Chile v. Europe

From Ostend came news last week that all zinc producing nations except the U. S. have agreed to a new cartel, lower production.

But in Lucerne representatives of ten nitrate producing countries failed to come to an understanding, saw their cartel crash to pieces when Germany stubbornly stood its ground.

Two years ago the European nations producing synthetic nitrates formed a cartel. Year ago the cartel was expanded to include Chile, world's great producer of natural nitrate. Rigorous production restrictions were laid down, price agreements made. To Chile the cartel was a timely aid. Its nitrate industry was being reorganized under the sponsorship of the Brothers Guggenheim; a breathing spell was welcome.

Observers who last year called the cartel an armistice rather than a peace were not surprised at what happened at the meetings which have been going on for the last two months. Chile arrived in a much better bargaining position than last year. Its industry has been concentrated in a trust, the "Cosach"; costs have been reduced and the selling price set at lower levels through removal of the export tax. Representing the Cosach was its president, Norse-born E. A. Cappelen Smith, skilled developer of the Guggenheim Process; representing the Guggenheims was broad-shouldered Edward Savage of Manhattan, Cosach director. Fluently and statistically they won other nations over to their contention that Chile had been asked to bear too great a monetary burden, that there was no reason why Chile's natural nitrates should sell higher than the synthetic product. But unbudgeable was Dr. Hermann Schmitz of Germany's I. G. Farben-industrie (who last week became all Germany's financial mentor--see p. 15). When Dr. Schmitz suddenly revealed that Germany had placed a prohibitive tariff on Chilean nitrates the South American nation withdrew from the cartel. For one more night the other nations wrangled among themselves, then gave up. Competition, free and bitter, reigns in the nitrate world.

Observers can only guess who will come out on top. In the U. S., synthetic producers have enlarged their capacity, will enter no agreements. As soon as the cartel was broken, the price of sulphate of ammonia, a nitrate fertilizer, broke $4.50 per ton to $27.50. Biggest of U. S. nitrate companies is Allied Chemical & Dye, buyer of all the sulphate of ammonia which forms in the ovens of United States Steel.

Mighty in war and peace, nitrogen is the base of many a chemical product. A vice president of International Agricultural Corp. has said that in the future "nitrate production and not gold will measure the world's wealth." To Chile the problem is most immediate, for when the Government removed the export tax it expected to benefit equally by sharing in Cosach's profits. Failure of these to materialize was largely responsible for Chile's financial crisis of last week (see p. 18).

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