824.24/869: Telegram
The Ambassador in Bolivia (Boal) to the Secretary of State
[Received 7:20 p.m.]
1554. Department’s recent telegram advocating a modified Alternative Plan III of export control.47 The Bolivian Country Agency remains adamant in its opposition to Alternative III and insists on the adoption of Alternative I for Bolivia. The vote in the Country Agency meeting of September 15th on this issue was unanimous.
The Country Agency takes the position that contrary to the Department’s belief current Bolivian import and exchange controls are not adequate in the absence of a decentralized system. Merchandise could be ordered and brought to the customhouse without official permission. [Page 142] Foreign exchange is generally purchasable at the official rate for any importation and in the cases where foreign exchange would not be available dollar currency could be bought in the free market at a premium of 5% without Government interference. The Bolivian exchange control system is primarily designed to prevent the flight of capital and not to insure the importation of merchandise in accordance with economic needs.
Furthermore it is felt that an Import Recommendation procedure if operated merely in Bolivia with no transmittal of Import Recommendations to the United States would function in a vacuum. It would have no relation to reality since imports from the United States could be effected without Import Recommendations. The paper work involved would be fruitless and the procedure would not be taken seriously by informed importers.
The Country Agency does not believe that under Alternative III either the Bolivian Government or the Embassy could maintain effective control over shipping space, consignees and importers since under a noncontrolled system they would not have the requisite factual data as to prospective shipments. On the other hand the Government agencies in Washington could not apply effective control since they would not have essential information as to Bolivian needs, commercial relationships and possible cloaking activities. Thus there would be no method of assuring under Alternative III that the import trade of Bolivia is being conducted in the best interests of Bolivia and the United Nations. Trade would be conducted chiefly on a basis of self interest of the firms involved which is not compatible with the prosecution of an all-out war effort.
It is believed that the difficult task of keeping American goods out of the hands of Proclaimed List firms would be rendered far more formidable under this weakened system of control.
The Embassy is in thorough agreement with the foregoing point of view and in addition desires to point out that it could not safely participate in a purely local system of import control divorced from our export control procedure since such participation would amount to Embassy interference in the domestic policy and practice of Bolivia in regard to imports. In effect the Embassy representatives would be sitting in on a local import and foreign exchange control board. Such action would not be consonant with our principles of noninterference in the internal affairs of other nations.
The Embassy also has grave misgivings on the score of consignee control. Experience has shown that the Embassy officers with their intimate knowledge of trade channels in this small country can operate consignee control better than persons in Washington entirely dependent [Page 143] on card indices who have no first-hand knowledge of the local trade situation.
The Country Agency has pointed out that in the absence of decentralization or a modification thereof it would probably be necessary for the Bolivian Government to adopt a system of rigid exchange and import control. This would probably be done by invoking the undesirable decree of July 21, 1941 vesting complete foreign exchange and import control in the Banco Central. At present this decree is dormant. Were it invoked we would see an arbitrary system of exchange and import control administered by the Directors of the Banco Central who would not be directly accountable to anyone for their actions. Inequitable and excessive allocations of foreign exchange and import licenses might well result eventually involving a trend toward bilateralism, blocking barter and compensation agreements which have in the past proved to be great obstacles to Secretary Hull’s foreign trade policies.
The Country Agency stresses that the present decentralized system is eminently workable. Neither American exporters nor Bolivian importers have been subjected to undue hardships or discriminatory treatment under the plan. The Country Agency is not prepared to acknowledge that the failure of the system in other countries should obligate Bolivia to abandon it.
The painful experience of Bolivia in 1942 when its import trade with the United States was reduced to a chaotic condition by the absence of informed planning resulting in the arrival in Bolivia of unneeded goods and the unavailability of essential goods naturally militates against any inclination which Bolivia might otherwise have to return to an uncontrolled system.
The Bolivian Country Agency identifies the present move in favor of Alternative Plan III with American exporters motivated chiefly by their own special interests. They are not prepared to give in to this move without registering an emphatic protest and pointing out the drawbacks of a system which has been proved unsuited to the peculiar needs of Bolivia as an individual country and as a member of the United Nations.
While the members of the Country Agency take the foregoing position decisively they are prepared to reconvene in accordance with Pool’s48 telephone suggestion as soon as an answer is received to this urgent telegram.
Kazen and Acton OEW concur.