The Acting Assistant Secretary of State for Economic Affairs ( Kalijarvi ) to the Administrator of the General Services Administration ( Mansure )1
Dear Mr. Mansure : Reference is made to the question now under consideration in your office of whether the General Services Administration should extend its contract for the purchase of tungsten ore [Page 479] from the Argentine firm Minerales y Metales (MINMET). This matter has been discussed on a number of occasions between officers of this Department and of your agency.
The Department of State understands that the contract in question provides a schedule of deliveries beginning in 1952 and running through June 30, 1958. This schedule was revised July 17, 1952. The contractor has made only small deliveries against this schedule and those were made early in the contract period. The contractor claims he has been prevented from developing his properties and delivering material because he was unable to place orders for machinery and get delivery in 1951, due to the economic controls exercised in the United States at that time. The Export–Import Bank loan that accompanied the purchase contract required that it be spent for United States materials. His machinery has only recently arrived in Argentina.
The contract contains a provision that permits the contractor to claim force majeure for a maximum of 270 days. If deliveries are not made on schedule after that time has elapsed, the United States Government may, at its option, further extend the suspension period or cancel the contract. MINMET has requested that the GSA extend the force majeure period and permit the company to deliver the full amount under the contract. It is understood that the GSA has taken no action under its option either to extend the suspension period or to cancel the contract, and that the company is not willing to proceed further with its development until it is assured its deliveries will be accepted.
At a meeting in Mr. Eberly’s office on July 7, 1954,2 it was decided to postpone a decision until we should have an opportunity to obtain the opinion of the American Embassy in Buenos Aires as to the possible effect of cancellation on over-all relations between Argentina and the United States. The Embassy submitted its opinion in its despatch no. 83 of August 2, 1954,3 copies of which were sent to the General Services Administration.
As you will have noted from the mentioned despatch, the Embassy has informed the Department that it is convinced that a cancellation of the GSA–MINMET contract might well “jeopardize the present United States-Argentina rapprochement”, and at the very least the adverse consequences would far outweigh any possible temporary financial advantage to the United States that might come from the action. On September 20, Mr. Henry F. Holland, Assistant Secretary of State for Inter-American Affairs was visiting Argentina and he discussed the effects [Page 480] of cancellation with the Ambassador. As a result of the discussion, the Ambassador cabled4 the Department that it was the considered opinion of the Embassy and Mr. Holland that cancellation would unduly jeopardize United States relations with Argentina.
In view of the opinion of the Embassy and the Assistant Secretary of State this Department on political grounds strongly opposes a cancellation of the MINMET contract. Argentina is a key country in Western Hemisphere defense. During the past fifteen months our relations with that country have improved markedly over their previous status. This improvement has been achieved as a result of several years of careful implementation of a considered United States policy which has been directed towards inducing Argentina to better our bilateral relations and to collaborate with the United States on important world issues. The Embassy’s despatch no. 83 and its cable of September 20 in effect inform us that a cancellation of the MINMET contract might well bring about a major setback in the relationship which has been attained and which has been brought about basically in the interest of the security of the United States.
Aside from that aspect of this problem having to do with United States-Argentine relations, this Department is concerned about the adverse effect which cancellation of the MINMET contract may have on the comparative success or failure of United States objectives at the Economic Conference of the American republics which is scheduled to meet in Rio de Janeiro on November 22. We have been striving to resolve as many of our bilateral problems with the other American republics as possible before that Conference so that the atmosphere for constructive discussion will be improved and so that the meeting will not be taken up with numerous particular grievances of the various participants against the United States. We have been especially desirous of resolving our bilateral problems with Argentina because, being one of the largest and most influential Latin American countries, it is in a key position to contribute to the success or failure of the Conference. Through its effect on our Argentine relations, therefore, the cancellation of the MINMET contract could have an adverse effect on our foreign policy objectives at Rio de Janeiro.
If the contract is not cancelled, it would seem necessary and desirable to negotiate an amendment. The Department understands that Mr. Otto Tolerund of MINMET is now in Washington for the purpose of arriving at a satisfactory settlement of this problem and the American Embassy in Buenos Aires has informed the Department confidentially [Page 481] that Mr. Tolerund is authorized in his negotiation to omit from further consideration the deliveries which failed to be made and to consider only future quantities due. This would seem to be a promising beginning toward a compromise settlement which would alleviate hardships on the part of the contractor, lessen the grounds for criticism of the United States by Argentina and other Latin American countries, and, at the same time, substantially reduce United States commitments to buy tungsten.
In the light of the considerations referred to in this letter, I urge in the national interest that the MINMET contract not be cancelled.5
- Drafted by Mr. Dearborn; cleared with the Bureau of Inter-American Affairs and the Office of International Materials Policy.↩
- No record of this meeting was found in Department of State files.↩
- Not printed (835.2547/8–254).↩
- Reference is to telegram 164, from Buenos Aires, dated Sept. 20, 1954, not printed (835.2547/9–2054).↩
- The question of the extension or cancellation of the MINMET contract was not resolved in 1954.↩