The Secretary of State to the Minister in Paraguay (Nicholson)
29. Your 33, August 1, 10 a.m. and Department’s 27, July 27, 11 a.m. and 28, July 27, 6 p.m. The hostile comment to which you refer and the statement published as coming from the Minister for Foreign Affairs appear to be based upon complete misapprehension of the situation. The Joint Resolution and the Proclamation of the President issued in accordance therewith did not impose an embargo as stated in your cable under reference, but solely a prohibition of sales of arms and munitions to Paraguay and Bolivia. The imposition of an embargo would have been contrary to the provisions of our existing commercial treaties with Paraguay and with Bolivia. The arms and munitions of a total value of $615,000 destined for Bolivia and excepted from the prohibitions of the Joint Resolution had been manufactured under contracts entered into in good faith long prior to May 28th, the date of the Proclamation; had been paid for in whole or in part; and in all cases the process of manufacture had been nearly completed. As you have been already advised, these exceptions were made after a protracted and painstaking study of all contracts between the Bolivian Government and American manufacturers and were necessarily made solely on the grounds of equity and fair dealing. Identical action would have been taken if any similar contracts between the Paraguayan [Page 298]Government and American manufacturers had existed. The attitude of friendly but strict impartiality as between the belligerents consistently maintained by this Government is, the Department trusts, recognized by the Paraguayan Government, and the statement issued by the Minister for Foreign Affairs referred to in your cable is a matter of some surprise to this Government.
You may, in your discretion, seek the earliest opportunity of discussing these facts as indicated above very frankly with President Ayala and with the Minister for Foreign Affairs. You may point out that the action taken by this Government with regard to prohibiting the sale of arms and munitions to Paraguay and Bolivia was taken of its own initiative and prior to similar action taken by other governments. You may further take the opportunity of stating that information has been received by this Government from various sources that Paraguay has been receiving shipments of arms and munitions from European countries where she had placed contracts prior to the imposition of any arms embargo by those countries, whereas it is our understanding that all recent contracts for armaments had been placed by Bolivia in the United States and that the operation of the prohibitions of the Joint Resolution and the President’s Proclamation has prevented Bolivia from receiving more than approximately one-third of the total value of munitions contracted for in this country. With regard to the continuing references made in the Paraguayan Press to the influence of the Standard Oil Company, the Department has received from the President of the Standard Oil Company of New Jersey a copy of a message sent by him to the Secretary of the League of Nations on July 27th, of which a full copy is being sent to you by air mail. This message asserts that none of the Company’s concessions lie within the territory in dispute and that the total actual production during 1933 from the Company’s concessions in Bolivia was an average of 307 barrels per day, sold locally within Bolivia.
It is believed that it would be very helpful if the facts as above set forth were made available to public opinion in Paraguay so that there may be no room for doubt as to the friendly and consistently impartial attitude of this Government as between the two belligerents.
The conciliation formula21 presented by Dr. Saavedra Lamas to the Governments of Paraguay and Bolivia was supported in Bolivia by the Governments of Brazil and of the United States at the request of the Argentine Foreign Office. It is our confidential understanding that the Bolivian Government accepts the formula in principle provided the Government of Argentina, Brazil, and the United States are joined by Chile, Peru, Colombia, Uruguay, Mexico, and Cuba in presenting the formula officially to the two belligerents. The Argentine [Page 299]Minister for Foreign Affairs is now discussing the points raised in the Bolivian reply with the Paraguayan Government and this Government, together with the Brazilian Government, has agreed to support such representations as Dr. Saavedra Lamas might make to the Paraguayan Government for the purpose of conciliating the Paraguayan and Bolivian points of view with regard to the formula at such time as he might deem appropriate. The Department consequently believes it advisable that you should not discuss the attitude of the United States with regard to mediation until you receive further instructions, which will be sent you upon receipt of further advice from the Argentine Foreign Office.