811.20 Defense M (Bolivia)/3–644

Memorandum by Mr. Paul Linz, Division of Supply and Resources, to the Director, Office of Wartime Economic Affairs (Taft)

I had a meeting this morning with Mr. Lyon, WCA40 and Ambassador Boal41 at their request, to work out statements for the Under Secretary42 on actions which might be taken resulting in reduction or discontinuance of procurement of commodities from Bolivia.

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Tin. I informed them that the present price which we are paying Bolivia, f.o.b. Chilean ports, was on a day to day basis. The only contractual obligation which we have is under a contract signed November 4, 1940, retroactive to July 1, 1940, for a five year period which, therefore, expires July 1, 1945. The terms of the contract provide for payment at 48½ cents c.i.f., or the standard market price, less 1½ cents a pound. All amended contracts or letters of understanding calling for higher prices have expired. We could, therefore, fall back on the terms of the five year contract.

We are at present paying China 53 cents f.o.b. Chinese airports for tin. China shipped to the United States and Russia a total of about 7,000 tons in 1943. Our contract with the Belgian Congo provides for a base price of 53 cents f.o.b., plus a preminum of an additional two cents if a specific set tonnage is exceeded in any one quarter. The Belgian Congo shipped about 17,000 tons to the United States in 1943. We received insignificant tonnages from other places, such as Mexico and French Cameroons. It, therefore, appears that legally we could reduce our buying price to Bolivia from 60 cents to 53 cents f.o.b.

Copper. The only government contract expired on February 29, 1944 and was not renewed. The American Smelting and Refining Company have a contract with Corocoro in Bolivia (a subsidiary of theirs) to buy copper which they bring in in bond and sell to the Metals Reserve Company. Metals Reserve has no long term commitments and if we wish to discontinue the purchase of this copper, the Metals Reserve would simply have to notify the American Smelting that they were no longer buyers.

Antimony. The contract expired on December 31, 1943 and was not renewed. No action, therefore, is necessary.

Tungsten. We have an over-all agreement with the Bolivian Government which does not expire until July 1, 1944. We must, therefore, purchase until that date. The agreement provides that we commence negotiations on new terms at least six months prior to the expiration of the contract. We have not done this because there is no recognized government with which to negotiate. The Banco Minero and leading tungsten producers are, therefore, already conscious of the fact that we may not be interested in purchasing beyond July 1, 1944.

Rubber and Quinine. These two products are still badly needed for the United Nations war effort. However, it was felt that if Argentina is successful in forming a bloc, they will get the rubber and quinine anyway (the rubber they could readily use domestically and the quinine they could use in part domestically and in part for making handsome profits through smuggling to the Axis). Therefore, one had to balance the risk of losing rubber and quinine temporarily as a result of our actions or losing it permanently as a result of inaction.

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At the same meeting, Mr. Swihart, WT,43 was present and gave his advice as to what steps could be taken to freeze Bolivian funds in the United States. Since Bolivia might very well continue to ship tin at 53 cents, it was felt that a freezing of exchange would be an essential part of any program.

Ambassador Boal also discussed the possibility of the Argentine supporting the Bolivian economy by a subsidy of our seven cents price reduction or by subsidizing the entire tin production. This brought all of us to the conclusion that there was always the risk that any action that we might take against Bolivia might not be effective unless we were prepared to take similar action against the Argentine.

  1. Cecil B. Lyon, Acting Chief, Division of West Coast Affairs.
  2. Pierre de L. Boal, American Ambassador to Bolivia, temporarily in Washington.
  3. Edward R. Stettinius, Jr.
  4. James W. Swihart, Assistant Chief, Division of World Trade Intelligence.