294. Note From the Embassy in Bolivia to the Bolivian Ministry of Foreign Affairs1
The Embassy of the United States of America presents its compliments to the Ministry of Foreign Affairs and Worship and has the honor to refer to the aide-mémoire of the Government of Bolivia dated August 9, 1957 on the subject of supplementary aid for Bolivia. The contents of this aide-mémoire have received the most careful consideration of the United States Government and the Embassy has been instructed to make the following reply.
The United States Government is deeply mindful of the great efforts made by the Government of Bolivia for the stabilization and the consequent expansion of the Bolivian economy as well as of the very considerable progress already achieved.
It is noted from the aide-mémoire of August 9 that the aggregate amount of aid requested for supervised credits, labor resettlement, and a minimum development program is between $60 million and $80 million over a period of years. It is observed from the aide-mémoire that the amounts specified were set forth only as tentative estimates. The United States Government is, in principle, sympathetic with programs of this type in Bolivia, and, as the Government of Bolivia is aware, is preparing to assist such activities through the Fiscal Year 1958 aid program.
In order to enable the Government of Bolivia to formulate its plans, the United States Government desires to state that it is not in a position to consider additional grant aid to Bolivia over and above the amounts set forth in the Fiscal Year 1958 program presented to the Government of Bolivia on October 16, 1957. There are two basic reasons for this. The first is the limited amount of funds made available by the United States Congress on a global basis and the competing needs of other countries. The second is the conviction increasingly borne out by developments that Bolivia should be able to meet an increasing share of its requirements of foreign capital [Page 624] through the normal channels of private investment and public credit. In this connection it may be recalled that the Executive Branch of the United States Government has always assumed that grant aid to Bolivia would be a decreasing program as time went on, and that it has explicitly based its requests to the Congress for funds on this assumption.
With respect to the specific requests made in the aide-mémoire of August 9, the views of the United States Government are as follows:
(1) Budget Support.
At the current rate of exchange, the Fiscal Year 1958 aid program should generate counterpart funds which, together with anticipated accruals from prior-year programs, should provide enough bolivianos to cover the deficit in the ordinary budget for 1958. This calculation is based upon the policy of continued rigorous fiscal economies which the Government of Bolivia has adopted and it underlines the importance, of which the Government of Bolivia is already aware, of creating new sources of tax revenue.
(2) Supervised Credit.
It appears from the aide-mémoire of August 9 that the Government of Bolivia would contemplate the extension of very substantial loans, in the form of supervised credits, not only to private mines and industry, but also to the Corporación Minera de Bolivia (COMIBOL). For the sake of convenience, the question of COMIBOL is herein discussed separately. As regards supervised credit in its more ordinary sense, it will be noted that the Fiscal Year 1958 aid program will provide for credits to private mining and industry.
(3) Resettlement of Surplus Labor.
The Fiscal Year 1958 aid program also provides for land settlement, road construction, land clearing, environmental sanitation, and agricultural supervised credit, to absorb displaced workers.
(4) Development.
Under the rubric of “Minimum Development Plan” the aide-mémoire of August 9 envisages public projects in the fields of road transportation, food production, irrigation, and school construction. As noted in the immediately preceding paragraph, at least a part of this program will be made possible by the aid funds provided for resettlement of surplus labor. Additional resources which will assist significantly in accomplishing the objectives of the plan will be provided by servicio contributions and program contracts.
[Page 625]In reference to agricultural development, the United States Government has noted the increase in actual and anticipated output of agricultural products, which it believes may be attributed primarily to the abandonment by the Government of Bolivia of price controls and of an artificial system of exchange rates, and in some degree to improved production methods resulting at least in part from the technical assistance activities of the Servicio Agricolar Interamericano.
Though the aide-mémoire of August 9 does not deal specifically with the question of private investment, the United States Government knows that the Government of Bolivia is fully conscious of the important role which private investment can play in accelerating Bolivia’s economic development. The United States Government is confident, therefore, that the Government of Bolivia will continue to make every effort, through appropriate legislation and otherwise, to encourage the accumulation of capital in Bolivia as well as the entry of private capital into the country.
In addition to the matters touched on above, the aide-mémoire of August 9 solicits the cooperation of the United States Government with regard to two further problems.
The first relates to “support and facilities for the effective use of the Monetary Stabilization Fund”. It may be pointed out that the ICA funds and the stand-by under the Treasury Exchange Agreement have been available to Bolivia on conditions and under procedures at least as favorable as those applicable to other countries receiving these types of assistance. Nevertheless, the appropriate officials of the United States Government are prepared to discuss with officials of the Central Bank of Bolivia any aspects of this question which the latter may wish to raise. As regards facilities for using that part of the Stabilization Fund which is provided by the International Monetary Fund, the United States Government is, of course, not in a position to comment.
Finally, the aide-mémoire of August 9 seeks the assistance of the United States Government in “obtaining international credits for the amplification and renovation of equipment for COMIBOL”. The United States Government fully understands the concern of the Government of Bolivia over the declining trend in the output of COMIBOL and the potential effect of this trend on the balance-of-payments and general economy of Bolivia. The United States Government would agree that the grave deterioration in the capital equipment of COMIBOL is an important factor in this decline, which must be corrected if the present trend is to be halted or reversed.
The United States Government has on several occasions in the past pointed out the inextricable connection between the problem of [Page 626] obtaining foreign credits for COMIBOL and a settlement of the claims of the former owners of the nationalized mines. The Government of Bolivia can help to remove this particular barrier to foreign credits by taking positive steps to reach a definitive settlement of this problem through procedures that would assure fair and disinterested treatment to all the parties concerned.
The Embassy of the United States of America takes this opportunity to renew to the Ministry of Foreign Affairs and Worship the assurances of its highest consideration.
- Source: Department of State, Central Files, 824.00–TA/12–2657. Official Use Only. Transmitted in despatch 580 from La Paz, December 26.↩