prices. Consuming nations were eventually given access to the proceedings but, much to the consternation of Washington, were denied any vote.49
For Bolivian miners, this “prescient cartelisation,” to use Dunkerley’s phrase, had been nothing short of a godsend. Alluvial tin concentrates from the Malay Straits, far purer than Bolivian ones, were dredged from easily accessible rivers by cheap labor and would have otherwise doomed Bolivian producers. Simply put, the Bolivians could not compete. Their tin, generally of low quality, had to be extracted from the dizzying heights of the Andes hundreds of miles from the nearest port. Moreover, Bolivian workers, though poorly paid, were still better compensated than their Far Eastern counterparts. Finally, the tin barons bore the bulk of the nation’s tax burden. In all, U.S. experts estimated that that the cost of production in Bolivia was almost double that of Malay Straits producers. The cartel remained the only means by which Bolivian tin could remain competitive with English and Dutch producers in the Far East.50
In June 1940, U.S. planners, weary of the decades they had spent at the mercy of the ITC, set in motion a series of events that culminated in the United States seizing control of the international tin trade in the postwar period and placing Bolivia at Washington’s mercy. The U.S. military consumed massive quantities of tin, primarily for canned food and solder. Anticipating war and economic dislocations, Undersecretary of State Sumner Welles proposed creation of a fifty-thousand-ton tin stockpile and construction of a U.S. tin smelter designed to accommodate low-grade Bolivian tin concentrates. A smelter and stockpile, in conjunction with a massive recycling campaign, would insulate U.S. industry from the conflicts in Europe and East Asia and possibly shatter the ITC once and for all. Roosevelt agreed and authorized the Reconstruction Finance Corporation’s Metals Reserve Company to construct a U.S. tin smelter.51
Ostensibly in response to the German seizure of the Dutch Arnhem smelter and to fears that the Luftwaffe might at some point put British smelters out of commission, the Longhorn Tin Smelter was built in Texas City, near the port of Galveston. It cost the U.S. government $8 million but more than paid for itself during the war. It was the potentially the world’s largest and most versatile smelter, capable of processing any type of tin concentrate from any part of the world. The RFC contracted with the Dutch smelting giant Billiton Mastschappij, known for its experience with both Bolivian hard-rock and Far Eastern alluvial concentrates, to construct and operate the Longhorn smelter. Because the urgency of its construction had mandated against using innovative but still relatively unproven techniques, the smelter itself was not the world’s most modern, but it was capable of processing the entire Bolivian tin output and perhaps meeting U.S. demand. Although high labor costs and outdated techniques hurt the Longhorn smelter’s efficiency, it was hoped that plentiful fuel and acid, combined with cheaper transportation costs from Bolivia, might make it competitive with European commercial smelters.52
Still, the Longhorn smelter’s construction was not entirely a response to the war. Indeed, the smelter was established explicitly to “eliminate this country’s dependence on the foreign tin cartel.” The British, who along with Patiño dominated the International Tin Committee, hoped to first dissuade the Roosevelt administration from building the smelter. Failing that, they sought to secure a commitment that the Longhorn smelter would be closed at the end of the war. Needless to say, the State and War Departments refused both requests, adamant that the United States never again be held hostage by the ITC. Indeed, when State Department analyst Herbert Feis negotiated the first contract with the Bolivians in 1940, he sought a twenty-five-year commitment of all Bolivian tin—a clear indication of U.S. long-term goals. Although the British were horrified by the prospect of the U.S. government entering the field of tin processing, Feis coolly reminded them that the discrimination and restrictions of the previous half century made this move inevitable. When the British complained that a U.S. smelter could not be operated profitably, Feis retorted that, although this was “probably true,” underhanded British tactics and the cartel had never permitted that thesis to be tested. Indeed, U.S. corporations had, on several occasions, attempted to open smelters on U.S. soil in the past, only to have the British drive them into bankruptcy.53
The State Department sought more than one thousand tons of tin concentrates per month to supply the Longhorn smelter, but this requirement ran afoul of existing contracts that sent almost all Bolivian tin to Great Britain. Because the British smelted nearly all of their Far Eastern tin in Malaya, smelters in England were almost entirely dependent on Patiño’s Bolivian production. Still, after the fall of Holland, where the Arnhem smelter had traditionally processed Hochschild’s and Aramayo’s tin, Peñaranda and Hochschild encouraged construction of the Longhorn smelter. Not only might U.S. competition break Bolivia’s dependence on the British smelting monopoly, but it would also permit the tin barons and the government to acquire dollars rather than blocked sterling. The first U.S. offer was for 42¢ per pound, slightly more than London was currently paying, and the Japanese made their own offer soon thereafter. Within weeks, Peñaranda and the tin barons were presiding over a bidding war among the three rival nations.54
Although Patiño saw the Longhorn smelter as a means to “extricate” himself from restrictive British sterling contracts, and other tin barons viewed it as a way to weaken Patiño’s dominant position in smelting, they soon found that the sword cut both ways.55 The Bolivians sought 45¢ per pound for all grades of tin concentrates, but the United States hoped to pay just 42¢ for only the highest grade. For the tin barons, the U.S. contract was a unique opportunity: neither the British nor the Dutch smelters had been willing to process their lowest-grade concentrates, and if they could secure a fixed price, they would now be able to export their lower grades. Washington attempted to break the deadlock by increasing the amount of tin it would purchase to eighteen thousand tons per year, but the Bolivians demanded even more concessions regarding smelting charges. After months of negotiation, the State Department, eager to begin operations at Texas City, finally agreed to pay a fixed price of 48½¢ per pound, to match low British smelting charges for five years, and to take responsibility for the ores in the Chilean ports of Arica or Antofagasta. Through hard bargaining that even the RFC’s own historian conceded meant “not standing as a neighborly supporter of Bolivia in its hour of economic distress,” U.S. planners were purchasing a good percentage of the tin available to the Allies at less than half of the World War I price.56
For Great Britain, this arrangement was little short of a catastrophe on a number of levels. Patiño now argued that unless the British matched the U.S. price, he would break his long-term contract with them and sell to the RFC. At one point, he even threatened to enter the bidding to construct the U.S. smelter himself. Although the British were unable to forestall the U.S. contract with Bolivia, they attempted to end U.S. involvement by agreeing to purchase all Bolivian tin production for the five years after the U.S. deal expired.57 Naturally, Peñaranda and the tin barons refused, hoping to keep Anglo-American competition alive for the foreseeable future.
Pearl Harbor and the Japanese offensive in Southeast Asia changed everything. As Japanese forces overran British Malaya and the Dutch East Indies, world tin markets were thrown into chaos. Both the Allies’ main sources of tin concentrates and much of the world’s smelting capacity were captured. The British and Dutch, anticipating Hitler’s onslaught in Europe, had shifted much of their smelting capacity to Malaya and the East Indies, placing it directly in the path of the advancing Japanese. More than 70 percent of the world’s tin production (and an even higher percentage of its smelting capacity) rapidly fell into Axis hands, and U.S. leaders faced the unhappy prospect of entering the war with no viable source of either raw tin concentrates or processed tin plate. As precarious as the situation was for the Allies, Peñaranda and the tin barons seemed to have an unprecedented opportunity to become virtually the only source of tin for the Allied war machine.58
It did not take long for Patiño to recognize the implications. With the ITC’s production control schedule set to expire at the end of 1941, the British requested a renewal on favorable terms. For the Bolivians, letting Great Britain, which would remain almost exclusively a consumer for the duration of the war, use the ITC to establish a low tin price seemed foolish. Instead, the Bolivian government and tin producers sought
