824.6354/282

The Minister in Bolivia ( Jenkins ) to the Secretary of State

No. 305

Sir: I have the honor to report that negotiations have been under way for some time in London for a British-Bolivian agreement covering payment for tin shipments from Bolivia.

It is understood that the negotiations have been between the Bolivian and British Governments. The British Government appears to have insisted that, instead of Bolivian tin shipped to England being paid for entirely in free exchange, as has heretofore been the case, an arrangement be made for payment partly in dollars and partly in pounds, the latter usable only in Great Britain and the sterling area. Seemingly, any Bolivian firms shipping to Great Britain would have to accept payment on the terms suggested.

The British proposal is understood to be that two-thirds of the net price of tin in England would be paid for in free exchange (dollars) and one-third in pounds. The net price would be calculated not as the f. o. b. price from South America but on that basis minus freight and insurance and the cost of smelting, the latter being paid in pounds. In other words, with tin now quoted at about £270 per ton, the net price would be only some £180, meaning that the Bolivian sellers would get the equivalent of about £120 in dollars, free exchange, and the remaining £150 in pounds utilizable only for imports from or other expenses in Great Britain or the sterling area.

Last week, the Bolivian Cabinet approved a decree authorizing the signing of an agreement along the lines proposed by the Bolivian Minister in Great Britain, Mr. Antenor Patiño, whose father is not only the largest Bolivian tin producer but the principal stockholder in Williams Harvey, the smelting company which would be buying most of the Bolivian tin on these terms. The joker in the Bolivian Government decree is that it stipulates that the agreement should contain a provision whereby the Bolivian Government could insist on payment in full in dollars at any time. This does not, of course, meet British desires and negotiations have been continued. There would appear to be no way in which the Bolivians can keep from accepting the British proposal in toto within a short time since Great Britain is the only important market for Bolivian tin in the absence of the establishment of a large-scale tin smelting industry in the United States.

Respectfully yours,

Douglas Jenkins