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

289. Memorandum From the Ambassador to Bolivia (Bonsal) to the Assistant Secretary of State for Inter-American Affairs (Rubottom)¹

Washington, June 26, 1957.

SUBJECT

• Summary of Consultations in Washington

The purpose of this memorandum is to summarize very briefly the various discussions which I have had during my period of consultation here and to formulate certain recommendations.

Additional Aid Requested By President Siles

As I had anticipated and as I indicated to President Siles on June 13, there is apparently no immediate possibility of securing any additional aid to Bolivia because:

a. ICA believes aid already granted is not being made wholly effective due to delays in counterpart generation and in the development and submittal of projects for which aid is already available, to say nothing of those for which additional aid might be required, and

b. FY–1958 appropriations are not yet available.

Dr. FitzGerald has, however, agreed to permit us to use the $1,153,000 of uncommitted aid funds remaining in the FY–1957 appropriation as a cash grant to be used to purchase bolivianos from the Central Bank. I intend to tell President Siles that the bolivianos resulting from this $1,153,000 in funds previously uncommitted can serve as a basis for initiating the supervised credit program. We should be guided in part by USOM’s planning but principally by President Siles’ judgment in determining which projects should be given preferential treatment. I will say to President Siles that, in view of the fact that there are stocks of U.S. food and textiles in Bolivia sufficient for several months consumption, and in view of the further fact that considerable additional stocks of food are provided in the PL–480 agreement recently signed, it is evident that much of our FY–1958 program will be available for other than food imports, and that it is my hope that the program can concentrate on development purposes. This is important to combat criticism to the effect that stabilization has, in effect, meant a drastic reduction in economic activity. It is also important to expedite consideration especially by ICA/W and USOM of the FY–1958 program in the light of the Bolivian budget and balance of payments estimates for 1958.

I am hopeful in this connection that you and others in the Department will find it possible, as you indicated it was your intention, to put together some sort of a “special package” which I can hand to President Siles in the relatively near future. Such a package should include an allocation from the Smathers fund for general health purposes (anti-smallpox campaign, medical education, hospital equipment, etc.).

Replies To Bolivian Memoranda

I require instructions regarding answers to be made, preferably in writing, (a) to the memorandum given me by President Siles on June 12 requesting additional aid of $10 million,² and (b) to Minister of Economy Tamayo’s memorandum of June 6³ regarding food collections and prices.⁴

PL–480 Program

The current PL–480 agreement should produce the equivalent of $3 million in bolivianos to be loaned to the private sector and $2.5 million in loans to the public sector. Although these funds will not actually be generated until well into 1958, it is most important that projects for their effective use be developed without delay. I am hoping that we can get from ICA energetic co-operation along these lines, including activation of the signature of the loan agreement, a draft of which is presumably in La Paz for comment. This agreement when approved will be signed by Ambassador Andrade on the one hand and by the Export-Import Bank acting as agent for ICA.⁵ The Department can be most helpful in following up on this matter. (Mr. Briggs and Mr. Silberstein have agreed to prepare a check list and schedule of items to be covered in Washington and in La Paz.)

Prices At Which U.S. Aid Foodstuffs And Other Items Are Sold In Bolivia

This matter was extensively discussed with Dr. FitzGerald, and he expects to let me have some positive word prior to my departure. It is my intention to tell President Siles that, if in his judgment the prices at which U.S. aid items are currently being sold in Bolivia is hampering consumption of these goods in comparison to consumption of similar goods from other sources, and if he believes that a demand for dollars is being created for the importation of this type of goods from other than U.S. aid sources because prices are more attractive than those charged for U.S. grant aid items, then the Bolivian Government should without delay lower prices on U.S. items to levels consistent with local and international market conditions. I hope that we will be able to reduce U.S. billing levels also, but the main problem is that of current prices in Bolivia. This is a problem on which we may need the help of a marketing expert.

Mining Situation

I have discussed with ICA and with the IBRD, the Export-Import Bank, and others the serious situation resulting from the decline in Bolivia’s mining production, particularly in the nationalized sector. I have also discussed the status of negotiations between the Bolivian Government and the former owners of the nationalized mines. Although I have received no indication of any change in our present negative policy toward the nationalized mining industry, I hope that I have made the point that in the absence of improvement in the productivity of the Bolivian mining sector, all efforts to improve the Bolivian economy tend to be nullified. I think that we will have to continue working on the subject in order to find out whether there is not something which we can do to help Comibol to obtain working capital for a minimum of productive projects. For instance, the required $1.5 million for Catavi and Colquiri is most urgent. It will perhaps be obtained from private sources. We must also stress in the FY–1958 program projects designed to absorb miners who should be eliminated by the nationalized mines.

Negotiations With Former Mine Owners

I do not believe that, if left to their own devices, the former owners and the Bolivian Government will reach any agreement as to total compensation. The immediate situation with which we are confronted includes serious doubt as to whether the present rate of indemnification payments can be maintained. I can conceive of no method of arbitration satisfactory to both parties. A possibility which has been suggested would be for the Bolivian Government to address a formal request to the IBRD for advice as to the bases of a fair settlement. This possibility might be investigated by the Department at a high level in IBRD. Another possibility would be for the Department itself to take an active role in the matter and to indicate to the Bolivian Government and to the former owners an opinion as to what would constitute a fair settlement. Our influence in securing acceptance of such an opinion would be great. I have discussed this with Mr. Herter and with Mr. Dillon, and I believe that the importance of the matter warrants the following up and the development of some formula. In this connection, I have been impressed in the talks which I have had with high officials of many agencies in Washington with the general realization of the political elements involved in this situation.

Visit to the United States by President Siles

I recommend we give favorable consideration to including a visit to the United States by President Siles in 1958. He is an outstanding figure among the Chief Executives of this hemisphere in the matter of courage, intelligence, and respect for human rights. I would appreciate being advised as soon as possible of the decision reached.

CCC-Type Project for Unemployed

I urge a favorable decision on this project to the extent of permitting the start at an early date of a pilot unit using mainly equipment already in Bolivia. There are political and other implications involved which I consider can only be properly weighed on this basis. I consider that this project represents a promising approach to one of our major problems, and that it should be explored on a practical basis without delay.

Replacement for George Eder

I took occasion on June 24 to call Mr. Charles Hilles, Executive Vice President of International Telephone and Telegraph, in order to tell him how deeply impressed and warmly appreciative I had been of Mr. Eder’s work. Mr. Hilles said that his Company was most anxious to get Mr. Eder back. I think it would be a good idea for the Secretary to write a letter to General Edmund H. Leavey, President of the International Telephone and Telegraph, expressing our thanks for Eder’s services. Perhaps Mr. Hollister would like to write a similar letter. Mr. Eder left Bolivia on June 25.

With regard to Mr. Eder’s successor, I have talked with Mr. Elmer G. Burland, who is retiring from the IBRD, and to Mr. Albert Waterston, of the same organization. I believe that both of these gentlemen could handle the job in Bolivia. My preference would be for Mr. Waterston because he is younger and speaks Spanish, while Mr. Burland is 65 and admits that his Spanish would require considerable brushing up. Also, I am familiar with Mr. Waterston’s work in Colombia, and we are good friends. I would recommend that Mr. Rubottom ask Mr. Waterston to come over in order to discuss the possibility of his taking this job, and that, if he is willing to do so, we then make a high level approach in co-operation with ICA and perhaps also with the Treasury (Mr. Burgess), in order to persuade Mr. Black to give Mr. Waterston the necessary leave of absence.

Personnel

I wish to reiterate the high opinion which I have already expressed of Mr. Gilmore, and I hope that some suitable Deputy Chief of Mission job can be found for this very fine foreign service officer whose age (55) and record warrant full recognition. I would also like to stress the importance of filling the Economic Counselor vacancy on which people in Washington have been working for the last year or so. With the departure of Gilmore in August and of Bridgett toward the end of the year, we will be very much weakened in this field. During my stay here, a number of names have been investigated, and I have made a couple of suggestions, but nothing definite has been decided yet.

Housing

I wish to reiterate my recommendation that steps be taken by purchase or by building to provide an adequate Ambassador’s residence in La Paz. The present residence which is owned by us would be a quite suitable residence for the Deputy Chief of Mission.⁷

Cochabamba Consulate

Please let me know as soon as possible when we have an affirmative decision on this matter. This Consulate will be most useful to us, and the announcement of a decision to re-open it could serve a most useful political purpose.⁸

1. Source: Department of State, Central Files, 611.24/6–2657. Confidential.
2. A memorandum of the conversation between Siles and Bonsal on June 12, regarding supplemental aid was transmitted in despatch 774 from La Paz, June 14. (Ibid., 724.11/6–1457)
3. Not printed.
4. A marginal notation next to this paragraph reads: “We can’t get clearance at this time for anything more than B. [Bonsal] has already told S. [Siles] & if we put into writing & clear it all around it will look less encour[aging] than his words.”
5. The agreement further amending the agricultural commodities agreement of June 7, 1957, was effected by an exchange of notes at La Paz, August 30, and entered into force on the same date. For text, see TIAS 3897.
7. A marginal notation reads: “No go.”
8. A marginal notation reads: “Still dubious.”