824.6363 ST 2/196

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

No. 73

Sir: Referring to my telegram No. 65 of November 16, 9 a.m. I have the honor to report that I have not yet received a reply regarding my inquiry made to the Minister of Foreign Affairs on November 15, as to the possibility of an extension of the ninety day period provided by the decree of October 22, in order to allow adequate time for the preparation of its case by the Standard Oil Company as well as to facilitate informal negotiations in a friendly spirit. It seems probable that a decision on this important question will not be reached until the regular meeting of the Junta of Government which is expected to take place on Friday morning November 19.

In the meantime President Busch has given an interview to the press which appeared in La Razon for November 16, (of which a complete translation is enclosed in Despatch No. 72 dated November 17,54) in which among other topics he re-states publicly his belief in the illegal character of the acts previously charged by the Government against the Standard Oil Company of Bolivia.

I continue to believe that the friendly conversations which have been proposed may still be useful in giving more time for careful consideration of all aspects of the case. In the light of the recent public declaration by the President of the Bolivian Republic, I have however [Page 306] come somewhat reluctantly to the conclusion that the issue between the Government and the Company is now too sharp and definite to be capable of ready adjustment or compromise.

On the one hand the Bolivian Government has stated publicly on various occasions that the Company was guilty of deliberate frauds which justify, morally and legally, the confiscatory decree of March 13, 1937. On the other hand the Company maintains the position that no frauds were committed and that the decree of March 13, is wholly arbitrary and illegal; and further points out the fact that, although the Government has had exclusive control of the confidential files of the Company since the date indicated above, convincing evidence of deliberate fraud has not yet been adduced, for the reason that in its judgment such evidence does not exist.

On an issue so sharply and publicly drawn, it seems to me almost impossible for either this Government or any other which is likely to succeed it to give a decision favorable to the Company, at least on the fundamental question of principle which is involved. This difficulty applies not only to the executive branch but also to the judiciary which is—as I believe reliably reported—to be completely subject to the control of the executive.

Even such a favorable judgment on the main question, entirely improbable as it seems, would scarcely be satisfactory from the broader point of view of the American interests in this part of the world. For there can be little doubt that the agency, either executive or judicial, making such a favorable decision would at once be charged not only by the newspapers in Bolivia but also throughout South America with having yielded to pressure from the American Government; and some newspapers would undoubtedly go so far as to say that the agency in question had yielded not only to intimidation but even to bribery.

On the other hand in case, as seems entirely probable, the executive or judicial opinion should be unfavorable to the Company, the Company would undoubtedly continue to believe, with considerable show of reason, that it had been the victim of a prejudiced unilateral decision; and for that reason the amicable solution of the question would be made still more difficult and remote than it is today.

The fundamental question at issue is however a definite matter of law and of fact; and especially in the new circumstances which have now arisen, I venture to express the personal belief that it is exactly the kind of a question which ought to be capable of solution, with due regard to the proper dignity of all parties concerned, by the adjudication of an impartial outside agency; and to add that in my judgment a situation has now arisen in which such a solution is the only one which gives any great promise of just and mutually satisfactory results. This seems especially true because such a solution [Page 307] would be so completely in accord with the principles so recently enunciated at Buenos Aires and because it would avoid inevitable criticisms which would otherwise be raised by one party or the other against the American Government on grounds of supposed partiality in the case.

In this purely tentative suggestion, I do not of course have in mind, at least at the present time, anything approaching a formal international arbitration. For I realize that the position of the American Government is that of a friendly mediator rather than of a party to the dispute. For that reason, and also because of the decisive character of the result for the two parties directly concerned, such reference of the fundamental issue to an impartial outside agency would almost necessarily originate with one or the other of the two parties, perhaps as an item in the friendly conversations which have been proposed.

It seems reasonable to suppose that the Bolivian Government might welcome a possible solution which, in the light of existing local opinion on the question, would relieve it from the necessity for a direct decision which must at best prove to be difficult and embarrassing. Since, however, the attitude of either party to such a possible solution is as yet necessarily unknown, and remains a matter of mere surmise, if at any time direct information should seem desirable to the Department, it would of course be feasible, and perhaps even helpful, to sound out in a purely personal and informal way the views of the Minister for Foreign Affairs on a solution of this general type, and in the first instance purely as a matter of background regarding an important question of common interest.

Respectfully yours,

Robert G. Caldwell
  1. Not printed.