Foreign Relations of the United States: Diplomatic Papers, 1942, The American Republics, Volume V

710. Consultation 3/590

The Chargé in Bolivia (Dawson) to the Secretary of State

No. 1661

La Paz, February 2, 1942.
[Received February 7.]

Sir: I have the honor to refer to my telegrams Nos. 40 of January 26, 8 p.m., and 41 of January 27, 3 p.m., both in regard to negotiations at Rio de Janeiro between the Bolivian Minister of Foreign Affairs and the Undersecretary in regard to certain economic questions affecting Bolivia and the United States.

As I reported to the Undersecretary at Rio de Janeiro in a telegram dated January 28, 1 p.m., which was not repeated to the Department, I have seen most of the exchange of telegrams between the Bolivian Minister of Foreign Affairs, in Rio de Janeiro, and his Government covering the various problems discussed at Rio de Janeiro, i. e., the question of Bolivia’s breaking diplomatic relations with the Axis powers, that of the establishment of a Bolivian Development Corporation and that of the settlement of the Standard Oil problem in Bolivia.¹⁶ Some of these telegrams were shown to me by the President and others by the Acting Minister of Foreign Affairs.

Prior to Dr. Anze Matienzo’s departure for Rio de Janeiro, I had had extensive conversations with him about all of these matters. He had assured me of his complete support for a general breach of relations with the Axis powers by all of the American Republics. As stated in my telegrams Nos. 6 of January 5, 2 p.m.,¹⁷ and 13 of January 7, 7 p.m.,¹⁸ to the Undersecretary, Dr. Anze Matienzo had made it clear that he hoped to get Mr. Welles to sign some sort of a commitment for implementing the plan of economic cooperation between the two countries and to make an attempt to settle the Standard Oil question while at the Rio de Janeiro Consultative Meeting.

It was in order to present the Legation’s and Economic Mission’s considered opinion as to the best method of dealing with the first point and having a concrete proposal ready for consideration by Mr. Welles instead of relying on Dr. Anze Matienzo’s rather vague ideas that Mr. Bohan¹⁹ prepared the general outline of a Bolivian Development Corporation embodied in my telegram No. 5 of January 5, 11 a.m.²⁰ This seems to have formed the basis of the agreements on this point signed by Mr. Welles and Dr. Anze Matienzo at Rio de Janeiro.²¹

So far as the Standard Oil question was concerned, Dr. Anze Matienzo told me that he had secured President Peñaranda’s permission to take the matter up at Rio de Janeiro somewhat against the President’s own judgment but that he was willing to stake his political future on reaching a settlement and pushing it through on his return from Rio de Janeiro. In our conversations, we discussed possible formulas and amounts which might be paid which coincide closely with the agreement finally reached between Dr. Anze Matienzo and Mr. Herman A. Metzger, representative of the Standard Oil Company of New Jersey, as quoted in the Department’s telegram No. 39 of January 28, 9 p.m.²²

It seemed advisable to have Mr. Bohan go to Rio de Janeiro to assist in the conversations since he was the originator of the plan for a Bolivian Development Corporation and since the carrying out of any commitments which might be made at Rio de Janeiro would fall to the Economic Mission and the Development Corporation. Furthermore, I had discussed with him at length the ideas of Dr. Anze Matienzo concerning a Standard Oil settlement and it seemed that he could assist in that matter also. I accordingly telegraphed to the Undersecretary at Rio de Janeiro under date of January 9, 3 p.m.,²³ suggesting that Mr. Bohan be detailed to Rio de Janeiro to assist in the conversations with Dr. Anze Matienzo. The Undersecretary replied in a telegram of January 13, 1 p.m.,²³ asking that Mr. Bohan go to Rio de Janeiro immediately and this was confirmed by the Department in its telegram No. 17 of January 14, 2 p.m.²³ Mr. Bohan left on the latter date.

I had also arranged with Dr. Anze Matienzo before his departure to have Mr. Guillermo Mariaca go to Rio de Janeiro if Mr. Bohan were detailed there. Mr. Mariaca is the Bolivian official who has been most sensible in his approach to the Standard Oil problem and has for years endeavored in every way possible to support a settlement when no other Bolivian authority would touch the matter. It seemed evident that ensuring his advice for Dr. Anze Matienzo would be helpful toward the objective of a fair settlement.

On January 26 after the Consultative Meeting was under way, the Acting Minister of Foreign Affairs, Mr. Justo Rodas Eguino, showed me telegrams from Dr. Anze Matienzo in which the latter described in general terms the agreements he was reaching with the Undersecretary in regard to the Bolivian Development Corporation, covering an authorized capital of $25,000,000 and a loan from the Export-Import Bank of $10,000,000, as well as the proposed Standard Oil settlement. Dr. Anze Matienzo urged strongly that the Bolivian Cabinet take action to break diplomatic relations with the Axis powers and that he be authorized to announce at the Consultative Meeting that this had been done.

When he handed me these telegrams, Mr. Rodas Eguino also showed me his reply, stating that it had been drawn up at a Cabinet meeting and approved by the President and Cabinet. This reply did not touch on the Standard Oil questions. It told Dr. Anze Matienzo that he could announce at the Consultative Meeting that the Bolivian Government confirmed its intention to break relations with the Axis powers (not that it had done so) and asked him to secure commitments from the Undersecretary that:

1. the United States would guarantee Bolivia against any aggression by the Axis powers or other nations;

2. the capital of the Bolivian Development Corporation should be $40,000,000 instead of $25,000,000;

3. prices for the Bolivian minerals sold to the Metals Reserve Company would be raised, and

4. these prices would be figured f.o.b. Chilean ports (they already are in the tungsten contract but not in the tin contract) instead of c.i.f. New York.

It was stated clearly in the telegram to Dr. Anze Matienzo that these were to be considered as a “preliminary” to breaking relations. While the telegram did not say when the Bolivian Government would break relations with the Axis powers, Mr. Rodas Eguino told me that this would take place within two or three days if the above conditions were met.

I accordingly telegraphed a summary of the telegram and conversation to the Undersecretary and repeated this to the Department as my telegram No. 40.²⁵ I suggested that no commitments be made to Dr. Anze Matienzo until the breach in relations had actually taken place …

The Undersecretary’s reply of January 27, 4 p.m.,²⁶ which does not appear to have been repeated to the Department, stated that Dr. Anze Matienzo had made no suggestions to him touching in the slightest degree on the points outlined above. He added that it was the understanding in Rio de Janeiro, confirmed by press reports, that relations between Bolivia and the Axis powers had been broken on January 26.

From this telegram and subsequent conversations with Mr. Rodas Eguino and President Peñaranda, it seems obvious that Dr. Anze Matienzo did not comply with his Government’s instructions because (a) of his realization that its desires could not be met and (b) his willingness to fight through ratification of the agreements he was reaching with Mr. Welles on his return to La Paz with the assistance of Mr. Luis F. Guachalla, Bolivian Minister to the United States, a member of his delegation who has considerable prestige in Bolivia through his successful representation of Bolivian interests in the United States. It likewise appears probable that Dr. Anze Matienzo deliberately declared that his Government had broken relations with the Axis powers in an attempt to force its hand, realizing that the Government was wavering and being convinced himself of the advisability of such action as promptly as possible. These actions of Dr. Anze Matienzo were, of course, in the real interest of improved relations between the two countries and required very considerable courage. I reported the above conclusions to the Undersecretary in a telegram dated January 28, 1 p.m., but did not repeat it to the Department.

In the meantime, concerning the question of the supposed breach in relations, Dr. Anze Matienzo’s statement at Rio de Janeiro had caused his Government considerable anxiety. Relations had not been broken and the Bolivian Government was not certain when it would take the action and yet it did not wish to disavow its Minister of Foreign Affairs completely. It consequently … issued an official communiqué, published in the morning press of January 27, 1942, reading as follows, in translation:

“In accordance with the decision taken at the last Cabinet meeting, the Foreign Office has instructed the Bolivian delegation at Rio de Janeiro to state at the Consultative Meeting of American Foreign Ministers that the Government ratifies its adherence to the formula, already approved, recommending the breaking of relations with the Axis powers. Consequently, the decree putting this attitude into effect will be promulgated in due course.”

On January 27, 1942, I saw President Peñaranda in the company of Mr. Rodas Eguino and presented certain arguments to him in favor of an immediate breach of relations. These appeared to have some effect on him and he promised me that the appropriate decree would be forthcoming within two or three days, assuring me that the telegram to Dr. Anze Matienzo setting forth the commitments he should get from the Undersecretary were not, as stated in the telegram, a prerequisite to a breach of relations but merely an outline of what the Bolivian Government hoped the United States would do for Bolivia eventually. The President explained that the delay in issuing the decree was caused solely by the necessity for taking precautionary measures to prevent sabotage, etc., by Axis elements. The foregoing was reported to the Department in my telegram No. 41²⁷ and likewise in summary to the Undersecretary.

The President interrupted a Cabinet meeting to hold this half-hour conversation with me. The decree breaking off relations with the Axis powers was issued thirty hours later. Cabinet officers inform me that my conversation with the President and the fact that Dr. Anze Matienzo had stated that Bolivia had broken off relations were the two deciding factors, the President not having been certain whether Bolivia should not delay indefinitely and follow Argentina and Chile’s lead until the conversation.

Either Dr. Anze Matienzo has not yet fully informed his Government of the agreements he reached at Rio de Janeiro with Mr. Welles and Mr. Metzger, or it has not understood them. Unfortunately, instead of awaiting his arrival, not scheduled until mid-February because of a trip to Buenos Aires, or that of Mr. Guachalla, who is due in La Paz tomorrow, the Bolivian Government spokesmen have made wild statements as to what was agreed upon at Rio de Janeiro, including statements that Bolivia would get a credit of $40,000,000 in connection with the Development Corporation instead of the $10,000,000 which was agreed upon (this is apparently based upon the fact that Dr. Anze Matienzo was asked to have the authorized capital made $40,000,000 in lieu of $25,000,000; Mr. Rodas Eguino has persisted in disregarding the difference between authorized capital and the conditional Export-Import Bank Loan of $10,000,000 to the Corporation despite my continued efforts to make him understand the difference). … There is enclosed a translation of an interview²⁸ granted by the Acting Minister of Foreign Affairs to El Diario and published in the January 28 edition of that newspaper which will repay careful reading …

A further example of the Bolivian Government’s loose giving of publicity to its aspirations instead of the realities may be found in an official communiqué with regard to the Standard Oil settlement issued by the Office of the President and published in the morning press of February 1, 1942. This reads, in translation:

“The Government has received a suggestion in the sense of paying the Standard Oil Company $1,000,000 in exchange for all of the plans and studies carried out by the Company (in Bolivia). It would furthermore be declared that neither Bolivia nor the Standard Oil Company has any claims pending, the right of Bolivia to its petroleum being thus accepted.

“Simultaneously, the Export-Import Bank would lend us a first instalment of $5,500,000 for the development of our petroleum industry, which sum would be increased as necessary. This credit would be independent of others already agreed upon for help to mining, agriculture and communications.

“This subject will be definitely decided after consideration of the report which will be made by the Foreign Minister, Dr. Eduardo Anze Matienzo.”

Mr. Rodas Eguino has shown me much of the telegraphic correspondence exchanged between him and Dr. Anze Matienzo in regard to the Standard Oil question. Dr. Anze Matienzo informed him of the proposed terms whereby $1,500,000 plus interest from March 1937 would be paid by the Bolivian Government to the Standard Oil Company and the Export-Import Bank would open a credit of $5,000,000 for Bolivian petroleum development. To this, the Bolivian Government replied suggesting that the payment to the Standard Oil Company be reduced to $1,000,000 and the credit from the Export-Import Bank increased to $5,500,000. Dr. Anze Matienzo answered that this was impracticable. Nevertheless, the Bolivian Government has now announced to its public that the terms being considered are the ones it would like, not those signed by its representative at Rio de Janeiro. Incidentally, Mr. Rodas Eguino informs me that it was not the Government’s intention to say anything about the Standard Oil settlement until Dr. Anze Matienzo’s return but that it was felt necessary to do so since the fact that a settlement was under consideration had leaked from Cabinet meetings into the press and the Government thought it was essential to “give the public the true facts.”

Fortunately, the press had accepted the idea of a Standard Oil settlement without too much opposition and public opinion also seems to be inclined in the same sense, although the picture will undoubtedly change somewhat when it is found that the terms are not as favorable as the Bolivian Government has irresponsibly announced. However, now that the fundamental step of breaking relations with the Axis powers has been taken, Bolivia can no longer hold off and present the possibility of such a breach as a quid pro quo for further concessions. Once Dr. Anze Matienzo and Mr. Guachalla arrive and the matter is taken up in the Cabinet definitely, I believe that they, with such assistance as Mr. Bohan, Mr. Mariaca, and I can offer them, will be able to overcome obstacles and get the agreements approved. However, the situation will not be an easy one. …

Respectfully yours,

Allan Dawson

16. For correspondence on the negotiations between Bolivia and the Standard Oil Co., see pp. 586 ff.
17. Not printed.
18. Post, p. 586.
19. Merwin L. Bohan, Chief of the U. S. Economic Mission to Bolivia.
20. Not printed; for correspondence on the economic cooperation program, see pp. 592 ff.
21. See pp. 592–595.
22. Post, p. 587.
23. Not printed.
23. Not printed.
23. Not printed.
25. Dated January 26, 8 p.m., p. 515.
26. Repeated to the Department as telegram No. 63, January 27, 6 p.m.; not printed.
27. Dated January 27, 3 p.m., p. 516.
28. Not printed.