811.20 Defense (M) Bolivia/137: Telegram

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

238. Your 257 April 18. Your suggested proposal has been carefully considered. Only difficulties are with respect to price and bonus payments. It does not seem feasible at this time to pay more than established in our agreements with Brazil and Peru. The method of taking care of additional costs of production, inaccessibility of rubber supplies, supplying rubber gatherers, etc. has been to make payments therefor from the fund proposed to be established by Rubber Reserve Company. We apparently did not make clear the nature of the fund. It is not a loan repayable by the Bolivian Government, and represents merely a commitment by Rubber Reserve Company to expend up to this amount for increasing rubber production. There will be no obligation on Bolivia with respect to its repayment; however, premiums paid are deducted from the balance of the fund not theretofore expended. The figure of $1,125,000 was an estimate made here of the amount which might reasonably [Page 565]be expended to increase production. But, for your information only, if additional sums can profitably be spent for this purpose, resulting in increased production there will probably be no difficulty in making provisions for them.

It is agreed that the fund might best be spent under the direction of Rubber Reserve Company, or some other American governmental agency operating in Bolivia, if this is acceptable to Bolivia.

In the agreement with Brazil a base price was fixed for the highest grade, the agreement providing that other grades were to be at appropriate differentials. A preliminary schedule fixed for this purpose has now been revised after discussion with the Brazilian authorities, and on the basis of the revised schedule, the price payable to Bolivia for Beni Upriver Fine would be 32¼ cents per pound f.o.b. vessel at Belém, Brazil and 39 cents per pound f.o.b. vessel at Belém for Beni Hard Fine on washed and dried basis as stated in Department’s 205 of April 11.99 Rubber Reserve advises that Beni Upriver Fine has not drawn a premium in world markets over first grade plantation rubber. It is agreed that other grades would be purchased at differentials based on past trade usage.

In view of the general difficulties we have requested Mr. Douglas Allen and Raymond Bogardus, representatives now in Brazil of Rubber Reserve Company, to go to La Paz as soon as possible to aid you in negotiations. They may be accompanied by Messrs. Manifold and Roberts.1 These men all have full background on the rubber situation and should give you substantial assistance. They intend to leave Belém within the next few days.

In conversation Friday with Guachalla,2 we indicated to him the great urgency for our acquisition of the Bolivian rubber production and the unfortunate political reactions here if this production should go to Argentina. We said that a decision by Bolivia to sell to Argentina was certain to have importance in the development of economic relations between the two countries. The talk then touched on the fact that discussions were going on for revision of our tin and tungsten purchasing agreements with Bolivia. We threw out the suggestion indirectly but sufficiently clearly that if the Bolivian Government worked out the rubber production in accordance with American requests, it would facilitate our endeavor to meet Bolivian requests as regards tungsten and tin.3 At the end of a general review of various factual features of the three supply questions, the Ambassador stated he would be glad to do anything he could to aid in concluding satisfactory [Page 566]agreements on all three matters and said he would immediately cable his Government.

Pending the arrival of Allen, we suggest that you do everything possible to delay any agreement with Argentina. In view of the time element, we think it is impossible to initiate with Argentina at this time any negotiations as to its acquisition of rubber from the producing countries.

Hull
  1. Not printed.
  2. Courtland B. Manifold, representative, and James C. Roberts, assistant to the President, Rubber Reserve Co.
  3. Luis Fernando Guachalla, Bolivian Ambassador in the United States.
  4. For the opinion of The Chargé in Bolivia (Dawson) on this suggestion, see his telegram No. 286, May 3, 11 a.m., p. 544.