811.20 Defense (M) Bolivia/137: Telegram

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

257. Department’s 205, April 11, noon,96 et ante. Rubber trade accord with Argentine. Offers are now 50 cents per pound or more apparently delivered in Buenos Aires although this is not clear. There are at least six representatives of Argentine business in La Paz trying to buy rubber or producing properties. Some shipments of rubber from the Beni to Buenos Aires via Manaos are already under way. Arrival of two Argentine Government experts mentioned in telegram No. 688, April 17, 1 p.m. from the Embassy at Buenos Aires96 will undoubtedly make situation still more difficult.

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It is my understanding that Beni Up River Fine has always drawn a substantial premium in the world markets over Number One Plantation.

I would suggest a proposition along the following lines as perhaps sufficiently attractive to interest Bolivia:

Commitment of Bolivia to sell and the United States to buy all Bolivian rubber (this would hardly be accepted unless we take care of Argentina as suggested below).

Term of 5 years.

Price of 35 cents per pound for Beni Hard Cut Fine Classified at Bolivian border less actual weight deductions. Other grades to be purchased at differential identical with past trade usage.

Advance of $500,000 with promise of as much more as may be necessary for fomenting rubber conditions, organizing supplying of rubber gatherers, et cetera, to be administered through Bolivian Development Corporation or experienced special field representative of Rubber Reserve Company.

Bonus of 5 cents per pound on all rubber exports to be applied to repayment of advance. Funds from this bonus to go to the Bolivian Government after full repayment of advance.

Additional bonus of 5 cents per pound on all rubber exports if these exports exceed 1500 tons per annum, this bonus to go to producers. Publicity could be given the additional bonus so as to help rubber gatherers to get added wages.

While I realize these are stiff terms from our point of view even they will be insufficient if Argentines, as seems likely, want rubber [Page 564]enough to raise ante. Is there no possibility of making a deal with Argentina whereby it would withdraw from [the Bolivian market?] and we would guarantee it say 50% of its normal imports these to be supplied by us from Brazil, Bolivia or wherever most convenient?

If something of this sort is impossible and we cannot meet Argentine price it might be better to withdraw our offer, let Argentina have Bolivian rubber and concentrate on Brazil. As Argentina would not offer as much if we were out of the market this would at least prevent price spiral in competition in Bolivia. If price is boosted materially here Brazil will undoubtedly demand upward revision of our price agreement with it.

As stated in my 216, March 30, 5 p.m.,98 premium proposals contained in Department’s 177, March 28, 9 p.m., have not been presented pending further word from the Department. Difficulties I see in the telegram are that (1) proposed fund would apparently be advanced to Bolivian Government which could not be trusted to use it properly, (2) there would thus be no direct incentive to producers to increase production and (3) the Argentine-Bolivian production can be increased to 2500 tons in which case there would be no opportunity for repayment of fund.

A prompt decision is vital as situation is daily becoming more difficult and complex.

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