Memorandum by the Adviser on Political Relations (Duggan)

The Minister61 permitted me to see a clipping from a La Paz newspaper containing the text of a telegram which Señor Salamanca had sent to Señor Paz Estenssoro, to the effect that the United States was prepared to consider a program of economic assistance to Bolivia without a prior or accompanying settlement of the Standard Oil problem.62

The Minister stated that this telegram had provoked considerable discussion in La Paz. The opposition was making it appear as though the visit of Salamanca and Prudencio had resulted in a change in the Department’s attitude, that these two deputies had accomplished more in their brief visit to the United States than had the Bolivian Government and its Minister in Washington in more than a year.

The Minister stated that he knew that neither Mr. Welles63 nor I had given these gentlemen to understand anything different than what had been conveyed to him from time to time. He would like to make two points clear: In the first place, the Bolivian Government had endeavored to secure credits from this Government but had failed because of the Standard Oil problem. The Minister referred particularly to the negotiations carried on by the Minister of Foreign Affairs with Mr. Welles in Panama in September, 1939.63a He stated that the same point of view had also been indicated to him from time to time by the Under Secretary, by Dr. Feis,64 and by me. In the second place, the Minister desired to remind the Department that it was he who had suggested, practically a year ago, that this Government make certain credits without exacting any commitment with regard to the Standard Oil question. He had suggested this Government grant Export-Import Bank credits to permit the financing of the Santa Cruz railroad.65 Mr. Welles had not turned the proposition down. On the contrary, he had stated that the first step was to have a detailed survey of the route in order to ascertain how much credit would be necessary. This attitude of Mr. Welles’ and the [Page 435] subsequent making of the survey gave the Bolivian Government grounds to believe that, at the opportune moment, credits would be forthcoming, even though the Standard Oil question had not been settled.

I informed the Minister that I was sorry if his Government or he had been placed in an embarrassing position because of Señor Salamanca’s telegram. I said that he was quite correct in his assumption that nothing had been told Señor Salamanca that had not been repeated frequently to the Minister. I said that, after his last call on Mr. Welles, the latter had requested that the Bolivian situation be reviewed. I explained that a memorandum had been drawn up and was about to be presented to Mr. Welles which would suggest various new approaches to the problem. I told the Minister that I would let him know as soon as a decision had been arrived at but indicated that, in a case of this kind, a decision not only of the Department but also of the Federal Loan Administrator66 might be necessary.

The Minister stated that he would withhold compliance with new instructions which he had just received, to present a request for a $36,000,000 loan. Of the total amount, $30,000,000 would be used for the Santa Cruz railroad, $3,000,000 for stabilization purposes, and $3,000,000 for miscellaneous public works including certain road construction. The Minister volunteered the information that, since the last conversation, he had been thinking over my suggestion that, instead of investing such a large amount of money in a railroad which would help only one section of the country, it would be far better to build a highway network that would tie the country together and help all parts.

  1. Luis Fernando Guachalla, the Bolivian Minister.
  2. See pp. 464 ff.
  3. Sumner Welles, Under Secretary of State.
  4. For correspondence regarding these negotiations, see Foreign Relations, 1939, Vol. v, pp. 313322.
  5. Herbert Feis, Adviser on International Economic Affairs.
  6. For correspondence regarding proposed railroad construction in Bolivia, see Foreign Relations, 1940, Vol. v, pp. 548 ff.
  7. Jesse H. Jones.