No. 911.
Mr. Bacon to Mr. Bayard.

No. 257.]

Sir: During the past year there have been several ineffectual attempts to settle the question of the “Chaco limits” between Paraguay and Bolivia.

Diplomatic efforts in this regard having failed, the parties have come to an open rupture at a place called Puerto Pacheco, on the river Paraguay, near the Bolivian frontier.

So far as I can ascertain, the facts leading to this conflict (which will afterwards be more particularly described) are as follows: About four years ago a Bolivian citizen, Suarez Arana, having first obtained permission from the Paraguayan Government, founded a colony, or “agricultural center,” at or near the point above indicated, which he named Puerto Pacheco, and from which he proposed to open a highway into Bolivia and ultimately induce the construction of a railway connecting the two countries.

A short time thereafter Bolivia began to send military pickets to the said point and to exercise certain acts of dominion and possession over the same.

The Paraguayan Government resisted these acts, and it was supposed that the difficulties arising from the dispute had been settled by what is termed here the “Aceval-Tamayo treaty” between the two countries. This treaty, however, it seems, was ultimately rejected by the Bolivian Congress, and thereupon the Government of Paraguay, in order to be ready for an emergency, sent a small garrison under the command of Sergeant-Major Gimenez to Fuerte Olimpo, the most advanced northern position of the Chaco, to watch, report, etc., as to the acts of the Bolivian Government at Puerto Pacheco.

The Bolivian minister at Asuncion demanded an explanation of these movements, which was not, when given, satisfactory.

Recently a crime having been committed in Puerto Pacheco, the Paraguayan Government directed the commander at Fuerte Olimpo to investigate the matter. Gimenez, the said commander, having proceeded with this view to Puerto Pacheco accompanied by a small guard, one Don Enrique Moscoso, called the administrador de la colonia, familiarly called the governor, demanded a satisfactory explanation of the Paraguayan military advance.

Gimenez replied that the country, including the said point, Puerto Pacheco, was Paraguayan territory and that he would not recognize any other than Paraguayan authority over the same. The Bolivian administrator insisted that the territory was Bolivian and that he had been placed in command thereof by his Government.

Thereupon the Paraguayan commander ordered the taking down from the Bolivian administration quarters of the Bolivian shield, which being resisted, the said administrator and his guard were taken prisoners and carried to Asuncion.

The Bolivian minister at that city demanded the immediate release of the prisoners, which was ultimately accorded, save that of the alleged criminal, who was retained for trial.

This conflict and arrest created great excitement along the Paraguayan [Page 1358] River, especially in and about Malto Grosso and Corumba, while at Puerto Pacheco there reigned the greatest indignation on the part of the Bolivians and their allies, the Chamacos Indians, more than a thousand of whom (the latter) were reported to have been seen near the river ready for battle.

Notwithstanding all of this, the Paraguayan journals say that there will be no war, as the Paraguayan rights to the territory in question are so apparent and incontestable that Bolivia will be forced to yield all pretensions thereto.

Meantime Bolivia is in the midst of a revolution and nothing definite can be heard as to the intentions of that Government in the premises.

This Chaco or Gran Chaco, as it is called, is an immense territory lying to the west and northwest of the rivers La Plata, Paraguay, etc., and has been, until within the last ten or twenty years, regarded as comparatively worthless, owing to its supposed impenetrable swamps, dense morasses, and uninhabitable territory. The recent tide of immigration, however, to the Plata Valley, gave rise to surveys of portions thereof and disclosed astounding developments of its fertility salubrity, and other desirable qualities.

These qualities, as gradually developed, have given rise to great contentions as to proprietorship thereof by the neighboring States, especially those of the Argentine Republic, Paraguay, Chili, and Bolivia.

The limits, so far as the Argentine Republic and Paraguay were concerned, were left to arbitration (as is known) to President Hayes, who decided in favor of Paraguay. This decision has been of far greater importance, in every way (especially financially), than was anticipated. Indeed, there has poured into the Paraguayan treasury, from the sales of lands accorded to the Government by said arbitration, a large amount of money, and it has been greatly instrumental in the rapid improvement, financially and otherwise, of the Republic.

I have been promised by a reliable authority the Bolivian version of the matter, and, if furnished, will advise the Department thereof.

I am, etc.,

John E. Bacon.