740.00112A European War 1939/10867

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

No. 2007

Sir: I have the honor to refer to my confidential despatches Nos. 1873, 1874, and 1909 of March 20, March 21 and March 28, 1942, respectively,2 reporting foreign exchange transactions carried out by Kyllmann, Bauer y Cía. with the cooperation of the Banco Central de Bolivia, and to respectfully suggest that, as a means of convincing the Banco Central of its past mistakes, banks in the United States be approached, perhaps informally, with reference to the possibility of their not making any more collections than necessary through the Banco Central.

The Department will recall the numerous despatches which have been written reporting sales of dollar exchange by the Banco Central to various Proclaimed List Nationals; although this has been stopped in large part… sales of Argentine peso and Peruvian sol exchange have increased tremendously. (Such Argentine and Peruvian exchange is of course available to Bolivia only by reason of the fact that this country is receiving a large supply of free dollars from the United States in return for its tin and tungsten; Bolivia’s balance of trade with both Peru and Argentina is extremely unfavorable.) It is true, of course, that the banks have been given carte blanche to do as they [Page 618] please in this matter (see my No. 1575 of January 15, 1942,3 enclosing a copy of a letter written by the Minister of Finance4 to all the banks in which he suggested that they decide for themselves whether or not to observe the Government’s freezing decree) but it is the Banco Central more than any of the others which has taken advantage of the anomalous situation to enrich its coffers.

. . . . . . . . . . . . . .

In this connection it has occurred to the Legation that perhaps one effective means which might be employed would be for American banks no longer to make their collections, at least for La Paz, Cochabamba and Oruro, through the Banco Central. In all of these cities the Banco Mercantil has a branch and could satisfactorily handle the business; as suggested in previous despatches, the manager of this bank is completely friendly and cooperates in every way possible with the Legation. In all the other interior cities except Sucre only the Banco Central operates and in Sucre the other bank is the Banco Nacional, the manager of which is Nazi in sympathy (see my despatch No. 1957 of April 10, 19423).

However, probably ninety percent of the foreign collection business is done in La Paz, Cochabamba and Oruro, and unquestionably the Banco Central would suffer considerably if that particular source of its income were temporarily cut off. In addition to the commission which it enjoys on such collections most importers purchase their foreign exchange from the bank which is making the collection and this is of course another source of profit which would be affected if the Banco Central were to experience a sudden decrease in its foreign business.

There seems to be no question that the manager of the Banco Central and the Minister of Finance would quickly realize the significance of what was happening. Their first reaction probably would be at the end of the month, when no doubt they would deduce from a study of the bank’s report that importations from the United States had suffered a sharp reduction. However, after observing that during the same period of time the collection business of the Banco Mercantil, and the Banco Nacional in La Paz, had experienced a corresponding increase it hardly seems possible that they would not be struck by the coincidence. A conversation with the Legation would undoubtedly result with, it is to be trusted, a satisfactory solution for both parties.

It appears to the Legation that the main advantage in taking action of this kind is the unobtrusiveness with which the desired end might [Page 619] be achieved. As far as anyone in Bolivia except the Legation is concerned American banks, by some coincidence, all would have made a purely commercial decision at more or less the same time to deal with some bank in Bolivia other than the Banco Central. There would have to be no publishing of names or other obvious action, and there would be no necessity to tell anyone what was happening; however, the Banco Central would understand.

For the Department’s information Mr. Edward G. Miller, of Assistant Secretary Acheson’s office, while in La Paz a short time ago suggested that perhaps the above action might be effective if the Legation considered it advisable; since Mr. Miller’s departure nothing has occurred to make it seem less desirable that the Banco Central be brought to task for its unfriendly operations.

Respectfully yours,

Allan Dawson
  1. None printed.
  2. Not printed.
  3. Joaquín Espada; enclosure missing from Department files.
  4. Not printed.