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

BL–30. Memorandum of Conversation by the Officer in Charge of Bolivian Affairs (Pitts)¹

Washington, April 28, 1960

SUBJECT

• Possible Settlement between the Patiño Group and the GOB and COMIBOL’s Difficult Situation²

PARTICIPANTS

• ARA - Mr. Rubottom
• Victor ANDRADE, Ambassador of Bolivia
• ARA/WST/B - Mr. Pitts

Ambassador Andrade referred to negotiations that had taken place last month between representatives of the Patiño group and COMIBOL at Montreal on the question of compensation to be paid for Patiño’s expropriated mining properties. On that occasion the Bolivians had indicated that they would recommend the GOB pay $4 million to Patiño in addition to retentions already paid, and the Patiño representatives had proposed $9-1/2 million. Ambassador Andrade stated that he had received instructions from his government to inform the Patiño group and the Department that $4 million was all the GOB was prepared to offer, in addition to past retention payments, as a definite and final settlement. He pointed out that making even this offer required a certain amount of political courage as there was a strong feeling in Bolivia the government owed nothing further to Patiño.

Mr. Rubottom said that he was encouraged to hear of the recent negotiations and hoped for a settlement, which he thought would benefit the GOB’s public relations abroad. He added that he did not know what we could do to help bring about a settlement between the two sides. Andrade said that feelings had mellowed over the years and that he thought that it was quite possible to reach a settlement of the Patiño problem, just as a settlement was eventually reached with the Standard Oil Company of New Jersey following expropriation of that company’s properties in 1937. Mr. Rubottom reiterated that in his opinion a settlement was certainly desirable, and he hoped that some means would be found to bring this about in the near future.

Mr. Rubottom then referred to information just obtained from our Embassy at La Paz indicating a serious government financial crisis caused by continued COMIBOL losses. He said that COMIBOL’s production had dropped considerably in the first quarter of 1960 and a sizeable deficit was probable this year.³ He said we understood that Mr. Clark⁴ of the IMF had talked to President Siles about this matter.⁵ It appeared that action was needed in order to take those measures, such as the dismissal of a large number of surplus miners and elimination of commissary losses, which were required if a bad inflationary spiral were to be avoided.⁶ Mr. Rubottom hoped that the necessary action would be taken, although he realized it might not be possible to institute some measures until after the elections.

Mr. Rubottom also referred to the attack by a large number of demonstrators on April 26 against the building housing the Servicios in Cochabamba. He said that he understood that the police had eventually arrived and provided adequate protection, but he deplored the irresponsible actions of the Confederation of Construction Workers.⁷ Andrade replied that he was not familiar with this incident, but would inquire regarding the circumstances.

Following the discussion in Mr. Rubottom’s office the Ambassador and Mr. Pitts continued the discussion along the following lines:

Should an agreement be reached with Patiño, Andrade said the GOB would probably then approach the Department in an effort to obtain assistance in financing such a settlement. The Ambassador pointed out that the Bolivian government simply did not have the required funds with which to pay Patiño and would, therefore, have to look to lending institutions of the United States Government or to the IBRD and commercial banks for help with this matter. Mr. Pitts replied that he could not encourage Andrade regarding possible action by the USG. Andrade commented that he had been assured that once a settlement of Bolivia’s outstanding bonded indebtedness had been concluded, the GOB would be able to obtain funds from the IBRD. Although an agreement was reached and payments were being made to the bondholders, the GOB had not obtained assistance from the IBRD as it was unable to finance the studies required before presenting proposals to the IBRD. Andrade added that COMIBOL was badly in need of funds with which to purchase new equipment and improve its activities. He said that should a settlement with Patiño not improve the GOB’s credit standing to the extent that it could obtain loans for COMIBOL, there would be a feeling in his government that it was not worth while to conclude the agreement. Mr. Pitts said it would not be possible to make any commitment on this matter. He added that while a settlement with COMIBOL would undoubtedly greatly improve the likelihood of COMIBOL’s obtaining outside assistance, the GOB’s 1960 budget contained only $2–1/3 million for payment of foreign debts, whereas the amount due in 1960 (including 1959 delinquencies) amounted to some $20 million. Even if a settlement were reached with Patiño, therefore, the GOB might have some difficulty in obtaining financing for COMIBOL.

Mr. Pitts again referred to COMIBOL’s current financial problems and stated that the information just received indicated that drastic measure might be required in order to reduce COMIBOL’s operating deficit. The Ambassador agreed that there might be strong political reasons why desirable drastic measures could not be taken, “but still, if the doctor recommended amputation of a leg in order to save the patient’s life, the patient would have to make the hard decision”.

1. Source: Department of State, ARA Files, Lot 63 D 61, “Bolivia-Memoranda of Conversations.” Confidential. The source text is an unsigned carbon copy.
2. Further documentation concerning this subject is in ARA/WST Files, Lot 63 D 61, “Bolivia-Comibol.”
3. Reference is to telegram 619 from La Paz, April 27, 1960, which reported that Comibol’s deficit might be predicted at $12 million for 1960. (824.10/4–2760)
4. George J. Clark, resident IMF representative in Bolivia, June 1959–June 1961.
5. Telegram 619 reported that Clark informed Siles on April 25 that the Government of Bolivia must take drastic measures to cut Comibol losses or face a serious financial crisis.
6. Telegram 619 stated that the situation required dismissal of large numbers of surplus miners, closing marginal mines, elimination of commissary losses, and other drastic measures, but stated that Siles was unlikely to take such action before elections.
7. The incident was reported to the Department in telegram 615, from La Paz, April 26, 1960, 724.00/4-2660, and telegram 620, from La Paz, April 27, 1960, 724.00/4-2760.