824.6363 ST 2/145

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

No. 244

Sir: I have the honor to refer to my despatch No. 241, dated May 31, 1937,42 and to report that Mr. C. J. [F. C.] Pannill had his first [Page 291] preliminary conversation with the Bolivian Minister of Foreign Affairs yesterday. The immediate object of Mr. Pannill’s visit was to inquire, under instructions from New York, directly of Dr. Finot whether or not the Junta of Government was prepared to revoke, or cancel, the decree of March 13, 1937, as an essential precedent to the opening of discussions. Dr. Finot emphatically replied that this would be impossible for internal political reasons. Dr. Finot added that there was no object in discussing the legal aspects of the case for, “right or wrong, the Government is right”. He added that since the Company, for its own reasons, does not desire to go to the Supreme Court, the only way out is for a transactional agreement, and added that the final agreement could be so drawn up that it would be in fact a revocation of the decree of March 13, 1937. Mr. Pannill informed me that Dr. Finot received him most cordially, and he gathered a distinct impression that the Minister of Foreign Affairs wants an adjustment.

Present indications are that if the Standard Oil Company of New Jersey is merely interested in getting out of Bolivia, desires only to obtain as much financial compensation as possible and is not interested in the equities of the case, an agreement would not be impossible.

Mr. Pannill, however, is becoming more and more inclined to the view that the aim of the Company should be to thwart the Bolivian Government’s acts and delay it from consummating its plans with the Y. P. F. of Argentina. Dr. Finot mentioned to Mr. Pannill during the course of the conversation that Bolivia was at the mercy of the Argentine in this, as well as in other matters. Mr. Pannill feels that this case might be made a good precedent to all Latin American countries, particularly the Argentine and Peru, that the Standard Oil Company prefers to accept financial losses than to allow these countries to get the impression that it can be forcibly expulsed.

I personally feel that an agreement without some prior understanding regarding cancellation of the March 13 decree is not advisable. It would appear that the best course would be for the Company to present the memorandum regarding the legal aspects of the case (this has not yet been completed by Dr. Carlos Calvo), then make a formal petition that the decree be cancelled and the Company’s previous status fully restored, as a precedent to opening discussions towards an agreement legally transferring the properties to the Government. I am confident that Toro and Finot would not dare cancel the decree in view of the internal political situation. The result would be that the Company would have to bide its time until the political set-up here changes and then have recourse to the Bolivian courts.

[Page 292]

I have come to the conclusion that this would be the better course since any agreement otherwise made with the Government would inevitably be interpreted throughout Latin America as a successful expulsion of the Standard Oil Company by the Bolivian Government, would eliminate any legal rights the Company might still have, the Company could expect very little compensation the payment of which would always be problematical, and it would be playing into the hands of the Argentine Y. P. F. The Bolivian Junta of Government at present appears to be wobbly, and any agreement involving payment over a period of time would probably not be recognized by any succeeding Government, particularly not by the young militarists.

Respectfully yours,

R. Henry Norweb
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