824.2544/8–1852

Memorandum of Conversation, by Milton Barall of the Office of South American Affairs

confidential

Subject:

  • Tin Talks between RFC and the Bolivian Ambassador
  • Participants: Victor Andrade, Bolivian Ambassador
  • OSA—Mr. Atwood, Mr. Barall

Ambassador Andrade called on Mr. Atwood to report on the three meetings he has held with RFC officials to discuss the possibility of a tin contract. He said that the RFC was reluctant to enter into a long-term contract at this time because of the question of legal ownership of the ores in the event of nationalization. The Ambassador tried to [Page 499] dispel these fears by giving assurances that there would be no immediate question as to ownership and that any lawsuits which might be brought would first there would be no immediate question as to ownership and that any lawsuits which might be brought would first have to be taken before the Bolivian courts. Eventually, should it be felt that compensation for the mines were not adequate, a case might go into diplomatic channels. However, in view of the feeling in RFC against a long-term contract at this time, the Ambassador said he had proposed the sale of 6,000 tons of tin on a contract basis prior to September 30. Since the nationalization report is not expected before October, there would be no question as to the legality of this sale.

The Ambassador said that the Bolivian Government was taking what it considered a very reasonable stand and was trying to avoid difficulties by asking the same price as had been paid for previous spot purchases, $1.17½ cents per pound, with the smelting charges to be kept at the previous rate. He said it would be most difficult for Bolivia to accept a lower price because of the psychological factor. The Bolivian public would believe that the country was being discriminated against because of the present regime, especially since other countries were getting this price for tin under contract arrangements with the United States. The Ambassador said he was trying to work in the most friendly and cooperative way with the RFC but that his Government would be subjected to severe attacks by Hochschild and the Bolivian public if a lower price were accepted. He also pointed out that his colleagues in Latin American Embassies in Washington had displayed great interest in the tin question and had asked him directly if the Bolivian Government were being discriminated against. Thus, he claimed, RFC insistence on a lower price would cause resentment throughout Latin America and again raise the argument that Latin America is not treated as well as other areas of the world. In Bolivia, it would also be claimed that the US Government was supporting the mine owners in the fight against nationalization. Andrade reiterated that the Bolivian Government considered its price request perfectly reasonable and had not anticipated difficulties along these lines.

The Ambassador said the RFC had offered a price of only $1.17 cents per pound together with higher smelting charges. Since the difference in price of only ½ cent per pound is so slight, the Ambassador felt that the political and psychological factors far outweighed the price question and he asked Mr. Atwood’s assistance in getting the RFC to agree to pay $1.17½. He said the problem of smelter charges could be taken up at a later date in connection with a long-term contract after the nationalization issue is settled.

Mr. Atwood said he understood that the Bolivian Government had allowed certain sums to the mining companies for transportation and smelter charges but that not all of this money was used for these purposes. Under the present plan, the Bolivian Government would receive more dollars, since Hochschild would no longer be able to draw [Page 500] benefits from the artificially low smelting charges. Mr. Atwood asked if the Ambassador could accept new smelter charges if the price of $1.17½ cents were agreed to. The Ambassador replied that this would be a better solution from the point of view of public relations since the smelter charges could be raised gradually so as to minimize the impact of the increase. The Ambassador seemed to recognize the necessity for an eventual increase in the smelter charge. He said the Bolivian Government has been cutting expenses (for example, the Army previously got 40% of the budget) and was eliminating the profiteering of the middleman. By following its new economic policy the government will be in a good economic position. Thus, they could take ½ cent less on the price of tin without going into bankruptcy but the psychological effect might be disastrous.

Mr. Atwood explained that unless our advice were specifically requested State had not participated in the discussions of the tin question and that the RFC had been acting on its own. He explained that the RFC had responsibilities toward Congress and was required to explain why the Texas City smelter operated at a loss. They had been able to do this in the past on the basis of strategic necessity but this argument will not continue to be valid and an increase in smelter charges would be necessary. Mr. Atwood agreed with the Ambassador that the timing of the increase would have to be worked out carefully. Mr. Atwood expressed appreciation of the Ambassador’s point of view and said he would discuss the problem in the State Department and then with the RFC to see if we can help in bringing about a mutually satisfactory agreement. Mr. Atwood made it clear that the ores under discussion were separate from those to be shipped to England inasmuch as the British Government considered that they have a contract through Williams-Harvey to purchase Patiño ores for their smelters.

The Ambassador said that eventually Bolivia will wish to discuss the financing of a leaching plant to improve the concentration of ores—perhaps up to 60%. This would make it better for the Texas City smelter and minimize the question of smelter charges. Then he repeated that all he was seeking at the present time was an orderly method of selling tin prior to nationalization, leaving the other complications for later discussion.

The Ambassador added that there were also many intermediaries, such as Henderson and Ditisheim, who were trying to cut in on Bolivian tin. These two gentlemen continue to insist on their offer of 80% in cash and 20% in machinery. Andrade said that he was very much opposed to this type of arrangement because it would protect a monopoly market and disrupt free enterprise channels. It would also deprive those who now import machinery from the US of their commissions. The Ambassador feels that no intermediaries are needed but expressed the fear that they may offer a higher price for tin than the [Page 501] RFC, then sell the ores to the RFC at a loss in order to get a monopoly market in Bolivia. He reported that the RFC said it could not refuse to buy from intermediaries if they offered to sell at a lower price, even though the RFC was not in favor of their getting into the act. This is another reason for achieving promptly a reasonable agreement between the RFC and the Bolivian Government.

The Ambassador then called Mr. Atwood’s attention to another problem which he hoped could be worked out satisfactorily. He said he had talked with Mr. Larson of GSA and with Mr. Gaston of the Eximbank about the contracts between GSA and tungsten producers in Bolivia, to whom the Eximbank had made loans for the purpose of increasing production. The Ambassador said the interests of the Bolivian Government and the GSA coincided in this matter since both are interested in increased production. Andrade was to see Mr. Gaston this afternoon and expressed the hope that no difficulties would arise. With the Banco Minero designated to control exports of metals, the Bolivian Government feels that tungsten sales should also come under its jurisdiction. The Banco Minero is willing to act as agent for the producers or to take over the contracts and assure delivery of the tungsten. Mr. Larson was reported as having no objection to any internal arrangements made in Bolivia, provided that tungsten production is increased and shipments to the US continue. The Ambassador said he hoped to obtain Mr. Gaston’s approval to the assumption of responsibility for Eximbank loans by the Banco Minero. He assured Mr. Atwood that the money loaned by the Eximbank would be used exclusively to increase production and that earnings would be used to repay the loans.

Mr. Atwood explained that it was necessary to avoid pooling the tungsten so that the identity of the producer would not be lost. He said that if the Bolivian Government can assure that the money would be paid to the producers and used for the purposes stated in the agreements the Eximbank would probably have no objection to the Bolivian plan.* Mr. Atwood spoke of the long range importance of tungsten as a dollar earner for Bolivia since tin was now in a surplus position and therefore could not be counted on as a continuous source of high dollar income. The Ambassador agreed with Mr. Atwood that economic diversification and increased agricultural production are essential to the economic well-being of Bolivia. He explained that the Government had certain long range plans to bring this about and that it was trying to accumulate a good dollar reserve so as to bring the official and unofficial rates of exchange into balance, this type of measure being necessary to promote increased production within Bolivia.

  1. Note: In a telephone conversation between Ambassador Andrade and Mr. Barall, this date, the Ambassador stated that he had seen Mr. Gaston and received a favorable reaction to the Bolivian proposal. The Banco Minero will prepare a draft of the proposal to be submitted to the Eximbank by the Ambassador. [Footnote in the source text.]