BL–8. Letter from the President of the Export-Import Bank (Waugh) to the Vice President1
Re: Oil Problems in Bolivia
Complying with our agreement, I have this morning had an extended talk with Mr. W.K. Whiteford, President of the Gulf Oil Company of Pittsburgh, Pennsylvania, who stopped over in Washington in accordance with my request.
First, I found Mr. Whiteford completely familiar with the problems, both technical and political, that are prevalent in Bolivia. I also found that he had a most constructive attitude and approach.
The question presented to us in Bolivia was the possibility of a loan to Yacimientos Petroliferos Fiscales Bolivianos of from $8 million to $10 million for the purpose of furthering their exploration in the restricted area which, according to Mr. Whiteford, is a deep well distillate field (12,000 to 14,000 feet).
The digging of these wells and assuming that they find the oil is but the first stop in an over-all problem of a magnitude approximately ten times the figure that they have given to us.
In other words, the locating of this amount of oil is merely the first step. The country cannot absorb the oil domestically and therefore an [Typeset Page 159] export market is an absolute necessity. To transport the amount of oil necessary to make an operation of this size successful would require the building, at a tremendous expense, of an additional and larger pipeline to the seacoast.
The history of this situation is that Mr. Whiteford and Gulf Oil had an open bid for a number of weeks to carry out this program and he has the feeling that he had the complete support of President Siles and also the General Manager of Y.P.F.B., Eduardo Hinojosa, who he says is a Penn State graduate and a first class oil man.
[Facsimile Page 2]Apparently, as is so often the case, the situation became embroiled in domestic politics and the President of the country and the General Manager of Y.P.F.B., were not able to carry through to a successful conclusion the steps necessary to be taken to consummate the arrangement.
Mr. Whiteford insists that the loan requested at this time of from $8 million to $10 million would not aid, but would rather complicate the long-range problem for, as above stated, this would be but the first step in a much larger program that would be necessary to complete the transaction.
Mr. Whiteford makes the constructive suggestion that if the President and the General Manager of Y.P.F.B. could control the situation it probably could still be worked out whereby Gulf or a consortium of companies would go in on a 50–50 basis, not only to develop the field but also to provide the larger financing needed, namely, the building of an additional pipeline, and assuming the responsibility for the basic development of the markets.
There would have to be an agreement reached to the effect that any money paid by the oil companies as a bonus would have to be earmarked so that it could be used for the further development of the producing properties that are already discovered and under the operation of Y.P.F.B.
I have obtained Mr. Whiteford’s permission to discuss this problem with Ambassador Victor Andrade, with whom I have been in touch since our return and from whom I have obtained the information with reference to the outstanding oil concessions, etc. In view of what has transpired, I think it would be unwise to even approach any other oil company or oil executive until after we have explored the possibility outlined above.
I will keep you and the State Department informed as to developments, but if you have any suggestions to offer in the meantime, please pass them along.
Very sincerely,
President
P.S.—June 2, 1958—
On Friday morning, the holiday, Ambassador Victor Andrade came in and we had an extended conversation, first with reference to our visit in his country, and second regarding my talk with W.K. Whiteford, President of Gulf, which had taken place the day before.
The Ambassador related some of the problems with which the present Government of Bolivia is confronted, speaking now from a political standpoint. He hastened to add, however, that he was not a technical man and was not certain as to whether or not he understood the point of view put forth by President Whiteford of Gulf.
It occurred to me, and I immediately stated, that rather than attempting outline the position of Mr. Whiteford, since neither the Ambassador nor I were technicians in this field it would be far better to get the two men together and therefore he, the Ambassador, could get the story first-hand.
There is one point in the conversation that impressed the Ambassador very much, and that was that the amount of money necessary to develop this oil field which is now under the exclusive control of Y.P.F.B. would be ten or-fifteen times the amount suggested as a present loan, namely $10 million.
While we all know the difficulty that might be encountered from a political standpoint if the Government of Bolivia made further commitments in the semi-proven territory now being worked by Y.P.F.B., nevertheless it seems to me that if the government officials could attract from $100 million to $150 million in outside capital without completely losing the identity of Y.P.F.B., it might be the possible lifesaver for this little country.
In any event, this morning I reached President Whiteford in New York, related my conversation with Ambassador Andrade to him, gave him the Ambassador’s address and telephone number, and received the promise that he would get in touch with the Ambassador at the earliest possible date. I think this is as far as anyone in the Export-Import Bank should go, particularly at this juncture.
A copy of this letter and postscript is being sent to the Department of State in order that they may be fully informed.
[Facsimile Page 4]I explained to Mr. Whiteford over the telephone that these documents carried a confidential classification and therefore could not be distributed outside of government circles. He replied that he understood, that he was certain that the transaction had been reported and recorded as we agreed upon during our first talk.
S.C.W.
- Source: Department of State, ARA/NST Files, Lot 62 D 16, “Economic, 1958, Bolivia, YPFB.” Confidential.↩