824.6354/10–2149
Memorandum of Conversation, by the Assistant Secretary of State for Inter-American Affairs (Miller)
Participants: | Sr. Don Ricardo Martinez Vargas, Ambassador of Bolivia |
Assistant Secretary Miller | |
Mr. King, NWC |
The Ambassador said he wished to take a few moments of my time to prepare me for my trip to Bolivia where, he was sure, one of the major topics of conversation would be tin.
First, the Ambassador explained the complete dependence of the economy of Bolivia on tin. He said about 80% of the foreign exchange available to the Government was derived from sales of tin, which amounted to almost $60,000,000 last year. As an estimate, he said [Page 542] about 90% of his country’s business activity revolved around tin, directly or indirectly.
Secondly, he noted that Bolivia was a high-cost producer of tin, having poor ore bodies in remote locations which are very difficult to work. Increased costs of materials imported from the US have contributed to the high cost of production as well as the social benefits given to the workers in recent years. Because of its production costs, and the complex and poor nature of its tin concentrates, Bolivia cannot compete with the producers in other parts of the world. The Ambassador said that the large mines, such as Patiño, probably could operate at a small profit as long as the price remained at 99¢ per pound, but that he doubted whether any Bolivian mine could do so at the new price of 92¢.
The third item described by the Ambassador was the method of selling Bolivian tin. He said prior to the war most of Bolivia’s exports went to the UK and Holland for smelting. In those days, there existed the International Tin Committee, which stabilized production and price. He said many Americans mistakenly called this a “cartel” but it really was not. It helped producers and consumers alike by bringing stability into a market which formerly had been subjected to great fluctuations. In 1940, Bolivia began selling about half its tin to the US, through annual contracts with the RFC. He said these contracts resulted from periodic negotiations where, in a purely commercial atmosphere, the sellers tried to get the highest price possible and the buyer tried to get the lowest price. Each year, after lengthy and sometimes heated debate, a contract was signed. After explaining the price provisions of the present contract, he noted that it would expire at the end of the year and that negotiators were now here to arrange a new agreement.
Then, at some length, the Ambassador dwelt on the conversations now in progress. He explained that the negotiators had been instructed to ask that the 99¢ price remain in effect for the balance of the year. This obviously could not be done since the present contract very clearly tied the Bolivian price to that of British tin docked in New York. That price went down seven cents—so did the Bolivian price. Secondly, the negotiators had instructions to ask that the 1950 price be 990. The Ambassador noted that the British Ministry of Supply probably would reopen the London Metal Market in the near future and there would be a free-market in tin, thus making it impossible for the RFC to pay Bolivia a higher price in the absence of special Congressional authorization. The RFC explained this to the negotiators who then asked if the decrease in price could not be compensated for by decreased penalty and smelter charges. However, the RFC indicated that, rather than lower these charges, it was faced with the necessity [Page 543] of increasing them since its operating losses have gone up due to the receipt of progressively poorer ores from Bolivia. The Ambassador then said the two parties to the negotiations, their hands tied by legal restrictions, absence of authorization and urgent necessities, were so far apart that they never would be able to get together. What would happen he did not know, but it appeared to be a very serious situation.
The Ambassador suggested that Bolivian tin was of strategic importance to the US and that some arrangement should be made, for the benefit of the two countries, to insure that the industry, and probably the entire economic structure of Bolivia continue to exist.1
- The negotiations did not lead to the signing of a new contract in 1949. After the outbreak of the Korean War in June 1950, the price of tin rose to 98 cents per pound, which price RFC agreed to pay in signing a contract with Bolivia covering delivery of roughly three-fourths of Bolivia’s annual production of tin concentrates for 1950.↩