AP files, lot 58 D 459, “Memoranda 1953”

Memorandum Prepared by Douglas B. Smith of the Investment and Economic Development Staff



  • United States Interest in the Volta River Project

United States Interest

The United States interest in the Volta River Development Scheme is based on its importance to the Gold Coast economy and the supplies [Page 279] of aluminum it will provide for the defense effort of the free world. Our interest in the aluminum production is not a direct one since in the foreseeable future the United States will obtain its bauxite and prime aluminum needs from domestic sources and other Western Hemisphere producers. However, we are fully aware of the growing world demand for this metal and the contribution that Gold Coast aluminum can make in assuring adequate supplies. The U.S. Government has been greatly encouraged by the progress that has been made by the Governments of the Gold Coast and the United Kingdom in working out mutually satisfactory arrangements for the development of the Volta River.

This multi-purpose project could be of immeasurable value to the Gold Coast economy. The contributions it can make in the way of irrigation, transportation, navigation and cheap power will provide a substantial base for the growth of agriculture and industry. With this as a start the Gold Coast will be able to develop a diversified economy which will be able to withstand the vicissitudes of world market prices in basic commodities.1 Furthermore this development will mean rising incomes and increased employment assuring greater political stability.

As the project develops it may be possible to interest U.S. investors in complementary industries and perhaps the U.S. Government can assist in the financing of certain projects. But as to the initial project, it is the Department’s view that the major benefits will accrue to the peoples of the Gold Coast and the U.K. If their governments can between them and with the cooperation of the Aluminum Company of Canada find the necessary funds to finance the project, and this appears to be the case, it would be inappropriate and less satisfactory to all concerned to seek financing from some alternative source.

Possible U.S. Financing

Despite satisfaction with present arrangements concerning the financing of the Volta River Project, the Department has carried on discussions with other U.S. Government Agencies which are responsible for foreign aid and lending programs in order to explore the possibility of U.S. Government financing. The reactions of these agencies were as follows:

Export-Import Bank: The Eximbank was set up to finance projects which would encourage the exports and import of commodities into the United States. In performing its lending operations it has adhered to the policy of stepping in to finance projects only where alternative means of financing were not available from private sources and/or from foreign governments. The Bank Staff’s conclusion from the British White paper2 is that these other alternative sources are available. Furthermore, the staff does not see where the Volta River project would directly encourage an increase in U.S. exports or imports. The magnitude of the project is such that, assuming that in [Page 280] other respects it would meet the Bank’s criteria, substantial participation by private interests or the governments concerned would be required. In summary it is the view of the Bank Staff that the Volta River project would not be considered favorably for Eximbank financing.

Mutual Security Agency: It is the policy of MSA to employ its funds to supplement and encourage the use of those available from other sources and not to replace them. MSA would be unwilling to participate in the financing of a project in such a way as to eliminate or reduce private financing. MSA is interested in the Volta Project and it appears that the project would meet the basic material criteria. If development funds for the overseas territories are available in fiscal ’54 MSA is prepared to consider a request from the U.K. for financial assistance in carrying out the Volta River Project. This assistance would be a marginal supplement to funds from other sources.

Defense Materials Procurement Agency: This agency was established to aid in the financing of projects which would produce increased supplies of materials for U.S. industries and stock piling. To aid in a project which would increase supplies solely for other than U.S. needs would be out of DMPA’s frame of reference. In addition DMPA has no interest itself in the financing of aluminum products. The responsibility for the procurement of aluminum during the defense build-up has remained with the Office of Defense Mobilization.

Office of Defense Mobilization: In offering government assistance under the terms of its authorizing legislation, ODM is restricted to consideration of only those programs which promise a relatively near-term increase in production or availability of strategic materials. Thus far it has limited its activities in expanding the production of primary aluminum to a guarantee of a market for five years at prevailing market prices, the guarantee of private loans for increased production facilities (one case), and advances on future deliveries of aluminum to be completed within five years. It has not undertaken any loans of the type which would be required for the Volta River scheme. The estimate of the ODM Office of Aluminum is that even under the most favorable circumstances, no aluminum will be produced in the Gold Coast for at least 5 to 10 years.

Long Term U.S. Aluminum Needs

In the Paley Report3 no fundamental difficulty is seen in meeting the world’s demand for aluminum over the foreseeable future, however rapidly that demand may grow. This statement is made recognizing that it is possible that in the next twenty-five years there might be a five-fold increase in consumption demands. To quote from the report.

“If the cost of producing aluminum abroad remains substantially below that in the United States, and if the benefits of such lower costs are made available to American consumers, it will become increasingly economical to turn to aluminum-producing facilities in areas outside the United States, initially in Canada and possibly Alaska, and eventually [Page 281] in those areas where low-cost power is to be found close to the bauxite deposits, as along the northern coast of South America and the western coast of Africa.

But if the United States should become increasingly dependent on primary producing capacity outside its borders, serious problems of wartime security will arise. Even at present, in view of normal peacetime dependence on foreign bauxite, measures are required to protect aluminum supplies in case of war.”

  1. That was one of the problems with cocoa.
  2. Cmd. 8702, Volta River Aluminum Scheme.
  3. Resources for Freedom; a report to the President by the President’s Materials Policy Commission, vol. II, The Outlook for Key Commodities (Washington, 1952), pp. 65–73.