Battling Over Bauxite

The Caribbean island nation of Jamaica is small and poor--but it also is the source of 60% of the bauxite that U.S. companies use to make aluminum. That gives it power that under the leadership of Prime Minister Michael Manley, it is starting to use. Last week, after three months of futile resistance, the companies coughed up the first $39 million due under Manley's plan to multiply eightfold the taxes and royalties on bauxite mined out of the Jamaican earth. The payments presage substantial price increases in the U.S. on aluminum products ranging from lawn chairs to beer cans--and foreshadow difficulties industrialists may encounter from now on in dealing with poor countries that possess vital raw materials.

In Jamaican eyes, Manley's power play is only an attempt to redress a neocolonialist relationship. Between 1949 and the mid-1960s, five American corporations and one Canadian firm bought 225,000 acres of bauxite-rich land, or 13% of the island's total land area, mostly from private owners. Ore exports from the mines reached 7.4 million tons in 1973, and taxes and royalties on the shipments that year brought in $25 million, roughly 40% of Jamaica's foreign currency. But under the complicated tax system, the Jamaican take on each ton shipped dropped from $2.83 in 1971 to $1.61 in 1973. Moreover, the companies could determine how much ore they would mine and export without consultation with Jamaican authorities. Says Manley: "They were able to exploit the fields without regard to Jamaican economic interests."

Jamaica needs money. The nation of 2 million people is suffering vicious inflation, now racing along at an annual rate of 25% to 30%, and more than one-fourth of its work force is unemployed. Revenues from bauxite exports have not risen as quickly as the prices of imports--including oil, for which Jamaica will pay $150 million this year, v. only $50 million in 1973.

New Taxes. Three months ago, Manley demanded that the aluminum companies renegotiate their contracts. But after ten weeks of vitriolic argument, the talks broke off. Manley professes astonishment at the companies' attitude. "They just would not offer a realistic figure," he told TIME'S Bernard Diederich. Company executives insist that they did not oppose higher payments--only the tough tactics that Manley adopted. In fact, the companies say, they offered to agree to a tripling of payments, but Manley refused.

Manley finally rammed through the Jamaican Parliament a set of new taxes and royalties calculated to raise Jamaica's revenues from bauxite to $200 million this year, eight times as much as in 1973. Though the companies are paying, they protest: Alcoa, Kaiser Aluminum and Reynolds Metals have announced their intention to take their case to the International Center for Settlement of Investment Disputes, a branch of the World Bank, for observation on the ground that the new taxes violate a lawful contract.

Manley has made it clear that he will not obey any adverse decision from that body and has told the aluminum companies that a new round of negotiations, aimed at securing a 51% government interest in all the companies' Jamaican operations, must now begin. He also demands that the companies sell the government their land, though he says that Jamaica will pay a fair price and give the companies continued access to the bauxite. Manley also has agreed with the governments of the neighboring countries of Trinidad and Guyana to build two new aluminum smelters in those nations--so that if the companies turn elsewhere for their ore, Jamaica can process bauxite into aluminum on its own.

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