Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

BL–16. Letter from the Ambassador in Bolivia (Bonsal) to the Director of the Office of West Coast Affairs, Bureau of Inter-American Affairs (Siracusa)¹

La Paz, January 6, 1959

Dear Mr. Siracusa:

I have your letter of December 30.² My letter of December 19³ was written on the assumption that Messrs. Dillon, Rubottom, Mann, and others had taken a clear-cut affirmative position on the YPFB loan matter, and that Secretary Anderson had decisively vetoed this position. Since neither of these assumptions now appears wholly correct, I will have to leave to you whatever use, if any, you make of my letter of December 19. If the situation reverts to what I thought it was when I wrote the letter, I should certainly want it shown to Messrs. Rubottom, Mann, and Dillon.

There is a lot of dynamite in this whole situation, both as it relates to U.S. relations with Bolivia and, consequently, with the hemisphere as a whole, and also as it relates to the respective leadership positions of the U.S. Government and of certain American oil interests in relations to our foreign policy. But I realize that my view of the situation probably does not take into account all of the factors with which you in Washington are confronted.

It is interesting to note Mr. Whiteford’s position to the effect that if YPFB were able to increase its oil production, it would probably not be able to market it abroad. On the other hand, Gulf, Chaco, Shell, Andes and others are making extensive investments in Bolivia on the assumptions that if they find oil they will be able to market it abroad, since they certainly will not find a market for it in Bolivia which already produces more than its domestic requirements. If such a position were, in effect, to develop, i.e., YPFB unable to sell while the foreign oil companies were marketing their output, the position here of the foreign companies would deteriorate rapidly. This is just another phase of the same argument which we are making to secure needed capital for YPFB. I am concerned and depressed at the statesmanship being shown by the oil companies in this matter.

I am not familiar with the marketing problems for Bolivian oil. I know that Williams Brothers⁴ has been helping YPFB to sell gasoline to pay for the pipeline. I also understand that there might be a possibility of some sort of triangular trade whereby Bolivian sales of petroleum products to Chile would be paid for in terms of Argentine foodstuffs to Bolivia. I am looking into this matter and also other aspects of the situation and will let you know whatever I can find out. In addition to the outlet to the Pacific, there is, of course, a possibility of selling considerable quantities of Bolivian oil to Argentina when the Yacuiba-Buenos Aires pipeline is completed in 1960 or 1961. In any case, I do not consider that the no markets bogy should be considered a valid argument against a modest U.S. Government credit for YPFB.

As to the probable effect of a U.S. Government loan to YPFB on Henry Holland’s current negotiations with YPFB,⁵ I do not know how far the Department considers that there is a pertinent relationship. I note that the Holland proposition is for exploratory work in the mixed concession area, whereas the U.S. Government credit would presumably be for equipment and supplies for use in YPFB’s proven areas, notably Camiri. The effect of both these propositions would be to increase YPFB’s total resources available for both exploration and current production.

This whole situation is not going to stand still, and I hope that you can get some favorable action. A favorable decision would, in my judgment, swing the situation here very definitely in our direction. It would also lay a basis for a gradual reduction in our grant aid to Bolivia, which is to me, and I assume also to the Department, a major objective.

Many thanks for your New Year’s wishes which I heartily reciprocate.⁶

Sincerely yours,

Philip W. Bonsal

1. Source: Department of State, ARA/WST Files, Lot 62 D 429, “Bonsal Letters.” Secret. The source text bears Ambassador Bonsal’s typed name.
2. Not printed; ARA/WST Files, Lot 62 D 429, “Bonsal Letters.”
3. The referenced letter, from La Paz, stated that the Ambassador found “most distressing” the information that the $3–4 million proposed loan to YPFB had been cancelled because of a veto by Secretary of Treasury Anderson. Bonsal further stated, “Favorable action on our part would have had an extremely favorable effect politically and economically on the situation here. The prospects over the next few weeks are, as we have reported, very dark indeed. We may well have adopted a position which will insure the failure of our entire enterprise. It is certainly one which may postpone the day when the Bolivian burden on the American taxpayer can be lightened.” (ARA/WST Files, Lot 62 D 429, “Bonsal Letters”)
4. Williams Brothers Sud Americana, Ltd., an oil company associated with John Williams, which had just completed a pipeline from Sicasica, Bolivia, to Arica, Chile.
5. Reference is to the activities of former Assistant Secretary of State for Inter-American Affairs, Henry F. Holland, who was then representing the investment firm of Loeb-Rhoades, which were discussed in Bonsal’s letter of December 19, 1958.
6. Further documentation concerning the proposed loan is contained in ARA/WST Files, 62 D 16, “Economic-1958-Bolivia-YPFB.”