834.6363/144b: Airgram
The Secretary of State to the Chargé in Paraguay (Montgomery)
A–281. The Department has been reviewing with Ambassador Frost certain phases of the petroleum situation in Paraguay. The Department is obliged to state that it would not be possible for any agency of this Government to undertake the geological exploration of Paraguay on the scale which would actually be necessary to determine the possibility of finding oil.
Moreover, even though such an undertaking were to be arranged and oil should be found in certain localities, the problem would still remain as to how the difficult and costly work of development would be undertaken and efficient operations established on a self-paying and profitable basis. Experience over many years and in many countries has shown that even under the most favorable conditions, such projects require skill and resources beyond those currently available [Page 1468] in Paraguay. (For example, after the discovery of oil was originally established in the central Magdalena Valley in Colombia, the first barrel of oil was delivered onto a tanker at the Port of Cartagena only after expenditure of 50 million dollars.)
The Department can understand a reluctance on the part of the Paraguayan Government to enter into agreements with private companies on terms which might result in losing a share of the national wealth if oil were to be discovered. However, as was previously explained to Dr. Gross Brown, it may be possible for the Department to assist the Paraguayan Government in contacting a group of oil companies to explore, develop and refine oil on a basis which insures to the nation an equitable return.