824.6363/10–148: Airgram

The Acting Secretary of State to the Embassy in Bolivia

A–303. Reference Embassy’s Airgram 464, October 1, 1948.1 The Department is interested in the projected legislation defining the potential petroleum bearing areas of Bolivia that may be thrown open for development by foreign oil companies. It will be appreciated therefore if the Embassy will transmit any advance information regarding the legislation as soon as it is available.

If legislation is enacted that has the effect of inviting foreign capital to share the responsibility for developing Bolivia’s oil resources with YPFB, this would establish a precedent which might have some effect in other Latin American countries with respect to liberalizing the terms of their petroleum laws. Consequently the Department hopes that the proposed legislation will represent a sincere effort on the part of the Bolivians to provide a favorable climate for the reentry of foreign private capital into the country.

In discussions with Mr. Mariaca2 and the Bolivian Ambassador with respect to the loan that YPFB has requested for the development of the Bermejo field,3 the Department did not give any encouragement that the loan application would receive favorable [Page 336] consideration. A principal factor in such consideration is of course the economic soundness of the use to be made of the funds. If the Bolivians can furnish tangible evidence of their willingness to allow private enterprise to assist in the development of their petroleum resources through the medium of an acceptable petroleum law, the Department would regard this as additional justification from its standpoint for giving favorable consideration to their loan application.

As the Embassy probably realizes, most of the oil companies in a position to undertake operations in a country like Bolivia have already made such heavy commitments for development elsewhere that there is serious question whether anyone will be in a position to enter Bolivia, even if the necessary legislation is enacted. The companies are also discouraged by the magnitude of the capital outlay that would be required to develop sufficient production in Bolivia to justify the heavy expenditure necessary to construct a pipe line outlet to the Pacific.

Pending completion of the projected Appraisal Survey and Report by Hoover, Curtice and Ruby on the Bermejo field, as well as on Camiri, the Department would appreciate the Embassy’s preliminary views regarding the loan application.4

  1. Not printed.
  2. Guillermo Mariaca, General Manager, Yacimientos Petroliferos Fiscales Bolivianos (Bolivian Government monopoly).
  3. YPFB had applied for a $2,500,000 loan from the Export-Import Bank for a drilling program at Bermejo (824.6363/12–1448). For documentation on Export-Import Bank funds made available to the government monopoly in 1942 and 1947, see Foreign Relations, 1942, vol. v, p. 595, and 1947, vol. viii, pp. 342 ff.
  4. In despatch 829 of November 17, 1948, not printed, the Ambassador in Bolivia (Flack) transmitted a draft of a new proposed petroleum law for Bolivia. Replying to the last paragraph of A–303, he reported the Embassy’s view that, even if the proposed law were enacted, the United States, for the present, at least, should refrain from granting a loan from public funds to YPFB for development of the Bermejo field (824–6363/11–1748). The Bolivian Congress adjourned without taking any action on the proposed petroleum law which was introduced with Mr. Mariaca’s approval.