810.79611 PAA/6–1047

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

confidential
No. 1429

Sir: I have the honor to refer to the Embassy’s despatch no. 1195 of April 9, 1947,67 concerning difficulties between Panagra and the Ministry of Defense in the Bolivian Government over the 1943 operations contract between those two parties, and to report further on this subject. As reported in the above-mentioned despatch, the Minister of Defense at the time, Mr. Nestor Guillén, decided to allow Panagra to suspend its Uyuni diagonal route to Buenos Aires for one month (April 4–May 4) and to continue its service of increased frequencies to Arequipa and Puerto Suárez for the same period, with the understanding that in the meanwhile Panagra and the Bolivian Government would commence discussions with a view to the modification of Panagra’s contract.

On April 18, Mr. Ernesto Araníbar, Manager of Grace & Company in Bolivia, which acts as Panagra’s agent in this country, directed a letter to the Ministry of Defense stating that in Panagra’s opinion no violation of the contract had been committed by that company when it increased its frequencies to Arequipa and to Puerto Suarez in eastern Bolivia, Panagra being at liberty under the contract to modify its frequencies as it feels traffic requirements so merit upon prior notification to the Bolivian Government. The letter also pointed out that as Panagra had decided not to suspend the diagonal route—this removed the Bolivian Government’s objection on that point, and therefore, in Panagra’s opinion, everything was in correct order as far as the contract was concerned and there would be no need for further discussions. No answer to this letter has as yet been received from the Ministry of Defense, nor have any further efforts been made on the part of the latter to institute negotiations with Panagra for the modification of its contract, as had been indicated by former Minister Guillen [Page 370] on April 2. This is no doubt due in part to the absence of Captain German Pol at the ICAO Convention in Montreal and to the assumption of office by a new Minister of Defense, Eduardo Montes y Montes.

It is Panagra’s present policy in connection with its contract to continue the status quo and to do nothing towards the contract’s modification, at least for as long a time as negotiations for the United States–Bolivia Air Transport Agreement continue. This has been made clear to the Embassy in discussions with Mr. Douglas Campbell and Mr. Thomas Kirkland, Vice Presidents of Panagra, and with Mr. Araníbar. Panagra does not wish consideration of its contract tied in with negotiations over the bilateral agreement through deliberate efforts on the part of the Bolivian Government, and it feels that its position will be considerably strengthened and that the air will be cleared when the bilateral agreement is signed first with the inclusion of an article providing for the continuance of existing contracts. Mr. Araníbar has on a number of occasions shown his keen interest in a prompt conclusion in the signing of the bilateral agreement, with the inclusion of such an article as mentioned above. The Embassy has furthermore received the impression from discussions with these officials that Panagra does not desire to modify its contract anyway, with the possible exception of clarifying certain terms to the mutual understanding of both parties.

It might be mentioned, finally, that there are indications that the anti-Panagra attitude of Captain Pol is losing influence in the Bolivian Government, and that such influential elements as the Foreign Office and General Felipe Rivera, Commander in Chief of the Bolivian Armed Forces, are dissatisfied with Pol and will aid in the establishment of a situation more favorable to Panagra’s interests and to the obtaining of a prompt and favorable conclusion of the bilateral agreement. Minister Montes’ opinions in this matter are not yet known.

Respectfully yours,

For the Ambassador:
John A. E. Orloski

Commercial Attaché
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