CHILE -- INR ANALYSIS OF GOC ATTITUDES AND INTENTIONS ON COPPER COMPENSATION

• Document Type: CREST
• Collection: Library of Congress
• Document Number (FOIA) /ESDN (CREST): LOC-HAK-540-18-7-5
• Release Decision: RIPLIM
• Original Classification: T
• Document Page Count: 14
• Document Creation Date: January 11, 2017
• Document Release Date: October 5, 2012
• Sequence Number: 7
• Publication Date: October 8, 1971
• Content Type: MEMO

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lip yin-- ? a r - - 1
JrEMOR.ANLftJM
-ran SZCREE
NATIONAL SECURITY COUNCIL [OUTSIDE SYSTEM]
MEMORANDUM FOR:
FROM:
SUBJECT:
DR. KISSINGER
ASHLE'el/IIEWITT
INFORMATION
8 October 19725X1
CHILE -- INR Analysis of GOC Attitudes and
Intentions on Copper Compensation
Attached at Tab A is a study done by the Bureau of Intelligence and Research
in the State Department on
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Nevertheless, the study provides interesting 125X1
sights into the assumptions the GOC has been using in its policies towards
us, and the conclusions it has drawn from developments to date.
The main assumptions of the GOC have apparently been that:
? This Administration has a?n in.hPrent ideological hostility tcrwarcis
the'GOC.
-- The U.S. Government has had hostile intentions towards Chile since
before the September 1970 Presidential election.
? The U.S. Government will apply economic pressures against the
GOC due to both ideological considerations and pressures from
U.S. investors.
However, the GOC believes that a policy of hostility on the part of the U.S.
against Chile will not succeed because:
-- The U.S. is in serious difficulty both abroad and at home, a situation
which favors the GOC in the long run.
The U.S. will not be able to maintain pressures on Chile due to Latin
American solidarity and growing support for Chile within the U.S.
-- Despite U.S. Government economic pressures, the GOC will be able
to obtain economic assistance from other sources, including the World
Bank and the IMF.
NSA review completed
State Dept. review completed
MORI/CDF C05138610
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-- Ambassador Korry followed a hard line in his pursuit of U.S. Govern-
ment interests, which tended to strengthen the GOC conviction that
U.S. intentions were hostile.
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- The Allende Government views Ambassador Davis as a "conciliator",
offering the prospect of a shift in U.S. Government policy over a
period of time.
? The study concludes that the Allende Administration hopes an eventual resolu-
tion of the copper compensation problem will be reached with the U.S. in
overall bilateral negotiations at a high level, settling a number of interrelated
financial and economic issues, including access to credit and debt renegotiations.
Attachment:
Tab A -- cc 30 Sept Memo INR to AsstSecy Meyer
ref Amb Davis
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MEMORANDUM
CTF-ihe -714-Z6W0-3
September 30$ 1971
To : ARA - Mr. Meyer
from ?t INR/RAR/OD - G. H. Summ
subject: Chile - Analysis of GOC Attitudes and Intentions
on Copper Compensation
The following informetien and analysis has been derived from
A thornumh review of
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. The GOC has engaged in considerable contingency planning
? regarding anticipated US reaction to the copper compensa-
tion issue, incorporating the following factors:
a. The Nixon Administration basically has an
ideological hostility towards the GOC;
? b. The USG has had hostile intentions towards
Chile before, during, and following the
September 1970 election;
c. The USG will apply economic pressures against
the GOC (e.g., ITO loans from the Export-Import
? Bank), due to both ideological considerations
and pressures from US investors (including ITT),
? in the event of inadequate compensation.
2. The GOC nevertheless believes that the USG will not
succeed in any such policy against Chile, for the following
reasons:
a. The US is in serious difficulties both abroad and
at home, a situation which favors the GOC over
time;
b. The USG will not be able to keep pressure on
Chile for a long period of time, due to Latin
American solidarity with Chile and growing
support for Chile within the US; notably in
political, intellectual and media circles and
in some interested private sectors,
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Despite anticipated USG economic 'pressures, the
GOC may be able to obtain assistance from the
IBRD and the IMF;
The GOCts two agreements with the Cerro Corporation (one
covering compensation, the other naming Cerrc as a GOC
purchasing agent) are of special tactical importance to
the 0000 in its overall "game plan" of projecting an
international image of reasonableness in the face of USG
hostility and pressure.
In addition,
following:
suggests "IP
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1. The Allende Administration views Ambassador Korry as follow.
ing a "hard line" on behalf of the USG, confirming GOC
suspicions of USG intent;
2. The Allende Administration views Ambassador-designate Davis
as a "conciliator" thereby offering the prospect of bring-
ing about a shift in USG policy over a period of time;
The Allende Administration hopes that eventual resolution
of the copper compensation issue will be reached with the
USG in overall bilateral negotiations at a high level
settling a number of inter-related financial/economic
issues, (e.g., access to credit, debt negotiation).
For your additional information, some of the above points are
dealt with in greater detail in the attachment.
Attachment:
Copper Compensation . Further Details
on GOC Attitudes and Intentions.
cc: 1/ARA . Mr. Feldman
E/IFD - Mr. Weintraub
S/S
INR/RAR:RWRichardson:aps
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o er Com ensation - Further Details on GOC Attitudes
an In en ons
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? From the very outset, the Allende Administration suspected
that the USG was hostile to the new Chilean Government
(GOC), due to ideoloeical considerations reinforced by
pressures from US investors.
. As early as February 1971 the GOC was gathering information
on possible "reprisal measures" available to the Export-
Import Bank, and authority/operations of the US'? Foreign
Settlements Commission.
Presumably. the GOC was developing continency plans in
aalia7176 with the nationalization of US investors. Further
evidence supporti this resum tion is to be seen in the
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Despite GOC suspicions of USG intent, and parallel with
apparent GOC continency planning, the GOC by late February
robablv saw the USG as maintaining a "wait-and-see" attitude
v s-a-v s the Allende Administration.
A constant element in GOC policy formulation has been
consideration of US domestic factors (e.g., 1972 elections,
serious internal problems) and the US international position.
Closely related to the foregoing has been very close GOC
attention to US media views on US-Chilean relations, and
views or political and intellectual circles in the US
regardine Chile.
As early as February 1971, various reactions in the US to
the cancellation of the visit of the USS Enterprise were
interpreted as indicating significant public-opinion
support for the GOC, and also as evidence of at least some
differences within the USG. This view became stronger with
the passage of time.
It should be assumed, therefore, that the GOC has included
the following parameters in its formulation of policy towards
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the USG: there are divisions within the USG over Chilean
policy; there is considerable political support in Demo-
cratic Party circles for the GOC; and very important and
influential information media (e.g., New York Times,
Washin6ton Post) are favorably disposea to the GOd.
The GOC application for EXIM Bank financing of Boeing
aircraft for LAN-Chile apparently served two purposes for
the GOC:
(a)
As a minimum, the application served as a"probe"
of USG political views rearding the Allende
Administration, and the results would indicates
whether the USG was going to conduct affairs with
the GOC on an ideoloicaipolitical basis, Or on
a pragmatic, business-like basis;
(b) As A maximum, the application (if approved) would
nerve as a keystone in a GOC policy of maintaining
normal relations With very important external financ.
ing sources, simultaneous with the GOCIs carrying
out the nationalization of private foreign investors.
In this" sense, the GOC considered good relations
with EXIMBANK as vital.
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Two conclusions may be derived from the EXIMBANK-LAN case:
one is that the GOC by August already had decided that the
amount of compensation to US copper companies was not going
to meet USG expectations; the second is that the GOC now
believed it had a definite reading on attitudes at the
highest levels of the USG regarding the Allende Administra-
tion (i.e., confirmation of ideological hostility).
Beginning in mid-August 19710 the GOC stepped up the
preparation of materials in connection with a determination
of the level of compensation to US copper companies. Evidence
of the approach to be followed may be seen in the following:
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It Is reasonable to assume that the ?GOC was intending to
decide on a "punitive" level of "excess profits", and perhaps
of compensation in General, in liGht of the information
requested?all of which could be used defensively by the GOC,
both for domestic and forein consumption. 25X1
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the following judgmefits are likely to
be factors in GOC policy in the future:
(a)
President Nixon would like to avoid Chile's becoming
an issue in thenext presidential campaign;
(b) Ambassador-desinate Davis may be helpful in
maintaining US-GOC relations on a cordial level;
The general position of the State Department is to
try to avoid a confrontation with the GOC over the
interests of US investments, as long as OPIC
insurance is not involved. Recourse by investors
to OPIC insurance would bring the GOC and the USG
face to face;
(d) With the US confronted by international and domestic
problems, and being in a pre-electoral period,
conditions are favorable for the GOC to obtain
support from certain important Democratic Party
groups; while holding to a firm policy toward the
Nixon Administration, and anticipated economic
pressures.
(c)
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. 5 .
GOC fulfillment pf the negotiated s47,reement with
the Cerro Corporation is very important, to divide
the ranks of the US copper companies and to have
a positive effect on those US sectors which have
been understandint; towards Chile.
INR/RAR:RWRiehardson:aps 9/30/71
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