811.20 Defense (M) Peru/2a

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

No. 517

Sir: Mr. Julian D. Smith has been designated by the Federal Loan Agency to act as the special representative in Peru of the Agency and the Metals Reserve Company to negotiate an over-all purchase agreement with Peru. Mr. Smith leaves for Peru by air on July 23. He will take with him a draft letter which he has been authorized to sign on behalf of Metals Reserve Company whereby that Company will agree to purchase the total Peruvian exportable surplus of antimony ores, copper ores and concentrates, vanadium ash, and zinc concentrates. A copy of this letter is enclosed.55 As you will see, this letter specifies the prices of each commodity, and makes as a condition of the obligation of the Metals Reserve Company the creation of an export control whereby the Peruvian Government will prohibit the export of any of these commodities during the specified period, except to the United States and the other American Republics having parallel systems of export control. The letter limits the amounts of each commodity to the exports of 1940, but the Metals Reserve Company is prepared to increase the amounts to 125 percent of the 1940 exports.

Molybdenum, which was one of the materials referred to in the Department’s telegram no. 99 of May 15, has been eliminated. This has been done, with the consent of the Metals Reserve Company, at the request of the British Government, which is now conducting negotiations [Page 532] for the acquisition of the entire exportable surplus of Peruvian molybdenum. Bismuth, another material referred to in the Department’s no. 99 of May 15, is not included in the draft letter of the Metals Reserve Company. Bismuth was omitted because it is understood that the entire production of Peruvian bismuth is owned by the Cerro de Pasco Company. You are requested to investigate the accuracy of this understanding, for, if it should appear that there is any production of bismuth in Peru which is not owned or effectively controlled by the Cerro de Pasco Company or some other American company, bismuth will be added to the list of materials in the Metals Reserve Company’s letter.

It is understood from your telegram no. 235 of June 21 that the Peruvian Government is prepared to restrict the export of strategic materials as soon as an agreement is reached as to the Metals Reserve Company’s plan for the purchase of Peruvian materials. It is assumed that you will assist Mr. Smith in his negotiations for acceptance of the offer to be made by the Metals Reserve Company and that simultaneously you will make arrangements with the Peruvian Government for the issuance of a decree which will prohibit the exportation of the materials covered by the Metals Reserve Company’s offer except to the United States and to such of the other American Republics as have parallel systems of export control satisfactory to the United States. A similar decree has recently been issued by the Mexican Government in connection with the over-all purchase agreement recently concluded between the Federal Loan Agency and the Mexican Government. A copy of the Mexican decree is enclosed.56 It is hoped that you will be able to obtain the consent of the Peruvian Government to the issuance of a decree approximating the Mexican form. The products to be subject to the export control should include all the products to be covered by the Metals Reserve Company’s offer and, additionally, if possible, molybdenum.

It is suggested that when the negotiations reach that point you telegraph to the Department the form of decree as tentatively agreed upon by the Peruvian authorities and yourself. It is also suggested that you regard the enclosed draft of letter by the Metals Reserve Company to the Peruvian Government as the basic draft and telegraph any proposed changes in it textually. For convenience, the lines in the Metals Reserve Company letter have been numbered.

Very truly yours,

For the Secretary of State:
Dean Acheson
  1. Not printed.
  2. Not attached to file copy, but see telegram No. 301, July 11, from the Ambassador in Mexico, p. 407.