Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

824.2544/1–1553

The Deputy Assistant Secretary of State for Inter-American Affairs (Mann) to the Administrator of the Reconstruction Finance Corporation (McDonald)¹

confidential

[Washington,] January 15, 1953.

My Dear Mr. McDonald: On December 30, 1952, I wrote you to confirm the understanding which had been reached between the Reconstruction Finance Corporation and the Department of State regarding the simultaneous negotiation with the Bolivian Government of a one-year tin contract and an agreement for the compensation of American shareholders of mining companies whose properties were nationalized by the Bolivian Government October 31, 1952.

I am glad to say that progress toward the implementation of this procedure has been made in conversations with representatives of the Bolivian Government and that drafts of a compensation agreement are now under consideration here and in La Paz. I am also informed confidentially by officials of Patiño Mines and Enterprises, a corporation in which American investments in the Bolivian mining industry are concentrated, that the Bolivian Government has made an approach to the corporation regarding a direct settlement of the compensation problem. If a direct settlement is reached between the Bolivian Government and Patiño Mines there will be no necessity for an intergovernmental compensation agreement.

Meanwhile the Department of State has been informed that the Bolivian Government wishes to make a spot sale to the RFC of up to 5,000 tons of tin in concentrates. The purpose of this sale, according to the Bolivian Foreign Office, would be to cover urgent requirements of foreign exchange which will be needed for the purchase of foodstuffs during the course of negotiations for the one-year tin contract and the compensation agreement. This Department would have no objection to your making a spot purchase of non-Patiño ores produced prior to January 1, 1953, in an amount up to 5,000 tons of tin content. In fact, we consider that a refusal to make a spot purchase, including some nationalized ores, would be prejudicial to the interests of this Government, for the following reasons:

1. The making of a spot purchase will not appreciably affect our future bargaining power with Bolivia.

2. Our refusal to buy nationalized ores will be interpreted in Bolivia and elsewhere in Latin America as retaliation for nationalization and as applying economic sanctions to force Bolivia to agree against its will to an immediate settlement of the problem of compensation. There would be undesirable and perhaps serious consequences should Latin America come to believe that the United States is attempting to bring about an economic crisis in Bolivia, especially if, as currently appears entirely possible, irrespective of our attitude toward the purchase of tin, a situation of economic and political chaos should develop in Bolivia with a consequent strengthening of political elements in that country hostile to the United States. It was for this reason that Ambassador Sparks in early December, 1952 and the Department on December 19, 1952 stated, with the concurrence of the RFC, that we had not refused to make spot purchases of tin and were prepared to consider spot offers.

3. Both the Department and the Patiño interests are currently negotiating with the Bolivian Government for compensation; and, in view of the Bolivian Government’s statement that it recognizes in principle its obligation to make compensation and that it is prepared to consider the creation of a fund out of which compensation can be made, it would be premature to conclude that these negotiations will not be fruitful. An attitude of hostility on our part towards Bolivia will prejudice the chance that these negotiations will be successful.

4. There are the humanitarian considerations which flow from the fact that Bolivia must import about 40% of its food and that proceeds from the sale of tin are needed to buy it.

While this Department thus recommends that you consider the current spot offer, we suggest that you make it clear to the Bolivian Ambassador that in view of the tin-supply situation you cannot commit yourself to consider any further spot offers from Bolivia and this Government must reserve its right to withdraw its own offer of a one-year contract without advance notice.²

Sincerely yours,

Thomas C. Mann

1. Drafted by Mr. Hudson, with the assistance of Mr. Mann; cleared with the Bureau of Economic Affairs and the Office of International Materials Policy.

2. On Jan. 15, 1953, representatives of the RFC and Ambassador Andrade agreed to sign a spot-purchase contract for 5,000 tons of non-Patiño tin concentrates (Department’s telegram 180, to La Paz, Jan. 15, 1953, 824.2544/1–1553). The cut-off date for the contract was Mar. 31, 1953, later extended to Apr. 30.

   In a letter to Mr. Mann, dated Mar. 9, 1953, Mr. McDonald stated that the RFC had stipulated as part of the spot-purchase agreement that the contract in no way obligated the RFC either to additional spot-purchases of Bolivian tin or to negotiations for a long-term contract. He further commented that in view of the present United States tin situation, based on available stocks and existing contracts, the RFC proposed to notify the Bolivian Government that it was no longer interested in discussing a long-term tin contract. (824.2544/3–553)