811.20 Defense (M) Bolivia/284: Telegram

The Ambassador in Bolivia (Boal) to the Secretary of State

591. For Rubber Reserve from Roberts. During the last week we have learned by inquiry that, prior to the signing of the Rubber Agreement, the Bolivian Government had issued export permits for shipments to Argentina and Chile totaling 1050 tons. Most of the holders are not rubber producers but speculators who are using the permits as options. As a result of this situation, the three men we have in the Beni and Pando now trying to contract for rubber have [Page 582]not been able to obtain any as the holders of the permits are paying more.

This situation has been explained to the Minister of Foreign Affairs Matienzo, Under Secretary of Economy Suaz Nabar, and Acting Minister of Economy Sanjines on the basis, first, that article 3 of the agreement defines that not more than 250 tons per calendar year could not [sic] be exported to countries other than the United States and, therefore, that not more than 11/24ths of this amount could go out after the signing of the contract. If the permits were allowed to run, they in effect make the contract ineffective as far as this calendar year is concerned as the amount yet to be purchased and shipped against them will probably absorb the remainder of this year’s supply. We have implied that we cannot ask Washington to execute present orders for supplies for Bolivia which are sorely needed in Brazil unless we are assured that the letter of the agreement will be followed.

Secondly, that article 9 requires that Rubber Reserve be given an opportunity to buy existing contracts. We have talked with two holders of permits who advise they would be glad to sell to us instead of Argentina provided the Bolivian Government would give them legal basis for canceling their Argentine obligations.

Sanjines agreed this morning to issue a decree to the effect that no exports will be permitted unless bona fide and notarized purchase contract and sales contract dated prior to the signing of the agreement is presented to the Economy. As regards point 2, Sanjines agreed to explore a method whereby his Government can allow these permit holders to break their Argentina obligations.

It might be helpful if advantage were taken of the stay in Washington of Minister of Economy Crespo and Minister of Finance Espada to impress upon them the necessity of strict adherence to terms of Rubber Agreement in connection with general program of economic cooperation. Recommendations by them to their Government would aid us materially in our efforts. This situation explains why we have not been anxious give you approval to execute pending supply orders of Bolivian producers.

Repeated to Allen. [Roberts.]