[Excerpt from record of January 11, 1932]

Senator JOHNSON. When Mr. Townsend was on the stand the other day I asked him to produce a letter which he said had been given to him or sent to him by the Commerce Department, wherein substantially he was asked to render optimistic reports or, rather, to take a more optimistic view of situations than that which apparently he had done. He has produced that letter. I have the original before me, but because it is an original that he desires to keep, I have had a copy made and compared, and that copy I offer for the record, with the original here which any one can examine if desired.

The CHAIRMAN. The copy will be inserted in the record at this point.

(The copy of letter referred to and submitted by Senator Johnson is here printed in full as follows:)

BUREAU OF FOREIGN AND DOMESTIC COMMERCE,

Washington, May 20, 1927.

Mr. OLIVER C. TOWNSEND,

American Commercial Attaché, Lima, Peru.

DEAR TOWNSEND: I feel that I understand exactly how you look upon reporting at length upon every question put up to you by the Bureau or by business houses. As an engineer you believe in economy of words. You told

me after you had plowed through the files of reports from some offices that you thought a large part of the work was wasted effort and that you could say the same things in much less space, or perhaps leave them altogether unsaid.

I have some sympathy with your viewpoint for it is easy to agree that there is much duplication, unnecessary expansion of ideas, and unimportant reporting; but I don't know that I agree with your corrective measure. I'm sure you won't mind if I make some observations which are partly my own and partly those of commodity chiefs. I feel such a keen personal interest in you that I want to pass them on even though such action is outside my regular line of duties.

In the first place, I don't believe you fully realized when you left here the basic importance of the written word in the work of the bureau. The field man can pass on his ideas or knowledge verbally to only a comparatively few persons; the majority must be reached through written reports. Moreover, it is more important to reach the stay-at-home effectively than it is the traveler who already is fairly well informed. We in Washington and the export managers in Podunk and Oshkosh cannot get a true picture of Peru and its trade possibilities unless the commercial Attaché gives it to us fully in written form. In the second place, it would appear to me that you, in the desire to be brief, give an impression of impatience or curtness, or even discourtesy, which is far from your real nature or intent. When a man writes down to Peru and waits three months for a reply he expects something big, and, therefore, the reply, especially a negative reply, should be couched in friendly and sympathetic terms.

Thirdly, it is my impression and that of some commodity chiefs, that you are over alarmed about a temporary trade condition that has slowed up business but should not preclude all consideration of American sales to Peru. In several trade letters you have taken the view that the inquirer should not even try to investigate Peruvian trade possibilities for months or even years. Aside from the fact that such an answer rarely satisfies because the inquirer is interested in potential as well as present possibilities, there is the more important consideration that the trade situation may take a sudden turn for the better and our discouraging attitude may not be warranted even by the time the reply reaches its destination.

Right in this connection, I should like to emphasize that the spirit of the bureau follows the spirit of American business, which is to make sales in spite of difficulties, or to find ways of doing seemingly impossible things. As officials we should be encouraging whenever possible and discouraging only in the last extremity. We are builders, promoters-even propagandists, although never to such an extent that we fail to recognize and point out difficulties.

Finally, I think that you may be tempted to overlook the small things or those that you personally are more or less uninterested in. It is surprising how many big pieces of export business have developed out of almost nothing by attention to details; how a casual observation by some commercial attaché has opened up a market for some American specialty or a close study of costs and prices has put American goods in a hitherto closed territory.

I know you will take these observations in the friendly spirit in which they are made. I am so much interested in our Latin American work and in you personally that I want to do anything I can to be helpful. I do hope you are interested rather than impatient when you lay this letter down.

Sincerely yours,

1

THOMAS R. TAYLOR,
Assistant Director.

Senator JOHNSON. One portion of it I desire to call to the attention of this committee. This letter is signed by Thomas R. Taylor, assistant director of the Department of Commerce:

Right in this connection I should like to emphasize that the spirit of the bureau follows the spirit of American business, which is to make sales in spite of difficulties or to find ways of doing seemingly impossible things. As officials we should be encouraging wherever possible and discouraging only in the last extremity. We are builders, promoters, even propagandists, although never to such an extent that we fail to recognize and point out difficulties.

The CHAIRMAN. That had reference to trade in South America, did it not, Senator?

Senator JOHNSON. That had reference to Peru.

The CHAIRMAN. That is, general trade, not the selling of bonds? Senator JOHNSON. No, sir.

Senator HARRISON. Who was the director at that time?

Mr. TOWNSEND. Doctor Klein.

Senator HARRISON. Dr. Julius Klein?

Mr. TOWNSEND. Yes, sir.

Senator HARRISON. Is Mr. Taylor still in the employ of the Department of Commerce in that capacity?

Mr. TOWNSEND. I think so.

Senator HARRISON. That is the department that has to do with foreign and domestic commerce?

Mr. TOWNSEND. Yes, sir.

Senator JOHNSON. You mean Doctor Klein was the director of that particular Bureau of Foreign and Domestic Commerce of the Department of Commerce?

Mr. TOWNSEND. Yes, sir. Under the present administration he is Assistant Secretary of Commerce, but still is the controlling head, I think, of that bureau.

Senator JOHNSON. Were you in any other of the countries of Latin America?

Mr. TOWNSEND. Not as a representative of the Department of Commerce. I have been familiar in greater or lesser degree with all of the countries of South America. During the war I had charge of establishing and maintaining a policing system for the Navy, inside the 3-mile limit of the coasts of Colombia. As a mining engineer I had been there a great deal before that, and that is the reason for my selection for that job. They were neutral countries and we had to have that sort of defense.

Senator JOHNSON. Did you consider the loans that were made by Peru and that were sold in this country as unwise or unsafe?

92928-32-PT 3--23

Mr. TOWNSEND. Absolutely.

Senator JOHNSON. Did your reports indicate that fact?
Mr. TOWNSEND. Yes, sir.

Senator JOHNSON. Did you file reports as well with the Secretary of State as with the Secretary of Commerce?

Mr. TOWNSEND. No, sir. Our weekly letters and our general financial reports were all that went through. They were more statistical in respect to financial reports, and a report that went through to the Department of Commerce from our office was accompanied by a copy which was sent to the ambassador for transmission to the Department of State.

Senator HARRISON. And you say that this letter that you received from Mr. Taylor, under Doctor Klein, called your attention to the fact that your reports were too optimistic?

Mr. TOWNSEND. Too pessimistic. If you will allow me to explain a little the atmosphere of that letter, it was a perfectly friendly letter written to warn me that my pessimism or my brevity in dealing with cases that, so far as I was concerned, were perfectly patent, perfectly logical, was not desired. This letter was written to me to explain why I should be a little more optimistic. In other words, I think any of you gentlemen who have heard Doctor Klein's repeated offerings on that subject will realize that he did not want a subordinate of his department stating anything that conflicted with his chronic optimism.

Senator SHORTRIDGE. And he characterized your letters as overoptimistic.

Mr. TOWNSEND. Yes, sir. Mr. Taylor being his accredited agent. Senator SHORTRIDGE. Did he use that word?

Mr. TOWNSEND. This was not from Doctor Klein himself.

Senator SHORTRIDGE. No, but from the Mr. Taylor of whom you spoke?

Mr. TOWNSEND. I would not want to say definitely that there was any use of that particular word, but the idea was that the policy of the bureau was to bear very lightly on pessimistic reporting.

Senator SHORTRIDGE. Not to delay matters or to cumber up the record; but you used those two words, to this extent, that your reports or statements were pessimistic, and you added that they wanted you to make them optimistic. That was your conclusion?

Mr. TOWNSEND. That is the gist of it. Whether those words were used or not, I think no one could read the letter without realizing that.

Senator HARRISON. Are you still in the service?

Mr. TOWNSEND. No, sir.

Senator HARRISON. How long have you been out of the service?
Mr. TOWNSEND. I left at Peru in December of 1929.
Senator HARRISON. Did you resign?

Mr. TOWNSEND. Yes. We served by terms of enlistment; that is, three years; and in March of 1929 I advised the bureau that I had no wish to return to Peru, and they appointed another man to succeed

me.

Senator HARRISON. There was no misunderstanding with the department?

Mr. TOWNSEND. There were no misunderstandings; no, sir. There was a wide divergence of opinion and policy.

Senator SHORTRIDGE. Did you retire because of any conflict?

Mr. TOWNSEND. No; it was just because I was a man very much out of place in that field of endeavor.

Senator JOHNSON. Why?

Senator SHORTRIDGE. You are a mining engineer, are you not?
Mr. TOWNSEND. Yes.

Senator HARRISON. I thought that was a pretty good place.
Mr. TOWNSEND. Peru was.

Senator HARRISON. I mean, the Department of Commerce.

Mr. TOWNSEND. They seem to get them out as soon as possible. I think it was largely due to the fact that owing to my years of previous experience I acquired the habit of trying to think accurately, and an optimistic department was a very poor place for me during my term of service.

Senator HARRISON. That is what you meant when you made the reply that you made a moment ago. I thought possibly your reply might be misconstrued, and that is the reason I asked you.

Mr. TOWNSEND. No sir; that is all. I am rather well convinced that I am not the type of man to work with chronic optimists during such a period as existed in Peru from 1927 to 1929.

Senator SHORTRIDGE. You do not preach pessimism as a desirable doctrine to spread abroad, do you?

Mr. TOWNSEND. Having been educated as an engineer, I try to preach facts as I see them.

The CHAIRMAN. Doctor Klein's optimism, however, has resulted in bringing a great deal of foreign trade to this country.

Mr. TOWNSEND. I have heard that that is true, sir.

The CHAIRMAN. I do not mean Peru, but all over the world. Mr. TOWNSEND. Possibly that is true.

Senator HARRISON. The senator does not mean in the last two and a half years.

Mr. TOWNSEND. During the earlier period I have heard that claim very extensively.

Senator SHORTRIDGE. You are a mining engineer and you were in Peru. What are their principal mining products?

Mr. TOWNSEND. Copper and vanadium, some gold ore, and oil are the principal minerals that are exported. They have very valuable copper mines there and very valuable oil deposits.

Senator SHORTRIDGE. Copper and oil are on the free list under our law?

Mr. TOWNSEND. I think so.

Senator SHORTRIDGE. They ought to be on the protected list; do you not think?

Mr. TOWNSEND. I do not know, sir.

Senator SHORTRIDGE. Have you no definite opinion on that subject?

Mr. TOWNSEND. It depends on whether I am exporting or importing.

Senator SHORTRIDGE. It depends somewhat upon whether you want American oil industry and our copper mines to prosper; does it not?

Mr. TOWNSEND. I am not able to see that the tariff makes very much difference to them.

Senator SHORTRIDGE. You think that oil should just pour in here from Venezuela and Peru, free of duty, while our own wells are shut down because of so-called overproduction?

Mr. TOWNSEND. There is a very interesting report on that just issued by the Tariff Commission, which I have gone over with some care and interest. I have no opinion to deliver on the subject. 'Senator SHORTRIDGE. Were you ever in Africa?

Mr. TOWNSEND. Yes, sir.

Senator SHORTRIDGE. Did you visit the copper mines there?

Mr. TOWNSEND. No, sir; I never visited the copper mines. I have not been in Africa for a matter of 20 years.

Senator SHORTRIDGE. With regard to labor in Peru, how does it compare with the price of labor and wages in America?

Mr. TOWNSEND. The day laborers in the copper mining district of Peru are getting now about $1.25 a day, or equivalent to that. Of course fluctuations make it very difficult to analyze.

Senator SHORTRIDGE. About what would you say was the average daily wage of Americans working in our copper mines?

Mr. TOWNSEND. I think they are getting about $5 or $6.

Senator SHORTRIDGE. And the freight from Peru to New Orleans or New York, is that very heavy?

Mr. TOWNSEND. Yes. It is particularly heavy from the mines to the seaboard.

Senator SHORTRIDGE. How far are the mines from the seaboard? Mr. TOWNSEND. In an air line they would be about 40 miles only, but three times that, almost, by the route they are obliged to go. They come down from an elevation of about 14,000 feet to sea level.

Senator SHORTRIDGE. To sum up the matter, to your knowledge they can mine copper there and transport it to the United States and sell it here more cheaply than we can mine and deliver it? Mr. TOWNSEND. It depends upon the grade that they are working,

sir.

Senator SHORTRIDGE. Well, take the same grade of copper.

Mr. TOWNSEND. If you take the same grade of copper, they could probably just about meet competition.

Senator SHORTRIDGE. What do you mean by that?

Mr. TOWNSEND. Meet the competition of the United States. Senator SHORTRIDGE. Can they not mine and ship and deliver copper here at far less than any miner in Montana or Arizona? Mr. TOWNSEND. I do not think so, sir.

Senator SHORTRIDGE. I do not agree with you.

Mr. TOWNSEND. They happen to be able to do it from the Cerro de Pasco mine, to get out a cheap product, because they have a content of gold and silver.

Senator SHORTRIDGE. It costs about 12 cents to mine it in Montana. Mr. TOWNSEND. I do not know what the reports are of costs there. Senator SHORTRIDGE. You are not familiar with the mining industry in Africa?

Mr. TOWNSEND. No, sir.

Senator SHORTRIDGE. I understand they can mine it there for about 7 cents.

Mr. TOWNSEND. They claim to mine it in Chile for about 4 cents.