The Atlantic Report on the World Today
THE deadlock which has existed for the past nine months over United States purchase prices of Bolivian tin has become the most serious controversy in inter-American relations since Franklin Roosevelt initiated the Good Neighbor Policy nineteen years ago. So far only Bolivia has been directly affected. Except for a dribble of shipments during September, this barren inland republic has exported virtually no tin to the United States since the end of May, 1951.
Tin comprises 70 per cent, of Bolivia’s exports, It provides 60 per cent of the government’s revenues and 90 per cent of the dollar exchange for the country’s imports, including 90 per cent of the people’s food supply. So the effects on the Bolivian national economy can hardly be overstated. Unless the price deadlock can be broken, Bolivia faces a ghastly economic crack-up and all the political and social chaos which, in underdeveloped countries, goes with it.
This situation has arisen because United States policy toward the only tin reserve area in the world which is wholly safe from the Russians, and toward an extremely touchy political and economic problem as well, has persisted in an adamant “business as usual” attitude. Since the expiration of previous Bolivian tin contracts on May 31, the Reconstruction Finance Corporation — which earlier in 1951 was put in charge of United States tin purchases — has stood firmly, through all negotiations and pressures, on a take it or leave it price offer of $1.12 a pound.
Bolivian producers and mineowners have produced plausible statistics to show that they cannot put tin on the market at $1.12 a pound if they are to make a reasonable profit for themselves and at the same time perform the tin industry’s functions in supporting Bolivia’s economy. Their arguments have affected the RFC’s negotiators and pricefixers no more than the chitter of llamas on the Andean highlands. The net result has been a sellers’ strike. The Bolivians since September have stuck to an asking price of $1.50, placed high enough for normal bargaining purposes, and the deadlock has been on.
Meanwhile, with a fair minimum of output, tin mining in Bolivia still goes on. The republic’s 40,000 tin miners, the best-paid labor group in the country and at the same time the most sensitive to leftist political agitations, for the most part are still on the job.
But the tin-mining operations are being conducted on loans and capital outlays in anticipation of future sales and the restoration of a normal United States market. The loans will not be available if the deadlock is prolonged indefinitely. Already the strain on credit facilities has led to the closing down of a considerable number of smaller mines.
As the tin ores pile up by the thousands of tons in ports on the Pacific coast, resentment spreads through all sections of Bolivian society; and the accusation gains credence that the United States is letting a poor neighbor down.
Korea pushes tin up
In the background of the present tin crisis, of course, is a history of spectacular price fluctuations, due mainly to the Korean war but also, in considerable part, to certain manipulations of tin supply and markets which went on during the period following the Second World War.
Tin, for instance, in the early months of 1950 before Korea, was priced on the vital Singapore exchange at from 71 to 73 cents a pound. But this deep post-war low came about only because the British, following the pound’s devaluation in September, 1949, broke down a 99½-cent price by dumping an estimated stockpile of 20,000 tons on the market in order to get dollars. Temporarily, though, the Bolivians were then selling relatively little tin to the United Stales at prices in the 70s, so that the effect of the Singapore low was somewhat academic.
With the Korean trouble, this sinking trend was almost frenetically reversed. Military use and stockpiling stepped up so fast that, by early 1951, tin selling prices reached $1.83 a pound, with a few asking prices ranging above $1.90.
Tin producers meanwhile resolutely stayed out of the International Materials Control boards being set up in Washington to handle allocations and adjust prices on strategic commodities. As a result, in March of last year the Truman Administration, as an emergency measure, placed the entire tin-purchasing operation in the hands of the Reconstruction Finance Corporation.
The RFC, especially alter W. Stuart Symington became its sole chief a few weeks later, cracked away at war boom prices by practically ceasing all tin purchases for the time being. Buying was resumed in the early summer when Singapore prices broke to around a $1.03 level, but chiefly in Asiatic, Indonesian, and Belgian Congo ores. The Bolivians, refusing to sell at the Singapore prices after their contract ran out in May, were left in the cold.
During September, while negotiations were under way for a new contract, the Bolivians made a few token shipments under a month-long interim agreement at the $1.12 price. But since October 5, when the contract negotiations broke down over Symington’s refusal to consider any increase in the $1.12 figure, the deadlock has become total.
Anglo-American tin agreement
The first ray of hope for a break came early in January in the wake of the visit of British Prime Minister Winston Churchill and his staff to Washington. A general agreement was reached in the Churchill conversations for an Anglo-American exchange of American steel for aluminum and tin produced in the British dominions and colonies. Specific details were left to be worked out by a joint commission headed by Lord Cherwell, chief of the British atomic operations, and Charles E. Wilson, director of the American defense production effort.
The tin price agreed upon — chiefly for Malayan ores — was $1.18 on the Singapore exchange, with minor variations according to grades. This should give Bolivian producers prices of $1.23 to $1.25 a pound, allowing for the difference in freight charges. The question remains whether so slight an advance will enable Bolivian tin either to maintain normal output or to provide the peculiar services which the Bolivian economy expects of it.
High altitude, high price
In anything like a classical free market, much Bolivian tin production would be uneconomic. Asiatic, African, and Indonesian ores are washed or bulldozed out of surface deposits by coolie labor at relatively low production costs. Bolivia’s are dug out of deep mine shafts following the seams in the high Andes at altitudes of from 13,000 to 18,000 feet above sea level.
Bolivia’s tin miners are picked for their adaptation to heavy work in such a climate and for their skills in carrying out complicated industrial processes underground. As a result of pressure from their strong labor unions and the normal heavy demand for qualified labor, they get high wages, for their part of the world: $1.50 to $3 a day, plus legally required below-cost food and household supplies at the mining company stores, and free schools and hospitalization. During the past few years wages have generally kept pace with currency inflation.
Under these conditions, a few of the large, intensively mechanized mines of the Patino and Hochschild interests can doubtless produce tin, pay their share of the government tax roll, and still sell competitively with overseas producers at a moderate profit. But at the former Singapore price of $1.03, or even at the $1.12 RFC price, most of the smaller mines, joined together in the Aramayo, Mediano, and the Banco de Mineras syndicates, could do no more than break even, and might have to shut up shop to avoid losing money.
The RFC gets its back up
These factors in the situation have been ignored in the Symington purchase program. In effect, Symington’s position has been that enough tin is being produced in the world at lower prices to satisfy demands for current use and for stockpiling without calling on the Bolivians. Hence, if subsidy prices are required to keep the Bolivian tin industry functioning as a producing reserve, that is just the Bolivians’ hard luck. If Malayan, Thailand, and Indonesian tin areas should fall into Russian hands on the outbreak of another world war, leaving only a dismantled Bolivia to supply the Western powers, that is a bridge to be crossed when the time comes.
Throughout the autumn and early winter, in fact, the Symington office replied to all State Department and other government pressures for a complete price policy by simply keeping its back up. Instead of negotiating, the RFC spread a constantly stepped-up anti-Bolivian propaganda which culminated in a column by David Lawrence on December 28 charging that the Bolivian tin producers were international blackmailers and extortionists.
Meanwhile, as a result of short buying over so long a period, the United States was having to dip into its 11,000-ton tin stockpile by an estimated 2000 tons in order to provide civilian industries with tin for their immediate essential needs.
The tough neighbor policy
The unhappiest development of the impasse has been the spread of a bilateral row between Washington and Bolivia into a Hemisphere-wide irritant. Experiences in the Second World War and its economic aftermath have rendered all the Latin American governments more or less suspicious of Yankee “economic imperialism" especially with regard to purchases of strategic materials for defense.
So, on the heels of the tin deadlock, various Latin American capitals were alarmed about what might happen to their principal exports if the United States should apply Symington standards to other contracts. Cuba had an attack of jitters over sugar, Venezuela over oil, Uruguay over wool, Chile over copper.
On a single day at the year’s turn, five Latin American ambassadors appeared in the office of Assistant Secretary of State Edwin G. Miller, Jr., to protest solemnly against proposed United States tariffs on tuna.
Although Brazil is hardly a onecrop country, President Getulio Vargas joined the anti-gringo agitation by making a speech which threatened to cut drastically the amount which could be paid the United States as return on Brazilian investments.
Bolivia’s capable diplomats in the Latin republics fanned the flames, in both private and public declarations, with adroit complaints of their woes at the hands of Mr. Symington. Finally, they developed a Grade-A project of protest which should prove extremely embarrassing for the State Department, if not for the RFC.
Under the charter of the Organization of American States adopted at Bogotá in 1948, a serious international crime is proscribed, known under the name of “economic aggression.” Roughly speaking, one form of economic aggression consists of dipping into a defense stockpile of strategic materials bought and produced in the Hemisphere, for the use of civilian industries.
Bolivia’s diplomats in the other Latin American capitals began proposing more or less formally in late December that charges of “economic aggression” be brought against the United States. The Chileans pursued it at once, to the extent that the Chamber of Deputies unanimously voted to call an Inter-American Conference “in defense of raw materials.” While no other governments took specific action, their spokesmen in Washington began dropping dark hints that if something were not done shortly to clear up the tin impasse, more troubles might be expected.
To make the “economic aggression" charge stick, the Bolivians, to be sure, would have to prove that the tin recently released by the RFC to private industry was drawn from the military rather than from a general stockpile. This would be difficult. But the mere matter of proof would hardly lessen the embarrassment. The United States, at the beginning of the long road of intensive stockpiling for defensive military might, can hardly afford to be put on the spot for economic shenanigans with the crucial products of a poorer neighbor.
Mr. Symington’s departure from the RFC directorship late in January possibly measured the degree to which such dangers were realized elsewhere in the Washington government. What remains to be seen is whether either the tin grievances of the Bolivians or the commotions they have stirred up throughout Latin America can be assuaged.