151. Telegram 216697 From the Department of State to the Embassy in Chile1
216697. Subject: Copper Compensation Problems. Ref: (A) Santiago 5141; (B) Santiago 5168; (C) Santiago 4754.
1. Our objective in this remains to achieve recognition of debt and just compensation for equity in accordance with international law as [Page 406] stipulated in the Paris Club Agreement of April 19, 1972. Satisfactory resolution of this and other expropriation issues is necessary not only to protect the rights of U.S. nationals and broader U.S. investment interests, but to make it feasible for the USG to provide or support the financial assistance the new government will need.
2. At this stage we believe the USG should not be in the position of pressuring the parties on either side, of mediating negotiations, or of giving GOC an independent assessment of its proposals. Therefore, you should advise Saenz that in our opinion the only way to test the practicality of his proposals is to go forward with direct discussions with the companies. (FYI: we are unable to predict at this point whether Kennecott might eventually be persuaded to accept $80 million for its 49 (percent) equity. It is not at all clear that Kennecott has thought through its strategy or objectives. Nor are we confident that a rapid settlement with Anaconda is in prospect. Apparent cordiality of initial meeting with Quigley does not mean that Saenz can expect less than tough bargaining in that quarter. End FYI)
3. We see considerable merit in the GOC taking these cases one at a time, pressing to resolve the easier ones while working more gradually to narrow the differences in the others. A prompt resolution of the Cerro case followed by a settlement on Exotica and with Anaconda might set the stage for eventual agreement with Kennecott. At an appropriate time, if necessary, the USG would be prepared to use its good offices to help facilitate the resolution of any dispute that cannot otherwise be settled. However, it would be premature for USG to intervene at this point. We will, of course, appreciate being kept closely informed as the talks proceed so as to be prepared if our direct assistance should be required.
4. We believe a word of caution to Saenz is in order on another point. There is a danger that GOC will become locked into a particular procedure or framework that may not hold practical solutions in all cases. Although a reconstituted copper tribunal might play a useful role in certain respects, we have some doubt that adequate solutions can be based on corrections of mathematical errors in previous calculations and we wonder whether the tribunal would be a suitable means of resolving disputes that cannot be negotiated. The GOC should consider whether the tribunal can be used in any case without precluding other procedures, such as direct settlement or arbitration, in more difficult cases, and without endorsing concepts such as the excess profits deduction which the United States could not accept for broad legal and political reasons. In sum, we believe it important that the GOC maintain the possibility for maximum flexibility pending substantive discussions with the company.
5. A consideration also worthy of GOC’s attention is importance of maintaining contact with and favorable attitude of the companies. Walsh expected a telegram inviting him to resume negotiations by end of last [Page 407] week. He has had no word until now despite telephone calls to Santiago and inquiries of Embassy here. We realize that Saenz is stretched thin and that GOC must deal with a mountain of pressing problems. Nevertheless, it should be possible to establish a preliminary schedule for talks and to keep in touch with companies. (Anaconda has now been informed by GOC that it will be back to them by mid-November) if Saenz finds it difficult to travel to New York, and we can understand why he would, he might wish to hold next round of meetings in Santiago. (Walsh and Anaconda heard that GOC may be in process of establishing a special commission to handle expropriation problems. Any info you may have on this point would be appreciated.)
6. We will furnish comments on ITT problem in septel.
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Summary: The Department informed the Embassy it did not intend to pressure either the copper companies or the Chilean Government to reach an agreement on compensation for expropriation, and the Department recommended direct negotiations between the companies and the Chileans.
Source: National Archives, RG 59, Central Foreign Policy File, P750026–2009. Secret; Priority; Exdis. Drafted by Shlaudeman and Feldman; cleared by Karkashian, Kennedy, Miller, Hunt, and Lee; approved by Kubisch. In telegram 5141 from Santiago, October 23, Davis described Saenz’s plans for compensating the U.S. copper companies expropriated during Allende’s tenure in office. (Ibid., P750018–1215) In a December 12 conversation with Kubisch, Saez asked that “the USG not press too hard on the ITT case because of its sensitive nature” and expressed concern that if it became a propaganda issue it would exacerbate an already difficult problem. However, Saez suggested that discussions on ITT could begin as early as January 1974, and Kubisch agreed. (Telegram 245016 to Santiago, December 14; ibid., P750029–0776) On March 13, 1974, Cerro reached a compensation agreement with the Chileans. (Telegram 1270 from Santiago, March 14, 1974; ibid., [no film number]) On July 13, 1974, Anaconda reached a settlement. (Telegram 4125 from Santiago, July 13, 1974; ibid., D740188–0393) On October 23, 1974, Kennecott reached a settlement. (Telegram 6444 from Santiago, October 23, 1974; ibid., D740302–0628)
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