Memorandum of Conversation, by the Deputy Assistant Secretary of State for Inter-American Affairs (Mann)
Subject: Problem of Bolivian Tin Prices
|Participants:||W. Stuart Symington, Chairman, National Security Resources Board1|
|ARA: OSA—Mr. Warren2|
|ARA: OSA—Mr. Atwood|
Mr. Mann opened the conversation by stating that he, Ambassador Warren and Mr. Atwood were all from the Bureau of Inter-American Affairs and that their interest in the problem of tin prices was limited to its Bolivian aspects. Mr. Mann said that it appeared to the Bureau of Inter-American Affairs that Mr. Symington had done a very good thing in bringing down tin prices from the abnormally high levels which they had reached;3 that there was no desire on the part of the Bureau to interfere with Mr. Symington’s program but rather to cooperate with it; and that one purpose of the visit was to explain the situation which exists in Bolivia.
Mr. Mann then referred to the fact that Bolivia is a one-economy country with the Government dependent upon the mining industry, and particularly the tin industry, for a very large part of its tax revenues and virtually all of its foreign exchange. He recalled the income of the average Bolivian is about one-fortieth of the income of the average U.S. citizen and there abounds in Bolivia not only economic misery but social strife which makes Bolivia one of the most unstable countries in the hemisphere both politically and economically. Reference was also made to recent political developments, including the role of Paz Estenssoro and the recent elections.[Page 1153]
Mr. Mann then said that the sudden decline in the price of tin and the cessation of the U.S. purchasing program threatened to bring about a crisis in Bolivia and that this threat was of concern to the Department for the following reasons:
- A principal aim of our foreign programs is to build up strength rather than weakness in the free world. In Bolivia we have accordingly helped through loans in the building of the Santa Cruz-Cochabamba highway which will connect the highlands with the potentially productive lowlands. This will make it possible to develop agriculturally the lowlands and to transport food to the centers of population in the highlands. If the mining industry operations should be greatly reduced, this would prejudice the efforts being made to promote stability and create a situation which could be exploited by anti-United States elements.
- Some of the Bolivian tin mines are marginal and others are not. If the price of tin should drop below a certain point, marginal mines would cease to produce and the total amount of production of tin would thus be decreased. This is related to our procurement of tin as a strategic material since the ores which the U.S. buys for smelting at Texas City are low-grade ores.
- Nationalization of the mining industry in Bolivia is a continuing possibility and an economic collapse in that country might lead to nationalization or other radical steps which, if they occurred, would set an undesirable precedent in other Latin American countries where we are trying to keep business in private rather than government hands.
- The Latin Americans have a common bond in their belief that they are exploited as “economic colonies” through procurement by industrial powers of their raw materials at what the Latinos consider to be unfair prices. There is, therefore, a risk that other Latin American countries may side with Bolivia in the event a satisfactory agreement cannot be reached, to the detriment of our ability to procure strategic materials on a fair basis throughout the hemisphere. We would be particularly vulnerable in respect of the price of tin since we do not have a world price established under normal competitive conditions but rather a situation where the U.K. and the U.S. are such large consumers and buyers of tin that they have the power to fix prices by their buying and selling programs.
Mr. Mann then stated that he was not prepared to say what a fair price would be for Bolivian tin and that in as much as there appeared to be no possibility of an early agreement between the Bolivian Government and the RFC on the price question, it might be well to send to Bolivia representatives of both the RFC and the Department to make an on-the-ground assessment of the situation and to obtain data which would enable the RFC and the Department to come to a precise judgment. Such a mission could serve as a means of consulting with the Bolivians in accordance with our commitments and, by indicating an interest on the part of our Government in reaching a solution of the impasse, might serve as a convenient stopgap pending the reaching of [Page 1154] a mutually satisfactory agreement. (The Interior Department already has an official in Bolivia who could participate in the study.)
Mr. Symington indicated his agreement with this suggestion4 and explained that he had already made an offer to the Bolivians—which the Bolivian Ambassador refused to transmit to his Government—of a $1.03 price. He explained that the price of $1.83 was abnormally high and a result of cartel-type practices on the part of the principal producers of Bolivian tin and their counterparts in other tin-producing countries. He explained he considered it his duty to bring the price down to a fair level and, in this connection, that he considered the price of $1.03 to be fair since it represented a 30 percent increase over the price of 75 cents which prevailed shortly before the outbreak of the Korean war. He stated that while he recognized that the cost of producing a portion of the Bolivian tin from the marginal-type mines was higher than it was in other countries, he thought the question of preventing a collapse of the Bolivian economy should be met by grants from Congress if they were needed rather than by subsidizing the economy through artifically high tin prices. In this connection, he explained that in his view the American taxpayer was already very heavily burdened and that neither the taxpayer nor the American Congress could be expected to tolerate waste.
Mr. Mann expressed agreement with these statements in principle and observed that it was, however, not in our overall national interest to permit the price of tin to drop below a certain point. He said that he hoped the data which would be obtained by the survey team would serve to indicate what this point was.
Mr. Mann then inquired whether, as a stopgap measure pending the completion of the survey and a final decision on the price question, it would be feasible from the RFC standpoint to sign an open-end contract with Bolivia for the purchase of tin at the current Singapore price of $1.11. This contract could be subject to termination on short notice by either party. In the alternative, would it be feasible from the RFC point of view to enter into a short-term contract of say two months explaining publicly at the same time that the contract was devised to enable Bolivia to resume sales of tin ores and concentrates to the U.S. pending the report of the survey mission? In both of these cases the price to be paid for Bolivian tin would drop as the Singapore price declined. As another alternative, would it be possible from the RFC standpoint to resume tin purchases at the Singapore price without a contract?[Page 1155]
Mr. Symington indicated that all of these alternatives would impede the program to drive the price of tin down still farther. He added that if the price should drop below the $1.03 figure offered to the Bolivians, it would be very difficult to repeat the offer.
In the course of the conversation Mr. Symington indicated that he did not believe it would be in our interests to pay a different price for Bolivian tin than is paid for tin from other producing countries and he also indicated that his plan was to make separate contracts with each country which might or might not maintain a uniform price level.
- Mr. Symington was appointed Administrator of the Reconstruction Finance Corporation on May 7, 1951.↩
- Fletcher Warren, Director, Office of South American Affairs.↩
- A sharp increase in the worldwide demand for tin after the outbreak of the Korean conflict in late June 1950, had driven the price of that metal upward until it had reached an all-time high of almost $2.00 per pound in February 1951. The following month, in an effort to reduce the world market price of tin, the United States Government initiated a program which included the temporary suspension of all purchases for the tin stockpile, prohibition of the private importation of tin, and the designation of the Reconstruction Finance Corporation as the sole importer and seller of tin in the United States. Thereafter, the RFC steadily lowered its selling price, and partly as a result of this policy the world market price of tin declined. Although government restrictions relative to the purchase of tin affected only tin metal, the RFC had to purchase tin concentrates in order to keep the government-owned smelter in Texas operating. Documents pertaining to the international tin question are in several decimal files, principally 398.2544 and 811.2544. For further information on this subject, see U.S. Senate, Preparedness Subcommittee of the Committee on Armed Services, Tin 1951, Sixth Report, 82d Cong., 1st Sess., 1951.↩
- A joint mission representing the State Department, Interior Department, and the RFC was formed shortly thereafter. Its members spent the last week of June and the first week of July in Bolivia gathering information about tin production costs and their relationship to the Bolivian economy. Pertinent documents are in decmial files 103–RFC and 824.2544.↩