811.20 Defense (M) Bolivia/303: Airgram
The Ambassador in Bolivia (Boal) to the Secretary of State
[Received August 7—11:36 a.m.]
A–11. Department’s instruction no. 159 of July 24, 1942. Proposed quinine agreement being presented to Bolivian Government but Embassy is of opinion that prices offered are inadequate to stem reduction in production and are certainly insufficient to increase production. It has been noted that Department recognizes that bark price offer is less than the present market (in this connection Bolivian speculators’ price, presumably for delivery in Argentina, has risen to equivalent of $16) but that it is felt prices for sulphate and other alkaloids, as well as proposed efforts to expand production and distribution of alkaloids, are sufficient compensation. This general thesis might be supportable if alkaloids other than sulphate were produced by local factory and if purchases of bark and of alkaloids were to be made from same persons or organization; however, only alkaloid factory produces is sulphate and bark dealings will be carried on through middlemen with Indian gatherers while sulphate purchases will be made from factory. Sulphate prices could not possibly offer inducement to gatherers and it is to be feared that low bark price will result in collection of only most available and highest yield bark with consequent drop rather than temporary increase in production probable.
Also, present prices quoted and being received by factory are $29 per kilo of quinine sulphate containing 98% quinine and $5 per kilo of alkaloid mass containing about 16% quinine sulphate (in place of $3 price of early July as reported in Embassy’s telegram no. 524 of July 9, 4 p.m.74). These prices are for delivery at factory and do not include packaging. Our offer of $23.50 per kilo for quinine sulphate is less and even though factory’s production costs would be lower on basis of suggested bark price “judging prices in terms of aggregate yield” might still lead Bolivian Government and factory to oppose contract unless we offer higher prices. (Department will recall that large bark producers are politically more potent than persons interested in factory.) In any event, some bargaining will probably be necessary before agreement on terms can be reached.
The annual allowance of 120 tons of bark for the factory with the possibility of it being increased to 300 tons seems to the Embassy rather generous. It is true that the contract draft provides for purchase of alkaloids and that if operations of factory are sufficiently efficient it might be preferable to purchase alkaloids in place of bark, but as pointed out in Embassy despatch 4174 there is at least some [Page 553] doubt as to the possibilities of efficient operation of the factory with its present equipment and personnel. The fact that no alkaloids other than sulphate are being at present separated would seem to support thesis of inadequate equipment and improper operation; factory states that these products can be produced “only with elaborate laboratories”. Priester75 reports confidentially that director of Dutch quinine trust while here in August 1939 to consider Government’s offer to sell factory, stated it was “completely worthless”. While it has undoubtedly been improved since then it is to be doubted that it now represents peak in quinine production efficiency.
One possibility which may not have received consideration would be for Defense Supplies Corporation to purchase from factory total alkaloid mass (not sulphate) and to complete the alkaloid separation in United States. Local factory’s inefficiency is most apparent in its separation of sulphate and by handling this part of process in United States we might be able to avoid large part of waste now being experienced and still leave a place for the factory in the general scheme. Technical aid would be of assistance to factory in even the mass extraction process although as stated above this is most efficient part of factory’s operations. It might be possible even to so improve factory that all the bark might be processed here with resultant alkaloid mass being shipped to United States.