FOREIGN RELATIONS, 1942, VOLUME VI



825.6374/1462
   The Chilean Ambassador (Michels) to the Secretary of State

                           MEMORANDUM

  Due to late developments in the Far East, the possibilities for sales
of Chilean nitrate during the next few years have been reduced still
further, which will affect Chile's economy to a greater extent.
  To avoid a more extensive depression in the near future, and to pre-
vent a tremendous crisis in Chile after the war because of the excessive
production of nitrogen throughout the world, Chile would like to have
the cooperation of the United States,71 which might be based on the
following considerations:
  a) An agreement, for the duration of the present state of war, to
furnish the means of transportation which will make possible the sale
of 700,000 metric tons of nitrate per annum here;
  b) That all the plants last constructed or which will be constructed,
for the purpose of national defense, by the Government of the United
States, directly or indirectly, shall be operated, after the war, in an
indispensable proportion, and exclusively for the purpose of national
defense.
  c) The Government of the United States will keep Chilean nitrate
of soda on the "free list", both during and after the war. Neither
will
any import duty be imposed nor systems of quotas or licenses on im-
ports be applied, nor any other restrictions be adopted which may
limit imports of this product.
  d) The Government of the United States, as a policy of cooperation
in the maintenance of the market for Chilean nitrate of soda on the
Continent, will not in the future extend any credit facilities to finance
plants for the production of synthetic nitrate in other Latin American
countries.
  e) Elimination of regulations adopted by the United States that
give preference to national products for industrial governmental uses.
  After considering the situation in this country and the special con-
ditions imposed by the war, the possibility is suggested for the discus-
sion of an agreement, which should be satisfactory for Chile, on the
following lines:
  1. During the present state of war the Government of the United
States will devote all the production of nitrogen made in the plants
recently built, under construction, or hereafter to be constructed under
the war program, to the manufacture of war materials; will consider
as of first necessity for agriculture, and to fill out the needs of defense,
the importation of nitrate of soda from Chile; and will make special
endeavours to provide transportation for Chilean nitrate of soda in

  n The Under Secretary of State was said to have assured the Ambassador
and
Florenclo Garcia, manager of the Chilean Nitrate and Iodine Sales Corporation,
that the United States did not wish to harm the economy of any small country,
and that after the war it would be necessary for Chile and the United States
to
consider the nitrate question.



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