811.516 Export-Import Bank/12–2247: Telegram

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


991. For Martin from Kinnear and Holbrook. Urtel 627, December 19.58

In our opinion present disintegration BDC organization including weak and incomplete directorate and impossible Bolivian manager Knaudt, BDC Cochabamba office, makes complete reorganization BDC sine qua non solution highway problem. Problem law of 1947 making it possible government to interfere with Mariaca management YPFB and to turn both BDC and YPFB into political footballs must be settled at same time. Also BDC informs us changes in by-laws are contemplated and that BDC in dire financial straits since $2,000,000 Banco Central fund now authorized is only sufficient meet present BDC obligations including $248,000 interest to Exim Bank on December 31. Galbraith and Orloski agree with us that determination all Bank’s views and conditions it desires to impose in order to resolve foregoing and other basic problems must precede discussion highway problem. Also we told President Hertzog that we would cover problem as a whole and feel Bank should proceed that basis.
In view foregoing and difficulties inherent attempts explain adequately by cable to Exim Bank our position here, our opinions and our reasons, we request authorization to advise President Bolivia, Exim Bank has ordered us return Washington for consultation and that Bank thereafter will advise Bolivian Government of decisions reached. The only apparent alternative would be for the Bank to reach decision on and instruct us regarding following points which we believe must be resolved before discussing any of Bank’s views with the President:
Modification law September 20, 1947 as condition any substantial increase loan CBF in order remove grave doubts as to future subjugation CBF and YPFB politicial pressure and interference.
Appointment Exim Bank nominees to directorates CBF and YPFB (see recommendation our cable 982).
Requirement Bolivian Government undertake that no laws or decrees or changes articles incorporation thereof directly or indirectly affecting CBF-YPFB will be promulgated and no changes or retentions key Bolivian or US CBF-YPFB personnel will be effected or continued without consultation with and acquiescence of Exim Bank.
Appointment Exim Bank resident special representative; and
Cancellation SAODC well-drilling contract with YPFB. This procedure presumably would require consultation with State and would entail considerable delay. Since such delay would not only be [Page 362] embarrassing for us but would weaken Bank’s position we strongly urge our recall.59
We reiterate our conviction any expression Exim Bank views to Bolivia now or in foreseeable future must cover whole problem. [Kinnear and Holbrook]
  1. Not printed.
  2. In telegram 628, December 24, 2 p.m., to the Embassy in Bolivia, the acquiescence of the Export-Import Bank in the position here taken by its representatives was indicated (811.516 Export-Import Bank/12–2247).