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

293. Memorandum of a Conversation, La Paz, November 17, 1957¹

La Paz, November 17, 1957

PARTICIPANTS

• President Hernán Siles Zuazo
• Manuel Barrau, Minister of Foreign Relations
• Carlos Morales Guillen, Minister of Defense
• The Ambassador
• Dr. Moore
• Mr. Bridgett

SUBJECT

• President Siles’ Comments on Current Bolivian Situation

The President opened the conversation with a short discussion on the political situation especially as regards his position on December 15 when the one-year wage freeze established by the Stabilization Decree is ended. The President mentioned that there has been quite a bit of activity noted amongst certain disaffected members of the MNR party (who he described as “ex-cuperos” who today have no visible means of support) together with increased Communist activity attributed by him to the tremendous propaganda value of recent Soviet scientific achievements and as well within extreme rightist groups. He called upon Minister of Foreign Affairs Barrau and Minister of Defense Morales Guillen to present a short report of their knowledge of this situation.

Minister Barrau stated that the Government had knowledge that disaffected members of the party together with Communists and rightists were presently working independently towards causing difficulties from this time on especially regarding the unemployment legislation, the renewal of the President’s extraordinary powers, and the unfreezing of wages on December 15. At the present time these three groups apparently are working independently and there is no indication that they have accomplished a united front but he feels that this may not be in the too near future. His opinion is that they will not only continue to conspire but that they plan to commit overt acts of violence.

Minister of Defense Morales Guillen stated that the government could count on very little support from the army which has been torn by internal strife and is badly underpaid. While he made no mention of the carabineros, he apparently did not count upon their support to any extent either. His feelings were that the government will again have to arrive at a compromise solution to the problem which will be presented especially on wages. He also mentioned that the government could expect acts of violence and more so as the opposition realizes President Siles’ aversion to using armed force that it probably will be difficult to control.

The President then went on to state that there were three possibilities to meeting the wage increase demands which he is certain are to be presented. He already has knowledge that one demand will be for a minimum of 30%.

(1) A reduction in the value of the dollar—On this subject the President admitted that this idea had been discarded inasmuch as the IMF team argued strongly against it and indicated that the IMF would not accept such a procedure which was estimated to possibly cost a loss of some $10 million in reserves.

(2) Compromise on the lowest possible increase in wages—The President stated that he was convinced that an increase in wages without a corresponding increase in production was not realistic. He admitted that there was a very large sector of labor especially government employees who were in actual want and that their salaries were not sufficient to provide even a low standard of living. He hoped that he would be able to hold the line in not granting an increase in salaries, but did not close the door to the fact that he may be forced to do so.

(3) To increase real purchasing power of wages by lowering prices on essential commodities—On this subject the President felt that if he were able to lower the price of essential commodities to provide increased purchasing power of wages that he could possibly stave off at least for the time being a salary increase.

The President then went on to talk about the plans that the Government now has to bring about ratification of the decree to provide for unemployment. In this connection he stated that he was planning to have his cabinet discuss with the Congress in reserved sessions the state of the nation and to bring about a showdown by requesting a renewal of his extraordinary powers to legislate by decree certain economic measures. The original decree was granted in November 22, 1956 and will end November 22, 1957. He is of the opinion that he will have sufficient support in Congress to get this measure renewed, but at the same time he expects strong opposition and he hopes to be able to measure his chances for the passage of the unemployment law by the way in which the Congress receives the reports of the various Ministers.

At this point he mentioned the speech made in Deputies by Fellmann Velarde, generally recognized as spokesman for ex-president Paz Estenssoro. Fellmann Velarde spoke at great length against any reduction in labor force demanding that the government set an example by maintaining in their positions all workers and that private business do likewise. The President stated that he had called in Fellmann and endeavored to obtain an explanation from him as to why he had taken this position. The President stated that the Deputy had talked nonsense and had been unable to come up with a reasonable position. (It was apparent from the importance that the President appeared to give to his conversations with Fellmann Velarde that he believes that Paz Estenssoro may be being considered as a possible replacement for Siles in case Siles resigns or is forced out of the Presidency in December.)

The President then turned the conversation to the possibility of what groups were working in Bolivia to cause unrest. He apparently is convinced that some members of the MNR party are courting support of Peronistas (Lechin is known to be very close to high ranking Venezuelan government officials and the Bolivian Ambassador to Venezuela, Dr. Marin, was recommended by Lechin for this position and Marin is his very close friend. Likewise, the Venezuelan Ambassador to Bolivia is close to Lechin. All of which induces present thinking to tie Lechin in with Peron’s activities from his residence in Venezuela). Expanding on this subject the President pointed out that it was his opinion that a new government in Argentina would be pro-Peronista no matter what name it ran under in the elections, that is if there are elections. Also that Bolivia on account of its geographical position if it had a pro-Peronista government would be an excellent base for supporting political activities in Argentina. At this point the President stated that the present Argentine president Aramburu will visit Santa Cruz on December 5. It is expected at this time that conversations between the two presidents will be held with a view to Bolivia obtaining certain assistance from the Argentines and the Argentines obtaining some assistance from Bolivia in restricting Peronista activities in this country.

Foreign Minister Barrau took up the conversation and explained Bolivia’s situation comparing it to a buffer state and went on into a discussion of Brazil’s supposed intentions as regards Bolivia and especially the Bolivian territory comprising most of its prospective petroleum fields. The past history of Brazil’s imperialistic aims as regards Bolivia, the loss of the Acre area and the insignificant but present territorial claims that Brazil has pending with Bolivia. The President then mentioned his thoughts on the present Bolivian [Brazilian] situation. He stated that Brazilian President Kubitschek is surrounded by an army caste which is definitely committed to Brazilian territorial expansion at the expense of Bolivia. That Brazil was not entirely blameless in the recent disorders in Santa Cruz and that the activities of Ing. Whatley, Brazilian representative on the mixed Bolivian-Brazilian commission, had been under close surveillance and it was evident that he was engaged in, if not inciting the Cruceños, at least giving them more than moral support.

The unpublished and little known Brazilian trade agreement proposal submitted here some months ago was also mentioned. This proposal would have created a Brazilian zone of influence from Santa Cruz to Cochabamba and as far south as the Argentine would have allowed it to penetrate in this zone. It was proposed that extensive Brazilian investments even to the extent of a steel mill would be made and that special privileges would be granted to Brazilian investors. The President stated that he understands that a similar treaty was entered into between Brazil and Paraguay. In referring to the army’s imperialistic influence the President mentioned again the visit of Petrobas President Colonel Janery, laughingly referring to his offer that Brazil save Bolivia from the imperialistic Yankee capitalists and the oil trusts of the world.

The extent of the influence of the Hanson Letters² was then discussed in regards to the subject of petroleum and the attacks that this letter has been making against Bolivia’s supposedly captive status to the U.S. At this point the President again discussed the impending Senator Green inquiry and was hopeful that he would be able to take some steps regarding the settlement of the compensation to be paid to the ex-owners of the nationalized mines. The plan mentioned some time ago by the President to the Ambassador of having Ambassador Paz Estenssoro approach Antenor Patiño in London for a person-to-person discussion did not materialize as Patiño had already left England by the time this proposal was firmed up. The question then was asked as to whether the President intended to carry through his other plan of having an independent valuation of the mines made by a reliable firm (possibly Ford, Bacon and Davis) and on the basis of this valuation to make a definite offer of settlement to the ex-mine owners. The President replied in the affirmative. The Patiño proposal which suggested that the mines be turned over to an experienced mining company for operation was also mentioned by the President who stated that this proposal was politically impractical.

Amongst other subjects discussed were the foreign investment proposals now before the Bolivian Government for acceptance. In this connection President Siles assured the Ambassador that the South American Gold and Platinum Company contract³ (this has been the subject of strong opposition in the Senate where the contract is now awaiting ratification) will be ratified by Senate. He hopes that this will be accomplished during the present week.⁴ No other specific propositions were mentioned but the President gave the impression that he would give preferential attention to the acceptance or rejection of such proposals that are now pending.

Foreign Minister Barrau stated that the IMF had agreed to extend the present standby agreement to December 28 and that the Bolivian Government must accomplish the conditions set down by the IMF team by the early days of December, possibly a deadline of December 5. Also during the conversation Foreign Minister Barrau’s request to the Ambassador for a letter which would state the conditions under which the 1958 U.S. economic aid program was being made available to Bolivia was brought up. Foreign Minister Barrau made it clear that he considered that this letter would enable him to confront certain opposition members especially in Congress that the United States Government’s program could not be implemented unless certain conditions were met by the Bolivian Government, especially that regarding freedom to hire and fire labor. The Ambassador stated that while this subject was a delicate problem in Bolivia, it could also create a delicate political problem in Washington and that he was studying and consulting on the manner in which he could write such a letter to the Bolivian Government. He mentioned that it would possibly be several days before such a letter could be drafted if it were thought appropriate to do so.

Comment: It was apparent that President Siles’ main interest in arranging this conference was to bring to the Ambassador’s attention the numerous domestic and international political problems that were facing Bolivia at this time. The presence of Foreign Minister Barrau and Minister of Defense Morales instead of the Minister of Economy, the Minister of Finance or his economic advisor Mr. Gisbert tend to confirm this impression.

The Ambassador took occasion during the conversation to reiterate the Embassy’s position regarding the need for the Bolivian Government to obtain the renewal of the standby agreement with IMF and the U.S. Treasury, the renewal of the President’s extraordinary powers to continue the implementation of the Stabilization Program, the issuance of legislation to provide for freedom of hiring and firing of labor together with the unemployment assistance to be provided by the U.S. economic aid program, provisions for an appropriate climate to attract private capital investment in developing Bolivia’s natural resources and the need to hold the line regarding wage increases at the time of the unfreezing of salaries on December 15 so that if any wage increases are granted they be based on productivity. The President’s remarks to these points are contained in the body of the memorandum of conversation above.

1. Source: Department of State, Central Files, 724.00/11–2257. Secret. Drafted by Bridgett, Second Secretary of the Embassy in Bolivia. Transmitted in despatch 450 from La Paz, November 22.
2. Reference is to Hanson’s Latin American Newsletter. Documentation relating to the newsletter is ibid., 832.2553/7–1757 and 911.63/1–1155.
3. The South American Gold and Platinum Company, a U.S. based corporation, was negotiating exploitation contracts with the Government of Bolivia for nationalized mineral deposits, ownership of which was still claimed by the Aramayo Mining Company. Documentation is ibid., 811.05120 and 811.05124.
4. The contract was awarded on November 22, 1957. (Ibid., 811.05124/11–2257)