824.6354/11–1847
The Department of State to the Bolivian Embassy
Memorandum
Reference is made to the Memorandum dated November 18, 1947 from the Bolivian Embassy26 presented by His Excellency Señor don Ricardo Martinez-Vargas to Assistant Secretary of State, Mr. Norman Armour, on November 19, 1947.
The Memorandum referred to informal negotiations initiated with the Reconstruction Finance Corporation to determine the price and conditions of a new tin purchase contract to cover the year 1948. It states that the Government of Bolivia and the Bolivian tin producers consider the price that is to be fixed for 1948 should be substantially higher than that in the current contract. It further requests that the negotiations for the new contract be conducted in the City of La Paz. It explains that the reason for this latter request is that by holding negotiations in Bolivia representatives of the Government of the United States would have the opportunity to acquaint themselves by direct observation with the economic condition and the state of progress of the Bolivian tin mining industry as a basis for future agreements that may permit, for reciprocal benefit, a greater and closer collaboration between the United States and Bolivia.
It will be recalled that on the presentation of this Memorandum, Mr. Armour informed His Excellency Ambassador Martinez-Vargas that the questions raised in the Memorandum would be studied fully by this Government and in this respect that the Memorandum would be referred for consideration to the Reconstruction Finance Corporation, the Agency of this Government directly concerned in negotiations for the purchase of Bolivian tin concentrates.
The Department of State has just received from the Reconstruction Finance Corporation a communication submitting its views on the Memorandum under reference.
It is the opinion of the Reconstruction Finance Corporation that it would be inadvisable to conduct the negotiations in the City of La Paz. It is explained by that Agency that an acceptance of the Bolivian invitation would imply a willingness on the part of the Reconstruction [Page 340] Finance Corporation to establish a price based on production costs. This, in its view, would be contrary to its policy of seeking to purchase commodities for the industrial needs of the United States at the equivalent of a fair market price. It states that it has been concerned in the past with production costs only in purchases that had involved subsidies and that subsidy purchases have been discontinued. It explains, furthermore, that production costs are affected by labor regulations, social laws, taxation, and other conditions of a social or political nature and that it does not consider it is proper for representatives of the Reconstruction Finance Corporation to discuss such matters with a foreign government in connection with negotiations for a commercial contract. Finally it mentions that reliable cost data could be obtained only after extensive investigation which could not be completed before the present Bolivian tin contract expires.
With respect to the price to be decided upon for the contract for the year 1948, the Reconstruction Finance Corporation advises that it does not believe that the world price for tin should again be determined solely by its negotiations with the Bolivian tin producers as has been the case in the past few years; and that in this connection, the tin apparently available to the United States from Bolivia now represents a relatively small proportion of the estimated total tin procurement by the United States for the year 1948. The Reconstruction Finance Corporation states that it is informed that as a result of diversion to Argentina, Bolivia is in a position to give the Reconstruction Finance Corporation a firm commitment only for a portion of Bolivia’s 1948 tin concentrate production, estimated at nine to ten thousand long tons of fine tin. This amount is equivalent to only one-seventh of the total quantity of tin which the Reconstruction Finance Corporation expects to purchase in 1948 and only one-sixteenth of the estimated world production during the year 1948.
The Reconstruction Finance Corporation further states that by letter of October 8, 1947,27 it advised His Excellency, the Bolivian Ambassador, that it was prepared to discuss a tin purchase contract to cover the year 1948 and suggested that negotiations with the Bolivian tin producers be held at an early date so that the new contract could be concluded before the contract now in effect expired.
The Reconstruction Finance Corporation is prepared to continue negotiations for a new contract for the purchase of Bolivian tin concentrates for the year 1948.