Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

250. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Under Secretary of State (Hoover)¹

Washington, June 1, 1955.

SUBJECT

• Proposed Joint Program for Bolivia

The Problem:

To develop a sounder economy in Bolivia under a political system of which the United States can approve, by assistance to the present Bolivian Government and by encouraging that Government to take actions and follow policies which we consider desirable.

Discussion:

The economy of Bolivia is seriously depressed, due to its monoproductive emphasis on minerals production and reduced foreign exchange earnings from exports of those minerals, principally tin. The United States has been assisting that country by loans, technical assistance, and grant aid. $38.2 million of Export-Import Bank loans are outstanding or pending disbursement; technical assistance for fiscal 1955 is budgeted at $2.2 million; and approved expenditures since the fall of 1953 when grant aid was begun to avoid economic collapse, starvation and political chaos and to assist in the economic development program total $25.5 million; $7.7 million in developmental supplies and equipment, the balance in agricultural commodities, principally surplus commodities from CCC stocks. The budget proposals for the Mutual Security Program for fiscal 1956 include $16 million in additional aid. The necessity for aid will lessen and cease as a sounder economy is developed, and it is in our interest that this take place as promptly as possible.

The situation is complicated by the presence in Bolivia of a radical, nationalistic reform government, enjoying popular support, without effective opposition capable of taking power and maintaining order, made up of diverse elements including some extreme leftists but with moderately left of center elements in control. Originally tolerant of Communism, the regime has become increasingly anti-Communist. Originally distrustful of the United States, it now appears sincerely friendly. The regime states that it needs and welcomes private foreign capital, but there are elements within it which advocate degrees of state socialism and state capitalism which the United States would find objectionable.

It is felt that Bolivia should take certain steps at once which would promote the development of a sound economy based on private enterprise and improve the atmosphere for private foreign capital. Those steps have been incorporated in a proposed Joint Program for Immediate Action (Tab B),² in which both the United States and Bolivia would be expected to participate. The program requires the active cooperation of the Foreign Operations Administration and the expenditure of funds under the control of that Administration. It has been informally approved by action level officials of that Administration. It is planned to take it up with the highest officers of the Bolivian Government, with a view to acceptance in its entirety, promptly upon its approval by you and upon Mr. Stassen’s authorization of the necessary actions by the FOA.

Recommendations:

1. That you approve the proposed Joint Program (Tab B)

2. That you sign the attached letter to Mr. Stassen (Tab B)³

1. Source: Department of State, Central Files, 824.00/6–155. Confidential. Concurred in by Waugh, Topping, and Robert G. Sturgill of the Reports and Operations Staff of the Executive Secretariat.
2. The proposal was forwarded to the Embassy in Bolivia under cover of instruction A–135, June 10. (Ibid., 825.00/6–1055) For the proposal, which was adopted verbatim, see Document 253.
3. A handwritten notation on the source text by Topping reads: “Pearson says that act of signing letter means the program (copy attached to letter) was approved. JLT” The letter to Stassen is infra.