824.51/565: Telegram

The Minister in Bolivia (Feely) to the Secretary of State

71. My telegram No. 70 of October 13, 4 p.m. Minister for Foreign Affairs today handed me legalized copy of the Supreme Economist Council, saying that this memorandum represented the views of his Government as to practical remedies for the threatening financial crisis. Memorandum which is being forwarded by air mail recites at length causes for present depression, including fall in prices of Bolivia’s principal exportable products, large budget deficit, heavy foreign debt service and unemployment, and points out danger of [Page 430] spread of communism as a result, and probable inability to meet December and January quotas of debt service in spite of Government’s desire to maintain its credit abroad.

Memorandum arrives at certain conclusions which Minister for Foreign Affairs requested I transmit as an official invitation to the bankers concerned, at the same time intimating that the Bolivian Government would welcome the appointment of an official representative of the United States Government on the proposed commission.

The conclusions are as follows: That a commission made up of representatives of the American bankers interested be immediately organized and that the Republic of the United States be requested to appoint an official representative on the commission; that said commission recommend a plan of consolidating foreign debt; investigate the possibility of investment American and Bolivian capital in new industries; that the organization of the commission be negotiated simultaneously with the United States Government and American bankers by the American Minister in La Paz and Martínez Vargas already appointed Bolivian Special Agent in New York and Washington; that if Martínez Vargas decides consolidation can be arranged in New York commission need not come to La Paz; that as December-January debt service amounts to $1,838,000 negotiations should be undertaken immediately so that commission’s recommendations may be made effective and if possible short-term credit accorded by bankers for December-January service if consolidation plan is not completed then.

In accepting the memorandum I expressed the opinion that, while the Department would undoubtedly be pleased to transmit the invitation to the bankers and would follow the course of any negotiations with interest, I could not assure him that my Government would accept an invitation to participate officially. The Minister for Foreign Affairs then suggested that invitation be transmitted to the bankers and that I ask what the Department’s attitude would be toward the appointment of an official representative on the commission. Telegraphic instructions would be appreciated.

Feely