The Ambassador in Bolivia (Flack) to the Secretary of State
[Received 4:05 p.m.]
1130. My 1124, December 12.91 In further support of its request that some agreement re rubber purchases by RDC for additional 6 months after January 1st be accorded, further memo from Bolivian Government records following outstanding points.
- In the absence of such an arrangement a large part of Bolivian rubber would be smuggled into Brazil and Peru and there be sold as products of those countries to United States.
- Contract termination at end of year without any cushioning arrangement for ensuing 6 months would create a critical situation for Bolivian rubber industry along with a series of complex social and economic problems in the areas affected; would result in bankruptcy for many producers and cause hardship on the general economy of Bolivia.
- Reference is made to commitments at Chapultepec providing that measures will be taken to avoid disruption of a country’s economy through sudden cessation of purchases of strategic materials by another.
- Bolivia would experience a decrease in foreign exchange receipts as well as revenues accruing to the Government from export tax collections. The present paucity of foreign exchange and difficulty of obtaining exchange sufficient for raw material imports indicates [Page 403] seriousness of precipitous cutting off of this source at the present time.
- An extension of purchase for 6 months would permit RDC to collect, according to Munro’s estimate, an additional $100,000 in obligations not recoverable by end 1946.
In view of the unquestionable adverse economic and political effects which would immediately attest our failure to accede to alternative 2 previously mentioned and general adverse effect of failure to help at this time I reiterate most strongly my recommendation that the Department and RDC acquiesce in Bolivia’s request.
- Not printed.↩