¹ Nye, Joseph S. Jr, Keohane, Robert O. et al. , Transnational Relations and World Politics, (Cambridge: Harvard University Press, 1971),Google Scholar which originally appeared as an edition of International Organization, Summer 1971 (Vol. 25, No. 3).Google Scholar

² Moran, T. H., “New Deal or Raw Deal in Raw Materials,” Foreign Policy, Winter (No. 5), 1971–1972.Google Scholar

³ For the analysis of Anaconda's and Kennecott's behavior in Chile, see Moran, T. H., El Cobre es Chileno The Multinational Corporation and the Politics of Development: The Case of Copper in Chile 1945–1972 (Harvard: Center for International Affairs, forthcoming).Google Scholar

Also, cf. Mamalakis, Markos and Reynolds, Clark, Essays on the Chilean Economy, (Homewood, Illinois: Richard Irwin, 1965);Google ScholarCruz, Anibal Pinto Santa, Chile: Un Caso de Desarrollo Frustrado, (Santiago: Editorial Universitaria, 1959);Google ScholarValenzuela, Mario Vera, La político economica del cobre en Chile (Santiago: Universidad de Chile, 1961).Google Scholar The figures cited are taken from the official statistics of the Chilean Corporation del Cobre or from the annual reports of the companies.

For a general contrast of management views, see Marcosson, Issac F., Anaconda (New York: Dodd, Mead and Company, 1957);Google ScholarMcDonald, John, “The World of Kennecott”, Fortune, 11 1951 (Vol. 44, No. 11);Google ScholarO’Hanlon, Thomas, “The Perilous Prosperity of Anaconda", Fortune, 05 1966 (Vol. 73, No. 5);Google Scholar“Anaconda: The Domestic Problems of an International Giant”, Forbes, 12 15, 1968 (Vol. 102, No. 12);Google ScholarLoving, Rush Jr, “How Kennecott Got Hooked with Catch–22”, Fortune, 09 1971 (Vol. 84, No. 9).Google Scholar I have also benefitted from interviews with senior management officials of both companies in New York and Santiago, 1969–1972.

⁴ The Nuevo Trato mining legislation of 1955 was essentially a response to Anaconda's claims that a “good investment climate” would automatically bring huge new investments in copper mining from the profit–maximizing North American companies. But Kennecott officials plainly told the Chilean Congress that they planned no substantial new investments even after they were offered lucrative incentives (Historia de la ley 11.828, Congressional debates on mining policy, Volume 1, p. 3958–9, September 16, 1954). This increased the resentment against Kennecott and reinforced the determination to take over the El Teniente mine as soon as the country had developed the requisite domestic skills in production. Anaconda executives complained that it was Kennecott's reluctance to invest in Chile that poisoned relations for the companies during the administration of the Conservative Jorge Alessandri. President Alessandri himself expressed public displeasure at the behavior of Kennecott after the passage of the Nuevo Trato (Cobre, January 1963 [No. 5]). For the subsequent deterioration of the relations between the foreign copper companies and local conservative groups in Chile, see Moran, T. H., “The Alliance for Progress and ‘The Foreign Copper Companies and their Local Conservative Allies’ in Chile 1955–1970,” Inter–American Economic Affairs, Spring 1972 (Vol. 25, No. 4).Google Scholar

⁵ Speech to the Harvard Business School international management group, November, 1971.

⁶ On the evolution of thinking in Kennecott management, I have relied on the Annual Reports of the Braden Copper Company (Kennecott's subsidiary for Chilean operations) and of the Kennecott Copper Corporations, 1954–1965; on “Joint Mining Ventures Abroad: New Concepts for a New Era,” 1969 Jackling Award Lecture by C. D. Michaelson, President, Kennecott Metal Mining Division, before the American Institute of Mining, Metallurgical and Petroleum Engineers, February 19, 1969; and on an interview with Mr. Michaelson in New York, July 8, 1969. Kennecott toyed with the idea of undertaking the expansion project (originally called the Codegua Project) on its own. Charles Cox and Frank Milli–ken, successive presidents of Kennecott, came to Chile during the administration of conservative Jorge Alessandri to negotiate terms but gave up when Alessandri proved unable to control domestic hostility toward Kennecott.

⁷ For the course of Frei's Chileanization program, see my forthcoming volume, El Cobre es Chileno; the chapters by Mikesell, and Mamalakis, in Mike-sell, Raymond (ed.), Foreign Investment in the Petroleum and Mineral Industries (Baltimore: The Johns Hopkins Press, 1971);Google ScholarSáez, Rául, Chile y el Cobre (Santiago: Departamento del Cobre, 01, 1965);Google ScholarGriffin, Keith, Underdevelopment in Spanish America (Cambridge, Mass.: MIT Press, 1969);Google Scholar and Historia de la ley 16.425 (Santiago: three volumes of congressional hearings on Chileanization, 1964–1966).Google Scholar

⁸ Kennecott officials in Santiago were not surprised that both the Johnson and Nixon administrations refused to apply the Hickenlooper amendment, formally, in the case of the expropriation of the International Petroleum Corporation in Peru. They were only surprised that IPC's parent, Standard Oil of New Jersey, had not been more careful in privately mobilizing pressure against Peru. They apparently did not know that Standard of New Jersey had in fact worked quietly and effectively behind the scenes to deny aid to President Belaunde of Peru without the Hickenlooper amendment's ever officially being involved. Cf. Goodwin, Richard, “Letter from Peru”, The New Yorker, 05 17, 1969 (Vol. 45, No. 13);Google Scholar and Levinson, Jerome and de Onis, Juan, The Alliance that Lost its Way, (Chicago: Quadrangle Books, 1970, pp. 146–156.)Google Scholar

⁹ Interview, Santiago, May 27, 1970.

¹⁰ During the Frei administration while Kennecott was constructing its transnational alliances, a common judgment in Santiago was that the next president would be another Christian Democrat or a Conservative — men for whom marginal international pressure might make the difference in how hard they pushed the foreign copper companies or how much they were willing to pay in compensation. The massive movement for nationalization which included the Christian Democratic Tomic and affected even the campaign of the conservative Alessandri was unanticipated.

¹¹ ”The ITT Papers,” Jack Anderson, the Washington Post, March 21–22, 1972; and “Papers Show ITT Urged US to Help Oust Allende,” the New York Times, July 3, 1972.

¹² From 1964 to 1970, Kennecott received approximately $115 million in profits from Chile on an investment with an initial net worth of $69 million and left with at least $93 million in compensation ($80 million plus interest).

¹³ Annual Report, Overseas Private Investment Corporation, 1971, p. 34; and “US Foreign–Investment Insurer Seeks Profit Rise, Takes Tough Line on Anaconda,” the New York Times, December 6, 1971.

¹⁴ Cf. “Chile's Threatened US Property Seizure May Drain Federal Insurance Unit's Funds,” the New York Times, February 2, 1971; “Chile's Move Spurs US to ‘Get Tough’,” the New York Times, September 30, 1971; “Chile Assailed by Rogers for Compensation Stand,” the New York Times, October 14, 1971; “Six Concerns Embroiled in Seizures are Called In by Rogers,” the Wall Street Journal, October 25, 1971; “US Tells Chile Seizures Could Endanger Aid to Needy Nations,” the New York Times, October 16, 1971; “Chile to Nationalize Foreign–Owned Firms Legally, Allende Says,” the Wall Street Journal, October 30, 1971; “Chile, Reserves Low, Will Seek Renegotiation of Payments on Her $3–Billion Foreign Debt,” the New York Times, November 10, 1971. I have also benefitted from interviews with representatives of the US copper companies and of the Chilean government.

¹⁵ Chilean mine production in 1971 was approximately 712,000 metric tons. Although this was significantly lower than the goal of 1,054,000 metric tons projected under private management, it was still thirteen percent higher than the companies’ peak year (1969) and 20 percent higher than the companies’ average production in the 1960s before the beginning of the expansion program.

Unit costs of production were reported to have risen substantially in Chile, implying that more of the surplus from the copper industry was going to miners rather than to the government. But Chilean copper is sold at a price determined by supply and demand on the London Metals Exchange. Therefore, even with a production level lower than what had been hoped for, customers could still count on Chile's remaining the second largest copper exporter in the world supplying output at a competitive price.

¹⁶ “Chile Says She Will Pay $84 million to Kennecott,” the New York Times, February 26, 1972.

¹⁷ Cf. “Debt–Ridden Chile is Reported to Get Soviet Offer of $50–million in Credits,” the New York Times, January 16, 1972; “Nixon Announces a Tough US Stand on Expropriation,” the New York Times, January 20, 1972; “Chile, $3–Billion in Debt, Asks Creditors to Accept a Moratorium on Payments,” the New York Times, January 20, 1972; “Plea by Chile to Delay Debt Payment is Slated for Discussion in Paris,” the Wall Street Journal, Januay 26, 1972; “Allende Confers with Foreign Officials on Debts,” the New York Times, April 15, 1972; “US Joins in Credit Accord with Chile,” the New York Times, April 21, 1972. I have also benefitted from interviews with representatives of the US copper companies and of the Chilean government.

The Nixon administration continued to vote against loans for Chile from the World Bank and the Export–Import Bank, however. See Petras, James and LaPorte, Robert, “Can We Do Business with Radical Nationalists? – Chile: No,” Foreign Policy, Summer 1972 (No. 7);Google Scholar and “An Exchange on Chile,” Foreign Policy, Fall 1972 (No. 8).Google Scholar

¹⁸ Cf. “Freeport's Ertsberg is a Real Bargain,” Engineering and Mining Journal, 03 1971, p. 85;Google Scholar and Annual Reports, Freeport Sulphur Corporation.

¹⁹ Cf. Roan Selection Trust, Explanatory Statement for Shareholders and Appendix, 08 6, 1970;Google Scholar and “Amax Venture Obtains Financing to Develop Nickel–Copper Mine,” the Wall Street Journal, March 8, 1972.

²⁰ Cf. “Financing in Oil: Industry Uses New Techniques for Funds,” the New York Times, October 24, 1971; “Canada Faces Financing Woes to Develop Energy Resources; New Solutions Sought,” the Wall Street Journal, June 7, 1972; Mikdashi, Zuhayr, The Community of Oil Exporting Countries, manuscript, forthcoming, 1973.Google Scholar

The major problem in long–term sales agreements where the bulk of trading in the industry still takes place between subsidiaries at arbitrary transfer prices is the establishment of a price peg for arms–length transactions that is satisfactory to all sides. Also, it should be emphasized that financing through factoring is not a low–cost method of raising capital. There may be a “portfolio effect” in spreading high risk among a large number of institutions, but the shift of risk–bearing onto customers and financial intermediaries does not lower that risk.

²¹ Cf. “French Seek Embargo on Algerian Oil,” the New York Times, April 27, 1971; “French and Algerians Reported Near Accord on Oil Indemnification,” the Wall Street Journal, June 22, 1971; “Oil & Politics: Libya's Nationalization of British Firm Shows Such Action no Panacea,” the Wall Street Journal, February 3, 1972; “Iraq Offers Nationalized Oil at Cut Rate; Consortium Warns Buyers of Legal Battle,” the Wall Street Journal, June 5, 1972; “France Guaranteed Iraqi Oil for 10 Years in Accord Based on Preseizure Conditions,” the Wall Street Journal, June 19, 1972; “Japan Won’t Purchase Nationalized Iraqi Oil Pending a Settlement,” the Wall Street Journal, June 22, 1972; “Iraq Petroleum Gives Buyers of Seized Oil Conditional Reprieve,” the Wall Street Journal, October 10, 1972. Iraq's negotiations to sell nationalized oil to the Soviet Union, however, might limit the legal action that the Western consortium could undertake.

²² Kennecott has claimed that according to principles of international law its uncompensated equity holding in El Teniente is approximately $178 million. “Memorandum on Governing International Law Principles” by Covington & Burling, Expropriation of El Teniente (New York: Kennecott Public Relations Department, 1971).Google Scholar The Chilean tribunal had ruled that Kennecott was entitled to compensation for the book value of its equity interest but that reductions for excess–profits and deficiencies were allowable. The French Court will have to overrule the claim of excess profits, overrule the claim of deficiencies in installations, and overrule the claim that private corporations do not have possession of subsoil rights in Spanish law in order to side with Kennecott's suit for the commercial value of equity holdings. The IPC nationalization in Peru also involved the issue of back-taxes on excess profits as well as the issue of subsoil rights. The case was never resolved.

²³ Cf. “Inco and Guatemala Agree on Nickel Mine Costing $250 Million, but Money is Needed,” the Wall Street Journal, March 2, 1971; “El Paso Natural Gas Assails French Threat to Sue on Algeria Sales,” the Wall Street Journal, April 29, 1971; Quandt, William B., “Can We Do Business with Radical Nationalists? Algeria: Yes,” Foreign Policy, Summer 1972 (No. 7);Google Scholar “Algeria–US Test for Natural Gas: Trinidad, Nigeria and Ecuador also countries with thoughts of selling liquefied gas to the US,” the New York Times, August 13, 1972; “Inco Signs Accords with 6 Japanese Firms on Indonesia Project,” the Wall Street Journal, October 6, 1972.