Office of the Historian

824.51/1171: Telegram

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

La Paz, March 28, 1942—2 p.m.
[Received 6:52 p.m.]

213. My 194, March 21, 2 p.m.,67 and 203, March 26, 11 a.m. With regard to the request of the Bolivian Ambassador that a $200,000,000 [$2,000,000] stabilization credit be granted the Banco Central for a period of 2 years, the Legation and the Economic Mission feel strongly that this credit should be granted immediately but upon the following terms: Definite hypothecation of Banco Central gold held by New York Federal Reserve Bank instead of general security of Banco’s reserves which we understand has been offered; 1 year with renewal clause. Government expects to pay 4% interest.

The reserve position of the Banco Central expressed in enough [sic] currency was as follows on March 25: Total, $15,400,000; gold $8,200,000 of which $3,000,000 held in New York; blocked and free pounds $3,100,000; $2,700,000; other currencies $1,400,000.

[Page 598]

There is no real economic justification for this credit. The Legation and the Economic Mission recommend that it be granted however for the following reasons:

(1)
It would assure Standard Oil settlement since the credit should not be opened until after the payment is made;
(2)
There would be no risk involved with the security suggested by us;
(3)
The way would be cleared for the proper financing of the Development Corporation to which the Minister of Finance70 has promised in writing $3,000,000 per annum for the duration of the war;
(4)
It should bring to an end the growing and now serious campaign to the effect that American aid is a myth;
(5)
The position of the two Cabinet officers who have loyally supported Standard Oil and economic cooperation agreements71 reached at Rio de Janeiro would be strengthened;
(6)
Refusal of credit would result in Cabinet crisis with one of two equally unfortunate results:
(a)
Resignations of the Ministers of Foreign Affairs and Economy72 who are definitely committed to the Standard Oil payment irrespective of the result of the stabilization loan application or
(b)
Resignation of Minister of Finance so that his party, whose leader started the attack on constitutionality of Standard Oil settlement procedure, could make political capital in coming electoral campaign out of alleged threat to currency and further disseminate allegations of American non-cooperation.

It is respectfully urged that immediate consideration be given to this problem and that we be advised of decision by March 31 if possible because of coming Bolivian holidays and desirability of having this troublesome question settled before political attacks make it more difficult.

Dawson
  1. Not printed.↩
  2. Joaquín Espada.↩
  3. For agreement with the Standard Oil Company of New Jersey, see telegram No. 39, January 28, 9 p.m., to The Chargé in Bolivia, p. 587; for the economic agreement, see note of January 27 to the Bolivian Minister for Foreign Affairs, p. 592.↩
  4. Eduardo Anze Matienzo and Alberto Crespo Gutiérrez, respectively.↩