The Under Secretary of State (Welles)16 to the Secretary of State
[Received 11:18 p.m.]
5. I had an interesting talk this morning with the Bolivian delegation in regard to economic and financial cooperation. The Bolivian Government apparently faces a serious possibility of exchange [Page 314] difficulties because of the disturbances created by the war in Europe. They state that it would be very helpful to them if they could secure a moderate sized advance, say in the amount of two millions of dollars. They state that part of this sum would be used to purchase American products.
The first idea which they had arose out of the fact that there is now an appropriation of 10 million dollars for the purchase of strategic raw materials. They had been informed, and I confirmed the information, that a substantial part of this appropriation would be used for the purchase of tin. The idea that was put forward was that the payment for the tin to be bought as strategic reserve would pay any advance made to them. A promise was given that this possibility would be explored. At the same time, however, various difficulties were pointed out; particularly, (1) The comparatively rigid procedure which the Army and Navy Board was required to follow under the law for the purchase of these strategic raw materials. (2) The question of grades of tin. Would you please look into the various sides of this matter as promptly as possible and advise us as to whether any arrangement of this type might be practicable. In anticipation of possible practical difficulties, we suggested to the Bolivian delegation that an advance might be simpler and much more quickly arranged either through the Export-Import Bank or the RFC17 without establishing any direct connection with purchases of tin for the strategic reserve. Without commitment the Bolivian delegation was told that we would submit the following possible arrangement—the advancement of the agreed upon sum, say 2 millions of dollars, immediately. The Bolivian Government would give notes which would call for repayment in monthly installments beginning say 4 months after the advance. Each of these monthly installments would be at least the proceeds received from the sale of a minimum amount of Bolivian tin through the official Mineral Bank of Bolivia. The amount mentioned in that connection though tentatively was 200 tons a month which at current prices would be repayment at approximately $200,000 a month. The Bolivian Government might be willing to give the bank actual tin security in some form. The Bolivian delegation also mentioned the possibility of including antimony, wolfram ore, or tungsten as part of the arrangement. If this security seems satisfactory as tin, the total amount could be somewhat increased.
In response to a question as to the interest rate, the Bolivian delegation was informed that, for an advance of approximately this period, it was thought that the bank would be willing to make either a 3 per cent or at most a 3½ per cent rate.[Page 315]
It occurs to us that this matter might be handled expeditiously if the Mineral Bank of Bolivia created a subordinate American branch in the United States. The funds could then be advanced to this branch, when and as needed, to pay for the purchase of American goods or other purposes, as agreed upon. The Bolivian Government and the Mineral Bank would pledge themselves to the Import and Export Bank to provide the American branch with a minimum of 200 tons of tin a month or the equivalent amount in dollars each month.
Will the Department please discuss this whole possibility also with Pierson18 and Jones?19 It will be most helpful to us if the Department’s reply can set forth the actual details of a possible transaction which could be confirmed in all ways except final arrangements of documents and signature while we are in Panama if the Bolivian Government wishes to take the necessary steps that promptly.
If we succeed in working out this measure of financial cooperation with Bolivia, I am hopeful that it would be the basis of a joint statement that the two Governments could make as regards economic and financial cooperation.
The Bolivian delegation also raised the question of possible help for either Central Bank or exchange stabilization purposes. They were informed that this was a matter of most careful technical examination and that if they would submit a memorandum to us we would bring to the attention of the Treasury which would certainly be glad to discuss it with the Minister upon its return to Washington.
- Then United States Delegate to the Meeting of the Foreign Ministers of the American Republics Held at Panama, September 23–Oetober 3, 1939; see pp. 15 ff.↩
- Reconstruction Finance Corporation.↩
- Warren L. Pierson, President, Export-Import Bank of Washington.↩
- Jesse H. Jones, Chairman, Board of Directors, Reconstruction Finance Corporation.↩