824.6176/5–445: Telegram

The Acting Secretary of State to the Ambassador in Bolivia ( Thurston )

324. Dept. and RDC have conferred concerning your 479 May 438 and previous.

Bolivian agreement is one in framework of sixteen similar agreements resulting from Rio Conference39 and essential to common war effort. Bolivia receives as advantageous treatment as any and additionally has exceptional right to export 250 tons. It exercises this by selling at high prices to Argentina.
Vital necessity for rubber undiminished by victory in Europe. Extension offered to obtain maximum 1946 production. Unless accepted promptly, offer may be withdrawn as usefulness may be lost.
No change in established prices or export quota can be considered. Contrary to impression La Paz attempting create, RDC advises producers not dissatisfied with present prices. Bolivian Govt, unlike others has increased rubber export duties thereby reducing producers net. Under precise application of rubber agreement, Bolivia’s [Page 576] export quota would have been about 160 tons annually instead of 250 tons. RDC has applied the maximum quota from start in attempt accord Bolivia most liberal treatment.
Bolivia has pledged to US its entire export tonnage of rubber, except maximum hold-back of 250 tons. Bolivia has obvious duty prevent illicit export violating this pledge. Despite duty Bolivia has permitted smuggling to continue and admits military elements in own Govt, have been permitted to accept bribes to allow shipment contraband. Although duty police smuggling is Bolivia’s, RDC agreed to aid by providing funds for conduct special enforcement.
Anti-smuggling decree as signed differs materially from that agreed by RDC as a basis for RDC grant of funds. However, RDC representative authorized disburse to Bolivia agreed funds for enforcement if in your opinion this is best decree obtainable and Bolivia intends to enforce it.
RDC has attempted for 2 years to establish the basis on which volume premium payments will be made either to Bolivian producers or to Bolivian Govt, for development purposes which alternatives are contemplated in rubber agreement. Clear agreement not reached. RDC’s representative has been authorized to pay these funds to Bolivian Govt, provided Bolivia recognizes that they are payments on account of Development Fund40 and are to be used for RDC approved development projects. Alternatively RDC willing pay over to Govt now subject to clear understanding with Bolivia that later diplomatic negotiation will determine chargeability Development Fund (our 141, March 141). We request your recommendation whether this negotiation should be concluded in La Paz or Washington.
Terms of rubber agreement clear concerning purposes for which the Development Fund to be expended. RDC expenditures for developing immediate rubber production through roads, transport, health, supplies and production loans at a loss and for similar projects are development expenses and have been so accepted by other countries. These expenditures and deductions for volume premiums and for allowances for Bolivia’s export rubber as provided in contract are chargeable against the Development Fund. Fund has not been and will not be otherwise depleted.
Brazil, US, Argentina have concluded agreement providing for integrating Argentina into system of rubber conservation and control.42 Argentina pledged itself to stop rubber contraband. This [Page 577] agreement does not contemplate increased shipments natural rubber to Argentina. However, if additional natural rubber were necessary and possible to supply it would be made available to Argentina at prices not higher than RDC agreement prices in view of price control provisions in tripartite agreement. Neither Dept nor RDC concurs in suggestion paragraph 5 your 412 Apr 1343 that additional tonnage be allowed Bolivia for export Argentina.
Both Dept and RDC have always been willing discuss with Bolivian officials operating questions and matters of interpretation arising under rubber agreement. Refer notes on RDC Washington conference Jan. 24 with Moreno.44 However Dept and DRC have consistently refused consider basic changes rubber agreement. (Our 974 Sept 28, 1944)43

Understand foregoing are principal items raised by Bolivia. Present to Bolivian Govt Dept’s position on these as above. Represent also to Govt firmly:

We and Bolivian Govt bound to full discharge of mutual obligations stated in rubber agreement.
Rubber agreement not commercial transaction but essential intergovernmental agreement necessary to accomplishment of war.
Failure to observe and implement rubber agreement would constitute a serious impediment to our joint war effort.

Dept believes issues result from Bolivia’s desire avoid obligations it has assumed under rubber agreement. Take firmest possible position since Bolivia’s attitude this matter may affect not only relations with Bolivia but also stability of entire structure for procurement in Hemisphere of this most critical commodity.

Truslow prepared visit La Paz as suggested. Dept believes basic issue is whether or not Bolivia intends fulfill its obligations and on this issue compromise or negotiation inadmissable. Awaiting your further advice before requesting Truslow proceed.

  1. Not printed; in the Ambassador reported that the Bolivian Congress might reject extension of the rubber agreement, and that the Bolivian President felt that his problems were not receiving adequate attention in Washington (824.6176/5–445).
  2. For documentation on the Third Meeting of the Foreign Ministers of the American Republics, held at Rio de Janeiro, January 15–28, 1942, see Foreign Relations, 1942, vol. v, pp. 6 ff.
  3. The Rubber Agreement of July 15, 1942, provided a development fund of $2,125,000 for extension of rubber production, including auxiliary services in the fields of health, sanitation, and communication.
  4. Not printed.
  5. Department of State, Treaties and Other International Acts Series No. 1542, or 60 Stat. (pt. 2) 1821.
  6. Not printed.
  7. Presumably Gonzalo Romero, a director and Acting General Manager of the Bolivian Development Corporation.
  8. Not printed.