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

285. Memorandum of Conversations, La Paz, April 1957¹

La Paz, April 1957

PARTICIPANTS

• The Ambassador
• Mr. Gilmore, Embassy
• Mr. Eder (USOM), Stabilization Council
• Mr. Shields, Embassy

SUBJECT

• Stabilization Council Deliberations, April 2, 1957

Mr. Eder reported as follows:

I. Bolivia’s Proposal for Increased U.S. Aid

The President stated that the only solution he could envisage for Bolivia’s immediate problems is increased U.S. aid (see despatch 484²). He said that he had an “absolute promise” from Ambassador Drew of a substantial increase in aid and that this promise had been confirmed by Mr. Roland Atwood of the General Collins’ mission.³ He also asserted that USOM/B Director Ross Moore had made an “absolute promise” of additional aid for supervised credit operations.

Comment: The “absolute promises” to which the President refers were never given or implied. As nearly as past conversations can be recalled and reconstructed by the Ambassador, Mr. Moore and those in attendance at the Collins’ conferences, the facts are these:

(1) The Ambassador upon being handed the President’s proposals, stated that our government would consider it.

(2) Mr. Atwood stated that any of President Siles’ proposals would receive consideration by our government which, as has been demonstrated, is mindful of Bolivia’s problems.⁴

(3) Mr. Moore has on occasion referred to the channeling of existing ICA stabilization funds into supervised credit operations (see despatch 561⁵) but has never spoken of or implied the possibility of additional assistance funds.

Mr. Eder states that, on the basis of his experience, President Siles tends to consider his proposals accepted unless they meet with a prompt and unequivocal rejection.

II. The Wage Outlook

The President stated that he wishes to have a consideration of the general economic outlook at an early meeting since he was not certain for how long the wage freeze could be held. He added that the exchange rate must be kept at or below its present level, come what may.

Mr. Eder observed that if the exchange rate were to be held down while wages were increased, one or both of the following would be essential: (a) a reduction in the employer’s social security contributions from the present 30% to, say, 10%; (b) an authorization to employers to dismiss employees with impunity. While the latter would mean unemployment, it would of course be cheaper to provide work relief for the unemployed than to continue fulltime wage payments to employees which are surplus to their employers’ requirements.

Foreign Bondholders Agreement Mr. Eder reported on a recent conversation with Stabilization Council member Gisbert.⁶ Mr. Gisbert stated that Vice President Nuflo Chavez, whose intervention has blocked the implementation of the agreement reached last December between Mr. Gisbert and the Foreign Bondholders Protective Council,⁷ is likely to propose an alternative plan. He reports that, while in the United States, Chavez was approached by a Mr. Dowson, (?) who offered to buy up $7,000,000 of Bolivian bonds on the open market for $2,000,000, following which Bolivia could presumably carry out the agreement with the bondholders at a considerably reduced cost.

Mr. Eder observed that, in addition to this plan being immoral, it would constitute the worst possible type of public relations at just the time that Bolivia hopes to attract investment capital; that the obvious reaction in the U.S. would be that if Bolivia had $2 million available, it should be used for interest payments. In addition the $2 million figure may be high in terms of current bid ask prices.

1. Source: Department of State, Central Files, 824.10/4–857. Confidential. Drafted by Shields, First Secretary of the Embassy in Bolivia. Transmitted in despatch 580 from La Paz, April 8, 1957. (Ibid., 824.10/4–857)
2. Despatch 484 enclosed a memorandum on supplementary aid that President Siles handed to Ambassador Drew on March 1. (Ibid., 824.00–TA/3–557)
3. Reference is to the Subcommittee of the President’s Citizens Advisers on the Mutual Security Program, which visited Bolivia February 15–17. The committee included General J. Lawton Collins, Special Ambassador from President Eisenhower to Bolivia, and chairman; and John C. Hughes, former Ambassador to NATO. Atwood; Turkel; Colonel Thomas B. Hanford, International Security Affairs, Department of Defense; and William R. Dalton, Liaison Officer, Department of State, accompanied the Subcommittee. The visit was to study the U.S. technical assistance, economic development, and military programs in Bolivia and to confer with Bolivian officials. Documentation is ibid., 033.1100/2–1957.
4. Despatch 456 from La Paz, February 21, transmitted a memorandum of the conference of February 16 with President Siles on the need for expanded aid. (Ibid., 824.00–TA/2–2157)
5. Despatch 561 from La Paz, March 29, transmitted a memorandum of a conversation summarizing the deliberations of the Bolivian National Stabilization Council on March 26 and 27. (Ibid., 824.03/3–2957)
6. Miguel Gisbert Nogué, vice-president and chief executive of the Bolivian National Planning and Coordination Commission.
7. Final agreement with the Foreign Bondholders Protection Council was reached on June 6. (Department of State, Central Files, 824.10/6–657)