The Ambassador in Bolivia (Flack) to the Secretary of State

No. 1841

Sir: I have the honor to transmit a translation of a letter24 received from Mr. Raúl Canedo Reyes, Director General of Mines, outlining his views on the forthcoming tin negotiations.

Mr. Canedo Reyes, on handing the reporting officer the letter, said that he wished to explain once again his apparently overly antagonistic attitude towards the RFC in Washington. He said that he has recently fought against members of the Ministry of Economy who wished to orient Bolivia completely towards Argentina. With this background, he feels he can do no less than be absolutely frank in his criticisms of the United States. However, he assured the reporting officer once again that his expressions concerning the RFC and the United States negotiators, who have in the past been unfair to Bolivia, should not be taken as any indication of an anti-American feeling. He [Page 337] still believes that Bolivia’s economic future and independence must be based on cooperation with the United States.

This letter does not go into the question of the price which Bolivia will demand except where a vague reference is made to an appreciably increased price. Nevertheless, the general views contained therein furnish an indication of the mental attitude with which the Bolivian negotiators will be equipped when they go to Washington to draw up the contract for 1948. For this reason the letter is believed to be important.

It should be noted that Mr. Canedo Reyes states that Bolivia would like a long-term contract at prices guaranteeing Bolivian producers a steady even though small profit which would enable the country to increase production.

Another important point is the reference to economic imperialism, based on the general feeling that the United States, exercising a consumers’ monopoly, refuses to allow free play of the law of supply and demand which would mean a high price. However, when Far Eastern production again creates an over-abundant supply, the United States will allow this law to operate, driving prices down, and bringing about the ruin of Bolivia. There does seem to be some justification for this argument.

There is little doubt that Bolivia is unable to compete with other producers of tin in normal times. The question for the United States to consider is, therefore, that of the importance of preserving Bolivia’s capacity to produce. The Patiño and Aramayo groups can probably produce at almost any price. These two companies, even in their best years, produce approximately only 20,000 metric tons. Production by other companies depends largely on price—if the United States wants much more than 20,000 tons in the long run, it will have to pay higher prices. The Bolivian demand for $1.00 per pound is based on the assumption that such a price will revitalize the industry which has continued to deteriorate even though the demanded price of 76 cents was obtained during 1947. (The price was obtained only because of Argentina’s interference.) The steady deterioration during 1947 is taken as proof that the Bolivians not only were not demanding excessive prices for 1947, but underestimated their needs. Mr. Canedo Reyes points out that he fears the implications of the Argentine treaty, since the latter country is not interested in maintaining Bolivian production of a product for which it has no use, although it is committed to purchase it. The United States, on the other hand, should have great interest in maintaining a high level of production. He therefore asks that the over-all implications of tin supply be considered by the United States and that consideration be given to strategic and political factors during [Page 338] the forthcoming negotiations in place of the previous cold businesslike effort to purchase tin at the lowest possible price.

Respectfully yours,

For the Ambassador:
John A. E. Orloski

Commercial Attaché
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