Memorandum of Conversation, by the Assistant Adviser on International Economic Affairs (Stinebower)

Participants: Mr. Jesse Jones, Secretary of Commerce,
The Bolivian Minister,
Mr. Mauricio Hochschild,
Mr. Enrique Ellinger,
Mr. Carlos Aramayo,
Mr. Carlos Bowers,
Senator Henderson } Metals Reserve Company,
Mr. Gunderson
Mr. Feis,
Mr. Donovan,
Mr. Stinebower.

This meeting took place in the office of Mr. Jones for the purpose of discussion of possible arrangements between the United States and Bolivian tin interests for supplies of Bolivian concentrates to American smelters, if such smelters should be established.

As a preliminary, it was stated by Mr. Hochschild that present Bolivian production is about 3,200 tons per month (fine tin content) of which about 1,200 tons are produced by Patiño mines and 2,000 tons by the other Bolivian interests which were represented in the present conversations. Their contracts with British purchasers had run out or were about to run out and renewals of those contracts were being sought by the British. In the meantime, stocks were accumulating amounting to about 3,000 tons in Chilean ports. The miners, in order to maintain operations needed to know almost immediately whether to renew contracts with the British or whether they could conclude contracts with the United States.

Mr. Hochschild suggested a five year contract with the United States at a fixed price.

Mr. Jones replied that we would want a contract for not less than ten years with a price which could be fixed from year to year. He indicated that this Government is prepared to build a smelter, is willing to buy tin from Bolivia, and to make advances thereon, that the only question was one of arriving at the right price, and that this Government wanted to conclude discussions promptly as well as did the Bolivians. As far as the smelter was concerned, whether 1,000 tons a month, 2,000 tons a month, or some intermediate amount, that as well as the matter of price was a matter for consultation.

Mr. Hochschild and Mr. Aramayo were seriously hopeful that the United States would be able to take all, rather than a part, of their [Page 539] production, indicating that they felt the international tin control would be inclined to work against them for concluding such a contract and that they needed to be protected. Mr. Hochschild suggested that if it would not be feasible to conclude a contract with a price fixed for the life of the contract, agreement be reached for a fixed price for at least one year while a smelter was being built. He suggested that such a price be 50 cents per pound for blocked tin, roughly the current price in the United States, with deductions for processing and shipping. According to Mr. Hochschild, this would leave a price of about 45 cents in Chilean ports. On this they desired an advance of 90 percent on delivery to the port in Chile, the balance to be paid on arrival in the United States. Later it was suggested that 50 cents did not seem to be an unreasonable price for pig tin and that the deduction should be the same as in England—in other words, that any additional smelting expense in the United States as compared with England would be borne by this Government, but that the price of the tin concentrates would be on the same basis as in England. There seemed to be general assent to this suggestion.

With respect to quantities, Mr. Aramayo suggested that it would be necessary to provide some flexibility rather than a fixed amount per month in order that Bolivia might maintain its obligations under the international tin control scheme. For example, if they should agree to provide 2,000 tons a month and the quotas under the tin scheme should be reduced, they would in effect break the international agreement which they did not want to do. It was indicated that this Government likewise did not care to participate in any action which would destroy the international tin control. Such a result would undoubtedly prove disastrous to Bolivia which is a high cost producer and is able to produce only because the world price is kept up by the control and would be disadvantageous to the United States which would find its producing costs far out of line with world tin prices if it should continue to smelt Bolivian ore while world prices fell.

In connection with the price basis, the suggestion was thrown out by Mr. Feis that although it was felt that there should be a fluctuating rather than a fixed basis, consideration might be given to holding the fluctuation within maximum and minimum limits.

When Mr. Hochschild again returned to the question of British pressure for the conclusion of contracts, Mr. Feis said that the British Government had also expressed to us its hope that no action taken by this Government would be such as to embarrass the British if in an emergency they should need Bolivian ores. We had given assurances that this would be carefully safeguarded and at the same time Mr. Feis stated that the British Government had been requested to cease [Page 540] pressing Bolivians for a decision on the matter of contracts until we should have reasonable time to reach a decision.

The meeting was concluded by agreement that as soon as possible further discussions would be held relating to the precise terms of possible contracts, including the basis for price computation, quantities to be taken, and adjustments to possible British requirements. Mr. Henderson indicated that examination of these questions was currently being made by his staff and that he hoped to be able to meet with the Bolivian representatives early the following week.