811.20 Defense(M)Peru/655: Telegram

The Secretary of State to the Ambassador in Peru ( Norweb )

451. For Thompson from Rosenthal, BEW. Your 466, April 1, 10 p.m. Suggestion of the Finance Minister is not satisfactory, inasmuch as it might permit a substantial increase in export taxes unless very strictly interpreted.

We are sure that you realize and that it has been made clear to the Peruvians that we have little or nothing to gain from the conclusion of this over-all agreement if no provision is to be made against tax increases which would have an unfavorable effect upon production. There is little reason for continuing these negotiations if nothing can be done with respect to this matter.

Nevertheless, it will be considered satisfactory if a clause is included in the agreement incorporating in effect the Embassy’s suggestion in its No. 466. We suggest the following wording: “If, during the term of this agreement, the taxes, levies, fees or other charges imposed by the Peruvian Government on the production or export of strategic metals and minerals should be changed from those existing on the date of this agreement, the agreement shall not continue in effect unless the Governments of Peru and of the United States shall then agree to its continuation for the full term.”

Please take this up with the Peruvians and advise of their reaction to it. No agreement should be finally agreed to without further authorization. [Rosenthal.]

Hull