Foreign Relations of the United States, 1950, The United Nations; The Western Hemisphere, Volume II

825.00/5–3150

The Assistant Secretary of State for Inter-American Affairs ( Miller ) to the Ambassador in Chile ( Bowers )

confidential

Washington , May 31, 1950.

Dear Ambassador Bowers: I have had some dealings with Ambassador Nieto¹ recently which you should know about.

Shortly before your departure from the United States he came to see me about four points:

1. Extension of present suspension of excise tax on copper.

2. Pending International Bank loans.

3. The proposed acquisition of the tanker.

4. Transfer of synthetic nitrate plants.

It was not a very satisfactory conversation owing to the fact that this Department is unable to control action on any of these matters since in each case the authority rests in another agency or branch of the Government. However, I doubt that Nieto adequately appreciates our difficulty on this. We have been doing our best to help Chile out on these things and the following is a record of how we stand to date:

1. Copper tax: Your visits to Senator George and Congressman Doughton² were most useful. Senator George has recommitted the scrap metal bill³ for the purpose of considering the inclusion of a provision extending the present exemption on copper.⁴ A meeting of the Finance Committee is scheduled for June 1 to consider this with Senator Hay den,⁵ who is the proponent of terminating the exemption, along with the two Colorado Senators⁶ who are both members of the Finance Committee. We are doing some work with other members of the Committee and the Secretary of Commerce⁷ is going to help us. I am more hopeful about this matter than I have been at any time in the past but it would still be premature to give the Chileans too much encouragement because anything can happen in Congress.⁸

2. International Bank loan: I have been in very close touch with Mr. Anderson of the Bank about the pending applications involving (a) the lumber industry, newsprint and celotex; (b) the coal industry and (c) irrigation. Anderson advised me recently that the only thing that the Bank was waiting for was to see Chile embark on a determined program to control inflation. They realize that Chile cannot do everything it wants but they are anxious to see a real beginning. The fact that Alessandri began such a program and couldn’t put it over makes for scepticism and caution on the part of the Bank. They do not, of course, place too much importance on any particular individual and would be delighted if Vial could succeed where Alessandri failed. They do, however, want something more than statements of intention. While it would be difficult to tell just how much performance the Bank would be satisfied with, I would think that a sine qua non would be a unitary rate of exchange agreeable to the International Monetary Fund and something specific with regard to control of credit. I believe that even if the Bank should be more liberal in its view than this, there would still be great difficulty in obtaining the approval of the NAC. You will, of course, recall in this connection the long delay last summer in the NAC in connection with the $25 million Eximbank loan⁹ and if there should be no improvement in Chile’s performance in regard to inflation, there would certainly be trouble in the NAC over any new loan.

Since I wanted Nieto to get the story straight, I had him to lunch with Anderson last Friday and we had a good talk at the end of which Nieto stated that he would immediately advise President Gonzalez Videla about the substance of the conversation.

3. Tanker: I am more hopeful than ever about obtaining the approval of the transfer of the tanker.¹⁰ We have a letter drafted for the Under Secretary¹¹ to send to the Secretary of Commerce this week requesting that the transfer of the tanker be permitted. It was held up pending completion of the reorganization plan under which the Maritime Commission was abolished and its functions transferred to the Department of Commerce. I am hopeful that now that this reorganization has transpired, we will be able to work out this matter on which the Chileans place so much importance. Since the Minister of Economy of Chile, Mr. Julio Ruiz, telephoned me personally about this two weeks ago on instructions from Gonzalez Videla, you might mention to the President that we are working on this very actively.

4. Disposal of synthetic nitrate plants: Nieto has been very disturbed over the fact that the Department of the Army recently disposed of a synthetic nitrate plant in Kentucky without observing the requirements of consultation.¹² This is the second time that this has happened to the embarrassment of the Department of State and in this case as in the previous case some years ago the fault was entirely that of the Department of the Army which apparently has not had an adequate control system to insure the required consultation. This was a particularly flagrant case this time since the closing of the transfer of the plant occurred at the moment that Nieto was handing me the note setting forth the Chileans views about the terms of the transfer. While our Department was completely guiltless, it is impossible for the Chileans to believe this. Accordingly, in connection with another contemplated transfer of a plant at Morgantown, West Virginia, President Gonzalez Videla has now addressed himself directly to President Truman and Ambassador Nieto has also seen our President.¹³ However, I hope that this matter can be straightened out or that at least we go through the formality of appropriate consultation. In any event the Army has not received any bids as yet so that this matter may not be quite so serious.

We are trying to do our best for the Chileans on all of these matters but as you will see the ultimate authority with respect to each of them resides in bodies other than the Department of State. This is just another proof of the old adage that the Department has great responsibility without authority.

Sincerely yours,

Edward G. Miller, Jr.

1. Felix Nieto del Rio, Ambassador of Chile to the United States.
2. Walter F. George of Georgia, Chairman of the Senate Committee on Finance, and Robert L. Doughton of North Carolina, Chairman of the House Committee on Ways and Means.
3. S. 5327, not enacted.
4. Public Law 33, an act which extended the suspension of the excise tax on Imported copper, was to expire on June 30, 1050. For text, see 63 Stat. 30.
5. Carl Hay den of Arizona.
6. Edwin C. Johnson and Eugene D. Milliken.
7. Charles Sawyer.
8. In response to questioning at his news conference held June 1, President Truman stated that he hoped Congress would extend the waiver of the import tax on copper and that he had discussed the matter with President Videla. (Public Papers of the Presidents, Harry S. Truman, 1950, p. 152.)
9. For documentation concerning this loan (authorized October 5, 1949), whose principal purpose was to aid Chile’s foreign exchange position, see Foreign Relations, 1949, vol. ii, pp. 588 ff.
10. Reference is to attempts of the Chilean Government to purchase the tanker S.S. Fort Meigs from private American owners. Documents in file 925.537 for 1950 indicate that the Department of State and the Embassy in Santiago strongly supported this purchase as of potential substantial aid in improving the foreign exchange position of Chile through reduction in oil cartages to non-Chilean vessel operators. Maritime Administration approval, necessary for the sale abroad of any ship built under World War II programs, was given on July 26, 1950; President Truman had earlier indicated his support. The sale was not completed owing to the failure, in September 1950, of the Chilean purchasers and the sellers to agree on final terms.
11. James E. Webb. The letter mentioned, not printed, was dated June 2.
12. In a letter of March 5, 1945, from Secretary of State Edward J. Stettinius, Jr., to Chilean Foreign Minister Joaquin Fernandez Fernández, the United States undertook certain obligations towards Chile respecting disposal of U.S. Government-owned synthetic nitrogen plants. For text of the letter, see Foreign Relations, 1945, vol. ix, p. 795. Files 811.3972 and 825.2564 for 1950 contain documentation regarding the sale of the Ohio River Ordnance Works, Henderson, Ky.
13. On June 1, 1950, Ambassador Nieto handed to President Truman a memorandum on this subject dated May 27 (not printed) from President Gonzalez Videla. (825.2564/5–2750)