PERUVIAN SEIZURE OF IPC ASSETS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-03061A000400020009-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: November 11, 2016
• Document Release Date: August 4, 1998
• Sequence Number: 9
• Publication Date: January 1, 1969
• Content Type: REPORT

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PERUVIAN SEIZURE OF IPC ASSETS
The government of former President Fernando Belaunde Terry of Peru was
constitutionally elected in 1963 for a six-year term with solid voter sup-
port. Yet his administration encountered serious national political and
economic problems. The congress was dominated by the opposition party. A
serious economic downturn in 1967 resulted in a 31 per cent devaluation of
the sol and excessive capital outflow. Belaunde's problems were com-
pounded by pressure from the military who forced through sizeable purchases
of equipment, including French jet aircraft, at a time of severe budgetary
difficulties. When there were disclosures of corruption in high govern-
ment circles, including the military, and the possibility grew that the
Apristas, a liberal party traditionally hated by the military, would win
an election sweep in 1969, the military group, led by General Juan Velasco,
made plans to act.
When political tensions were even further increased because of dis-
satisfaction at the top levels of the military and among some civilian
elements with the government's settlement with the International Petroleum
Company (IBC), a split developed within Belaunde's own party, followed by
a change in the cabinet and, finally, the coup. The timing and motivation
of the coup may have been largely personal on Velasco's part, since he and
Belaunde had had their personal as well as professional difficulties, and
he himself was scheduled to retire in early 1969. Whatever his timing and
motivation, his junta represents a small clique of high-ranking military
officers that had no popular power base at the outset, and which desperately
needed support to sustain itself.
Background of Expropriation
One of the pretexts for the military overthrow of the constitutional
government of Peru on 3 October 1968 had been the latter's settlement of
Peru's long-standing dispute with the International Petroleum Company (IPC),
a Canadian corporation owned almost entirely by Standard Oil Company of New
Jersey. According to the Act of Talara, which the Belaunde government signed
on 31 August 1968, the IPC was to surrender its claim to ownership of oil-
fields at La Brea and Parinas in return for cancellation of the government's
claim to. more than $144 million in alleged excess profits and back taxes.
The company was to retain its refinery at Talara as well as its extensive
distribution and marketing facilities. The oilfields were to be managed
by the government-owned State Petroleum Enterprise (EFP) and the IPC was
to buy the output of the fields at a "fair" price for processing at the
Talara refinery.
The military junta, led by Major-General Juan Velasco Alvarado,
violently objected to the settlement, claiming that years ago IPC had
illegally acquired its oil concession in Peru, and that the company's agree-
ment with the Belaunde government meant the IPC would remain in full control
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of the Talara complex while freed of the huge debt in taxes claimed by Peru.
One of the junta's first acts, therefore, was to nullify the settlement on
4 October and, on 9 October, to expropriate much of the company's holdings
in Peru, including La Brea and Parinas oil fields and the refinery at
Talara. The expropriation instantly boosted the popularity of the junta and
brought it widespread popular and political support. Celebrations were
held throughout the country in an effort to rally political parties and
civic and professional groups in support of President Velasco and the junta.
At that time three large U.S. mining companies and other U.S. petroleum
companies operating in Peru were assured by the Minister of Development
that the government's action against the IPC was exceptional and that their
operations would be "scrupulously respected."
Meanwhile, rumors were growing that the president's advisory group,
composed mainly of radical-nationalist colonels and a group of leftist
attorneys, was urging the government to expropriate immediately the remaining
assets of the IPC as a means of gaining additional and badly needed revenues,
and also as a, means of emphasizing to other foreign investors that the
demands of the new government must be met. In the final months of 1968,
the government stepped up its propaganda campaign against the IPC, which
included a series of articles critical of the company in the pro-government
newspaper El Comercio.
In mid-January the government's oil trust, the EPF, unilaterally broke
off talks over the question of prices of the oil products sold through IPC's
extensive marketing and distribution system, demanded that the IPC pay
$14.4 million for these products at an average price of $3.34 per barrel
and announced that failure of the company to make such payment would lead
to the attachment and sale of its remaining assets. At the same time, the
company's funds were frozen and no cash expenditures were permitted with-
out the approval of the court-appointed military officers who had been
monitoring IPC's operations to protect the EPF's claim. When the IPC
appealed the EPF action in late January, the government took over
administrative control of the distribution apparatus and the IPC share in
the Lobitos oilfields, and threatened to auction off all of the company's
holdings, valued at more than $200 million if payment of the $14.4 million
debt was not made by 5 February. The legal procedure for these actions
was enacted by decree-law of 31 December, which requires payment first
before judicial hearing.
Current Status of Dispute
Most recently, the government has announced that the company owes
the state more than $690 million which is, in effect, the valuation the
regime puts on all oil taken by the company from La Brea and Parinas
fields in the past forty-five years of its operations in Peru. (The
fields were bought by IPC from a British concern in 1924 and, according
to a grant which pre-dates the Peruvian Constitution, the title to them
includes subsurface rights. When the Peruvian Constitution was later
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adopted it reserved all subsurface riches for the state, but made no pro-
vision for settling existing private holdings of subsurface rights. On'this
basis, nationalists have continually attacked the company's subsurface
title.) In a highly emotional and nationalistic television and radio
address to the nation on 6 February, President Velasco declared his regime
had :already started to take steps to collect this debt "to close definitely
and forever this ignominious chapter in Peruvian history." Although the
General did not specify what measures would ultimately be taken, it was
obvious that all IPC holdings would at least have to be taken to satisfy
the debt, since their value is something less than half of the amount
the junta claims is owed to the "Peruvian people." Thus there would be no
compensation for the assets expropriated on 9 October.
U.S. Sanctions: Hickenlooper Amendment and U.,S, Sugar Act
Although the claims of the Peruvian Government and the IPC had long
been in conflict, the case had not directly involved the Government of
the United States. However, it did immediately become involved by the
Peruvian act of expropriation because of a provision of the United States
law known as the Hickenlooper Amendment to the Foreign Assistance Act,
which was passed in 1962. In essence, this law simply provides that the
Government of the United States shall not grant economic aid to foreign
countries which expropriate the holdings of American citizens or companies
without due compensation or without commencing negotiations which, within
six months after the seizure, promise to lead to fair and just com-
pensation. The law does not reject the principle of expropriation, a
sovereign right of every nation and one which has long been fully
recognized by the United States. It does reflect the accepted norm of
international law that compensation must be paid. Obviously the law was
designed to prevent tax monies paid by American citizens from being given
to other countries which seize American assets and do not pay for them.
The law is fully accepted in the United States. Indeed, U.S. citizens
are irritated that, after giving over $100 billion dollars in foreign aid
since World War II (including a total of $550 million to Peru), foreign
countries should now feel in the position to demand the continuance of
aid, as if by right, at the same time that they confiscate U.S. holdings
without recompense. In his radio and television address, President Velasco
referred to the "celebrated and profoundly sad" Hickenlooper Amendment,
.which he said he hoped would not be applied to Peru and would be "thrown
out and never mentioned again." That provision of U.S. law as it applies
to assistance will be invoked 4+ April unless Peru takes steps to settle
the problem. April 4 is six months from 4+ October, the date of the
nullification of the IPC-Peruvian contracts called the Act of Talara.
The confiscation of. the IPC holdings also causes the automatic
withdrawal of preferential treatment accorded Peru under another United
States law, the U.S. Sugar Act of 1948. This law, which was designed
to provide'a stable market for sugar producing nations and to protect
them from the vagaries of wide fluctuations of prices on the world
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sugar market, provides quotas within which sugar producing countries can
sell sugar within the United States at a price which is currently well
above the world market price (6.6? per pound versus 2?). Last year total
Peruvian sales in the United States amounted to $45 million, of which $33
million amounted to a subsidy above world market prices. Because sugar is
one of the country's major crops, Peruvian economists believe a cutoff of
the U.S. quota may wreck the industry in that country, causing major unemploy-
ment. This suspension would be effective on 9 April, six months after the
9 October expropriation.
Division Within the Junta
In view of the junta's announcement on 25 January that Velasco, who
became eligible at the end of January for retirement from the army, will
retain the post of President, a change to a more moderate official line
appears unlikely in the foreseeable future. It has become known, however,
that there is a division in the government between the ultra-nationalists,
under Velasco, and the moderates, whose spokesman, Ernesto Montagne, is
Prime Minister and also Minister of Defense and Commanding General of the
Army. The latter group includes, among others, members of navy and air-
force staffs who are discontented with the dominance of the army in the
regime. If this group should eventually gain control, there would
probably be hope of improvement in Peruvian-U.S. relations.
Relations With Soviet Union
To further complicate the present situation, Peru established
diplomatic relations with the Soviet Union on 1 February, which was highly
publicized and widely supported in the local press. This marked a sharp
reversal of Soviet policy toward the coup, which Izvestiya referred to
on 1.0 October 1968 as "another gorilla operation." The Soviet ambassador
to Chile, who was in Lima for the exchange of diplomatic notes, said
that the USSR could supply Peru with machinery and equipment for its oil
industry and also heavy farm equipment and passenger airplanes. The
Soviet Union is the fourth Communist country with which the Peruvian junta
has established diplomatic or commercial relations in its five-month
existence, having previously had diplomatic or commercial negotiations
with Rumania, Yugoslavia and. Czechoslovakia. Opening of relations with
Peru is the first time since the close of World War II that the Soviets
have recognized a Latin American military government that came to power
by means of a coup. Thu Soviets immediately sent a five-man commercial
mission to Peru with promises of aid and technical assistance. Although
there were indications that Peruvian officials were disappointed in Soviet
offers of aid and trade, a trade agreement between the two was signed
17 February. First reports indicate it calls for the Soviets to provide
credit to both the Peruvian government and private enterprise for the
purchase of heavy machinery from the Soviet Union.
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Other Actions by Peru
In the meantime, relations between Peru and the United States
deteriorated still further when the Peruvian Navy opened fire on an American
fishing boat and captured another while more than 50 miles off Peru's coast.
The seized vessel was released after paying a fine of $7000. The U.S.
protested the incident since it (like almost every country in the world)
does not recognize a claim such as Peru's to the territorial limit of 200
miles offshore.
The Peruvian junta has now embarked on a campaign to win hemisphere-
wide support for its position on the IPC issue. This has begun with the
calling of a conference in Lima of Peruvian representatives to all Latin
American countries to coordinate diplomatic and propaganda action against
the United States.
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S61o Para Uso Como Marzo 1969
Material de Fondo
APODERASE EL PERU DE LA IPC
CPYRGHT
ApI
El gobierno del ex presidente Fernando Belailnde
Terry del Peru fue elegido constitucionalmente en 1963
por un t6rmino de seis aflos. A pesar de que contaba
con un amplio apoyo popular, su administraci6n pronto
tuvo que hacerle frente a serios problemas dom6sticos
de tipo politico y econ6mico. Por una parte, el Congre-
so estaba dominado por la oposici6n; por otra, un des-
censo econ6mico importante en 1967 habia ocasionado
la devaluaci6n del sol en un 31 por ciento y la fuga
excesiva de capital hacia el exterior.
Los problemas del Presidente Belaunde se agrava-
ron por la pres16n de los militares, quienes obligaron
al r4gimen a adquirir grandes cantidades de equipos
militares, entre ellos a.viones a reacc16n franceses,
a pesar de las enormes dificultades presupuestarias
de la Naci6n.
Al hacerse publicas ciertas revelaciones sobre
la corrupci6n en las altas esferas civiles y militares
del gobierno y aumentar las posibilidades de triunfo
de los apristas--corriente liberal tradicionalmente
odiada por los militares--en las elecciones de 1969,
el grupo de oficiales encabezado por el General Juan
Velasco se prepar6 para actuar.
Agudizada mas an la tens16n politica por el des-
contento de los m&as altos niveles militares y de algu-
nos elementos civiles por el acuerdo entre el goblerno
y la International Petroleum Company (IPC), dentro del
propio partido de Belainde se produjo una escisi6n, que
fue seguida por cambios en el gabinete y, finalmente,
por el golpe de estado.
Los motivos y la selecci6n del momento oportuno
para el golpe pueden haber sido escogidos personalmente
por Velasco, pues Este y Belaunde hablan tenido disNguss-
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CPYRGHT
Sin que importen los motivos o la selecc16n del
momento, su Junta representa a una pequefia camarilla
de altos oficiales militares que carecia en un princi-
pio de apoyo popular y que necesitaba desesperadamente
algun respaldo para mantenerse en el poder.
Antecedentes de la Expropiaci6n
Uno de los pretextos para el derrocamiento mili-
tar del gobierno constitutional del Peru el 3 de octu-
bre de 1968 habia lido la decisi6n del r6gimen de so-
lucionar la vieja disputa con la International Petroleum
Company, firma canadiense controlada casi totalmente por
la Esso Standard Oil de New Jersey.
De acuerdo con el Acta de Talara, que el gobierno
de Belaunde suscribi6 el 31 de agosto de 1968, la IPC
dejaria de reclamar como propios los Campos petrolife-
ros de La Brea y Par11as a cambio de la cancelaci6n de
la demanda que hacla el gobierno par mas de $144+ millo-
nes por supuestas utilidades excesivas e impuestos atra-
sados.
La compafiia retendria su refinerla de Talara asi
como su vasto sistema de distribuci6n y comercio. Los
campos petroliferos serian administrados por la empresa
petrolera del estado, la EPF. Por su parte, la IPC com-
praria la producci6n de los campos a un precio "justo"
para su elaborac16n en la refineria de Talara.
La junta militar encabezada por el Mayor General
Juan Velasco Alvarado se opuso violentamente al acuerdo,
manteniendo que hacla afios que la IPC habla adquirido
ilegalmente su conces16n petrolera en el Peru y que el
convenio con el gobierno de Belaunde significaba que la
IPC retendria el control total del complejo de Talara
en tanto que quedaba libre de la enorme deuda de impues-
tos reclamada por Peru. For tanto, una de las rimeras
medidas de la junta fue anular el convenio el 4 de octu-
bre y expropiar el 9 de octubre la mayor parte de los bie-
nes de la compafiia en el Peru, entre ellos los campos de
La Brea y Parinas y la refineria de Talara.
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CPYRGHT
La exproplac16n multiplic6 inmediatamente la po-
pularidad de la Junta con el co nsiguiente respaldo
popular y politico. Se efectuaron manifestaciones en
todo el pals en un esfuerzo por obtener el apoyo de
los partidos politicos y de las agrupaciones civicas
y profesionales en favor del Presidente Velasco y la
junta.
En aquella oportunidad el ministro peruano de
Fomento le asegur6 a tres grandes compa4Sias mineras
y a~otras empresas petroleras norteamericanas en el
Peru que la acci6n del gobierno contra la IPC era,
exceptional y que las operaciones de aquellas serlan
"respetadas escrupulosamente".
Entretanto, aumentaban los rumores que el grupo
asesor del Presidente, compuesto en su mayoria de co-
roneles radicalnacionalistas y de ciertos abogados
izquierdistas, estaba aconsejando al gobierno a que
expropiara inmediatamente los bienes restantes de la
IPC Como medio de recaudar mayores ingresos, muy nece-
sitados, y para hacerle saber a otros inversionistas
extranjeros que las demandas del nuevo r6gimen tenlan
que ser aceptadas.
Hacia fines de 1968 el gobierno acrecent6 su cam-
pafia de propaganda contra la IPC, y it Comercio, diario
de tendencia gubernamental, public6 una serie de a.rti-
culos que criticaban a la compafiia.
A mediados de enero el monopolio petrolero oficial
--la EPF--unilateralmente rompi6 las negociaciones sobre
el precio de los productos de petr6leo vendidos a trav?s
del vasto sistema de distribuci6n y comercio de la IPC,
exiai6 que la IPC pagara $14.4 mil.lones por esos produc-
tos al precio promedio de $3.34 por barril y anunci6
que de no hater efectivo el pago se produciria la incau-
taci6n y yenta de los bienes restantes de la compa?iia.
Al propio tiempo se congelaron los fondos de la IPC
y no se le permitieron gastos al contado sin el visto
bueno de los oficiales militares designados por el tribu-
nal que habian estado fiscalizando las operaciones de la
IPC para proteger las reclamaciones de la EPF.
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CPYRGHT
Al apelar la IPC la acc16n de la EPF a fines de
enero pasado, el gobierno asumi6 el control administra-
tive del aparato de distribuci6n y de la parte de la.
IPC en los campos de Lobitos, amenazando con vender
en subasta pdblica todos los bienes de la compa?Sia,
valorados en mas de $200 millones, si no se liquidaba
la deuda de $14.4 millones antes del 5 de febrero.
El procedimiento legal para estas acciones qued6 esta-
blecido por decreto ley de 31 de diciembre, que exige
el pago antes de la vista judicial.
Estado Actual de la Querella
El gobierno ha anunciado recientemente que la
comparila le debe al estado ma's de $690 millones, que
viene a ser, en realidad, el valor que el regimen le
atribuye a todo el petr6leo extraldo por la IPC de
los campos de La Brea y Parifias en los ultimos 45 afios
de sus operaciones en el Peru. (Los campos fueron ad-
quiridos por la IPC de una empresa britenica en 1924,
y de acuerdo con la conces16n de fecha anterior a la
Constituci6n del Peru, el titulo conlieva los derechos
en el subsuelo. Al ser adoptada me.s tarde la Constitu-
ci6n, esta reserv6 para el Estado todas las riquezas
del subsuelo, pero no dict6 disposiciones para la so-
luci6n de las tenencias privadas existentes de derechos
del subsuelo. Sobre esa base los nacionalistas han ata-
cado constantemente el titulo de la IPC al subsuelo.)
En un discurso emotivo y nacionalista pronunciado
ante el pals por radio y televisi6n el 6 de febrero, el
Presidente Velasco manifest6 que su regimen ya habla
iniciado los pasos para cobrar la deuda con el objeto de
"cerrar definitivamente y para siempre este ignominioso
capitulo en la historia del Peru".
Aunque el general no precis6 las medidas que
serian tomadas, era evidente que por lo menos todos los
bienes de la IPC tendrIan que ser incautados para satis-
facer la deuda, ya que su valor es algo menos que la mi-
tad de la suma que la junta dice que se le debe al "pue-
blo peruano". For tanto, no habria corapensac16n por los
bienes expropiados el 9 de octubre.
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Sanciones de EE.UU.: La Enmienda
y la Ley Azucarera
Hickenlooper
CPYRGHT
A pesar de que las reclamaciones del gobierno
peruano y la IPC hablan estado en conflicto desde
hate mucho tiempo, el gobierno de los Estados Unidos
no se habla visto envuelto directamente en el caso.
Sin embargo, si se vio afectado inmediatamente por el
decreto de expropiaci6n peruano a causa de la disposi-
ci6n conocida como la Enmienda Hickenlooper y aprobada
en 1962 de la ley norteamericana de ayuda al exterior.
Esta ley dispone, fundamentalmente, que el gobier-
no de los EE.UU. no podr6 conceder ayuda econdmica a
passes extranjeros que expropien las tenencias de ciu-
dadanos o empresas norteamericanas sin compensacibn
justa o sin iniciar negociaciones que en el plazo de
seas meses a partir de la incautaci6n prometan llegar a
una compensacibn justa y honesta.
La ley no rechaza el principio de expropiaci6n,
derecho de soberania. de toda naci6n que por largo tiempo
ha sido reconocido plenamente por los Estados Unidos,
si refleJa la norma aceptada de derecho internacion al
que hay que pagar la compensacibn.
Es evidente que la ley fue aprobada con el objeto
de impedir que el dinero pagado en calidad de impuestos
por los ciudadanos norteamericanos sea entregado a otros
passes que se posesionen de bienes norteamericanos sin
pagar por ellos. La ley tiene plena aceptaci6n en los
Estados Unidos. Es mas: los ciudadanos norteamericanos
estun irritados porque despu6s de haber repartido mas
de cien mil millones de d6lares en ayuda al extranjero
desde la II Guerra Mundial--incluso un total de $550
millones al Peru--, algunos passes se creen ahora en
condiciones de exigir que continue la ayuda, como cosa
de derecho, mientras que proceden a la confiscaci6n de
las propiedades norteamericanas sin compensacibn alguna.
En su discurso por radio y televisi6n el Presidente
Velasco se refiri6 a la "c6lebre y profundamente triste"
Enmienda Hickenlooper, la cual dijo que esperaba no fuera
aplicada al Peru y que fuera "descartada y ,jambs mencio-
nada otra vez".
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CPYRGHT
Esa disposici6n de la ley norteamericana, tal
y como se aplica a la ayuda exterior, ser6 invocada
el 4 de abril a no ser que el Peru tome medidas para
solucionar el problema. El 4 de abril es exactamente
seis meses despu6s del 4 de octubre, fecha en que qued6
anulado el contrato peruano-IPC conocido como el Acta
de Talara.
La confiscaci6n de los bienes de la IPC tambi6n
produce en forma autom6tica el retiro del trato pre-
ferencial extendido al Peru de acuerdo con otra ley
de EE.UU., el Acta Azucarera de 1948. Dicha ley, cuya
intenci6n era ofrecer un mercado estable para las na-
ciones productoras de azucar y protegerlas de los capri-
chos de las amplias fluctuaciones en los precios en el
mercado azucarero mundial, instituye cuotas dentro de
las cuales los palses productores de azucar pueden
vender en Estados Unidos a un precio que actualmente
sobrepasa con mucho al del mercado mundial ( 6.6 centa-
vos contra 2 centavos de d6lar).
El a?io pasado el volumen total de ventas peruanas
en EE.UU. fue de 45 millones de d6lares, de cuyo total
$33 millones equivalieron a un subsidio por encima de
los precios del mercado mundial. Debido a que el azucar
es uno de los principales productos del Peril, los eco-
nomistas peruanos creep que la suspensi6n de la cuota
por parte de los Estados Unidos puede arruinar la indus-
tria azucarera y causar grave desempleo en esa naci6n.
Esta suspensi6n ser6 efectiva el 9 de abril, seas meses
despu6s de la expropiaci6n del 9 de octubre.
Divisi6n en la Junta
Con el aviso de la Junta hecho el 25 de anero que
Velasco, quien tenia derecho a retirarse del Ej6rcito
a fines de mes, permanecer6 en el cargo de Presidente,
no se vislumbra en un futuro previsible un cambio a una
linea official mas moderada.
Sin embargo, existe una division entre los ultra-
nacionalistas de Velasco y los moderados, cuyo portavoz,
Ernesto Montagne, es primer ministro, ministro de Defensa
y Comandante General del EjArcito. Este ultimo grupo
cuenta con el apoyo, entre otros, de miembros de los es-
tados mayores de Marina y Aviaci6n que est4n descontentos
con el predominio del Ej6rcito en el regimen. Si dicho
pprYiFa~~~aiq*3;j ~8~ete
ueruano-norteamericanas.
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CPYRGHT
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Relaciones con la Un16n Sov16tica
Para mayor complicaci6n de la situaci6n actual,
el primero de febrero el Peru establec16 relaciones
diplom&ticas con la Uni6n Sov16tica con jran publi-
cidad y amplio apoyo de la prensa del pa s. El acon-
tecimiento indic6 un reverso total de la actitud so-
vi6tica hacia el golpe militar, al cual Izvestia se
habia referido el 10 de octubre de 1968 como"otra
operac16n gorila".
El embajador sovi6tico en Chile, quien fue a
Lima para el intercambio de notas diplomAticas, mani-
festo que la URSS podria suministrarle al Peru maqui-
naria y equipo para su industria petrolera, asi como
equipo agricola pesado y aviones de pasaje.
La Uni6n Sov16tica es el cuarto pals comunista
con el cual la junta peruana ha establecido relaciones
diplomAticas o comerciales en sus cinco meses de exis-
tencia, ya que anteriormente tenla relaciones diplomA-
ticas o comerciales con Rumania, Yugoeslavia y Checos-
lovaquia.
El inicio de relaciones con el Peru es la primera
vez despu6s de la II Guerra Mundial que los sov16ticos
han reconocido a un gobierno militar latinoamericano que
lleg6 al poder por medio de un golpe.
Los sov16ticos enviaron inmediatamente al Peru una
misi6n comercial de cinco miembros con promesas de ayuda
y asistencia t6cnica.
No obstante los indicios que los funcionarios
peruanos no estaban satisfechos con las ofertas sovieti-
cas de ayuda y comercio, se suscribi6 el 17 de febrero
un convenio comercial entre ambos palses. Los primeros
informes indican que los sov16ticos le otorgar6n cr6ditos tanto
al gobierno como a la empresa privada del Peru para la
adquisici6n de maquinaria pesada en la Uni6n Sov16tica.
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-8-
CPYRGHT
Otras Accirn es del Peru
Entretanto, se produjo otro deterioro en las
relaciones entre el Peru y los Estados Unidos a
consecuancia que unidades navales peruanas abrieron
fuego contra un pesquero norteamericano y capturaron
a otro a mas de 50 millas de la costa peruana. El
barco apresado fue puesto en libertad despu6s que
pag6 una multa de $7000.
Estados Unidos protest6 el incidente, ya que
no reconoce--como casi todos los passes del mundo--
una reclamac16n, tal comp la del Peru, sobre los
limites de aguas jurisdiccionales a 200 millas de la
costa.
La junta perua.na se ha dedicado actualmente a
una campa?Sa por conquistar la solidaridad del Hemis-
ferio en el caso de la IPC. Ha comenzado con la con-
vocatoria de una conferencia en Lima de representantes
diplomaticos peruanos ante todos los passes latinoame-
ricanos para coordinar la acc16n diplom6tica y de pro-
paganda contra los EE.UU.
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 CPYRGHT CPYRGHT
ApprA6CrVdt1' 6Ies9e 199 0'8/24: CIA-R 8-03061A 0 009- 0
eizure r s r eru- . les
By James Nelson Goodsell
Latta America correspondent of seen as the most likely targets.
The Christian Science Monitor Cerro has large holdings here. Its largest
Lima, Peru activity is in the copper mining field and it
is Peru's third largest taxpayer. One of its
A major confrontation between Peru Mid subsidiary firms, erro a asco Company,
the United States is developing in the wake has already lost 18 cattle ranches, expropri-
of last week's total seizure, of a large United, -11 8-1
States oil firm here. Gen. Juan Velasco Alvarado came to power
Although United States officials on the in last October's coup.
scene and in Washington are seeking to. In this case, contrary to the situation with
dampen the issue, there is a feeling here IPC, the lands are being paid for by govern-
that relations between the two nations are ment bonds valued at $620,000 and redeem.
worsening. able over 20 years. The government is also
This feeling persists despite a statement paying $500,000 in case for installations and
by Fernando Berckemeyer, the Peruvian $2.5 million for cattlei But some Cerro peo-
Ambassador to Washington, that no addi- plc are not happy with the agreement.
tional expropriations are expected. Here in
Lima, the mood of the government seems Manager held
less conciliatory and concern is widespread. Xerox has had financial and other prob-
The American business community is lems for some mgnths. It recently was ac-
clearly worried. So are businessmen from cured of violati g import laws and its
other countries--West Germany,' England, local mahager, Len Ferric, was held in
France, Australia. But the focus of Peruvian custody for some weeks until a court ab-
nationalism is on the American firms, par- solved him and the company. But Gen.
ticularly those which are large conglom- Armando Artola, Minister of Government,
crates doing millions of dollars of business says he is dissatisfied with the court ruling
yearly. and has ordered the case reopened.
ITT, the parent company of the telephone
l in u s listed firm, came under attack this past week
In addition to the seized oil firm, the Inter- from El Comercio, one of Lima's leading
national Petroleum Corporation, these firms. morning papers which led the strong ITT
are the Cerro Corporation, the Peruvian morning papers which led the strong nation-
Peruvian of the Xerox Corporation, and the' alist attack against IPC for nearly 10 years
Peruvian Telephone Company, a subsidiary before its seizure last October. ITT officials
of International Telephone and Telegraph have expressed concern over the develop-
Company. Together, these firms represent ing situation in recent weeks.
the largest single body of business taxpayers For its part, the Peruvian Government,
in Peru. through a spokesman last week, said ITT
One outcome of the current hassle is a operations "need to be looked into," adding
Peruvian Government effort to step up trade that "a contract between ITT and the last
and diplomatic relations with the Soviet government needs to be studied."
Union and other East European nations. Re- This is part of the mounting nationalist
lotions with Moscow were established last sentiment here. For years it was centered
Saturday, following establishment of ties on the presence of IPC, the wholly owned
with Yugoslavia, Romania, and Czechoslo- Peruvian subsidiary of Standard Oil Com-
~vakla earlier. pany (New Jersey) which for more than 40
President Nixon is bound by law to sus-
pend all United States aid and other assist- years operated in Peru. In fact, its facilities
ance to a nation which refuses to negotiate became the nation's principal source of
on the expropriation of United States prop- petroleum products, serving both the local
erty. This requirement, known as the Hick- and foreign. markets and winning praise for
enlooper amendment, is part of the ,foreign its marketing setup.
aid legislation passed by recent congresses. But the nationalist bent of many Peruvi-
Under the arrangement, the United States ans worked against IPC. The case is an
would also stop purchasing Peruvian sugar. Interesting one.
United States economic aid to Peru last Last August, Peru's constitutional govern-
year was $15 million, military . aid was $6 ment -worked out, an accord with IPC under
million, and sugar purchases under quota which it turned over its important La Brea-
were $45 million. Parifias oil fields to Peru, ceding also its
This Inflow of some $70 million is impor- compressor plants, pipelines, tankage, and
tant to an underdeveloped nation such as other producing facilities connected with
Peru. But Peru's army generals ~ and the fields. The government for its part re-
colonels, who took power last Oct. 3 depos- nounced any and all claims against IPC
Ing the constitutional government of Fer- arising from the long-standing controversy
nando Belaunde Terry, are not expected to The government also accorded IPC'% mar
qW to by the threat of this cutoff. keting and refining activities the sanie status
App Ir ;' tSiS` , page', 9B~i?/EI8/F atCIA-R4 iP O3064114(~ t @1~0~9~er
could well spur them to move against other Peru's general petroleum aw.,
United States Investments. in Peru which But the solution lasted only briefly. When'
 CPYRGHT
by the military on Oct. 3, the new govern- had e m r a
had taken over ot7rratinn nf~ holh La Llt ca?
h
tt~nt tlt?clarec ' eQII'~ ' a ;recment Qpull and
by n > tf yar JIta406020r009-8
~~;Q~rArrct~~i~tarliaif+W~~~W/24
the Lti lima-Parings oil fields and IPC's
Tatara refinery as well. The military
leaders said any compensation for the seized
property Would have to take into account
the company's debt to the government. These
alleged debts amount to more than the as-
sessed value of the seized IPC property.
IPC tried through the courts to get some
redress. But its suits were thrown out on
.the grounds that military law In this case
holds precedence over constitutional provi-
sions and all previous decrees.
But IPC continued in business, purchas-
Inc oil products from the state oil enter-
CFI,I;I,1'; ",Cii (R
P Fehrit?'ry 1o6.()
son goo SC
Latin America correspondent of
The Christian Science Monitor
Lima. Peru
lo new trade
R James Ncl r d II
v
CPYRGHTCPYRGHT
Peru looks _ toward Soviet bloc
Then, shortly after the first of the year,
,another claim against the comisany was
made--the $15 million for the oil products
purchased after fake-over. IPC said the
sum was unrealistic and based on a price
'structure so high it would cause the com-
pany to operate at a loss.
EPF attached IPC's assets and bank ac=
counts on Jan. 16 to collect the claim, pur
suant to a decree law passed two weeks;
before. The company was intervened the-,
:same day and EPF agents moved into the
offices. Then on Jan. 2$, company officials
were removed and EPF took over'total op-
erational management.: Y,;
result of the military government's seizure
of-the International Petroleum Corporation,
the Peruvian subsidiary of Standard Oil
Company (New
argest foreign companies doing business
here.
but now is virtually complete, presenlst
Washington with a serious policy dilemma.
It gives President Nixon a problem even
before he has worked out. his Latin-Amcri-
can policy.
New trade patterns sought
Under the Hickenlooper amendment to
the foreign-aid measure, the United States.
is bound to cut off foreign aid and other
assistance to a nation which takes over a
United States-owned firm and fails to en-
ter into negotiations to compensate the orig-
inal owners. Peru has until early April to
actually take such a step and while there
is hope that some sort of accommodation
can be worked out before then, the situa-
tion is not too promising.
Affected in addition to foreign aid would
be Peru's sugar quota which earns $45 mil-,
lion yearly in foreign currency, but which
also is important because Peru, as a signa-
tory to the world sugar agreement, can
sell only about 60,000 tons of sugar on the;
world market over and above what the'
United States purchases.
t
I
11S et, sat tat a intsston will discuss With such a cutoff, the Peruvian military
credit terms with "most favorable" interest leaders would be hard put to replace the
rates and the possible export of Peruvian United States market. It may be that they
products to the Soviet Union. are thinking ahead toward such an eventu.
The visit, according to government spokes. ality and hoping that the Soviet Union Wmiid
nten, is clearly in line with the govern- he willing to Purchase the sugar that tile
meat's policy of diversifying Peru's mar. United Slates may reject.
ets and reinforcing the country's foreign Certainly the mood within government
ommerce.
Tile rt~6ltlf?sdaFQiXl~i@t~~i~t$t41 ,99/08?24 : CIk~R[DP'll3-L01~1e?~t140A&20QQ9-8
tnitod States continne to snteriorate P. 4 pa erns, particularly with the Soviet 111"t.+.+
Peru's military leaders are looking to-
ward the, Communist-bloc nations as poten-
tial trading partners.
Almost. from the moment they. seized
power in early October of last year, the
military indicated an interest in both diplo-
matic and trade ties with the Soviet Union
and other East European nations.
But as relations with the United States
have steadily worsened, .this trend has be-
come more Insistent.
Diplomatic ties were established with the
Soviet Union Feb. 1, following the renewal
of relations with Czechoslovakia, Romania,
and Yugoslavia late last year.
The trend reverses Peru's long-standing
reluctance to do business with Soviet-bloc
nations. And it apparently sterns from a
growing readiness on the part of some Peru-
vian business leaders, who support the mili-
tary government, to look for new trade ties
within the Communist world.
To observers here, the situation reflects a
change in Peruvian attitudes which could
well affect other nations in the hemisphere.
U.S. relations deteriorate
A Soviet trade mission has arrived here
and Gen. Edgardo Mercado, the Foreign
t.
NI t ? 'd
I
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r i'"i''-).'nry 1966 CPYRGHT CPYRGHT
scrambles tO patch
dispute
By James Nrlsnn Gondaeff
Lnttn A?,erica correspondr,,t of f
The ChrIstkn Science Rfonltor
With United State
elations worsening steadily#
ashington is desperately try
ng to find some solution to the
risk caused by Peru's exproi
riat.lon of vast oil properties be-
onging to an American firm.
It wants a solution which will
mount to a fate-saving for both
ides.
But whether such a solution is
ossible is a major question
mark. There are some In
Washington who feel the situa-
inn has already rloteriorated
eyoncl the point where face.
giving corn he achieved.
ebt nAat~rlyd
One thing that hampers the
e* Nixon administration is the
ack of time to work out a co-
rdinated Latin-American pot.'
cy. Decisions on the Peru case
re being made against a vac.
tum in policy toward the West-
rn Hemisphere. So for, Presi-
ent Nixon has not tipped his
and on what he hopes 'will be
atin-American policy for his
dntinistration, nor has he
lamed his top advisers on Latin
merica.
The result is a major 'policy
rists before Mr. Nixon nas a
olicy.
i
The new administration, how.
ver., is carrying on much as the'
ohnson administration did dur-
fig its final months in the case
f Peru. The State Department,.
f or example, said over the week
ndthat it regretted a eruvian
overnment statement i i tithe
xpropriated International Pe.:
oleum Company (IPC) ower
Peru's military leader, which
'asserted the back debts against
IPC, a subsidiary'of Standard
Oil Company (New Jersey).
The claim allegedly repre.
Atnts the value of oil the corn-
pony extracted during the 45
years it operated in Peru. if
Fields seized
Peru's military contends that
the company's title to the oil
fields was invalid-although in-'
ternational arbitration, Peru's`
Congress, and other Peruvian
decisions had supported the
validity of the claim. The title
to the old La Brea Parings oil
ftnlds was exchanged witli the
former go) crnment, of Fernando
t3 hu,nde Terry last August for,
an operating concession.
But the Peruvian military,
shortly after ousting the consti-
tutional Bela6nde government,
seized the oil -fields and the
Nearby Talara refinery, and
subsequently took over the com-
,parry's remaining assets, includ.
ing a vast distribution servici
and the majority of Peru's gaso
line stations.
Amendment. rapped
The State Department statg.
'ment read: "This development
does not appear to be'leading
to a resolution of the problem
in accordance with . inter'
national law."
But the niceties of Interna-
tional law do not appear to. bA
eruvian
worrying the Peruvian military
leaders. General Velasco told
"No person with a conscience,
no people, no government, not
even a court of law, can any
longer support the despoliation
of the natural resources of a
generous people who have al.
Wt,ys offered, and continue to
offer generously, guarantees of
law to foreign investors who
came, are coming, and will
come to live and work here
honestly."
General Velasco also threw a
challenge at Washington on the
so-called Hickenlooper amend.
ment to the current Foreign As-
sistance Act which provides for
a cutoff in foreign aid and other
'assistance in case a country
nationalizes American property
without what is termed "prompt
and adequate compensation."
It is obvious that the Peruvian
military has no intention of con.
pensating for the IPC property
since it says that IPC owes a
whopping near-$700 million.
Cutoff scheduled
Under the Hickenlooper
amendment, which General.
Velasco called "celebrated and
profoundly sad," foreign aid
will be terminated April 9. This
cutoff will include both actual
foreign aid and such additional
Items as Peru's lucrative sugar
quota in the United States mar
ket. Both the aid cutoff and the
Sugar termination would be Seri-
ous blows to the Peruvian econ-
omy. 1
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