landers, which although old, were adequate for the mineral ores. The U.S.
government promised to sell new ships after the war to the Chilean Line. ¹

The Chilean Line had cut a shrewd deal because at minimal cost it guaran-
teed the renewal of its core fleet, which otherwise would have been ten years
old in 1947. The contract was so favorable that after the war the Grace Line
wanted the State Department not to honor it. Pretexts for noncompliance were
readily at hand. First, the C-2, the specific type of surplus vessel needed to
fulfill the contract, was in short supply. To aggravate the shortage, four C-2s
rather than just three were needed to replace the equivalent cargo space of the
three ships the United States had bought in 1943. The State Department felt
that the U.S. government had to live up to its written word and thus the Chil-
ean Line received the four C-2s between September 1946 and January 1947.
The clauses of the Ship Sales Act of 1946 were so favorable that the company
decided to round out its fleet with the purchase of another surplus ship, this
time one of the more abundant C1-MA-VIs. ²

The prospects of the Chilean Line, the oldest Latin American shipping
company, could not have been rosier as the record-high profits of the war con-
tinued after the return of peace. The ship transactions had proven extremely
lucrative: The company had sold the diesel ships to the War Shipping Ad-
ministration in 1943 at four times their purchase price in 1938, and then the
Chilean Line had bought at giveaway prices the surplus ships after the war.
Rather than plow back all the profits into shipping, the stockholders decided to
diversify into other industries on land such as a steel mill and even went so far
as to establish a bank ( Banco Sud Americano). The extraordinary success of
the Chilean Line, however, contrasted with the uneven performance of the
economy. The stagnant exports prevented any rise in imports at a time when
the population was growing. Precisely this shortfall in trade flows was a major
reason why the Chilean Line had not wanted to reinvest all its gains in shipping
and instead had diversified into the domestic market. The overseas trade could
not support any major expansion in the fleet, while the reappearance of foreign
shipping competition after 1945 worsened the prospects. ³

The diversification into land produced satisfactory returns but had not
matched the heady profits in wartime shipping; not surprisingly, the Chilean
Line sought ways to perpetuate the boom years. Carlos Vial, then the largest
stockholder, began to agitate for cargo preference. When he tried in 1944 to
have 50 percent of the foreign trade reserved for Chilean ships, the nitrate ex-
porters, who were used to carrying the ore in cheap Greek tramp vessels,
killed his initiative. ⁴ Shipping profits remained high in the immediate postwar
years, but as rates dropped in the late 1940s, the Chilean Line pressed again
for cargo preference. The spark for an intensified campaign came in 1949
when the European/South Pacific and Magellan Conference (which, like other
ocean conferences, set rates and frequency of sailings among countries) re-
fused to admit the Chilean Line. After a long struggle the company had
achieved affiliated membership in 1939, but management felt slighted and in-

-4-