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

No. 684

Sir: I have the honor to refer to previous correspondence concerning the possibility of reorganization or replacement of Lloyd Aéreo Boliviano, the Bolivian domestic aviation company, particularly my despatch No. 682 of March 3, 1941, and my telegram No. 19 of March 5, 3 p.m.10

In view of the continually postponed return to La Paz of Dr. Alberto Ostria Gutiérrez, Minister of Foreign Affairs, and the desirability of ascertaining definitely what action had been taken by the Bolivian Cabinet on the aide-mémoire in regard to consideration of a plan for reorganization of L. A. B., left with the Minister of Foreign Affairs on February 20 in accordance with the Department’s telegram No. 12 [13] of February 18, 8 p.m., I directed an officer of the Legation to discuss the question yesterday morning with Mr. Joaquín Espada, Minister of Finance, the Cabinet officer who has taken most direct interest in the question of dispensing with German influence in L. A. B. [Page 406] Mr. Espada stated that the aide-mémoire had been submitted to the Cabinet meeting on February 21, 1941, and that the Cabinet had agreed in principle to the working out of a plan for the reorganization of L. A. B. or its replacement by a new company with the elimination of German influence and management and to welcome the sending of a representative of Pan American–Grace Airways to try to work out an acceptable plan with the appropriate Bolivian officials. Mr. Espada said that the sense of the Cabinet meeting was that the Minister of Foreign Affairs should so inform the Legation. While the officer of the Legation was in Mr. Espada’s office, the latter telephoned to the Under Secretary of Foreign Affairs to enquire whether the Minister of Foreign Affairs had not given him instructions in this sense. The Under Secretary replied that he had seen his Minister for only a few minutes between the Cabinet meeting and his departure and that the matter had not been mentioned. The Minister of Finance then stated to the officer of the Legation that he thought his own statement that the Cabinet had agreed in principle to the Department’s proposal could be taken as an informal answer pending the return of the Minister of Foreign Affairs.

Mr. Espada went on to say that the President was, of course, fully informed of the program … He said that there was general agreement in the Cabinet that German influence would have to be eliminated from L. A. B. and that the only questions were as to the proper time to do so and the exact method of procedure. He stated that General Carlos Blanco Galindo, the Minister of Defense, had suggested that action be delayed until after the report of the committee appointed by his Ministry to investigate L. A. B. and the investigation by the Comptroller General11 of L. A. B. finances had been completed in order to have full ammunition to utilize against the present L. A. B. organization and that this was agreed to. Mr. Espada added that the Comptroller General had gone to Cochabamba, the headquarters of L. A. B., to try to obtain data.

Mr. Espada then remarked that he thought it essential for a representative of Pan American–Grace Airways, preferably Mr. Vidal since he had dealt with the matter before and was fully conversant with it, to come to La Paz promptly.…

Mr. Espada went at some length into the question of what form reorganization of L. A. B. services should take in his opinion. He said that the so-called international service of L. A. B., from La Paz to the Brazilian border should be turned over to Pan American–Grace Airways to run direct as part of its lines and that he hoped for an adequate United States Government subsidy for this line so that it could be properly run.

[Page 407]

On the question of the rest of the services of L. A. B., Mr. Espada said that there would have to be complete reorganization. He remarked that the equipment of the company was completely obsolete and that three modern planes would be necessary for adequate service. He said that he hoped it would be possible to obtain these through the good offices of the United States Government and mentioned a loan. He added that it was the intention to continue the present subsidy to L. A. B. which, he thought, would be sufficient for the operation of the domestic lines on a proper basis but not to make the lump sum capital investment involved in securing three new planes.

Mr. Espada then stated that the Deutsche Lufthansa had offered three planes but had made conditions whereby new stock in L. A. B. would be issued to it for their value. This would result in complete German control over the company which was exactly what he and the Bolivian Government in general wished to avoid.

. . . . . . . . . . . . . .

Mr. Espada terminated by saying that all of these problems required careful consideration with someone qualified to present concrete proposals on behalf of Pan American–Grace Airways with the backing of the United States Government in order that a definite program might be worked out and that for these reasons he thought that Mr. Vidal’s prompt arrival in La Paz was most desirable. He remarked that the actual mechanics of reorganizing or replacing L. A. B. could be worked out after a plan for operation had been decided upon.

As I have stated in previous despatches, it seems to me that the essential thing is for the Department and Pan American–Grace Airways to come to a decision as to what can be done and then be prepared to push the matter through to a conclusion.… I consequently feel that a decision in Washington as to what can be offered to the Bolivian Government and the return of Mr. Vidal in the near future to work on such a program as may be agreed upon are advisable.

Respectfully yours,

Douglas Jenkins
  1. Neither printed.
  2. José Alcides Molina.