After six months of negotiations accompanied by warlike rhetoric and substantial arms purchases, Argentina and Chile failed yesterday to settle their dispute over land and sea rights in the desolate but potentially rich area north and east of Cape Horn at the tip of South America.
But both countries agreed to resume negotiations at some future date, apparently postponing, at least for now, Argentina's threat to buttress its territorial claims by seizing several small islands in the South Atlantic.
Both countries had insisted until the last moment that there would be no future talks if an agreement on all the outstanding issues was not reached by yesterday's deadline. As the deadline came, both governments decided that an agreement to disagree would be preferable to armed conflict.
A joint communique issued yesterday afternoon in both Santiago and Buenos Aires was so vague that it was impossible to tell what would come next. But a source close to Argentine President Jorge Videla said that both governments had agreed to "more negotiations" on the central points they were unable to resolve.
Last night, Chilean Foreign Minister Hernan Cubillos sent a letter to the Argentine government suggesting that the two governments take the dispute to the International Court at The Hague or that a friendly government acceptable to both countries be asked to mediate the territorial questions left unresolved.
The Argentine government, which is in the midst of a cabinet crisis and has only an acting foreign minister, did not issue any official statements yesterday beyond the joint communique.
Although the communique was vague, it was learned that the two governments had been unable to resolve the ownership of several islands in the Beagle Channel, south of Tierra del Fuego, and several more islands farther south between the Beagle Islands and Cape Horn.
As a result, the two governments were unable to agree on a boundary line in the area and on sea rights that would flow from a determination of which country owned which islands. Argentina has insisted that it has jurisdiction over the Atlantic Ocean east of Cape Horn despite an international arbitration award that gave Chile ownership of the three Beagle islands and buttressed Chilean claims to waters that Argentina considers to be in the Atlantic.
The two governments were also unable to agree on sea rights to a portion of the Straits of Magellan, where Chile is now exploring for oil.
According to the communique, the negotiations did produce an agreement for joint exploration and economic development of the seas off the Beagle Islands. Agreement was also reached on claims both Argentina and Chile have on portions of Antarctica now under the jurisdiction of Great Britain.
Most observers here viewed the outcome of the negotiations as something of a victory for Chile because it had not caved in to threats from Argentina that war would be the alternative to a negotiated settlement. The status quo favors Chile because the arbitration award, signed by Queen Elizabeth II of England, gave the contested Beagle Islands to the government in Santiago, which then claimed a 200-mile sea limit into waters Argentina believes belong to it.
Argentina has sought to pressure Chile in recent months by holding air raid drills in major cities, by moving troops to border areas, by buying hundreds of millions of dollars worth of military equipment and by other acts designed to convince the Chileans that Argentina would fight if no agreement were reached.
Although many Argentines thought the war preparations somewhat ridiculous, the mood began to change here in recent days. Financial sources said that more than $200 million had been sent out of Argentina over the past 10 days to two weeks while the value of the Argentine peso against the dollar dropped substantially beginning Monday.
Tuesday and Wednesday, food stores were jammed here as thousands of people sought to stock up on food in case of war. There was general apprehension this week that an armed conflict might actually come.
In Santiago, Chileans remained calm, apparently not believing that the Argentines would resort to war even if the talks failed. Journalists in Santiago reported yesterday that the stores were crowded with people buying food but that, in general, there was no panic.
"Everything is calm," said one Chilean reporter interviewed by phone.