825.50/5–2747
Memorandum by the Assistant Secretary of State for American Republic Affairs (Braden) to the Director of the Office of American Republic Affairs (Briggs)
With further reference to Mr. Wells’ Memorandum of Conversation of May 21, subject, “Pedregal Economic Mission”,69 and Mr. McGinnis’ Memorandum of Conversation of May 22, “Report of Pedregal Economic [Page 540] Mission”, I think the following additional observations are important for the record:
Messrs. Pedregal and Santa Cruz endeavored to convey the impression that an agreement had been reached with the American copper companies, Kennecott and Anaconda. This agreement could be further amplified by discussions which would be carried on in Chile, in point of fact as Sr. Pedregal admitted, when I twice emphasized the fact no agreement has been reached but merely a starting point from which further discussions can be carried on in Chile.
The copper companies received no “guarantee” of “a reasonable return on their present investment.” In essence what was discussed in New York was:
- (1)
- That a system of labor courts should be established and other measures taken to reduce strikes to a minimum and to eliminate illegal strikes, it being understood that wages would be raised or lowered in proportion to the cost of living in each mining camp. Sr. Pedregal, while observing that all labor difficulties could not be eliminated, was hopeful that this procedure would in large measure obviate future difficulties.
- (2)
- The copper companies will no longer have to purchase pesos in exchange at the 19.37 rate but will be allowed to purchase pesos at the official rate, presently 31.00 or such future rate as may be established.
- (3)
- By means of new legislation all present taxation will be put into one basket, whereby normal profit of each of the companies for the average of the last ten years will be established. Thereafter any profits made in excess of this normal, the companies may retain 50 percent in the United States but will have to return the other 50 percent to Chile, purchase pesos with it and then will be allowed to invest these pesos either in their own plants in extirpation [exploration?] and development of other properties, copper fabrication or such other enterprise and/or Chilean bonds as may be decided upon.
In short, the Chileans while offering some hope of alleviating existing bad labor conditions and promising relief from the present discriminatory exchange situation, actually force the companies to return a still larger proportion of their net income to Chile than presently is the case, so that in effect it is the Chileans who are endeavoring to set a floor below which the Chilean Government returns may not decrease, while at the same time grabbing off rather more than they presently receive from the copper companies. This is apparently done exclusively with the American owned companies and therefore if anything continues the present discrimination.
The attempt by Messrs. Pedregal and Santa Cruz to put words into other peoples’ mouths as they did in my case at the luncheon tendered me by them on April 25 and by stating that an agreement had been [Page 541] reached with the copper companies is a discouraging beginning to such negotiations.
Similarly, in their communication to Mr. Rogers, President of the Foreign Bondholders Protective Council, Inc., it will be observed from my marginal notations that they have not made an honest approach to this problem.
- Not printed.↩