The Chargé in Bolivia ( Dawson ) to the Secretary of State
[Received November 4.]
Sir: I have the honor to refer to the Department’s telegram No. 204 of October 25, 1941, 5 p.m., directing me to endeavor again to dissuade the Bolivian Government from sending a mission to the United States to discuss the program of economic cooperation before the completion of the contemplated surveys by the United States economic mission to be headed by Mr. Merwin L. Bohan and studies thereof.
In the course of conversations this morning with Dr. Eduardo Anze Matienzo, Bolivian Minister of Foreign Affairs, and Mr. Joaquin Espada, Minister of Finance, while I was presenting Mr. Philip W. Bonsai, Acting Chief of the Division of American Republics of the [Page 445] Department, I took the opportunity to comply with the Department’s instructions by pointing out that the economic mission would shortly be in Bolivia and that its careful and detailed studies would be necessary as a basis for adequate discussion of any program of economic cooperation.
In contrast to previous conversations some time ago with both men, I found them both completely receptive to the idea. Two factors were probably responsible for this change in attitude: (1) the fact that I have recently been able to give them concrete information as to the proximate arrival of the members of the mission, and (2) reports from Mr. Luis Fernando Guachalla, the Bolivian Minister in Washington, advising them that the way to handle the question of economic cooperation was not to make a request for a lump sum loan at the present time but to await the report of the economic mission. (Dr. Anze read us part of a letter from Mr. Guachalla which served to give this impression; Minister Guachalla’s brother, Mr. Carlos Guachalla, has told me that he had received information from his brother that he was bringing pressure to bear on his Government in this sense.)
…The Minister of Finance went into an exposition of the Standard Oil case, giving in résumé some of the usual Bolivian criticisms of the Standard Oil Company for its “obstructionist” attitude during the Chaco War but stated that he had always held that, regardless of the failings of the company, a contract was a contract and that the question should be settled.
With regard to the question of the foreign debt, he explained in a reasonable manner why Bolivia had been forced to default on that debt: (1) because of the world-wide economic depression of 1930 and subsequent years, and (2) because of the continued financial difficulties of Bolivia as a result of having to fight a long and disastrous war with Paraguay. He made the interesting admission for a Bolivian official (I have never heard it from the lips of any Bolivian, although it coincides with the Legation’s opinion) that Bolivia is in a relatively better economic condition than any other South American country as a result of its increased sales of its principal exports, minerals, at high prices. Mr. Espada stated that his primary object since being Minister of Finance was to improve Bolivia’s financial position and increase its reserves of foreign exchange, having succeeded in bringing these up from $6,000,000 or $7,000,000 to $14,000,000. He said that his objective was to make Bolivia’s finances and currency situation thoroughly sound so that it could be in a position to meet its foreign obligations honestly on a necessarily modified basis in keeping with its capacity to pay.[Page 446]
Going on from this discussion, Mr. Espada said that he hoped to reorganize the Banco Central, the central government bank of issue, and to stabilize Bolivian currency. In this connection, he remarked that he hoped to get adequate advice on these subjects from Mr. Bohan; that he had thought of requesting assistance from Dr. Edwin W. Kemmerer74 but that it seemed better to use the economic mission since it would make a thorough survey of all possible phases of economic cooperation. I ventured to comment that, while I was sure that Mr. Bohan would be glad to be of any possible assistance, his principal task would be to coordinate and direct the activities of the mission and he was furthermore a general economist rather than a banking and currency specialist. Mr. Espada said that he hoped that such a specialist might be a member of the mission.
It occurs to me that if the Department wishes to have the questions of central bank reorganization and currency stabilization considered in connection with the mission, it might be well to detail a specialist in these matters to serve with the mission. It is my understanding that the general question of Bolivian currency stabilization has already been taken up with the Department by the Bolivian Minister in Washington.
- Professor at Princeton University and president of Economists’ National Committee on Monetary Policy.↩