711.00/12–448

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

secret

My Dear Mr. Secretary: I have the honor to acknowledge receipt of the Acting Secretary’s letter of October 23, 1948 with which was enclosed a copy of the September 20, 1948 issue of the “Policy Statement—Bolivia”1 with regard to which you asked my frank comment and recommendation.

I am in complete agreement with the statement of objectives.

In the statement of policy issues, I wish to emphasize also my complete agreement with the statement that the economic, cultural and political conditions of the Bolivian population constitute a challenge to the effectiveness of the system of free enterprise as compared with promises which totalitarian systems may hold out to them. It is for this reason that I consider that the work of the Inter-American Institute in Bolivia comprising the cooperative program of the Inter-American Educational Foundation and the cooperative Sanitary and Health program are most valuable. At the same time I consider that the Agricultural Experiment Station program set up under mutual agreement of our two Governments is likewise an important element in the improvement of fundamental conditions of life in Bolivia.

With regard to international organizations, I have previously reported to the Department that a small country like Bolivia faces difficulty in participating in the almost innumerable organizations which the complicated international life of today has brought into being. Bolivian participation in such organizations is difficult for financial reasons, since such participation must be financed by foreign exchange and repeated contributions of even such small amounts as $25,000 at a time become heavy burdens for a small country like Bolivia. There is also a lack of qualified material to provide intelligently qualified representatives in such organizations or to handle the multifarious questions which the central government is expected to determine for the purpose of instructing its delegates participating in various international organizations. Only yesterday I was talking with a diplomatic representative of one of the leading European countries who made the observation that the Bolivian Government had absolutely no knowledge of the problems of his country which at this [Page 340] time were being dealt with in the United Nations Assembly where Bolivia had a vote. An explanation for this is that Bolivia has no regular diplomatic service and does not have a regular civil service and that Ministers and Chiefs of Mission and subordinate diplomatic representatives are subject to change according to the will of the administration; consequently, few persons well informed in international matters are developed under such a system, although it is axiomatic that Latin Americans are very astute politicians in their local fields.

The cultural and information programs which we are conducting are in my opinion well designed to supply some of the lack in knowledge of international affairs which I have noted above, since they provide for exchanges of students, travel grants and information from abroad. On the political side I am in agreement with the Department’s statement that at present there is no major political problem to complicate our relations with Bolivia beyond the question of Bolivia’s internal political instability. This factor has been very strongly demonstrated in the present session of the Bolivian Congress where little has been accomplished other than bickering between the parties. Furthermore, the Government has not rallied sufficient numerical strength in either branch of the Congress thus far to enact essential legislation such as new taxation measures, the budget, and various international treaties which are important to Bolivia and to the Hemisphere. While it may be said that a higher type of intellectual and cultural representative should be elected to the Bolivian Congress, nevertheless, it is the people who elect the representatives and until the general cultural, intellectual and political level of the country has risen, it does not seem likely that there will be much improvement in this respect.

At the present time, it is the Embassy’s collective opinion that the Bolivian Armed Forces are loyal to the Government of President Hertzog, since most of their leaders suffered at the hands of the Villaroel2 Government and have expressed the opinion to members of the Embassy that the Army should remain outside of politics.

With regard to comments on economic aspects, I feel that our Government should leave no stone unturned to provide the necessary financial assistance for the completion of the Cochabamba–Santa Cruz highway once the Bolivian Congress has given its authorization to the additional $26,000,000 credit which now appears to be necessary for this purpose. Should we fail to do this, the Bolivians will consider that the United States was unable to complete this project which will enable Western Bolivia to tap the resources of Santa Cruz simultaneously with the arrival there of railways now being built to that point from Brazil and Argentina. The completion of the highway before or [Page 341] simultaneous with the completion of the railways mentioned will also tend to reduce the rival interests of Brazil and Argentina in Bolivia and thus tend to stabilize relations among the three countries.

I am likewise in complete agreement with the statement that our Government does not propose to consider financial assistance for the second part of the Bohan program until satisfactory completion of the highway is assured. I feel also that it will be useful to have the Bohan program revised by a competent technical mission sometime in the future since the Bolivian Government has already observed that the Bohan program did not contemplate the development of hydroelectric power nor the problems of immigration into Bolivia, both of which it regards as important.

In connection with our tin policy toward Bolivia, I feel that assistance in exploring the possibility of reducing the cost of tin production would be most helpful but I feel that at the same time there must also exist in Bolivia undiscovered rich deposits which should enable Bolivia to continue production for an indefinite period.

In the development of Bolivia’s petroleum reserves, I feel that since Bolivia is such a poor country and the expense of such development is so high due to the difficult terrain and distance from markets, that private venture capital alone will in the long run, if admitted into Bolivia under satisfactory conditions, be successful in bringing about important production in Bolivia.

Since the preparation of the Policy Statement, there was signed with Bolivia on September 29, 1948 a Bilateral Air Transport Agreement3 which is now awaiting congressional ratification to bring it into force.

In connection with the financial difficulties which the Bolivian Government has encountered as a result of the budgetary practices in the past, there is now pending in the Office of the Minister of Finance the question of inviting United States tax experts to come to Bolivia. However, in view of a tax reform bill which has just been introduced into Congress, it is believed that no action will be taken with regard to bringing these experts to Bolivia until after the tax measure has been acted upon. Though not stated in so many words, the Embassy understands that the Government holds the view that if the tax experts came to Bolivia before the enactment of the proposed legislation, the Government might be charged with bringing in foreign influence, and for political reasons it appears to desire to avoid such an accusation.

The negotiated settlement between the representatives of the Bolivian Government and Foreign Bondholders Council is now before [Page 342] Congress for its approval and may be acted upon after a favorable majority report if sufficient time remains in the present session.

I concur in the concluding statement of policy evaluation, that acceleration of the type of assistance now being given Bolivia would be advantageous to progress in Bolivia, which would result in making Bolivia a more effective member of the American nations. I think this is particularly true with regard to the steps necessary to complete the Cochabamba–Santa Cruz highway which have encountered considerable delays, but I feel that since we are morally committed to the completion of this highway, every step to be taken in Washington should be accelerated, for in this way we will prove more concretely to Bolivia that we are deeply interested in her welfare as a functioning member of the Hemisphere system.

Respectfully yours,

Joseph Flack
  1. Neither printed.
  2. Lt. Col. Gualberto Villaroel, former President of Bolivia, killed in the revolution of July 1946.
  3. See p. 349.