heatedly, to the recent loan made to the French Government and to the financial position of that country, which they compared unfavorably with Chile’s present situation. They further said that they did not see how Chile could look forward to lifting exchange restrictions and to following the principles of the ITO unless through foreign loans its economy could be balanced and stabilized. The Mission felt strongly that by insisting on a prior debt settlement the Bank had put a strong and unfair bargaining weapon in the hands of the FBPC.

The Mission added that it was considering a recommendation that an American expert be employed to study Chile’s financial and monetary situation. The Mission felt that, while complete information and statistics were available regarding Chile’s financial and economic position, a report from an impartial expert would carry more weight with authorities in this country.

Mr. Thorp expressed his appreciation for the Mission’s visit and stated that he was glad the Chileans had at least made progress toward the arrangement of the copper matter. With respect to the sending of an expert to study financial conditions, Mr. Thorp agreed that while complete statistics might be available on this subject, the findings of an impartial expert on these matters would doubtless be given more attention in this country.⁶⁸

1. While the Chilean Economic Mission gave the impression that substantial agreement had been reached in negotiations with the copper companies, it appears that neither Anaconda nor Kennecott are by any means satisfied with the Chilean proposals. [Footnote in the original.]

68. Two handwritten notes appended read as follows:

    “The net of this is that the Pedregal Mission is returning with a large goose egg. I am apprehensive that this may force the Chilean Govt, to recement its relations with the Communists. B. C. B[rundage].”

    “All in tone with Pedregal’s last talk with Mr. Braden; Dept should give careful consideration to attitude of Bank vis-à-vis Chile’s external debt. M. K. W[ells].”