811.20 Defense (M) Peru/2–245

Memorandum by the Minerals Attaché in Peru (Vanderburg) to the Ambassador in Peru (White)54

Reference is made to the memorandum dated January 26, 1945 from the Peruvian Ministry of Foreign Relations to this Embassy requesting the Department to hold in abeyance the recent revisions made by the U. S. Commercial Company in the Over-All Metals and Minerals Agreement on December 6, 194455 with respect to the quantities of copper, lead, and zinc ores and concentrates it agrees to purchase and the decreased price for zinc contained in concentrates.

The arguments advanced in the memorandum for the continuance of mineral purchases as originally specified in the Agreement may be summarized as follows:

—Mutual advantages to the United States and Perú through the sale-purchase of prime materials in accordance with existing contracts.
—Unemployment and lower standard of living for the working classes that would result from decreased purchases.
—Loss to Peruvian mining companies which have not yet had time to amortize large sums of money invested to increase production of minerals for the war program.
—Economic and social stability of the country will be affected by decreased mineral purchases.

Comment on the foregoing arguments follows:

1—According to information available here at the present time we have reached a position of adequate supply in virtually all the metals produced in quantity in Perú with the exception of lead, and it is difficult to see what economic advantage would accrue to the United States through purchases by the U. S. Commercial Company of minerals not essential to the war program. Our domestic mineral producers are concerned over the disposal of huge surpluses of metals which will have accumulated at the end of the war in stockpiles, battlefield and demolition scrap and further purchases of metals not required for the war program will only increase our problem. Furthermore this step would be out of line with the declared policy of our Government to divert international trade back into private channels as rapidly as conditions permit.

2—For the last four years there has been a chronic labor shortage in the mining industry due largely to the construction of roads, irrigation works, port projects, hydroelectric installations, etc., by the Government, and a greatly expanded program of building construction in Lima; most of this activity having no relation to the successful prosecution of the war. Only a fractional part of this construction has been in low cost housing or directly related to raising the living standard of the low income classes. When the procurement agencies were concerned about increasing the production of Peruvian minerals during the first months of our entry into the war no effort was put forth by the Peruvian Government to correct the labor shortage, and the Government’s participation in the war effort has been restricted largely to rhetorical gestures.

3—The statement that large sums of money have been invested by Peruvian mining companies to increase the production of minerals for the war program is wide of the mark and not borne out by the facts. An analysis of the investments made by mining companies in Peru shows the following approximate amounts which have not yet been amortized:

Compañía Minera Santa Elena $100,000
Volcan Mines Company (at end of contract) 60,000
Perú Molibdeno S. A. (at end of contract) 20,000
Compañía Minera Atacocha, S.A. 15,000
San Antonio de Esquilache Mines, Ltd. 40,000
Minas de Cercapuquio, S.A. 7,000
Sociedad Minera Yauli 5,000
Total $247,000

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Out of the foregoing total the first three companies were granted loans by the Metals Reserve Company of which about $180,000 still remains to be amortized. The remainder, or $67,000 invested by Peruvian firms does not indicate any great effort to produce minerals for the war program. It seems pertinent to refer here to the fact that Peruvian gold mines have enjoyed uninterrupted prosperity during the war while the gold mines in the United States were forced to cease operations by Government edict. In connection with the Peruvian production of minerals during the present war reference is made to Embassy Report No. 503, “Statistical Summary of Production and Exports of Mineral Products, Perú, 1934–1943,” dated November 16, 1944.56

4—The rehabilitation of international trade on a sound and enduring basis is one of the major problems of the world at the present time and in this readjustment the repercussions in Perú with its well balanced internal economy, the prosperity it has enjoyed during the war years, the comparatively light tax burden placed on its nationals for meeting the cost of the war, places the Republic in a more favorable position than most of the other countries of the world. At this juncture we are reminded that impending social and economic repercussions were predicted by the Government when the U.S. Commercial Company made cutbacks in antimony, tungsten, and molybdenum purchases, but to date these threatened catastrophes have not materialized. Most of the producers of these metals are still in business and disposing of their products in private markets. It is far better for Perú to seek markets for its minerals through private marketing channels at this time in order to cushion the effect of an abrupt transition, rather than to lean upon an economic crutch such as would be the case if we complied with the request that the U. S. Commercial Company continue to purchase minerals or other products which we do not need. To underwrite the economy of Perú and other Latin American countries is beyond even the financial capabilities of even an over-generous Uncle Sam.

In view of the tremendous debt facing the American taxpayer to defray the cost of the war—the end of which is not yet in sight—it is my opinion that the Peruvian Government is “off the beam” in requesting the United States Government to continue purchases of Peruvian minerals which we do not require for the war program.

  1. Addressed also to the Counselor for Economic Affairs (Greenup); copy transmitted to the Department by the Ambassador in Peru in his despatch 2553, February 2, received February 12.
  2. For documentation on the agreement of 1943, of which this was an extension and revision, see Foreign Relations, 1943, vol. vi, pp. 735 ff.
  3. Not printed.