256. Memorandum of a Conversation, La Paz, September 5, 19551

PARTICIPANTS

  • The Ambassador; E.A. Gilmore, Jr., Counselor of Embassy; Walter
  • Guevara Arze, Bolivian Foreign Minister; Eduardo Mendieta Alvarez,
  • Bolivian Minister of Finance

SUBJECT

  • U.S. Proposal for a Bolivian Stabilization Council

This meeting was arranged at our request to consider the establishment of a Bolivian Stabilization Council as a part of the Joint Program which had previously been agreed to. A memorandum2 embodying the U.S. recommendations contained in Embassy [Page 519] despatch No. 21 of July 12, 1955,3 as modified by Department’s telegram No. 16 of August 4 [3], 1955,4 was handed the Foreign Minister.

After reading the memorandum with care, the Foreign Minister said that the proposed plan was more than he had expected in view of the earlier discussions regarding the Joint Program. He had thought that a commission to study the financial situation and submit recommendations was envisaged, but he noted that the present suggestion was for a continuous working body. He considered that Bolivia’s present need was not for more studies of its financial difficulties. The situation was plain enough; Bolivia lacked sufficient dollars to finance its vital development needs plus its current consumption requirements. However, the suggestion that more government machinery be set up to control financial policy would have to be examined with care.

Concerning the proposed membership, he questioned the need for having the Banco Minero represented. He believed that six or possibly seven voting members would be desirable, i.e., the chairman, the Ministers of Foreign Affairs, Finance, and National Economy, the Presidents of the Central Bank and the Corporación Minera, and possibly the President of the Corporación de Fomento. At this point the Minister of Finance disagreed. He felt that the Council’s main task would be to fix priorities among various developments and other expenditures, and that it would hamper its work to have the representatives of the spending agencies sitting on the Council. He inquired whether the Foreign Minister wanted to include the President of YPFB as well. Without answering this directly the Foreign Minister said it seemed to him that the Council would need to include both the spending and the earning agencies (e.g. Corporación Minera) if it was to function effectively. The Ambassador pointed out that our proposal provided that any agency would be represented on an ad hoc basis when matters in which it had a special concern were under consideration. The Foreign Minister also commented in passing that the Ministry of Mines and the National Planning Commission would probably want to be represented. He did not express an opinion as to whether this would be desirable.

Speaking more generally, the Foreign Minister said that from the internal political standpoint, the establishment of such a Council would be subject to attack. He anticipated a bad time from the [Page 520] Communists. The Ambassador reminded him that when the Joint Program was under consideration Juan Lechin had been strong in his support of it. The Foreign Minister admitted this, but said that possible left-wing attack would be a factor to take into account.

He inquired what role the UN Adviser, Mr. Arthur Karasz,5 would have in the proposed council. Both he and the Finance Minister praised Mr. Karasz warmly, and said that his knowledge and experience should be utilized. The Ambassador said that we had made no proposal for an adviser to the President of the Central Bank with the thought that Mr. Karasz would continue in this capacity and that he would, therefore, automatically be drawn into the operations of the Council, if the President of the Central Bank so desired.

Both the Foreign Minister and Finance Minister saw some similarity between the proposed council and the Kemmerer Mission of the twenties.6 The Finance Minister digressed for some minutes to criticize the restrictive nature of the banking legislation which had been adopted on the recommendation of the latter.

Both the Finance Minister and Foreign Minister expressed concern over the possibility of finding a qualified Bolivian to head the Council. The Finance Minister, in particular, stressed that the chairman should be a practical operator, rather than a theorist. The Finance Minister said merely that they would see whether a properly qualified chairman could be found.

At the conclusion of the meeting the Foreign Minister explained that consideration of the new petroleum code would have top priority during the next two weeks, and that it would consequently be impossible to give a definite answer on the stabilization council proposal until approximately the end of the month.

  1. Source: Department of State, Central Files, 824.10/9–655. Official Use Only. Drafted by Gilmore. Transmitted to the Department in despatch 107 from La Paz, September 6.
  2. Supra.
  3. Despatch 21 transmitted a memorandum that suggested the establishment of a central coordinating body within the Bolivian Government to act as a permanent stabilization council. (Department of State, Central Files, 824.10/7–1255)
  4. Telegram 16 suggested that the council have cabinet rank, consist of the existing cabinet ministers and heads of pertinent agencies, and include a non-voting U.S. adviser. (Ibid.)
  5. Arthur Karasz, U.N. Financial Adviser to the Bolivian Government.
  6. A series of missions led by Professor Edwin W. Kemmerer of Princeton University, which resulted in the establishment of central banks in Colombia, Chile, Ecuador, Peru, and Bolivia (in 1928), that were to enforce deflation and maintain the external value of currency. See Edwin Walter Kemmerer, Informe Kemmerer y Proyectos de Ley para la Reorganización del Banco de la Nación Boliviana, y Otros Proyectos (La Paz, Finance Ministry, 1927).