Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

611.24/11–453

Memorandum of Conversation, by William P. Hudson of the Office of South American Affairs

confidential

[Washington,] November 4, 1953.

Subject:

• United States-Bolivian Relations in General

• Participants: Walter Guevara Arze, Foreign Minister of Bolivia¹
• Victor Andrade, Ambassador of Bolivia
• ARA—Mr. Cabot
• OSA—Mr. Hudson

In response to a reference by Mr. Cabot to the visit of the Eisenhower mission,² Señor Guevara remarked that the visit had produced an excellent and far-reaching effect in Bolivia. The enthusiastic reception which the people had given to Dr. Eisenhower had been entirely spontaneous. This enthusiasm, which had endured, had provided an important element of the base on which the Bolivian Government was now erecting its policy of open friendship with the United States.

The subject of the United States aid program for Bolivia then came up, and the Foreign Minister expressed the deep gratitude of his Government, saying that this assistance would help Bolivia cover the gap in her essential payments during the period for which the assistance was scheduled.³ However, he pointed out, without further assistance of some sort in the following year Bolivia’s position would be even more desperate than it had been when the present program was conceived. Bolivia’s foreign exchange costs, to feed her people, to keep the mining industry in operation, and to prevent the collapse of the national economic structure, were all fixed costs, whereas the price of tin was still going down and Bolivia lost $715,000 for every drop of one cent per pound. The United States assistance program would keep Bolivia from drowning for the time being, but additional help was needed to get Bolivia across the river—by which the Foreign Minister meant that Bolivia needed assistance for economic diversification which would remedy her fatal dependence on the price of tin.

Mr. Cabot replied that the Department faced domestic difficulties in justifying the kind of additional assistance which the Bolivians desired. He hoped that the Bolivian Government would do everything in its power to put us into a position from which at a later date we should be able to justify further assistance to Bolivia.

The Foreign Minister inquired whether Mr. Cabot had in mind any particular persons in the Bolivian Government. Mr. Cabot responded in the negative, and said that an example of the sort of action he had in mind was the settlement of the Patiño compensation issue. Sr. Guevara stated that a Supreme Resolution ratifying the retention agreements made in June and July with all the large companies was ready and would be issued immediately. Regarding the problem of evaluation of the expropriated properties, he said that his Government had invited the companies to initiate negotiations immediately and was awaiting the designation by the companies of representatives for this purpose.

Mr. Cabot said that another case he had in mind was that of Panagra, against which the Bolivian Government has made tax claims on a basis which Panagra considers inequitable. Señior Guevara said that neither Señor Elío, the La Paz representative of Panagra, nor Mr. Shea,⁴ the President of Panagra, whom he had seen recently, had ever mentioned this subject to him, but that he would look into it.

Mr. Cabot then brought up the case of the Bolivia Tin Corporation, a corporation registered in Maine, whose Bolivian properties have been “intervened” by the Bolivian Government. The Foreign Minister expressed surprise at our interest in this case, saying that he had supposed that Bolivia Tin was a British investment, since the British Ambassador had been to see him about it. He pointed out that there was always a danger that non-American capital interests might, as he contended the Patiño, interests had done, put up the facade of incorporation in the United States and the sale of a few shares to American citizens in order to be able to claim the protection of the American Government.

Mr. Cabot recognized this danger and told Mr. Hudson that we must be sure of the extent of the American ownership of Bolivia Tin. Mr. Hudson said that an effort was already being made to determine this factor. We were not sure that there was any substantial American interest in the firm, and furthermore we were not presuming to pass judgment on the facts and the law in this case. However, we were concerned about the background of emotionalism and agitation of public opinion which marked the case, and we hoped that the Foreign Minister would take an interest in it to insure that the company should obtain fair treatment and that the case should not become a source of friction between our two Governments. We believed that this case and that of Panagra were potentially important as sources of misunderstanding of Bolivian policy by foreign capital. Bolivia had proclaimed that its nationalization of the Big Three was a special case and that far from intending to pursue a policy of nationalization it wished to attract foreign private capital. In order to obtain general acceptance of the sincerity of these pronouncements Bolivia would have to be especially careful to avoid misunderstanding abroad of its handling of cases like these two.

Mr. Cabot pointed out that the United States policy of assistance to Bolivia had already provoked considerable criticism in this country. We had to be mindful of this criticism, and we should be less capable of helping Bolivia in proportion as any actions of the Bolivian Government might give rise to an increase in such criticism.

Referring to a Wall Street Journal article of November 2 criticizing Bolivia and United States policy toward Bolivia, Señor Guevara said that the attitude of the Journal appeared to be based on bad information. He planned to go and talk with the editors of the Journal and also to write them a letter explaining that nationalization was not a policy of the Bolivian Government. He wondered what advice Mr. Cabot could give him regarding this proposed action. Mr. Cabot suggested that he talk with the editors first and decide afterward whether to write a letter.

The Foreign Minister then pursued further the topic of Bolivia’s hospitality to foreign private capital. His Government, he said, had reversed the policy of the preceding governments with regard to petroleum investments and now had an open-door policy, as evidenced concretely by the favorable terms which it had accorded to Glen McCarthy.⁵ The Government was also studying legislation which would provide for the participation of private capital in the operation of certain of the nationalized mines.

Mr. Cabot said that he wished to make it clear that the United States Government was not seeking to force an entry for new private capital in Bolivia. The admission of new private capital was a matter for the Bolivian Government itself to decide on the basis of the interests of Bolivia. The only thing that we were insisting on was that American capital should be respected once it had entered Bolivia, because otherwise difficulties would arise in relations between our two Governments.

Señor Guevara then developed the idea that the only practicable fields of operation for private capital in Bolivia today were mining and petroleum exploitation. Bolivia would try to attract capital to these fields, but under present circumstances it could not be hoped that foreign private capital would participate in the agricultural development of the country. He wished to emphasize that Bolivia would have to rely on funds from public sources for agricultural development. Mr. Cabot expressed the view that when the Bolivian economy had been stabilized private capital might very well come to Bolivia for all sorts of purposes. For the moment, he agreed with the Foreign Minister that mining and petroleum exploitation were the only likely fields for private investment. It was still doubtful that much private capital could be attracted even to these fields, and a great deal would depend on the attitude and efforts of the Bolivian Government itself.

Ambassador Andrade brought up the subject of Bolivia’s need for further assistance after the expiration of the present aid program. Mr. Cabot said that there were at present too many variables, or unknown factors, for him to be able to give an answer on this point. He listed these variables as follows:

1) The future of United States aid programs in general is in doubt.

2) United States loan policy has still not been fully defined. He expected that the Eisenhower report would bring this question to a head and that it would be sharply debated in coming months, but he thought that this debate would produce a decision. Since he could not anticipate the action of Congress, however, he was not in a position to promise anything.

3) We were still uncertain how solidly we could get Congressional and public opinion behind us in recommending further assistance to Bolivia.

4) Much would also depend on what the Bolivians did to help themselves.

After expressing the determination of Bolivia to take all possible measures of self-help, the Foreign Minister said that he appreciated our inability to give him immediate answers to his questions but that he did want to pose the problem as widely and completely as possible among officials of the United States Government who would be concerned with it. With the present aid program Bolivia could get along until June 1954. This aid would have been thrown away, however, if Bolivia were left to sink after that date. To escape drowning Bolivia would need further emergency assistance (food) and would also need help toward increasing her domestic agricultural production. The $2 million of emergency technical assistance would serve for little more than an experimental program. He expected that self-help measures which his Government was taking would result by the end of 1955 in the covering of substantial parts of Bolivia’s present deficit in sugar and petroleum products. However, these efforts and the emergency technical assistance already promised would not in themselves suffice to solve the problem, and Bolivia would need additional developmental aid. He realized that this need was not immediate, since Bolivia could probably not immediately make good use of a large developmental credit; but he did want to prepare the way for developmental loans and further grant assistance in the near future. For this purpose he wanted to give the full background of the Bolivian situation personally to appropriate officials in the Department of State, the Treasury Department, the Foreign Operations Administration, the Export–Import Bank, the International Bank, and the International Monetary Fund. He also wished to pay a visit to Dr. Milton Eisenhower. Mr. Cabot said that the Department would help set up meetings for him with the United States officials whom he wanted to see, and suggested that he make his own arrangements directly with the IBRD and the IMF.

Mr. Cabot expressed doubt whether the IBRD would be able to consider loans to Bolivia in view of the status of default of Bolivia’s foreign indebtedness. The Foreign Minister replied that, while Bolivia was obviously not in a position immediately to initiate payments on the defaulted debt, he was prepared to discuss this subject with the IBRD and try to make some satisfactory arrangement.⁶ Although Bolivia’s present situation was very difficult, her long-term prospects were promising.

The Foreign Minister then inquired about Mr. Cabot’s views on the present political situation in Bolivia, remarking that the Government was now under attack by the Communists and that these attacks had been of such severity as to provoke the Government into arresting the editor of the Communist newspaper El Pueblo.

Mr. Cabot asked that the Bolivian Government not misunderstand the position of this Government regarding the Communist problem in Bolivia. We should be very seriously concerned if the Bolivian Government should permit Communists to hold official positions or if there were any Communist influence on the actions of the Government. Further, we were disturbed about attacks in the United States on our policy toward Bolivia which were based on the allegation that the Government of Bolivia was pro-Communist. However, we had not completely suppressed the Communist party in the United States, and we were not asking that the Bolivian Government do so in Bolivia.

Señor Guevara stated categorically that there were no Communists in any important positions in the Bolivian Government. Ambassador Andrade said that he had interpreted United States assistance to Bolivia as meaning that we were convinced that the Paz Estenssoro Government was non-Communist. Mr. Cabot assured him that we would not have assisted a government which we considered Communist.

Señor Guevara stated that there were a good many important people in Bolivia who were anti-American but were not Communists. In fact, he said, the Government itself had until recently been split between two groups, one of which maintained that the United States was interested only in conserving its imperalist hegemony in this hemisphere and was not concerned about the fate of the subject peoples, whereas the other group had maintained that it was the policy of the United States to help the Latin American peoples achieve their aspirations because the United States believed that such progress by its neighbors was in its own interest. The present program of aid to Bolivia had placed the latter group in a position of dominance.

Mr. Cabot commented that we had indeed consulted our own interests in reaching the decision to assist Bolivia, as he had explained frankly in his address on October 14.⁷

1. Foreign Minister Guevara Arze was in the United States from mid-November until mid-December 1953, as head of the Bolivian Delegation to the Eighth Session of the UN General Assembly.
2. Reference is to Dr. Milton Eisenhower’s visit to Bolivia, July 7–9, 1953, as part of a factfinding mission to the countries of South America undertaken at the request of President Eisenhower. Regarding Dr. Eisenhower’s mission, see the editorial note, p. 196.
3. In a briefing memorandum prepared for Mr. Cabot, dated Nov. 3, 1953, Deputy Director of the Office of South American Affairs Bennett stated that the U.S. program of assistance to Bolivia amounted to $31.3 million: $17.9 million in tin purchases for the stockpile; $9 million in Famine Relief and MSA grants; $2 million in emergency technical assistance; and a $2.4 million increase in the Export–Import Bank credit (No. 467) authorized Oct. 10, 1949, for the construction of the Cochabamba–Santa Cruz highway (611.20/11–353).
4. Andrew B. Shea.
5. A U.S. citizen of Houston, Texas, to whom the Bolivian Government granted oil concession rights in southern Bolivia; documentation pertaining to the McCarthy concession is in file 811.05124.
6. In a memorandum of conversation between Mr. Cabot and Foreign Minister Guevara Arze, drafted by Mr. Hudson, dated Nov. 23, 1953, the Foreign Minister was reported to have stated, inter alia, that he was authorized to talk with representatives of the Foreign Bondholders Protective Council regarding Bolivia’s defaulted external debt. (824.00/11–2353)
7. Delivered to the General Federation of Womens’ Clubs at Washington; for text, see Department of State Bulletin, Oct. 26, 1953, pp. 554–559.