As I have pointed out in the numerous despatches covering this subject
over the past year, this legislation is permissive rather than
[Page 508]
mandatory and my conversations
with the President and the Foreign Minister, (see despatch No. 1134,
April 6, 1932),64
indicate that the Government does not favor the strongly nationalistic
features introduced into the measure by the Senate. Moreover, the
difficulty of raising locally the funds necessary to put this law into
operation will, in the opinion of the managers of the foreign oil
companies, result in the postponement of the monopoly for an indefinite
period. Nevertheless, a measure of this nature is a nuisance at any time
and in the hands of an unfriendly or anti-foreign government, the law
could be turned into a real menace. I regret that the President did not
see fit to insist on amendments to the law before its promulgation but,
confronted by other and more pressing differences with Congress, the
Cabinet apparently decided in this case to follow the path of least
resistance.
In my telegram under reference I suggested the desirability of our making
some formal statement of our case to the Government. Heretofore, in
compliance with the Department’s suggestion with which I fully
concurred, my representations have been only of an informal character. I
believe, however, that the time has now come when we should put in
writing a declaration of our intention to support a claim for full and
effective compensation in case American interests are forced out of
business through the expropriation of their property in Chile.
[Enclosure—Translation]
Petroleum Monopoly Bill, Promulgated May 17,
193265
Article 1. Inasmuch as the national interests
demand it, there is reserved for the State, either alone or in
partnership with Chileans or national companies, the monopoly of the
importation of petroleum, its derivatives and substitutes, and of
the distribution and sale of these products.
The President of the Republic is empowered to fix the date on which
this monopoly shall become effective, and shall be able to
authorize, for determined purposes, the importation of petroleum,
its derivatives and substitutes.
Article 2. For the purposes of the preceding
article, a national company shall be considered to be one fulfilling
the following conditions:
[Page 509]
a) Be legally constituted and domiciled in
Chile; b) Its partners or stockholders to be
of Chilean nationality in at least 60%, and all of its directors to
be of said nationality, and, if it treats of a stock company, the
shares must be nominal; and, c) Its capital
must be Chilean in at least 75% whether this be because the natural
persons constituting same are of that nationality, or because the
stockholding juridical persons possess the requisites established in
this article.
Article 3. The exercising of the rights
conferred on the State by Article 1, can be conceded to third
parties associating with it in accordance with the preceding
articles, on the following bases:
-
a)
- That the State contributes no capital to the Company, nor
gives its guarantee to capital which might be invested in
it;
-
b)
- That the State be assured of a participation of not less
than 75% in the profits of the Company, and all of the
business connected with the importation, distribution and
sale.
-
c)
- That the Company shall have a maximum duration of 17 years
counting from the date referred to in the second paragraph
of Article 1;
-
d)
- That within the same period of time there shall be
amortized the obligations contracted in the nature of
contributions or quotas;
-
e)
- That upon the expiration of the term of 17 years the
Company shall become the exclusive possession of the State
without cost to it;
-
f)
- That the sums equivalent to the present importation duties
per unit of petroleum derivatives shall not be considered as
profits, which sums shall be previously discounted in favor
of the public in the form of royalty or import bounty or
reduction;
-
g)
- That at least one half plus one of the Board of Directors
shall be composed of representatives of the Fiscal interests
named by the President of the Republic;
-
h)
- That at least one of the Directors of the Company be named
at the suggestion of the companies or persons exploiting
coal mines; and,
-
i)
- That the price of petroleum, its derivatives and
substitutes cannot be increased without the joint agreement
of the majority of the Directors, and of all the Directors
representing the State in the Company.
Article 4. The shares of the Company formed
in partnership with the State for the exploitation of the petroleum
monopoly, in accordance with the preceding Articles, in case there
shall be constituted a stock company, shall be nominative.
Article 5. Declares of public utility, and
authorizes the President of the Republic to expropriate, the tanks,
pumps, pipelines, elements of transportation and package manufacture
for petroleum and its derivatives, and the products which said
deposits contain.
The indemnities to be paid by reason of the expropriations shall
[Page 510]
be governed by the
procedure indicated in Article 12 of Law 4144 of August 25,
1927.
Article 6. The properties expropriated in
accordance with the preceding Article can either be retained by the
State or transferred to the concessionary firm or firms for a value
not less than that of the expropriations.
Article 7. The price and quality being equal,
the Fiscal or concessionary firm, according to the case, shall
preferentially consume national petroleum, whether this be from
petroliferous deposits, from bituminous shale or from Chilean
coal.
Article 8. The State shall devote not less
than 50% of the profits referred to in letter b) of Article 3 to the development of the mining and
petroliferous activities of the country.
Of the profits of the Company there shall be devoted up to one
hundred thousand pesos annually to the investigation and study of
the hydrogenation and distillation of national coal.
Article 9. Authorizes the President of the
Republic to contract an internal loan which shall produce up to
60,000,000 pesos for effecting, itself, the exercising of the rights
conceded to the State in Article 1.
Article 10. The State or the Company
organized in accordance with the provisions of the present law must
preferentially employ, in the personnel necessary for its service,
the Chilean employees at present discharging similar duties in the
importing companies, and who may have, at the date of promulgation
of this law, at least one year’s service.
Workmen of Chilean nationality who, for whatever reason remain
excluded from the new organization, shall receive an indemnity
equivalent to two weeks’ wages for each year of service.
Article 11. Ninety percent of the personnel
of workmen and employees of the Company organized must be of Chilean
nationality.
This same proportion must be observed in the total amount of the
remunerations which the Company pays.
Article 12. The present law shall be
effective from the date of its publication in the Diario Oficial.
Juan E. Montero
Santiago, May 17,
1932.
