340. Telegram 148927 From the Department of State to the Embassy in the Dominican Republic1
148927. Subject: Bauxite Negotiations with Alcoa. Ref: Santo Domingo 2738.
1. We have been in touch with representatives of Alcoa in Washington July 10, including Messrs. Winkler and Yates who were recently in Santo Domingo for talks with the Dominican Bauxite Commission. As Winkler probably mentioned in his meeting with the Ambassador (reftel), he is convinced that the Dominican negotiators are slavishly following Jamaica’s lead in their talks with Alcoa. According to Winkler, Secretary of State for Finance Seliman has made at least one trip to Kingston in preparation for the talks and had lengthy sessions with Prime Minister Manley as well as members of the Jamaican Bauxite Commission while there. Winkler feels that the Dominicans were told by the Jamaicans that in any settlement they must not deviate from revenue is UE formula imposed by GOJ. Settling for anything less would mean their exclusion from membership in IBA to which Winkler [Page 903] feels the Dominicans aspire (FYI. During session Winkler received long distance call from Alcoa Rep Hughson in Santo Domingo who had heard there was already move [garble] Dominican Chamber of Deputies to table revenue legislation tailored after that recently adopted by GOJ. End FYI).
2. In talking about their facility in the Dominican Republic the Alcoa reps stated that it represents approximately five percent of the bauxite used throughout the Alcoa system. They contend that the type of ore differs from Jamaica grade and its quality is inferior in certain respects to that which they take from Surinam. In response to a question, Winkler said that their top annual take out of the DR is approximately one million tons though he implied that in some years it has been considerably less. Furthermore, as production from Guinea increases, Alcoa may scale back its Dominican production accordingly.
3. Department is obviously concerned to see the DR apparently lining up behind Jamaica on the question of bauxite revenues. Request that Ambassador at his discretion seek an early appointment with President Balaguer to discuss this developing problem, drawing on the following points in making his presentation:
—Alcoa seems prepared to discuss a meaningful adjustment in its present arrangements with the GODR, has offered a significant per ton increase in payments, and has even suggested a further upward adjustment depending on aluminum market performance. Would it not therefore be better to seek a mutually acceptable agreement which (a) could do much to promote the DR’s longer term economic interests in the bauxite industry, and (b) would involve significant tax revenue gains for the GODR. Would not a solution appropriate to the Dominican situation rather than adopting arbitrary Jamaican formula be better?
—USG was disturbed by Jamaica’s inflexible stand in its recent negotiations with the bauxite companies and its unilateral move to impose a settlement of revenue question.
—GODR may also be risking the possibility that future investors and private lending institutions will think twice about the DR if the GODR becomes involved in anything resembling a unilateral breach of contract (this would seem to us to be a much more telling argument in SD than in Kingston).
—The DR, like many other countries in the world, is faced with an important inflationary problem. However, by appearing to join with Jamaica in the formation of a cartel which will arbitrarily set an unreasonably high price for bauxite the GODR would in effect be fueling these inflationary fires.
—Finally, it could be pointed out to President Balaguer that we value very much our relationship with the GODR and would welcome [Page 904] any assistance he could provide in our common desire to curb worldwide inflation.
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Summary: Expressing its concern that the Dominican Republic might be following the lead of Jamaica in seeking to impose higher taxes on the bauxite mining operations of a U.S. corporation, the Department asked Hurwitch to encourage Balaguer to pursue a reasonable negotiated agreement with Alcoa.
Source: National Archives, RG 59, Central Foreign Policy File, D740184–0329. Confidential; Immediate; Limdis. Drafted by Burke and by William Courtney in EB/IFD/OIA, cleared by Shlaudeman and by Richard Smith in EB/IFD/ODF, and approved by Assistant Secretary Thomas Enders in EB. All brackets are in the original except those indicating garbled text. In telegram 1548 from Santo Domingo, April 16, the Embassy reported on the Dominican Government’s interest in renegotiating its contract with Alcoa and noted that Balaguer had appointed a commission to enter into talks with the company. (Ibid., D740087–1158) Telegram 2728 from Santo Domingo, July 5, in which the Embassy reported that talks between Alcoa and the Dominican commission had reached a “temporary impasse,” is the reference telegram incorrectly cited in the telegram as “Santo Domingo 2738.” (Ibid., D740178–1120) In telegram 151562 to Santo Domingo, July 13, the Department reiterated its concern about the situation and called upon Hurwitch to try to convince Balaguer of “the real advantages in trying to fashion a ‘Dominican settlement’ out of a genuine negotiation with Alcoa rather than forcing a potentially disruptive settlement through extra legal means.” (Ibid., D740187–0669)
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