811.20 Defense (M) Peru/1107
Joint Memorandum by Economic Officers of the Embassy and of the Foreign Economic Administration in Peru to the Department of State, the Foreign Economic Administration, the United States Commercial Company, and Other Agencies 41
Reference is made to the letter dated March 6, 1944,42 from the Peruvian Minister of Finance and Commerce, Julio L. East, to the Embassy concerning the desire on the part of the Peruvian Government to renew the Over-All Metals and Minerals Agreement43 with the United States Commercial Company (Metals Reserve Company) which expires June 30, 1944.
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We incline to the opinion that if Washington desires to renegotiate the Over-All Metals and Minerals Agreement it may be timely to [Page 1519] take advantage of our strong bargaining position to encourage arrangements for servicing and amortizing Perú’s various financial obligations to the United States,44 and to assure equal treatment for American firms in Perú in matters pertaining to taxation, settlement of wage disputes, and social legislation. In this connection reference is made to despatches No. 8983 of February 7, 1944, and No. 9116 of February 25, 1944,45 concerning the labor difficulties of the Cerro de Pasco Copper Corporation at its Oroya smelter. Mention may also be made of the pressure being brought on the Goodyear Tire and Rubber Company in Perú to accept a discriminatory plan for dividing profits with the Peruvian Government. (A despatch on this subject is being prepared).
If there is no inclination to renew the Over-All Agreement the Peruvians may advance a number of arguments in favor of its renewal. They may point out the importance of the mining industry in Perú’s economy and the possible unemployment that might result in the event of any appreciable curtailment of purchases by the United States. At the present time the United States is the principal market for Peruvian mineral products with the exception of substantial amounts of electrolytic lead, and minor amounts of electrolytic zinc, mercury, and some non-metallic minerals exported to other South American Republics. They may take the stand that we encouraged Peruvian producers to make capital investments to increase production and we should not let them down by refusing to take all their production. It may be pointed out to this that agencies of the United States Government have underwritten mine and plant expansions at a number of properties in Perú, including the Vanadium Corporation of America, Perú Molibdeno, S. A., Volcan Mines Company, Compañía Minera Santa Elena, Compañía Minera Eldorado, and several mica producers in the Camana district. While it is true that some of the smaller lead producing companies have added additional flotation equipment for the recovery of zinc minerals formerly discarded in the tailings, such expansions would have been undertaken in the normal course of events.
One of the possible advantages of the Over-All Agreement is that it gives us an opportunity to screen metal exports to Latin American countries thereby preventing shipments from falling into undesirable hands. It is believed that the navicert system bars shipments to Germany and Japan, and it may be pointed out that with the exception of mercury and a small tonnage of zinc concentrates virtually all the metals exported to Latin American countries are from the Cerro de Pasco Copper Corporation which has in the past cooperated in this respect without the Agreement.
[Page 1520]Another advantage of the Agreement from our viewpoint is the inclusion of Clauses A and B of Article 3 whereby Perú agrees that increased taxes, fees, charges, or levies on exports or production shall not be of such nature as to interfere with the free flow of metals or minerals. This ceiling on taxes enables us to purchase mineral products at stabilized prices as long as the Agreement is operative.
If the Agreeement is to be renewed we are in accord that the contract should stipulate that the amounts of mineral products exported to other Latin American countries should be credited to the quotas contracted for by the United States Government.
We also concur in the belief that in any renegotiation of the Agreement problems of social nature should not be injected into the discussions by either Government.
- Transmitted to the Department in despatch 9232, March 15, 1944, from Lima; received March 28.↩
- Not printed.↩
- For correspondence on and terms of the agreement, see Foreign Relations, 1943, vol. vi, pp. 735 ff.↩
- For correspondence on the debt negotiations, see pp. 1568 ff.↩
- Neither printed.↩
- Counselor for Economic Affairs in the Embassy.↩
- Representative of the Foreign Economic Administration in Peru.↩
- Representative of the Foreign Economic Administration in Peru.↩
- Foreign Service Officer in charge of arranging for mining equipment requirements of the Andean countries.↩