Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

444. Memorandum From the Executive Secretary of the Department of State (Eliot) to the President’s Assistant for National Security Affairs (Kissinger)¹

Washington, October 21, 1972.

SUBJECT

• Tin Disposal Program

In response to the request telephoned by Mr. Jorden’s office to Deputy Assistant Secretary Szabo on October 11 for views on the proposed resumption of the USG tin disposal program, because of the situation discussed below the Department of State recommends against rescission of the current indefinite suspension of tin disposals and against initiating consultations with producing countries regarding the disposal program at this time. Such actions would prejudice U.S. policy objectives in Bolivia and would harm relations with other major producers.

A ministerial delegation from Bolivia informed us on September 25 that President Banzer had decided to devalue the Bolivian peso provided Washington lending agencies gave assurances of adequate support to the measures. The delegation carried out detailed consultations with the IMF, IBRD, IDB and with us, departing early in October expressing satisfaction with the assurances received. We expect the devaluation to take place before the end of this month.

We and the other Washington financial institutions concerned regard satisfactory execution of devaluation and its accompanying measures as critical to solution of the serious budgetary and monetary problems facing the Banzer Government. The central purpose of our emergency assistance policy toward that government since its inception in August 1971 has been to provide the breathing space for it to effect fiscal and allied reforms such as this one which will put the government and the economy on a firmer base. In coming to its decision, the Banzer Government has had to overcome major concerns that currency devaluation is such a drastic cure, and is widely feared because of past Bolivian experience, that its adoption would risk the fall of the government.

The best hopes for a stable and prospering Bolivia are now tied to President Banzer’s determination to carry out an effective devaluation/fiscal reform program, a program which cannot succeed without the sympathetic support which has been promised by Washington financial institutions and ourselves. The IMF will provide in the weeks following devaluation standby resources totaling $22 million. IBRD and IDB have promised vigorous implementation of development lending activities. We have promised to release to the Bolivian Government upon devaluation the $4 million remaining from the 1971 U.S. emergency assistance program to Bolivia together with the $20 million in the second program loan to Bolivia signed last month. We are discussing with the GOB an accelerated and expanded PL 480 agreement which would provide timely shipments of wheat and oils to assist the government in heading off panic buying by consumers.

Settlement of the remaining Bolivian expropriation case (Matilde Mine Co.) is in final stages, giving hope for elimination of this category of problem with Bolivia.

Extreme Bolivian sensitivity at every level to U.S. Government tin disposals is a fact of political life. It cannot be doubted that rescission of the indefinite suspension of tin disposals or initiation of consultations on tin disposals at this time would come as such a heavy blow to the Banzer Government as to undermine the foundation of confidence and sympathy which we have built up in our relations, endanger the devaluation/fiscal reform program, jeopardize the Matilde settlement, and adversely affect the outlook for the success and continuation in power of the Banzer Government.

Once the devaluation/fiscal reform program has taken effect and put Bolivia and the Banzer Government on a sufficiently firm and stable foundation economically and politically, it would be timely to reconsider the question of resuming tin disposals.²

Harry G. Barnes ³

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 286, State, Volume 16. Secret; Exdis.
2. On the copy of this memorandum attached to Document 445, a note in the margin next to this paragraph reads: “probably in 1993.”
3. Barnes signed for Eliot above Eliot’s typed signature.