824.6363 ST 2/176
The Minister in Bolivia ( Caldwell ) to the Secretary of State
[Received September 30.]
Sir: In compliance with the Department’s strictly confidential instruction No. 4 of September 11, 1937, enclosing a memorandum dated September 7, 1937, regarding the difficulties between the Bolivian Government and the Standard Oil Company of Bolivia, I have the honor to report that, negotiations between the Company and the Bolivian Government having now been in abeyance for some time, the concrete features of the situation have not been substantially modified in any respect not previously reported to the Department in earlier despatches from the Legation.
From a careful examination of the files on this subject, however, and on the basis of informal conversations with persons who are presumably well informed, it may not be without convenience to summarize the chief features of the existing situation somewhat as follows:
- 1.
- The present Government of Bolivia is generally regarded as more conservative and reliable than its predecessor, this remark applying particularly to President Busch, who, although without large political experience, gives the impression of a definite desire to give to the country a reasonably honest and effective government. President Busch has secured the cooperation of a number of individuals who are generally respected for their ability and integrity, especially the Minister of Foreign Affairs, Dr. Fabián Vaca Chávez, the Minister of Finance, Dr. Federico Gutierrez Granier, and the Minister of Mines and Petroleum, Colonel Felipe M. Rivera, who spent three years as a student in the United States and who seems especially friendly. This Government has, of course, inherited a situation with regard to the development of oil in Bolivia which was not of its own making, and is accordingly in a better position to seek a solution than that of Colonel Toro, who was so openly and publicly committed to a specific, radical policy in this respect.
- 2.
- It seems to be generally recognized here in La Paz, as was at one time frankly acknowledged by Minister Finot in a conversation with Mr. Norweb, that the charges of fraud, on account of the shipment of 704 tons of crude oil by the Standard Oil Company of Bolivia in 1925–1926, were of a purely technical character. In any case, in connection with the decree of confiscation of March 13, 1937, and later, no real evidence was adduced that there had been any conscious or deliberate fraud on the part of the Standard Oil Company of Bolivia. If any facts of this character were in existence it would [Page 297] seem reasonable to suppose that such information would have been made public long since. On the other hand, the real grievance of the Bolivian Government lay in the fact that the Standard Oil Company of Bolivia was supposed to be treating its oil concessions as a potential reserve and that, however sound the reasons might be from an economic point of view, it had proved unwilling to proceed to the development of these oil fields even to the extent of supplying the ordinary necessities of the country. There seems to be little doubt, accordingly, that a leading purpose in the measure of confiscation was the hope of securing the rapid development of oil regions which were supposed to be capable of very much larger production and, at the same time, of using the property thus acquired as a pawn in the solution of pending difficulties between Bolivia and Paraguay arising out of the controversy in the Chaco.
- 3.
- Almost from the beginning thoughtful and intelligent Bolivians, even those connected with the Government, came to realize that Bolivia had neither the capital nor the necessary technical ability or experience to work out by herself the difficult problems connected with the production of oil. Thus, it is currently reported that, even without capital charges, the small quantity of gasoline now produced is marketed at a serious loss. Accordingly, it has been entirely natural for Bolivia to look to outside assistance in this respect, particularly to Argentina and to some extent Brazil. A solution along these lines has, however, proved to be much more difficult than had been previously expected, partly on account of the well known rivalry between these two neighbors and also on account of the very doubtful legality of the Bolivian Government’s title to the property of the Standard Oil Company of Bolivia under the confiscatory decree of March 13, 1937.
- 4.
- Probably for the reasons indicated above, members of the present government make no secret whatsoever of their desire to arrive at a definite solution which would remove existing doubts as to the validity of title. In the existing political situation it would obviously be extremely difficult for even a very strong government to cancel the confiscatory decree or to make an outright return of the property in question. It seems probable, however, that the Bolivian Government would be willing to consider an arrangement withdrawing previous charges of conscious fraud and arranging for compensation to the Standard Oil Company of Bolivia for the property rights which the Bolivian Government greatly needs in connection with both its diplomatic and its economic plans. It has even been suggested in this connection that indirect technical participation by the Standard Oil Company might not be unwelcome to Bolivian authorities as a possible off-set to the only other alternative, which would appear to be the [Page 298] active development of the oil regions of Bolivia by such powerful neighbors as Argentina or Brazil.
In this connection it may also be mentioned that it is the belief of certain diplomatic colleagues who are often well informed, particularly the Peruvian and the Mexican Ministers, that the question of the oil fields is intimately connected with negotiations for a final settlement of difficulties in the Chaco and that a previous settlement of the oil problem would facilitate the determination of a definite, permanent boundary between Paraguay and Bolivia in this region.
Respectfully yours,