Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume VI

811.20 Defense (M) Colombia/463: Telegram.

The Secretary of State to the Ambassador in Colombia (Lane)

Washington, January 24, 1943—1 p.m.

96. Embassy’s 132, January 19, 8 p.m. Department has discussed memorandum with Rubber Reserve and following comments represent our joint views.

We have only three general reservations. First, the new arrangements contemplate that Rubber Reserve will obtain approval from the Colombian Government or various of its branches prior to taking action with respect to individual transactions. We believe that the program would be expedited if only general approval were required and if consequently individual items did not have to be submitted. Our specific suggestions are contained below as to paragraphs 2 (a) and 2 (d). Second, we are not clear as to the extent to which the Caja’s monopolistic powers are terminated and free trade restored; as to this, see comments on paragraph 2. Third, the tire plant, discussed later.

Following are specific comments on paragraphs of corresponding number in memorandum:

1. The idea of a Commission seems to us good if it functions efficiently. It is suggested that the American members consist of the head Rubber Reserve man in Colombia, the head BEW⁴⁷ man there and if you approve a representative designated by the Embassy, possibly Livengood.⁴⁸ We would like to be informed as to the proposed Colombian representatives prior to their official designation. The success of the Commission will depend to a substantial extent on the representatives chosen.

2. Rubber Reserve is entirely willing to assume the obligations proposed in the named articles of the decree. It does not seem desirable, however, that the Caja and Rubber Reserve should together have exclusive rights to purchase within the country and hence jointly possess monopolistic rights. It is assumed that the Caja’s monopolistic rights will be terminated and free trade in rubber restored and that both Caja and Rubber Reserve shall be entitled to purchase at fixed prices but not to the exclusion of others, except that the Rubber Reserve might be designated as the sole ultimate purchaser for export.

(a) This appears to contemplate an orderly process, but we are somewhat concerned about the resulting delays. Would it not be possible to have these zones determined by the Commission, which in case of any disagreement would report the proposal to the Government for decision. We also suggest that it is unnecessary to institute any licensing system and that a recorded approval will be sufficient. The procedure set forth in your (a) would seem more appropriate if Rubber Reserve contemplated any direct production operations or direct employment of laborers, but since its activities are to be limited to contracts for financing producers and contracts for supplementary services not involving direct operations, we trust that the procedure may be simplified.

(b) and (c) satisfactory.⁴⁹

(d) The items specified seem too restricted.⁵⁰ We suggest adding as sub-paragraph (4) “Transportation equipment, such guns and ammunition as shall be approved by the Ministry of War, and any other goods required for the rubber program which are not procurable in Colombia.”

We suggest that it will involve a substantial loss of time if individual licenses must be obtained from the Ministry of Hacienda through the Ministry of National Economy. The difficulties which would be encountered under this system are illustrated by difficulties in recent months under a similar system where it has proved impossible to obtain the necessary authorization for specific items in order to meet shipping schedules. We suggest as an alternative or possibly as an agreed-upon implementation of the present language that a blanket license good for 6 months be issued covering all shipments destined to Rubber Reserve against Rubber Reserve’s agreement that it will ship only items within the specified categories and will at the beginning of the 6 months’ period file schedules of its contemplated shipments.

(e) It is assumed that the exemptions referred to will cover funds transferred to Colombia for the payment of salaries of Rubber Reserve personnel.⁵¹

3. We consider this provision undesirable so far as termination date is concerned. If it contemplates the extension of the rubber agreement beyond December 31, 1946, its adoption would require us to re-negotiate the rubber agreements with 15 other countries and colonies. We feel that this would have a most undesirable effect on the whole program. If it contemplates a termination of the rubber agreement prior to December 31, 1946, in the event of the cessation of hostilities prior to that date, we think it would deter the investment of funds in rubber production and the organization of enterprises for that purpose, since we regard it as necessary to have a fixed period of substantial duration to give the necessary encouragement.

We regret that provision concerning tire plant is not possible of fulfillment. Even if we recommended high priorities on new equipment and material required and made exceptional efforts to press for completion, it would be impossible to give definite assurances that tire factory could be put in operation this year.

Following summarizes reasons.

(1) Highest priority equipment would be required for new equipment consisting of electrical mechanisms, cables, switchboards, motors, etc. Such electrical equipment is required for use in submarines, torpedo boats, fighting ships and land equipment for the fighting forces, and the War Production Board advises that it would be unwilling to grant priority to obtain such equipment for additional tire plants. Goodrich has been unable for 2 years to secure such equipment to put its Cuban plant in operation, although plant is otherwise complete.

(2) Aside from new equipment, while there is idle tire equipment in this country, it is impossible to be sure we may not be called upon to put this equipment into operation to satisfy actual war needs. For instance a Ford tire plant was recently dismantled and shipped to Russia to produce tires for the fighting front.

(3) While it is, of course, a matter for Colombian determination it is believed here that a small tire plant of the kind contemplated will be uneconomical both during and after the war. During the war it is doubted that Colombia can produce tires substantially more cheaply than they can be obtained from Brazil. After the war the rate of production in Colombia would be so low as to make it impossible to compete with production costs of factories in other countries in the absence of high protective tariffs. Even in Brazil and Argentina, with much larger markets than Colombia has, tariff walls have been necessary with resulting increased costs to consumers.

(4) The procedures now established contemplate that Colombia’s requirements for tires will be met from here or Brazil. The recent arrivals from Brazil and the recent emergency shipment from here should allay local doubts on this score. We are preparing a separate cable on retreading equipment for Colombia. Initial studies indicate need for two additional retread plants and if further investigation confirms need we would be prepared to arrange export.

Full memorandum on foregoing four points being sent airmail. As suggested by you, Department expects to talk with Turbay⁵² within the next few days.

Our position on this has been consistent since the proposal was first raised last spring and the actual situation regardless of our wish to cooperate on this point makes it impossible to give any encouragement to the Colombian authorities at this time.

Hull

47. Board of Economic Warfare.
48. Charles A. Livengood, Counselor of Embassy.
49. Item (b) provided that the Rubber Reserve Company would refer for prior approval to the Colombian Government the names of proposed personnel, and item (c) provided that the Company would guarantee to Colombian employees the benefits of Colombian social security and pay certain transportation expenses of employees.
50. These items were tools, machinery, food, and drugs, which were to be exempt from customs duty.
51. These exemptions covered the obligation to invest a specified percentage of the funds imported in Colombian national defense bonds.
52. Dr. Turbay had left for Washington on January 10. He resumed his post in Colombia on May 5.