Memorandum of Conversation, by Mr. James Espy of the Division of North and West Coast Affairs 71

During the meeting held to-day regarding the tin contract, Mr. Jorge H. Sanchez, representative of the Bolivian Ministry of Finance, repeated previous statements made by him and other Bolivian representatives to the effect that Bolivia had fully cooperated with the [Page 384] United States in the war effort in supplying tin and other essential minerals to this country. He implied, as has been so often done in the past, that Bolivia has given much more than it has received for this cooperation and that therefore the United States was under a moral obligation to help out Bolivia now. No rancor was shown or apparently intended by his remarks but they were indicative of a self-induced feeling manifest in the past months, not only by the Bolivian press but as well by elements of the Government, that Bolivia has gotten the “short end of the stick,” and full appreciation not shown or reward given for its efforts. I therefore took this occasion to say that I felt confident that Mr. Sanchez Peña, as a representative of the Bolivian Government, did not mean to suggest that our purchase of Bolivian minerals, particularly under the tin contract, during the war, had not been mutually beneficial to both countries. We had obtained appreciable quantities of Bolivian minerals and we had paid Bolivia well for them. I said that I was sure he would agree that the Bolivian Government had received large revenues from our purchases of Bolivian minerals as witnessed by the Bolivian Treasury surpluses; that the mining industry had made large profits; and that the lot of the laboring classes in Bolivia had been greatly improved.

Mr. Sanchez Peña tacitly admitted that this was true.

Mr. Jewett stated, during the course of the discussion, that if the RFC were to pay the price demanded by the producers, this would mean the “death knell” to the Texas City Smelter.

Following this remark I had a private chat with Mr. Sanchez Peña. I said that I understood that the RFC felt that if such a price as 66¢ to 68¢ per pound was paid for Bolivian tin, the eventual result would be that either the Texas City Smelter would be closed down and refined tin bought at a much cheaper price from other sources of the world, or the smelter would turn to other areas for the purchase of minerals. This, I said, in our opinion, and from all I can gather was also the opinion held by the Bolivians, would be a disaster! I then went on to state that we, in the State Department, were doing all possible to help out but that the purchase of tin was the primary responsibility of the RFC and that it, in turn, held itself responsible as an agency of the government to the people of the United States.

I mentioned that it was hardly likely that the American people would permit an indefinite continuance of the payment of prices for Bolivian tin way over those paid for tin in the world market, and that they would eventually, insist that either tin be purchased at a reasonable price from Bolivia or that it be bought elsewhere. (Mr. Jewett had said during the meeting that the RFC was obtaining tin supplies at a price substantially less than 58½¢). I noted that questions [Page 385] had already been asked in Congress about this matter. I said that the RFC was willing, and had so indicated, to raise its price from the present level to meet the Bolivians a good part of the way in their effort to maintain production but that there was obviously a limit to which it could go in this respect. Therefore, it was up to the Bolivian Government also to “lend a hand.”

To these remarks Mr. Sanchez Peña replied that it was politically impossible for his Government to reduce the exchange rates or taxes. He explained that he was a member of “The Party” (meaning of course, the MNR) and that it would be political suicide for his Government to make such concessions as the Government would be immediately accused of selling out to the “ROSCA” (mining interests).

I said that be that as it may there must be ways for the Bolivian Government to do something. I asked of him why the Bolivian people could not be told the full truth in the matter, i.e., that Bolivia was being paid the highest price for tin in the world; that this country in purchasing Bolivian tin was paying large subsidies; that it could not be expected that the United States would do so forever and that every effort must be made, if Bolivia is to maintain its tin industry, to reduce prices and costs to meet world competition. I then said that as a practical method, I wondered whether something could not be done possibly through a reduction of the Bolivian expenditures, implying that the Government would thereby be in a position to give some financial relief to the mining industry. In this respect I referred to what had happened last Fall. I pointed out that on October 10th, the Minister of Finance had submitted to the National Convention a proposed budget for 1946 which called for a reduction of 200 million bolivianos from the 1945 budget; that on December 28, President Villarroel had made a public statement that the budget would be reduced by this figure of 200 million bolivianos; and that on December 29, 1945, the President had told the same thing to Ambassador Thurston. I added that as he knew, we had not intervened to even suggest that such a reduction be made but that this had been a step initiated by the Bolivian Government itself. Yet when the 1946 budget was published, the first of the year, not only was a reduction not made but the budget was increased over that of last year by 33 million bolivianos. I mentioned that a large part of the budget was going to the Army and that in fact, the military appropriations were even raised by ten million bolivianos over those for last year and this, despite the fact that the war is over and we are now in a time of peace!

Mr. Sanchez Peña appeared to be impressed by what I said and informed me that he would immediately write privately to the Minister of Finance.

[Page 386]

During the meeting the question also came up of the cost of production of the Hochschild mines. Mr. Hochschild said in an offhand way, that he had practically made no profits since the beginning of the war. He said that the Unificada had paid no dividends and that Colquiri had only paid dividends one year. Mr. Lipkowitz observed in response to this “amazing” statement that according to the figures* we had received regarding the three mines, Unificada, Colquiri and San José, had made earnings every year through 1945 except for San Jose which had shown a loss only in 1945. Parenthetically, the San Jose is the smallest of the three mines and produced only approximately 250 thousand pounds of tin per month as against 750 thousand produced by Colquiri and 800 thousand to one million by Unificada per annum. Furthermore arrangements have already been made with the sanction of the Bolivian Government to reduce the number of laborers employed by the San José mine and thus cut down on its costs.

  1. A memorandum of conversation of April 9, 1946—of which this is a supplement—between representatives of the Reconstruction Finance Corporation, the tin producers, and the Department of State, indicated concessions as to price, bonus, and marketing limitations by the Corporation, but the offer was still not satisfactory to the producers (824.6354/4–946).
  2. Memorandum of January 1946 from Manager of Mauricio Hochschild S.A.M.I, to Mr. Abbot Renick, FEA representative, Embassy, La Paz. [Footnote in the original.]