811.20 Defense (M) Bolivia/110: Telegram

The Acting Secretary of State to the Chargé in Bolivia (Dawson)

177. Your 193 of March 20. The following is for your information in carrying on negotiations with the Bolivian officials.

As you undoubtedly perceive, it is urgently necessary that entire Bolivian production of rubber be assured to us. An agreement has been entered into with Brazil at a specified price and negotiations are under way with the other producing countries at equivalent prices. Any substantial increase to Bolivia might require changes in these other prices.

The Rubber Reserve proposal involves a 5-year commitment, thus assuring to Bolivia a steady demand which should be an important offset to any temporarily higher offer.

Negotiations with the other producing countries are proceeding much more satisfactorily, and the Bolivian position is causing unfavorable reaction here.

You may use in your discussions such of the foregoing as in your judgment would aid in negotiating.

Rubber Reserve Company will agree to pay premiums of 2½ cents per pound for all rubber in excess of 2,500 tons and up to 4,500 tons purchased by Rubber Reserve annually and of 5 cents per pound for purchases over 4,500, such premiums to be paid to the Bolivian Government and used for expansion of production of wild rubber.

In addition Rubber Reserve would establish a fund of $1,125,000 to be available for increasing wild rubber production, premiums paid as above provided being credited against the funds. It is not now feasible to permit the fund to be used for expansion of plantation rubber, because of the complex nature of this problem and of its bearing on the post-war situation. Also this is a long-range development which seems to be more a subject for consideration by the Bolivian Development Corporation.95

We understand that the Santa Cruz rubber you refer to represents only a small part of the total production. While communication from Santa Cruz to the Amazon may be difficult, can it be arranged at extra expense? Any such expense would be a justifiable increase in price over the Brazilian price. A possible method of effecting the reimbursement of this additional expense might be to have the Bolivian Government pay the additional costs and obtain reimbursement from Rubber Reserve.

[Page 563]

We agree with your decision on the matters referred to in the second paragraph of your 193.

  1. For correspondence concerning American aid to Bolivia involving this Corporation, see pp. 592 ff.