Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

824.054/9–2452:Telegram

The Ambassador in Bolivia (Sparks) to the Department of State

secret
priority

La Paz, September 24, 1952—6 p.m.

97. Deptels 78¹ and 80, Sept 19 discussed Saturday with Pres, Monday with Foreign Minister and Vice Pres and yesterday with Foreign Minister, Min Mines and Pres and two members Nationalization Study Commission.² Exhaustive conversations³ covered all phases.

Pres declared nationalization inevitable and asserted govt must nationalize or be ousted in which case need do so of succeeding govt wld be even more urgent. Therefore, Bolivian Govt decision nationalize is irrevocable taking place about Oct 20. Pres said expropriation will be pursuant Bolivian constitution and laws; confirmed govt will present companies with debit notes for unpaid taxes which companies cld contest in Bolivian courts and confided govt legal case against companies is convincing. Foreign Minister and others confirmed.

Since Pres admitted Bolivia’s inability comply requirement prompt compensation I explored possibility mixed commission or other arrangement accepting nationalization and permitting commissions [companies?] continued participation but recd no encouragement. This due govt complete lack confidence in companies because their alleged past deceptions, political intervention and selfish economic policies. Pres and others wish compensate legitimate US Patino shareholders but unalterably opposed extension same treatment to Patino family Aramayo and Hochschild. President desires nationalize without internatl friction but at loss how do same and wld welcome suggestions (Pres did not mention Spanel proposal⁴ Deptel 81, Sept 19⁵).

Pres said strong US position cld not be due small US investment in Patino and presumed it was US desire avoid precedent unsatis nationalization in Bolivia. View Bolivia’s inability make prompt compensation Pres inquired (1) if arrangement might be worked out for payment from future tin sales or (2) if US loan cld be obtained for immed payment compensation. I observed one similar Iranian proposal and two most unlikely view undesirable precedent.

Foreign Minister and Study Commission raised complicated legal questions which I declined reply. Foreign Minister queried if US will defend Patino Company or only US shareholders; if foreign shareholders cld institute embargo proceedings in US courts. Study Commission averred US courts cld not embargo or assume jurisdiction if expropriation effected pursuant Bolivian laws.

Pres expressed desire consider further RFC offer long term tin contract but this not raised subsequent meetings probably due fact contract conditioned upon satis nationalization. Foreign Minister queried re offer 6,000 ton purchase and I said still stands.

Lengthy discussion re tungsten contracts but without conclusion. Foreign Minister concerned re GSA position on subrogation para 4,⁶ also US support supreme resolution para 5.⁷ On 4, I ventured personal opinion GSA wld first wish see if production conditions under nationalization counseled subrogation or seeking tungsten elsewhere. On 5, I explained proposed supreme resolution simply one of many possible solutions. I foresee no satisfactory solution big three tungsten contracts prior nationalization.

Pres mentioned receiving tin purchase offer $1.24 Rosario Argentina but is not considering it as probably curtain origin. Also explained many offers investment due probably risks in Europe greater than Bolivia.

Sparks

1. The Department’s telegram 78, to La Paz, dated Sept. 19, 1952, instructed Ambassador Sparks to inform the Bolivian Government, inter alia, that the United States relied on the government’s assurances that it would honor existing contracts between tungsten producers in Bolivia and the GSA and avoid taking action interfering with their fulfillment (824.2547/9–1952).
2. José Nuñez Rosales and Carlos Morales Guillen.
3. Memoranda of the referenced conversations were transmitted to the Department of State under cover of despatch 220, from La Paz, dated Sept. 29, 1952 (824.2547/9–2952).
4. Reference is to the plan proposed by A. N. Spanel, Chairman of the International Latex Corporation, as an alternative to the nationalization of the Big Three mining companies in Bolivia. The proposal involved the establishment of a tax-free “private” corporation having a monopoly over the production, smelting, and chemical refining of all minerals. The ownership and profits of the corporation would be divided roughly in equal shares between four groups: government, labor, management, and capital (the Big Three and other mining companies).
5. The Department’s telegram 81, to La Paz, discussed the Spanel proposal and reads in part as follows: “Dept cannot sponsor corp because among other reasons this Bol domestic problem, but wld consider this type solution as applied to Big Three only to be one of several possible satis substitutes extreme nationalization if mutually acceptable Bol Govt and mine owners.” (824.054/9–1952)
6. Reference is to paragraph 4 of an Embassy memorandum, dated Sept. 20, 1952, handed to President Paz Estenssoro by Ambassador Sparks on that date. Paragraph 4 reads as follows: “The GSA [tungsten] contracts could be subrogated to the Banco Minero de Bolivia by mutual consent of the Banco Minero de Bolivia and the companies. However, GSA is unwilling to accede to the subrogation of the contracts until such time as the consequences of any nationalization which may be undertaken are known, or a decision not to nationalize is taken. The Eximbank takes a similar position with regard to the loan contracts.” (824.2547/9–2952)
7. Paragraph 5 of the Embassy memorandum of Sept. 20 reads as follows: “Pending a decision on nationalization, some such arrangement as that proposed by the [tungsten] producers to the Ministers of Finance and of Mines and Petroleum on June 19, 1952 appears desirable. GSA and Eximbank believe that the draft of a Supreme Resolution proposed by the producers appears to give the minimum requisite assurances of the fulfillment of the outstanding tungsten and tungsten loan contracts under the provisions of the [Bolivian] Export Monopoly Decree of June 2, 1952.” (824.2547/9–2952)