Editorial Note
Under date of December 24, 1949, the Chargé in Bolivia (Espy) transmitted his despatch No. 737 (not printed) on the question of consideration by the Bolivian Congress during its 1949 session of the agreement negotiated in June 1948 between the Bolivian Government and the Foreign Bondholders Protective Council for renewal of service on Bolivia’s defaulted dollar bonded indebtedness, then in default since 1931. Documentation on the 1948 agreement is contained in the compilation on United States interest in economic development [Page 547] in Bolivia in Foreign Relations, 1948, volume IX. Mr. Espy reported that the Bolivian Government did make every effort to induce the Bolivian Congress to ratify the debt service agreement and failed by a narrow margin due to indifference and the unwillingness of Congress to take its duties seriously. He recommended that the Department of State consider consulting with the Export-Import Bank and the International Bank for Reconstruction and Development to the end that the latter two financial institutions make clear to Bolivian officials the need for reestablishment of Bolivian credit, particularly in regard to the ratification of the 1948 dollar bonded debt settlement, before Bolivia could expect consideration of further credits from those institutions. (824.51 Bondholders/12–2449)
The Department of State responded to these recommendations in its instruction No. 5, January 19, 1950, to La Paz (not printed), the pertinent portion of which read as follows:
“Careful consideration has been given to the Embassy’s recommendations. However, the Department does not propose to approach either the IBRD or the Export-Import Bank as suggested. The IBRD has made it clear to prospective borrowers that satisfactory settlement of outstanding obligations in default is a prerequisite to the granting of credits. The Department feels the Bolivian Government to be well aware of this fact. With respect to the Export-Import Bank, in the past the Department has followed a policy of not requesting the Bank to connect defaulted debts with new credit applications, the granting of which otherwise would be in the interest of the United States and which would further general United States policy. As a rule, if the Bank wishes to raise the question of defaulted debts in connection with the application, the Department will agree. In the case of the Bolivian application for credits with which to complete the Cochabamba-Santa Cruz highway project, however, the Department opposed efforts which were made to make such credits dependent on settlement of the debt issue, feeling that the loan was an extension of an earlier credit granted without consideration of the defaulted debt. In the future, if Bolivia does not make a satisfactory settlement to resume service on its defaulted dollar bonds, the Department might well agree to oppose further loan applications presented to the Export-Import Bank.” (824.10/1–1950)