371. Telegram 106 From the Embassy in Guyana to the Department of State, January 29, 1971, 1430Z.1 2

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TELEGRAM
Department of State
GEORGETOWN 106

R 291430Z JAN 71

FM AMEMBASSY GEORGETOWN
TO SECSTATE WASHDC 5320

SUBJ: BAUXITE INDUSTRY NEGOTIATIONS
REF: STATE 013910

1. AS DEPT RECOGNIZES IN REFTEL, OUR CRYSTAL BALL IS A BIT HAZY AND IT IS DIFFICULT TO SPECULATE ON ULTIMATE OUTCOME OF CURRENT NEGOTIATIONS WITH DEMBA. OF ONE THING WE HAVE LITTLE DOUBT, HOWEVER, BURNHAM WILL GET WHAT HE HAS COMMITTED HIMSELF PUBLICLY TO GET, I.E. MAJORITY OWNERSHIP AND CONTROL OF THE BAUXITE INDUSTRY, OR, ACCORDING TO BURNHAM HIMSELF, HE WILL NO LONGER BE PRIME MINISTER.

2. HOW THIS WILL COME ABOUT DEPENDS PRIMARILY ON THE COMPANIES. IF THEY ARE WILLING TO REACH AN ACCOMMODATION, ON BURNHAM’S TERMS, THEY HAVE A GOOD CHANCE OF RETAINING A MINORITY INTEREST, A VOICE IN MANAGEMENT (BUT NOT THE FINAL SAY), AND CONTINUED ACCESS TO GUYANA BAUXITE (WHICH WE UNDERSTAND HAS CERTAIN UNIQUE QUALITIES). THIS IS WHAT BURNHAM HOPES FOR. IF COMPANIES ARE NOT WILLING TO REACH SUCH AN ACCOMMODATION (AND WE RECOGNIZE THAT IN MAKING THIS DECISION THE COMPANIES WILL BE INFLUENCED BY THEIR INTERESTS IN OTHER COUNTRIES) IT IS VIRTUALLY CERTAIN THAT BURNHAM WILL NATIONALIZE THE INDUSTRY AND TURN ELSEWHERE FOR TECHNICAL ASSISTANCE AND MANAGEMENT EXPERTISE TO HELP RUN IT AND SEEK OTHER MARKETS.

3. BURNHAM KNOWS FULL WELL THE RISKS, DISLOCATIONS AND SACRIFICES THIS COURSE WOULD ENTAIL, BUT HE IS COMPLETELY [Page 2] WILLING TO PAY THE PRICE IN THE NAME OF “NATIONAL DIGNITY” AND “ECONOMIC INDEPENDENCE.” WE KNOW [text not declassified] THAT LEGISLATION AND A PUBLIC RELATIONS CAMPAIGN ALREADY HAVE BEEN PREPARED TO COVER THIS CONTINGENCY, AND WE ASSUME BURNHAM AND HIS PARTY WILL DISCUSS THE MATTER IN DETAIL DURING VISIT TO YUGOSLAVIA BETWEEN FEBRUARY 1 AND 4.

4. SO FAR, ALTHOUGH GOG-DEMBA TALKS HAVE CONTINUED IN A REASONABLY FRIENDLY ATMOSPHERE, WE HAVE RECEIVED NO RPT NO INDICATIONS THAT DEMBA AND ALCAN ARE PREPARED TO ACCEDE TO BURNHAM’S DEMANDS. COMPANIES HAVE CONTINUED “TO EXPLORE IMPLICATIONS FOR FUTURE OPERATIONS OF GOG’S NON-NEGOTIABLE DEMANDS,” HAVE OFFERED COUNTERPROPOSAL WHICH DOES NOT MEET THOSE DEMANDS AND HAVE SAID PRIVATELY THAT THEY CANNOT AND WILL NOT MEET THEM.

5. AS EXPECTED NEGOTIATIONS “ADJOURNED” JANUARY 27 UNTIL FEBRUARY 8 AT REQUEST OF COMPANIES. JOINT COMMUNIQUE ISSUED NIGHT OF 27TH STATED “...THE NEGOTIATING PARTIES HAVE BEEN ENGAGED IN EXAMINING VARIOUS ASPECTS OF THE NEW COMPANY WHICH IT IS INTENDED TO FORM FOR THE PURPOSE OF ACHIEVING GOVERNMENT’S PARTICIPATION IN THE BAUXITE INDUSTRY. THE NEGOTIATIONS HAVE NOW COME TO THE END OF THE FIRST PHASE. THE REPRESENTATIVES OF DEMBA WILL TAKE THE OPPORTUNITY OF THE RECESS TO REPORT TO THEIR PRINCIPALS IN CANADA ON THE PRESENT STATE OF THE NEGOTIATIONS. WHEN NEGOTIATIONS RESUME ON 8TH FEBRUARY, IT IS EXPECTED THAT, AS A RESULT OF THE DISCUSSIONS SO FAR HELD THE REPRESENTATIVES OF DEMBA WILL BE RETURNING IN A POSITION TO FURTHER CONSIDER THE GOVERNMENT’S PROPOSALS, AND IT IS HOPED THAT AN AGREEMENT WILL BE REACHED BEFORE THE END OF FEBRUARY.”

6. THIS COMMUNIQUE TELLS IT PRETTY MUCH AS WE UNDERSTAND IT. BURNHAM WILL BE BACK ON FEBRUARY 6. DEMBA (READ ALCAN) WILL GIVE ITS FINAL ANSWER BEGINNING FEBRUARY 8, PERHAPS TO BURNHAM HIMSELF, AND SOMETHING FAIRLY CONCLUSIVE WILL BE ANNOUNCED PRIOR TO OR ON REPUBLIC DAY, FEBRUARY 23. THE CANADIAN HIGH COMMISSIONER (PROTECT) IS PESSIMISTIC, AND EVEN SPECULATES WHETHER COMPANIES REPRESENTATIVES WILL IN FACT RETURN. WE THINK THEY WILL, BUT SHARE HIS PESSIMISM ABOUT THE ANSWER THEY PROBABLY WILL BRING WITH THEM.

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7. OF PARTICULAR INTEREST AT THIS JUNCTURE ARE STRAWS IN THE WIND SUGGESTING THAT, CONTRARY TO WHAT BURNHAM TOLD ME IN DECEMBER, GOG MAY HAVE DECIDED TO DIGEST DEMBA BEFORE TAKING ON REYNOLDS. HEAD OF GOG NEGOTIATING TEAM TOLD USAID DIRECTOR TWO WEEKS AGO THAT IT WOULD BE SOME TIME BEFORE REYNOLDS BECAME INVOLVED. ALSO, SOLICITOR GENERAL SHAHABBUDDEEN, WHO IS MEMBER OF GOG TEAM, TOLD DCM LAST WEEK THAT REYNOLDS MIGHT NOT BE CALLED IN UNTIL 1972. WE KNOW BURNHAM HAS BEEN WARNED REGARDING IMPORTANCE OF GUYANA’S IMAGE. WITH THE U.S. CONGRESS WHEN IT CONSIDERS NEW SUGAR LEGISLATION LATER THIS YEAR, AND I MYSELF REMINDED BURNHAM PRIOR TO HIS DEPARTURE ON JANUARY 8 OF U.S. GOVERNMENT’S 16,316,000 DOLLAR US GUARANTEE OF REYNOLDS INVESTMENT. PERHAPS THESE REMINDERS AND DISCUSSIONS IN NEW YORK MAY HAVE COOLED HIS ENTHUSIASM FOR TAKING OVER THE ENTIRE INDUSTRY ONCE AND FOR ALL AT THIS TIME. IN ANY EVENT, LEGISLATION ALREADY PREPARED, [text not declassified] IS AIMED SPECIFICALLY AT NATIONALIZATION OF DEMBA RATHER THAN THE INDUSTRY AS A WHOLE AND WOULD NOT NECESSARILY AFFECT REYNOLDS. IN TERMS OF SENATOR PAUL MARTIN’S NOTE TO BURNHAM ON DECEMBER 2, WHICH SAID, IN PART “THE CANADIAN GOVERNMENT IS MOST CERTAINLY INTERESTED IN SEEING THAT THE CANADIAN FIRM GETS FAIR AND EQUITABLE TREATMENT AND IS NOT DISCRIMINATED AGAINST IN RELATION TO OTHER COMPANIES” (UNDERLINING ADDED. (NOTE: SECOND QUOTE IS UNDERLINED)), THIS COULD CAUSE PROBLEMS FOR GOG.

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8. THERE IS NO DOUBT IN MY MIND THAT BURNHAM’S LONG-TERM OBJECTIVES FOR THE BAUXITE INDUSTRY INCLUDE CONSOLIDATION OF PRESENT TWO COMPANIES INTO AN INTEGRATED OPERATION, THE DEVELOPMENT OF WHAT HE CALLS “LINKAGE” INDUSTRIES AND THE CONSTRUCTION OF A SMELTER. HE HAS MADE THIS CLEAR IN A SERIES OF CONVERSATIONS. FOR EXAMPLE, WHEN I ASKED HIM LAST SUMMER IF HE WANTED TO GO AHEAD WITH THE BERBICE BAR PROJECT WHICH WOULD ALLOW REYNOLDS TO INCREASE PRODUCTION AND USE DEEPER DRAFT ORE BOATS, HE ASKED THAT IT BE DEFERRED ON GROUNDS THAT GOG MIGHT FIND IT PREFERABLE TO MOVE ORE FROM KWAKWANI OVERLAND TO MACKENZIE FOR PROCESSING THERE. HE ADDED THAT A RAILROAD CONNECTING THE TWO POINTS WOULD HAVE THE SIDE EFFECT OF “OPENING UP THE INTERIOR” (THUS MOVING WHAT IS GENERALLY CONSIDERED “THE INTERIOR” SEVERAL HUNDRED MILES).

9. SECONDLY, BURNHAM HAS RAILED AT DEMBA REPEATEDLY FOR CONTINUING TO IMPORT “WHEATEN FLOUR” RATHER THAN SWITCHING TO CASSAVA STARCH AS A FLOCCULENT FOR ITS ALUMINA PLANT, ARGUING THAT COMPANY, HAD IT WISHED, COULD HAVE HELPED DEVELOP NEW AGRICULTURAL INDUSTRY WHICH WOULD HAVE BENEFITED GUYANA RATHER THAN CANADIAN EXPORTERS. SIMILARLY, HE HAS ARGUED THAT CAUSTIC SODAS ALSO USED IN ALUMINA PLANT, COULD HAVE BEEN PRODUCED LOCALLY HAD THE COMPANY BEEN WILLING TO ENCOURAGE IT [Page 5] AND INVEST IN SOMETHING WHICH WOULD HAVE BEEN OF! BENEFIT TO GUYANA.

10. BURNHAM HAS ALSO CRITICIZED WORLD BANK’S NEGATIVE POSITION ON TIBOKU HYDROELECTRIC POWER PROJECT AS OVER-LOOKING SUCH “LINKAGE” IN ARRIVING AT COST ESTIMATES OF POWER DELIVERED TO MACKENZIE FOR A SMELTER (AND FOR REASONS WE CAN APPRECIATE HE WILL NOT CONSIDER SERIOUSLY THE BANKS ALTERNATIVE OF ECONOMIC POWER FROM ITS GURI DAM PROJECT IN VENEZUELA, ALTHOUGH HE ONCE MENTIONED TO ME THE POSSIBILITY OF BUYING FROM SURINAM’S PROPOSED KABALEBO HYDROELECTRIC PROJECT PROVIDED THE BORDER DISPUTE WITH SURINAM WERE RESOLVED.

11. BURNHAM MAY BE SLOWED DOWN BY THE ECONOMICS OF HIS DREAMS BUT THERE IS NO DOUBT AS TO THE EXTENT OF THESE DREAMS. THIS IS THE WHOLE POINT OF TAKING ON THE BAUXITE INDUSTRY--TO BE SURE THAT MANAGEMENT DECISIONS ON THE USE OF A NATURAL RESOURCE OF GUYANA HENCEFORTH WILL BE MADE BY GUYANESE RATHER THAN FOREIGNERS AND WILL BE BASED ON WHAT IS GOOD FOR GUYANA AND THE GUYANESE PEOPLE RATHER THAN ON THE INTERESTS OF STOCK- HOLDERS AND WORKERS IN CANADA AND THE US.
KING

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 785, Country Files, Latin America, Guyana, Vol 1. Secret. A stamped notation on the telegram indicates that it was received in the White House Situation Room at 9:10 on January 30.
  2. The success of the negotiations between Prime Minister Burnham and the aluminum companies depended on whether the companies would accept the Government of Guyana having majority ownership and control of the bauxite industry.