811.20 (D) Regulations/2314: Telegram

The Secretary of State to the Ambassador in Peru (Norweb)

112. Reference your 180 of May 16 and 181 of May 16. It is not believed that negotiations by the Metals Reserve Company directly with the individual producers would attain the object we are seeking, namely, the acquisition of the entire exportable surplus of the various commodities which the Metals Reserve desires to buy, unless these negotiations would be supported by an export control or some other governmental regulation which would prohibit the export of the materials subject to the agreement to any country other than the United [Page 527] States. Unless there were such control of exports, the result would only be competitive buying which would not achieve the purpose of this Government.

The Department understands the reluctance of the Peruvian Government to be the first to put such a regulation into effect. For your confidential information, however, arrangements are being made which it is hoped will, when announced, change the attitude of the Peruvian Government in this respect. Arrangements have been made with Brazil for the imposition of such an embargo on a list of materials which will be bought by the Federal Loan Agency and it is hoped that an announcement of this arrangement will be made soon. An agreement has been made with Bolivia as you know for the purchase of its tin production and a similar arrangement has just been completed for the purchase of the entire tungsten production of Bolivia. The latter agreement will be accompanied by a customs regulation prohibiting the export of tungsten except to the United States. Negotiations are also about to be begun with Mexico and Argentina along the same lines. All of the above, except the two Bolivian agreements, is strictly confidential but when we will be free to refer to these arrangements and negotiations it is hoped that their existence will dispose of this objection on the part of the Peruvian Government.

The existence of contracts with the Japanese is not in itself an insuperable obstacle as it might be possible to recognize these contracts and to allow them to be fulfilled if they are not in too large an amount and do not cover too long a period of time.

The matter of restricting the use by the Japanese of dollar credits through American Banks is under consideration. We will advise you shortly if developments along this line take place.

The Department is also aware of the difficulty caused by the large purchases by the Japanese of Peruvian cotton. This matter is also being studied by the Department and further advices will be sent to you shortly.

While it is impossible to discuss these other negotiations, the possible regulation of dollar credits, and the cotton situation with the Peruvian Government at present, it is hoped that you will use your best efforts to prevent the Government of Peru from taking a firm position at this time against export control. The important thing now is to keep the negotiations open and to make it clear to the Peruvian Government that no effective arrangement can be made for the purchase of the entire exportable surplus of the strategic and critical Peruvian materials unless some form of effective export control is a part of the arrangement.