824.51/1177: Telegram
The Chargé in Bolivia (Dawson) to the Secretary of State
[Received 11:50 p.m.]
248. My 242, April 13, 6 p.m. and previous. Minister of Finance informed me yesterday that Bolivian Ambassador in Washington had advised that interest on proposed stabilization loan would be 1½% instead of 4% and said that Banco Central would consequently use it. He has been giving impression in conversations and press interviews that loan will be for revolution of boliviano instead of stabilization. Any strengthening of boliviano would partially nullify effects of increased tin price (see my telegram 245, April 14, 4 p.m.75). Strongly urge that Treasury, Metals Reserve76 and Department confer as these problems are intimately related.
Minister of Finance also said that he expected part of loan to be used for setting up government-controlled company to carry needed mining supplies. While I feel that such a company is essential, other funds will be available and stabilization funds should certainly not be utilized for the purpose.
My idea in recommending loan was purely as a gesture since under terms suggested by me credit would only have been used if absolutely economically necessary to maintain exchange position of Banco Central. I hope that no definite commitment has been made on an interest rate of 1½% since this would be an open invitation to Bolivian Government to raid Banco Central using equivalent of these funds for purposes not related to currency stabilization and thus in effect increasing the total foreign obligations due the United States under the program of economic cooperation. If the Treasury is not committed I again urge that the interest rate be made high enough and the collateral sufficiently ironbound so that the loan will only be used in case of necessity and for stabilization (the safe way to accomplish this is to make terms severe). Otherwise it would add another burden to the future foreign exchange position of Bolivia and increase the difficulties which will be present in any case in the repayment of the [Page 601] credits to which the Export-Import Bank is already committed. These credits will be controlled through the Bolivian Development Corporation whereas the stabilization loan if diverted will be under no control whatsoever.
As I have pointed out before the operation was intended solely to assure settlement of the Standard Oil question through guaranteeing exchange position of Banco Central.…