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

BL–26. Memorandum from the Assistant of State for Economic Affairs (Mann) to the Under Secretary of State for Economic Affairs (Dillon)¹

Washington, October 5, 1959

SUBJECT

• Assistance to YPFB

In my attached memorandum (Tab B),² you were informed that Treasury, ARA and this Bureau had concurred in a new approach to the problem of providing financial assistance to the Bolivian Government’s petroleum company, YPFB, which would authorize Embassy La Paz to offer a grant of $5 million to the Government of Bolivia to be used indirectly for YPFB and which would permit President Siles to make some announcement in connection with this assistance. You were also informed that ICA did not concur and favored a direct loan to YPFB.

Since that time, we have had further discussions and are now all agreed on a new message to Embassy La Paz (Tab A) which is now ready for transmission. You will note that the mechanism proposed is that we would release up to $5 million in boliviano counterpart to the Government of Bolivia for it to loan to YPFB and we would make $5 million available in cash grants to the GOB to be available for purchase at the Central Bank by YPFB to finance necessary imports. These funds will only be made available after YPFB has purchased a minimum of $4 million foreign exchange out of the current Bolivian exchange budget, and will be released to coincide with YPFB requests from time to time for conversion of local currency.

Recommendation:

That you authorize transmission of this message by signifying your approval hereon.

APPROVED: ___________________³

DISAPPROVED: _______________

Concurrences: ARA

ARA:WST:JASilberstein:pge

[Attachment]

Memorandum from the Assistant Secretary of State for Economic Affairs (Mann) to the Under Secretary of State for Economic Affairs (Dillon)⁴

SUBJECT

• Assistance to YPFB

ICATO 81 of August 14, 1959, (Tab B)⁵ instructed Ambassador Strom, if Embassy/USOM concurred, to inform President Siles we are prepared to make available a $5 million cash grant which would provide indirect assistance to YPFB. Embtel 120 of August 20, 1959, (Tab C)⁶ informed us that neither the Embassy nor USOM concurred, inter alia, because the Government of Bolivia would find it politically impossible to carry out the reforms we deemed necessary (increase in internal gasoline prices to economic levels and settlement of debts owed YPFB by Comibol and other Government entities) if the aid to YPFB was to be indirect and secret.

In considering Embassy/USOM’s answer it occurred to us we had three alternatives: a) to drop the matter, b) to override Embassy/USOM and insist on the ICATO 81 proposal, or c) to seek some other means of achieving the objectives sought. We do not believe we can afford to drop the matter in view of the continuing urgency of YPFB’s need for financing, and also having in mind the accelerating left-wing campaign in Bolivia “in defense of YPFB” which favors acceptance of a Soviet loan and drastic modification of the liberal petroleum code under which several U. S. oil companies are actively engaged in exploration activities.

In recognition of Treasury’s opposition, on policy grounds, to a direct open loan to YPFB, we have drafted an answer to Embassy/USOM La Paz (Tab A)⁷ authorizing them to reiterate the ICATO 81 proposal but also authorizing them to inform President Siles that when announcing the over-all FY 1960 aid program and his Government’s plans for utilizing our aid, he could state that in view of the stabilization support Bolivia is to receive from the United States his Government has found it possible to channel some of Bolivia’s own resources to YPFB. We have pointed out that in connection with such an announcement he could explain the need for the necessary reforms. We believe that in this way Embassy/USOM’s main objections to the ICATO 81 proposal can be resolved.

Unfortunately, although Treasury has cleared our message ICA has informed us (Tab D)⁸ that it cannot concur. ICA now holds that it does not agree with the indirect grant approach and favors a direct loan to YPFB. ICA further recommends that a survey team be sent to Bolivia to study YPFB’s financial situation and future prospects to provide the basis for determining the amount and conditions of a loan. In view of Treasury’s strong objection to a direct loan we cannot accept ICA’s proposal. Moreover a survey team would be inconsistent with Treasury’s desire to play down the connection between our aid and YPFB’s financing. We have no doubt YPFB badly needs at least $5 million in financial assistance at this time. The details of what our assistance would be used for and procedures for assuring ourselves that our money goes for this purpose can be worked out through our Embassy and USOM.

Recommendation

I recommend that you speak directly with Mr. Saccio⁹ to obtain his concurrence with our proposed telegram. In the present context, our modified proposal appears to be the only way open to us to provide some assistance to YPFB.¹⁰

1. Source: Department of State, Central Files, 824.2553/10–559. Confidential. Drafted by Joseph A. Silberstein, Deputy Director, Office of West Coast Affairs.
2. The memorandum attached to the source text, matching the description given here, was not designated as Tab B.
3. Dillon initialed approval.
4. Co-drafted by Silberstein and Henry L. Pitts on September 3, and retyped on September 14, 1959; concurred in by Assistant Secretary Rubottom.
5. Not attached to the source text, and not found in Department of State files.
6. Not attached to the source text: a copy is filed under [illegible in the original]
7. Not attached to the source text.
8. Not attached to the source. The reference is to a memorandum from ICA to Assistant Secretary Rubottom, dated September 9, 1959.
9. Leonard J. Saccio, Deputy Director, International Cooperation Administration.
10. A memorandum of conversation between Bolivian Foreign Minister Andrade and Assistant Secretary Rubottom, held in Washington, October 22, 1959, reads in part as follows:
    “Mr. Rubottom opened the conversation by stating that we were very pleased to be able to assist YPFB in the manner outlined by our Embassy to President Siles several days ago and to the Foreign Minister through the Bolivian Chargé here. He explained that this additional assistance would become available after YPFB had received some $3 million in foreign exchange out of this year’s GOB budget and gasoline prices had been raised either to provide YPFB with additional local currency or the GOB with tax revenue. He pointed out that our success in arranging this assistance to YPFB was the result of considerable effort over a long period of time.
    “The Foreign Minister expressed appreciation for this assistance and asked regarding the condition that the domestic price of gasoline be raised. Mr. Rubottom said that the gasoline price should be raised in order for our $5 million in aid to YPFB to be affective. Andrade mentioned that he had voted in the Stabilization Council several months ago to increase the price of gasoline, but that the vote had gone the other way. He added that it might be difficult politically for the GOB to raise the price of gasoline at this time.”