824.6363 St. 2/589: Telegram

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

219. My 194, March 21, 2 p.m.53 After numerous conversations by Bohan54 and me with President, Cabinet officers and others involved, Cabinet yesterday decided unanimously to make Standard Oil payment as soon as possible and Banco Central directors approved loan to Government of $1,750,000 with which to make payment. The payment thus will be made by the Government itself as provided in Rio de Janeiro agreement and not by YPFB55 as recently contemplated. Am assured by personal letter that payment will be made in Washington next week, probably April 7, regardless of whether $2,000,000 so-called stabilization credit bill of Export-Import [Page 591] Bank to Banco Central is forthcoming although they hope for it and Guachalla56 has been optimistic as to chances of securing it.

While situation has changed thus since my 213, March 28, 2 p.m.,57 Bohan and I still recommend strongly that credit be offered. Our reasons are:

(1)
It will take ground from latest accounts oppositionists’ allegation that payment to Standard Oil endangers reserves of Banco Central and help our friends to stand firm.
(2)
The credit will probably not be used as Banco Central is not likely to want to pay 4% interest when it does not really need the money and can get short term credits from New York commercial banks cheaper.
(3)
With the form of guarantee we have suggested there would be no risk.
(4)
And most important. It will be months before any of the credits from the Import Bank to Bolivian Development Corporation can be opened. With congressional elections only a month off the story already current that the Bolivian Government is paying Standard Oil but that the promised aid from the United States Government is a fable will be spread and probably result in losses to Government in elections unless evidence to the contrary is produced. An announcement of a $2,000,000 credit would counteract this effectively, as we have said before this is really a political not an economic matter. Weak and bad as the Government is it does cooperate within limits and it is to our interest to help it unobtrusively instead of playing into the hands of the opposition which is much less friendly.

Dawson
  1. Not printed.
  2. Merwin L. Bohan, Chief of the U. S. Economic Mission.
  3. Yacimientos Petrolíferos Fiscales Bolivianos.
  4. Luis Fernando Guachalla, Bolivian Ambassador in the United States.
  5. Post, p. 597.