811.6354/726

Memorandum by the Adviser on International Economic Affairs ( Feis ) to the Under Secretary of State ( Welles )

Mr. Welles: This afternoon Sir Owen Chalkley of the British Embassy came at his request accompanied by Mr. Pierce who is an executive of a consolidated tin mining company which controls the large tin smelter of England (under Patiño control). Sir Owen stated that it had come to their knowledge that we were engaged in discussions with the Bolivian Government and tin producers of arrangements whereby a large part of Bolivian ore production would be bought by the United States Government. He said that he wanted to inform us that any such step on our part might work a serious disadvantage to Great Britain during this war crisis and afterwards. Mr. Pierce conveyed the same view though rather in terms of injury to the smelter. In response to my request for an explanation as to how the injury would come about, he explained that at present practically all of the Eastern tin is being smelted in the East where it is more cheaply handled and that the smelters in England were largely dependent upon continued supplies of Bolivian ore. They said that if the Bolivian ore was not available, their only recourse would be to substitute Straits’ tin for it and this would mean, among other things, a loss of badly needed dollar exchange.

I said that I was certain this Government would not want to handle the matter in such a way as to injure Great Britain’s efforts during this war emergency and therefore it had been contemplated right along to discuss the matter with the British Government when and as the discussions of the Bolivian interests had reached a point where plan of action had defined itself. I said that action contemplated by us would have some effect upon the financial prospects of tin smelter business in England but we could not permit that to be a decisive factor; this remark I made for Mr. Pierce’s benefit since he seemed [Page 541] to believe it should be a decisive factor. Sir Owen left the following informal notes for me and it was agreed that next week we would resume discussion on the subject:

“During the conversations which Sir Owen Chalkley has had with Mr. Henry F. Grady arising from the British Ambassador’s communication to the State Department of August 14, 1940, the request was made by Sir Owen Chalkley for consideration of any assistance or advice which the United States departments could extend in certain matters of which the following is one:—

7. Avoidance of diversion to the United States in connection with the proposal to erect a tin smelter of supplies of Bolivian tin ores which at present are shipped to and smelted in the United Kingdom.

Two-thirds of the tin ores used by the English smelting industry are derived from Bolivia; the average for the years 1935–1939 inclusive is 66.75 per cent.

“Mr. E. V. Pierce, Chairman and Managing Director of Consolidated Tin Smelters, who arrived recently from England, in association with Patiño Mines and Enterprises, New York, has submitted certain proposals to the Defense Council in connection with the proposed erection of a tin smelter in the United States to smelt Bolivian ores.

“This whole subject is extraordinarily complicated and the British Ambassador only wishes to suggest at the moment that an opportunity may be offered of putting the views of the British Government and the British industry before the competent authorities of the United States Government before Mr. Pierce returns to England at the end of next week.”

Later in the afternoon at Mr. Jones’ invitation I attended a meeting between himself, Senator Henderson of the Metals Reserve Company, the Bolivian Minister, and Messrs. Aramayo and Hochschild, owners of two of the large tin mining properties in Bolivia (a separate memorandum is being prepared regarding this matter). I told Mr. Jones of Chalkley’s visit and he heartily concluded in the assurances I had given, pointing out at the same time that the British were facilitating the current efforts of the Metals Reserve Company to acquire reserve stocks of tin.

In the course of this meeting, Mr. Hochschild stated that one reason why it was desirable to conclude the ore purchase contract with the American Government promptly was of course that the British were trying to force them immediately to sign contracts which would commit them to deliver their tin ore to England over a period of the next five years. The Bolivian Minister confirmed that some such effort was being made and said that if they had to dispose of all their ore in England, it would mean that they would have to accept half payment in blocked sterling, and they would become short of dollars.

[Page 542]

I thereupon phoned Chalkley and informed him:

(1)
That I had confirmed with Jones the assurances I had given him of our desire not to do anything that would materially injure the conduct of Great Britain’s war efforts and that before we concluded any ore buying arrangements, with the Bolivians, we should be glad to talk the matter over with them.
(2)
I added, however, that we were now informed that they were pressing the Bolivian ore producers to sign contracts which would make it impossible for us to build a smelter here and that I therefore wished to suggest to them that they do not bring any unfair pressure. Chalkley said that he did not know whether this charge was justified or not but he would certainly look into it.

Incidentally, there is every reason to believe that the real source of pressure is Patiño, majority owner of a smelter in England (whose interests are at stake).

H[erbert] F[eis]