The Ambassador in Bolivia ( Flack ) to the Secretary of State

No. 863

Sir: The General Manager of the Bolivian Development Corporation, Joseph C. McCaskill, has attempted to answer in a press statement published January 10, 1947, the various criticisms regarding its [Page 343] activities which have recently been leveled against that Corporation, and I have the honor to transmit herewith a copy of the article as it appeared in the press and a translation thereof30 and to refer to Embassy’s despatch no. 664 of November 29, 1946,30 entitled “Transmitting Boletín Comercial for November Containing Article Criticizing Bolivian Development Corporation” calling attention to various phases of earlier criticism.

Mr. McCaskill called specific attention to the fact that the Corporation is operating with an exceedingly small capital. In the first place, he said, credits extended to the Corporation by the Export-Import Bank in Washington are restricted to the Cochabamba–Santa Cruz highway and to the petroleum program. In the latter instance, the Corporation serves merely to channel these credits from the bank to YPFB. The entire agricultural program and any other program the Corporation might undertake must be financed from funds provided by the Government of Bolivia. For this purpose the government in 1943–1944 made available to the Corporation $9,000,000. Mr. McCaskill stated that of these nine millions the government directed the Corporation to lend two millions to the Banco Agricola, one million to the Dirección General de Riegos for the construction of the Angostura and Challapata projects, and one million to the Direcćion General de Ferrocarriles for the purchase of locomotives and freight cars for the Villazon–Atocha railroad. In addition, the Export-Import Bank required that before it would make advances under the road credit, the Corporation must put three millions of its own funds into the highway. This was later reduced to two and one-half millions. Thus, six and one-half million dollars of the nine million were immediately obligated before the Corporation could get a program underway. Further, the Corporation always has a million dollars tied up in the highway awaiting reimbursement from the Export-Import Bank inasmuch as the bank does not advance money except for refunds for expenditures already incurred. This accounts for seven and one-half million of the nine million dollars while loans to municipal and private industry aimed at the development of the country have required another half million.

Nevertheless, the General Manager stated, the Corporation is attempting from its limited funds 1) to develop the Beni program designed to supply meat to La Paz and much needed merchandise to the population in the vicinity of Reyes; 2) to set up a tractor unit for the clearance of land of private owners; 3) to build a large sawmill at Espejo; 4) to develop a plantation for production of rice and other products at Chané; and 5) to carry out the preliminary work necessary [Page 344] for the installation of the sugar mill at Saavedra. In addition, a small sum has also been set aside to aid in the development of the agricultural experimental stations under an agreement with the Department of Agriculture of the United States and the Ministry of Agriculture of Bolivia.

Mr. McCaskill stated that most of BDC’s undertakings have proceeded at a much slower pace than contemplated. A major reason for this, he stated, has been the difficulty of obtaining machinery from the United States. As a result, progress on the Cochabamba–Santa Cruz highway has been slow but progress has been satisfactory in the last several months but even yet a considerable quantity of the machinery and equipment on order has not yet arrived.

In connection with the cost of the Cochabamba–Santa Cruz highway, Mr. McCaskill stated, that officials of the Export-Import Bank were not shocked when the Bolivian Ambassador in Washington31 together with the President and General Manager of the BDC 32 laid before the bank an application for an additional credit to insure the completion of the road. As a result of increased materials and labor costs, the original estimate has been necessarily moved upward but in this connection the Public Roads Administration in Washington indicated that the unit costs to date on the highway were not out of line with similar costs in road construction in the United States and in other Latin American countries. The original estimate of twelve million dollars has now been moved up to between eighteen and twenty million dollars, although the Corporation expects that unit costs will be lowered as additional equipment arrives and that perhaps the ultimate cost may be kept below the new estimates.

Respectfully yours,

For the Ambassador:
John A. E. Orloski

Assistant Commercial Attaché
  1. Not printed.
  2. Not printed.
  3. Ricardo Martinez Vargas.
  4. Guillermo Gutierrez.