Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

248. Memorandum of a Conversation, Department of State, Washington, January 25, 1955²

Washington , January 25, 1955

SUBJECT

• Bolivia’s Plans for Economic Development

PARTICIPANTS

• Ambassador of Bolivia Victor Andrade
• Assistant Secretary for Economic Affairs Samuel C. Waugh
• Director, Office of International Financial & Development Policy Jack C. Corbett
• OSA—John L. Topping

Ambassador Andrade called at his request, to leave with Mr. Waugh a copy in English of “Memorandum II—Economic Development of the Republic of Bolivia”,³ a study of the present conditions of the Bolivian economy, projects for improving and stabilizing that economy, and the methods by which it is planned to implement those projects. The Ambassador pointed out that there were three fundamental objectives of the Bolivian development program: (1) Improvement of the mining industry by mechanization and increased labor efficiency; (2) development of other sources of foreign exchange, which meant in practical terms development of Bolivia’s petroleum resources; and (3) increased production within Bolivia of the country’s agricultural necessities. There were certain other steps which were complementary to these main objectives, such as improved systems of transportation. Success in this development program would mean the creation of a stable economy in Bolivia. The Memorandum discussed in considerable detail and in a forthright manner present conditions in Bolivia, the problems and the steps which would have to be taken to overcome them. It had been prepared by the several agencies of his Government interested in the matter, under the general supervision of the Ministry of Foreign Relations. Technicians both of the United States and the United Nations had collaborated in the study. The Ambassador pointed out that the study clearly demonstrated that external grant aid for Bolivia would be necessary for the next few years, but that it was hoped that the development program would cause the need for such aid to disappear rapidly thereafter. His Government hoped that the necessary aid would be forthcoming from the United States, and that the Memorandum would serve as a guide to indicate the kinds of aid required, as well as a demonstration of the efforts being put forth by the Bolivian Government and the necessity for help.

Mr. Waugh said that one of the Bolivian problems which was causing the U.S. Government serious concern was the continuing inflation in that country. The Ambassador said that the principal cause of the inflation was the fact that costs of production in the Bolivian mining industry were greater than the income received from the sale of its production abroad. His Government would take all possible steps to correct that situation, but in the absence of improvement in the mining industry, which would obviously take some time, felt that the inflationary trend could not be completely halted. In response to Mr. Waugh’s question, the Ambassador said that Bolivia hoped to obtain private financing for the proposed pipelines to La Paz and to the Pacific. The Ambassador added that he believed that Bolivian officials, as a result of conversations with Mr. Holland at the Economic Conference at Rio de Janeiro,⁴ were already in communication with interested sources of private capital.

The Ambassador pointed out that a principal Bolivian desire was that the Texas City smelter continue in operation. If that smelter were closed, Bolivia would once again be at the mercy of what he called the “International Tin Cartel” and would receive lower prices for its concentrates, and might even find itself unable to sell any tin. The Ambassador was told that the question of the future of the Texas City smelter would be considered at the highest levels of the Administration, and that the decision would be subject to Congressional approval. He was told that it seemed improbable that the United States would purchase additional quantities of tin to be held off the commercial market. Thus, whether the smelter continued in operation or not, it could be expected that the total world demand for tin would drop within the next year to approximately 135,000 tons per annum, in comparison with a consumption of about 160,000 tons per annum during the period when the United States was stockpiling.

Mr. Waugh assured the Ambassador that the Memorandum, which he found excellent on a cursory examination, would receive careful and sympathetic study and consideration by the Department.

2. Source: Department of State, Central Files, 824.00/1–2555. Unclassified. Drafted by Topping.
3. Not printed. (Ibid. 824.00/1–2455)
4. For documentation on the Rio Economic Conference, November 22–December 2, 1954, see Foreign Relations, 1952–1954, vol. iv, pp. 313 ff.