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

824.2544/6–2454

Memorandum by the Assistant Secretary of State for Inter-American Affairs (Holland) to the Under Secretary of State (Smith)¹

official use only

[Washington,] June 24, 1954.

Subject:

• Tin Purchase from Bolivia

Pursuant to the recent decision to continue the operation of the Texas City smelter, the RFC is now negotiating with Bolivia a purchase contract for tin concentrates.² After reviewing its production costs, RFC has offered to Bolivia the same terms as the September 23, 1953 contract, with the exception that an additional deduction will be made ammounting to approximately $350,000 on the total contract of about $20 million. The Bolivians object on the grounds that this action is not justified and will be resented in Bolivia.³

The present contract negotiations are in the nature of a commercial operation and therefore the RFC feels justified in insisting upon the additional deduction. The RFC feels that it cannot agree to other terms in the absence of specific authorization to do so. Costs of operating the smelter have increased, but the processing of Bolivian ores is only a part of the operation. RFC acknowledges that its production costs are necessarily estimates; assessing the increase among various phases of the operation is largely a matter of bookkeeping.

The United States has extended $14.5 million in assistance to Bolivia during the current fiscal year. The Administration plans to extend substantial further aid during the new fiscal year in line with US objectives there. In view of the aid being given to Bolivia, the sum involved will become available to that country in one form or another. Moreover, it is my considered opinion that the adverse psychological effects in Bolivia of a contract on the proposed RFC terms would negate the favorable effect we expect from the purchase itself. In view of the present situation in Latin America, I feel that we should avoid adverse reactions in Bolivia.

Recommendation

I strongly urge that you seek Cabinet authorization for the Reconstruction Finance Corporation to conclude a contract with Bolivia for the purchase of 12,000 tons of tin on terms identical with those of the contract of September 23, 1953, covering the last purchase from Bolivia.⁴

1. Drafted by John L. Topping of the Office of South American Affairs and cleared with Mr. Atwood, but not signed by Mr. Holland.
2. A memorandum by Mr. McKinnon to the Administrator of the RFC (Cravens), dated June 17, 1954, summarizes to its date the course of the negotiations between representatives of the Bolivian Government and the RFC, which took place at Washington during late May and June 1954 (824.2544/6–1754).
3. A memorandum by Milton Barall of the Office of South American Affairs to Mr. Atwood, dated June 17, 1954, reads in part as follows: “In a conversation I had with Ambassador Andrade on June 15, he became quite emotional about the tin contract now under negotiation with the RFC. He said from his point of view the contract had become successively worse and that at the present time some ‘functionary’ in the RFC was trying to save the US Government a little money at the expense of Bolivia which was in dire need. He said a saving of $300,000 on smelter charges on a total contract of $20 million would be of little importance to the Government of the United States, whereas it would jeopardize the political value of the contract in Bolivia.” (824.2544/6–1754)
4. The Department’s telegram 177, to La Paz, dated June 28, 1954, reads as follows: “RFC agreed today purchase 12 thousand tons Bolivian tin on terms Sept. 1953 contract with no new deductions. Seek early opportunity convey this decision orally to FonMin and President Paz adding problem considered at top level where decision reached to meet Bol request despite sound justification of original RFC offer.” (824.2544/6–2854)