229. Editorial Note

Documentation relating to relations between the United States and Bolivia is being printed in an accompanying microform publication. A narrative summary based on that documentation is provided below, along with a purport list of the documents published in the microform supplement. The document numbers cited in the summary correspond to the document numbers in the purport list and the microform supplement.

The central theme which runs through the story of U.S. relations with Bolivia during the last 3 years of the Eisenhower administration is the effort made by U.S. officials to encourage the reform of the ailing Bolivian economy while not, at the same time, contributing to the collapse of the Bolivian Government. Except for Haiti, Bolivia was the poorest country in Latin America. The Bolivian economy was inefficient, underdeveloped, unbalanced, and plagued by the vagaries of the international metals market. The Bolivian Government was hampered in its efforts to deal with these problems by its commitments to the workers who had supported and sustained the government since it came to power in 1952. Bolivia was heavily dependent on financial support from the United States to meet a succession of economic crises, but the Bolivian Government had to avoid the stigma of appearing to fall back into the embrace of “Yankee imperialism”. Under the circumstances, the objectives which the United States hoped to achieve in its relations with Bolivia were easier to define than to achieve. A policy paper drafted in the Department of State on November 3, 1958, stipulated that the United States was prepared to support any government in Bolivia which was free from Communist influence, and which had the ability and disposition to carry out an effective stabilization program. Conditions in Bolivia were so difficult, however, that the paper defined the primary objective of U.S. policy as “the maintenance of relative political stability in order to forestall a serious politico-social upheaval.” (BL–15)

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The Natural Resources Issue

Vice President Nixon visited Bolivia in May 1958 and President Hernán Siles Zuazo took advantage of the opportunity to point up the problems afflicting the Bolivian economy, particularly in light of reduced exports of and prices for tin. He asked for Nixon’s support for additional loans from the Development Loan Fund. Nixon promised to support such loan applications, but he stressed the importance of continuing Bolivian efforts to establish an effective financial stabilization program. He also indicated that prospects for Congressional support for financial aid for Bolivia would be enhanced if Bolivia would complete the compensation of U.S. shareholders of the mines that had been nationalized in Bolivia in 1952. (BL–5)

State ownership of Bolivia’s natural resources was a central tenet of the governing party, the Nationalist Revolutionary Movement. It was politically difficult for President Siles’ government to meet foreign demands for full compensation for expropriated properties, and it was correspondingly difficult for Bolivia to attract new foreign capital to develop such assets as unproven oil reserves while maintaining the principle of public ownership. As a result, the Bolivian Government pressed the United States repeatedly for development loans to the state-run companies which managed the Bolivian mining and oil industries. (BL–8, 26, 33) The U.S. response was to point to the continuing compensation problem in the mining industry, and to defer to private sources of development funds, such as Gulf Oil in the oil industry, and the German Salzgitter firm in the mining industry. (BL–8, 34)

In 1960, however, the Soviet Union offered to build tin mining facilities and to provide oil drilling equipment and technicians in exchange for the establishment of full diplomatic relations between Bolivia and the Soviet Union. (BL–28, 35, 37, 43) Faced with the danger of expanding Soviet influence on the South American mainland, and the possibility that anti-American sentiment and an economic crisis might lead in the direction of another Communist government in Latin America, policymakers in Washington altered their strategy and offered direct loan support for Comibol, the Bolivian state-owned mining company, and for Yacimentos Petrolíferos Fiscales Bolivianos, the state-owned oil company. (BL–26, 29, 40, 41)

U.S. Concerns Over Bolivian Political Stability

The Eisenhower administration was, in fact, sensitive throughout the period to the danger that political instability, exacerbated by economic problems, might lead to a more radical, anti-American government in Bolivia. The uncertain prospects for the ruling party were highlighted by an unsuccessful coup attempt in October 1958, and [Page 655] anti-American sentiment underscored by violent anti-American demonstrations in March 1959. (BL–14, 18) It was in the U.S. interest, therefore, to try to shore up the Siles government and the successor government of Victor Paz Estenssoro, which took office in August 1960. To that end, the United States provided Bolivia with substantial economic aid, amounting to $26 million for fiscal year 1959. (BL–12)

Aid and the Stabilization Program

U.S. relations with Bolivia were colored, however, by the fact that economic assistance was provided with conditions attached. Policymakers in Washington recognized that the Bolivian Government would prefer to receive unqualified assistance for development projects, but the conviction underlying U.S. policy was that assistance to Bolivia would be wasted unless Bolivia could implement the economic reforms necessary to stabilize the Bolivian currency and to convert the critical mining sector of the economy from a financial drain to a contributing asset. Consequently, the United States repeatedly pressed Bolivia to accept the rather draconian solutions proposed by the International Monetary Fund as a basis for stabilizing the Bolivian economy. (BL–5, 11, 12, 13, 22, 32)

These measures included a wage freeze, exchange rate reform to achieve currency depreciation, the dismissal of surplus labor in the mines, and a reduction in social welfare benefits such as government-subsidized prices in the mine commissaries. The predictable effect of this program of economic reform on the Bolivian work force would have been to produce rising prices, increased unemployment, and further demands for wage increases. Accordingly, the Bolivian Government protested that political pressures prevented more than a halfhearted effort to implement the reforms stipulated by the IMF. (BL–11, 14, 43) U.S. officials, however, continued to argue for economic reform in Bolivia, with the result that the substantial economic assistance provided by the United States to Bolivia produced as much resentment as appreciation. (BL–12) Nonetheless, the Eisenhower administration could take some satisfaction at the end of 1960, that U.S. advice and assistance helped sustain the moderate governments of President Siles and Paz and prevent the Soviet Union from establishing a foothold in South America.