811.516 Export-Import Bank/8–547

Memorandum by Mr. James Espy of the Division of North and West Coast Affairs to the Assistant Secretary of State for Political Affairs ( Armour )


The purpose of the call on you this morning by the Bolivian Ambassador, Señor Don Ricardo Martinez Vargas, is to bring up the subject of a request by the Bolivian Government, through a note received by our Ambassador at La Paz dated April 28, 1947, for a loan of $30,000,000 and the services of an American engineer for the construction of a railway that would run from La Paz over the Andean cordillera down into the eastern lowlands of Bolivia. It is estimated that the construction would take about ten years, and the Bolivian Government is prepared to pay 3–½% interest on the loan, with amortization at 5% per annum.

The reasons presented why the Bolivian Government is so anxious to obtain the loan from the United States Government are (1) the need of the railway to connect the consuming centers of the altiplano with the cattle and agricultural areas of eastern Bolivia; (2) the [Page 353] Bolivian Government does not consider it prudent that neighboring countries collaborate in executing the project, since its construction under such conditions would mean the participation of these countries in the exploitation of Bolivia’s agricultural and cattle wealth and Bolivia desires to exploit solely for its own account; (3) the railway is considered by Bolivia as a national aspiration.

With the knowledge and approval of the Export-Import Bank, the note in question has not, up till now, been referred officially to the Bank for its views. In June past Ambassador Martinez Vargas was informed orally that it was still under study and that we were seeking more information. The reason for this action was that difficulties have been experienced with the Bolivian Government in arranging for satisfactory execution of the construction work on the Cochabamba–Santa Cruz highway, which is being financed by the Bank. It was felt that this problem should be resolved first of all; but at the same time, there were also considerations of the international relations of Bolivia, involving its neighboring countries, such as Argentina and Brazil. You may recall that a comprehensive economic treaty was signed between Argentina and Bolivia last March, but it has not thus far been ratified by either country.

Observations on the economic angles to the present application for a loan may be set forth as follows:

There is a good deal of justification for the railway’s eventually being constructed.
However, there is much doubt whether it is an economically sound project because of its high cost and of the difficult terrain through which it will have to be constructed.
The highway, which is already well under way, should be much more economical to complete; and after the highway has opened up the area, a railway could follow.
Most important of all, Bolivia has not carried out satisfactory arrangements for the completion of the Cochabamba–Santa Cruz highway to be financed by the Export-Import Bank. This artery of communication is much more important to the whole country of Bolivia for the integration of the nation’s economy than the La Paz-Beni railway, which latter is primarily of interest to La Paz.