Latinnews Archive
Latin American Weekly Report - 20 December 1968
Peru: bitter words against US intervention
There has been a very distinct cooling of relations between Lima and Washington over the oil question. This has not, however, put off new investors.
As official attitudes rapidly harden on both sides, the dispute between the Peruvian government and the US administration about compensation for the installations of the International Petroleum Company, the Canadian affiliate of the US Jersey Standard Oil concern, assumes the proportions of an ever larger international incident.
The US government has now twice warned the Peruvian authorities that it expects full, prompt and effective payment by Peru for the installations taken over by General Velasco's military government at the beginning of October. In statements circulated by the US embassy in Lima the state department has said that the administration in Washington will have no alternative under the 'Hickenlooper Amendment' but to suspend all economic assistance to Peru automatically, and the Peruvian sugar quota in the US market, if that country does not settle its quarrel with the IPC within six months. The US authorities have brushed aside Peruvian arguments that the IPC has always described itself as a Canadian company and that any diplomatic representations should therefore come from the Ottawa government, by saying that the effective owner of the IPC is the New Jersey corporation.
As a reaction to this the Peruvian military have taken up increasingly hostile attitudes to the US, accusing that country of international blackmail and vowing in fervent terms never to give in to the pressures used against Peru. On Tuesday the finance minister General Angel Valdivia announced that the US was exerting pressure on the International Monetary Fund, the International Development Agency and the Inter-American Development Bank in favour of the IPC. 'If there are pressures', he said, 'I must denounce them but not give into them.' The threat from the IMF was that payment of the 75 million dollar stand-by credit arranged in November to stave off the devaluation of the sol would be withheld, according to Valdivia. He also said that officials of the IDA and the IADB had visited him in his office to ask him for a quick solution to the problem of compensation.
Two days later the finance ministry announced that the 75 million dollar IMF credit was safe. A first tranche had already been made available and the remainder would be made available as planned 'as the US government is not in a position to interfere with the decision of this great international financial organization'. To calm further doubts the minister added that negotiations were going ahead with the World Bank and the IADB. Valdivia announced that he would be undertaking a trip to Germany, France, Spain, Britain and the US to sign refinancing agreements to the sum of 68 million dollars.
In an extremely adamant speech delivered to the military club on the 144th anniversary of the battle of Ayacucho, when Spaniards were defeated roundly by the rebelling Peruvians, Velasco declared that the country would prefer death to 'bowing under amendments which seek to bend the necks of less developed peoples'.
General Mercado, the foreign minister, added his word when he said that the taking over of the Talara refinery from the IPC was bound up with the very sovereignty of Peru and would be followed through with 'deep faith, absolute confidence and unshakeable perseverance'.
The statements poured out in a veritable flood. The development minister General Maldonado warned that the US should 'think twice before taking such a decision.' After such a torrent of defiance it was difficult to see how the generals had left themselves any room for diplomatic manoeuvre.
The Peruvians are taking their stand on the fact that the expropriation was the act of a sovereign government which had nationalized properties as was its right. The case was now before the courts, which would decide whether the government owed anything to the IPC -- in which case, according to Valdivia, the government would pay the last cent. On the other hand, the tax debts of the IPC might be proved to be so great that they would more than cancel out the valuation of the Talara refinery, in which case the company would end up without a refinery but still owing money.
A further black cloud on the horizon of US --Peruvian relations came with the disclosure that the Cerro de Pasco Corporation was unhappy with the value placed on the installations on its estates also taken over by the government. Though the company accepted the valuation placed on its lands and its livestock, the question of the installations would have to go before the court.
In all this, however, Valdivia maintained that it was not the government's intention to bring a great deal of the economy under state control, but rather that the state should be the promoter and guide of economic activity. The battles between the government and the two North American companies have manifestly not deterred foreign companies from participating in something of an oil boom in Peru. Occidental, Continental and Peruvian Gulf are among companies applying for 6 million acres of offshore concessions. Four firms have been given permits for offshore geophysical surveys and bids have been called for acreages in Huanuco and Loreto. The state oil company EPF will probably be seeking more contractors to aid it in the exploration of the increasing areas it has been awarded.
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