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

No. 418

Sir: I have the honor to refer to the efforts of this Embassy to induce the Bolivian Government to carry through an effective replacement program and specifically to the following correspondence on this subject:

Despatch no. 1165, March 28, 1947,1 entitled “Economic Defense Board Issues Resolution Excluding Specified Firms from Benefits of Provisions of Supreme Decree Listing Restrictions on Axis Firms and Individuals”.

Embassy’s Confidential Airgram no. 188, May 16, 1947.1

Department’s Confidential Instruction no. 73, April 28, 1948.

During the month of May, numerous meetings were held by Embassy representatives with various officials of the Bolivian Government including the Minister of Economy and the Sub-Secretary for Foreign Affairs in an effort to obtain effective action against Kyllmann [Page 348] Bauer y Cia., Zeller-Mozer y Cia., and Juan Elsner y Cia. The Bolivian officials indicated their desire to cooperate with the Embassy to terminate the troublesome question of the replacement program once and for all. As a result of these discussions, the Embassy drafted a Resolution which was supplied to the Foreign Office informally at the request of the Sub-Secretary. (See enclosure no. 1.2) It will be noted that this draft was not an effort on the part of the Embassy to interfere with the functioning of the Economic Defense Board, nor did it dictate to that agency any procedure to be followed in solving the question of the three concerns involved. It merely provided that the firms should present themselves before the Economic Defense Board within thirty days to be informed regarding the action each must take to enjoy the benefits of Supreme Decree no. 00716 of February 12, 1947. The draft was an effort to rectify the omission of penalties in the Supreme Resolution of March 3, 1947.

Both the Minister of Economy and the Sub-Secretary for Foreign Affairs agreed to promulgate this Resolution and repeatedly asserted that this would be done “next week”.

On June 9 there appeared in the local press a Supreme Resolution issued by the Ministry of Economy ordering the firm of Velasco y Cia (formerly Elsner y Cia) to prove within twenty days that the former owners have no participation in the control and profits of the firm. The resolution does not mention Kyllmann Bauer or Zeller Mozer. (See enclosure no. 2.2)

At the request of Mr. Luís Romero Saenz, Chief of the Section of Treaties and International Conventions in the Foreign Office, representatives of the Embassy called on June 9 to discuss the status of the replacement program. They were informed that only Velasco y Cia had been included in the provisions of the Supreme Resolution because the other two firms had presented documentary proof of the elimination of the former objectionable interests. However, before a final decision is made, the Foreign Office wishes the Embassy to examine said documentary evidence. Mr. Romero stated that any comments which the Embassy wished to make concerning the proof of elimination of Axis influences would be welcome.

It is the Embassy’s opinion that no effective measures will be taken against the three spear-head firms. The procedure being carried out will save the face of the Embassy and of the Bolivian Government but will accomplish nothing. It is felt that this situation should be accepted since it is doubtful that it ever will be possible to do anything more on the Bolivian Replacement Program. The Embassy will examine [Page 349] the documents concerning Kyllmann Bauer and Zeller Mozer and will make comments thereon, but it is assumed that they will be officially cleared and freed of all restrictions. It is assumed that whatever documents Velasco and Company may present to the Economic Defense Board will be given to the Embassy for examination and comment. Through this procedure the replacement program will become a dead issue without serious injury to the Nazi elements involved.3

Respectfully yours,

For the Ambassador:
Richard A. Johnson

Second Secretary of Embassy
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  5. In despatch 215, March 30, 1949, not printed, Ambassador Flack reported on the lifting of restrictions during 1948 on all spearhead firms excluded from the benefits of the Supreme Decree of February 12, 1947 and concluded: “Thus, almost completely normal trade relations have been renewed with all spearhead firms and the replacement program is now a dead issue” (740.24112A/3–3049).