Memorandum of Conversation, by Mr. Henry C. Ramsey of the Division of North and West Coast Affairs
I called on Ambassador Andrade by appointment this morning to pay him my personal respects and to wish him well on the Bolivian Independence Day (August 6). After the initial pleasantries and some conversation regarding mutual friends in Bolivia, he spoke, virtually without interruption, for the better part of two hours on what he conceived to be his mission to the United States and what he conceived to be our obligations to Bolivia. The bulk of his discourse centered on the pending tin negotiations, what he hoped would eventuate therefrom, and what, in connection therewith, he hoped to be able to persuade officials of the Department. I confined my role to that of a passive listener and only occasionally asked a question for the purpose of eliciting a more pointed or direct statement of opinion on his part.
Ambassador Andrade’s salient points were:
- He and his Government are very disappointed with the terms of the proposed tin ore purchase contract60 handed to the Commercial Attaché (Mr. Rovira) and representatives of the Bolivian producers on July 23 by Dr. Bateman61 of the U.S. Commercial Company and Foreign Economic Administration. Although he has not received a detailed response from his Government on its reaction to the proposed contract, he has received a cable which states that the price schedules in the contract are deemed to be unacceptable. He does not expect to receive a detailed response from the Bolivian Government for a week or so because he was compelled to mail the contract (it was too long to cable) and, presumably, the Government’s response will also be sent by mail.
- He will travel to New York on August 7, in company with Mr. Rovira, to meet all representatives of Bolivian producers who are signatories to the contract. His purpose will be to persuade the producers to prepare a joint protest to the proposed contract and to submit it to the USCC and FEA as promptly as possible. Thereafter, and after he receives the reaction of his Government, he will lead the [Page 585] producers in making counter proposals. He will attempt to persuade the producers to ask for a two year (or preferably 3 year) contract at the present price of US $0,635 a pound fine (plus US $0,016 smelter rebate) f.a.s. west coast ports. He believes that the producers will join in such a counter proposal and stated that whereas last year there was some friction between the producers and himself, such has been repaired and that, furthermore, there is a substantial unanimity of point of view among the producers. He indicated that the counter proposal of the producers might be expected within a reasonably short period of time.
- He very frankly deprecated the manner and attitude in which the proposed contract had been handed to Mr. Rovira and representatives of the producers by Dr. Bateman and other officials of the FEA and USCC. He said that an attempt had been made to “dictate the price” without consulting the Bolivian point of view. He added that he felt the FEA officials had been unnecessarily harsh in making such statements as “take it or leave it” and “the honeymoon is over”. He mentioned that he had discussed this point with Mr. Rockefeller (see Mr. Rockefeller’s Memorandum of Conversation with Ambassador Andrade dated July 25, 1945.62) and had also mentioned it to Senator Connally and Senator Vandenberg.63 He stated that each of these gentlemen had been shocked that an agency of the United States Government should resort to such dictatorial methods so soon after the San Francisco Conference in which, according to Ambassador Andrade, the small nations had won the substantial battle of freedom of discussion on controversial subjects.
- He then talked at length of why it would be unjust, from his
point of view, and unwise from our point of view, to reduce the
prices of tin at this moment. From his point of view, it would
be unjust to reduce tin prices for the following reasons:
- The world tin price is a controlled price and would be much higher than US $0.65 (the effective price now paid for Bolivian tin) if all controls were removed. FEA officials had admitted to him that if controls now governing the price were removed, the price might increase to more than US $1.00 a pound fine. Under such circumstances, it was unjust not to permit Bolivia to sell its tin for at least US $0.65 a pound fine.
- The United States is badly in need of tin and the WPB64 admits such fact. Nevertheless, the USCC and FEA are seeking to take advantage of Bolivia because it believes that tin will be in more ample supply within the year and after the reopening of the Malayan deposits. [Page 586] But until the Malayan deposits are reopened and until the United States begins to receive Malayan tin, there is no justification for reducing prices paid for Bolivian tin. Because we anticipate increased supplies within the year at lower prices does not justify reduction of the Bolivian price before such supplies eventuate. Ambassador Andrade stated that in his opinion tin will be scarce for at least four years. He likewise discounts the availability of dredges in Australia or elsewhere to dredge Malayan tin immediately after the Straits are reconquered.
- Bolivia cannot reasonably be expected to reduce production costs until its economy is diversified and made more self-sufficient through completion of the program of the Bolivian Development Corporation. This will take a minimum of three years. During this transition period, the United States should maintain the price of Bolivian tin. Unless such is done, Bolivia may have to be written off as a wartime casualty. The Ambassador did not foresee the possibility of the Bolivian Government’s reducing taxes or depriving the mining workman of recently conferred social benefits and wage increases. These social benefits and wage increases, he said, had been conferred in order that Bolivia might perform satisfactorily under the previous tin ore purchase contract; unless such benefits had been granted the workmen would have been guilty of such disturbances as to diminish tremendously the production of tin. Although he would be against such a step, the only alternative open to the Government, in the event a decrease in the price of tin should require certain mines to suspend operations, would be to nationalize such mines. He said that in his opinion this would be a mistake, as the Government could not be expected to operate the mines successfully for more than two years, but it would be the Government’s only way out of a difficult crisis. And after the Government had completed its experiment in nationalization, the country would be in a more chaotic condition than ever and without any reasonable likelihood of rapid recovery because its external credit would be destroyed and it would be unable to negotiate for loans of the type which the Export-Import Bank has placed at the disposal of the Bolivian Development Corporation. He said it was his mission in the United States to persuade the Department that Bolivia must be saved from such a catastrophe, that the price of tin must be sustained until the program of the Corporation is completed, that thereafter the tax burden on tin may be reduced and Bolivian tin may be able to compete in the world markets, and that Bolivia’s strategic location in South America justifies the United States’ underwriting her economy in order to preserve it. In this connection, he said he would consider his mission as Ambassador a failure if he secured a US $0.70 price for tin and nothing else; he added that the important thing was to remove Bolivia from a sole dependence on tin as such was always pregnant with danger.
- He stated that reduction of the tin price at this time was, he
believed, unwise from our point of view for the following
- In view of the facts that an uncontrolled world price for tin would exceed what we now pay for Bolivian tin and that the United States needs tin badly, the reduction could only be interpreted as a [Page 587] form of economic sanction against his Government. Certain Bolivian producers are already spreading such a rumor, particularly the Hochschild interests. This would be unfortunate, since the Bolivian Government has given us 100 per cent cooperation, particularly in international matters.
- It would create an economic crisis of the severest proportions and very probably set the stage for a nationalization of the mining industry. The Ambassador thought the latter would end in failure and that it was in our long range interests to assist Bolivia in stabilizing and diversifying her economy instead of undermining it at this crucial transition point. He pointed out that unless the tin price were maintained the country would be without resources to repay the Export-Import Bank credits to the Bolivian Development Corporation, that the program of the latter agency would no doubt be curtailed if Bolivia evidenced an inability to repay the loans, and that such would mark an end to all possibility of Bolivia’s solving her internal problems. On the other hand, if the price of tin were maintained, the Corporation’s program could be completed, the tax system could gradually be altered in a fashion designed to assist the mining industry, and the country could emerge as a diversified and largely self-sufficient economy which did not necessitate its present high requirements in foreign exchange.
- Ambassador Andrade stated that after the present tin
negotiations were concluded he intended to propose to the
Department that an American commission of technical experts be
named to study the situation in Bolivia and to make
recommendations for the consummation of the following program:
- Alteration and improvement of the tax system. He believes with Minister of Finance Victor Paz Estenssoro that the incidence of export taxes should be decreased and the incidence of profits taxes should be increased. This would permit marginal mines to operate and would be an inducement to capital investment.
- Reduction of production costs in the mining industry in addition to tax savings. In this connection, the Ambassador will seek to have the proposed commission study the feasibility of installing a tin smelter in Bolivia.
- Increased prospecting for Bolivian ores, including large scale geo-physical testings.
- The Ambassador said that he would propose that this commission be jointly financed by the United States and Bolivian Governments.
- The Ambassador said that he believed he had been greatly handicapped in connection with the tin negotiations by reason of the recent reorganization. He stated that former Secretary Stettinius65 had understood his point of view and was sympathetic, he believed, to a 3 year extension of the tin contract at the present price in order to permit Bolivia to solve its difficult internal problems.
The Embassy had been informed in telegram 499, July 25, 5 p.m., that the Foreign Economic Administration offered a contract with the following price schedule:
- July 1 through September—63.5 cents
- October 1 through December—62 cents
- January 1 through March—60.5 cents
- April 1 through June—58.5 cents
The contract was offered on a “take it or leave it” basis. (103.9169)↩
- Alan M. Bateman, Assistant Director, Foreign Procurement and Development Branch, Foreign Economic Administration.↩
- Not printed.↩
- Senators Tom Connally and Arthur H. Vandenberg, of the Senate Foreign Relations Committee.↩
- War Production Board.↩
- Edward R. Stettinius, Jr., was succeeded on July 3, 1945, by James F. Byrnes as Secretary of State.↩