18. Memorandum of conversation, October 22, among Kennedy, President Paz, and U.S. and Bolivian officials1

Part III (of 3)
[Facsimile Page 1]

SUBJECT

  • Meeting between President Kennedy and President Paz of Bolivia: Bolivia—The Alliance for Progress; US Aid Programs; COMIBOL; Petroleum; Tin Smelter

PARTICIPANTS

  • Bolivia

    • President Victor Paz Estenssoro
    • Minister of Foreign Relations José Fellman Velarde
    • Minister of National Economy Alfonso Gumucio Reyes
    • Ambassador Enrique Sanchez de Lozada
    • Mr. José Paz, President of Bolivian Oil Enterprise (YPFB)
    • Mr. Jorge Paz, President Paz’ uncle
    • Mr. Raul Vivado (Interpreter)
  • United States

    • President Kennedy
    • Under Secretary George W. Ball
    • Mr. Ralph A. Dungan, Special Assistant to the President
    • Assistant Secretary Edwin M. Martin
    • Ambassador Ben S. Stephansky
    • Ambassador-designate Douglas Henderson
    • Mr. Teodoro Moscoso, Coordinator for the Alliance for Progress
    • Mr. Ragnar Arnesen, Acting Director, Office of West Coast Affairs, AID
    • Mr. Herbert B. Thompson, Acting Director, Office of West Coast Affairs, Department of State
    • Mr. Fernando A. Van Reigersberg (Interpreter)
    • Mr. Donald F. Barnes (Interpreter)
[Facsimile Page 2]

President Kennedy invited President Paz’ views on the situation in Bolivia, particularly in the mines. President Paz said that the rehabilitation of the nationalized mines is a prerequisite to Bolivian development. This has required that the Government impose its authority on the mine union extremists. He said the Government had been successful in this effort. However, with the Communist union leadership brought to heel, the rehabilitation effort must enter a new phase involving a technical approach to administrative reform.

The Bolivian Government has a suggestion for the beginning of this phase. Heretofore the Governments of the United States and West Germany and the Inter-American Development Bank, partners in the [Typeset Page 46] Triangular Operation for the rehabilitation of the state mines, have sought to deal with this problem through an Advisory Group in Bolivia. The difficulty is that, in addition to acting in a purely advisory capacity, the Advisory Group is made up of a heterogeneous group of technicians without a sense of organizational responsibility and loyalty. These people are rather like international civil servants. They have been recruited as individuals for a relatively brief period and will then move on to other employment. The Bolivian Government believes that an effective beginning of the administrative reform phase could be made by contracting a business firm to administer a group of the COMIBOL mines. This might be on the basis of a fixed fee with a bonus for production increases. This would have to be accomplished by means of a contract under which the business firm would administer the mines for the Government. There can be no question of denationalization, which is not to be considered. It would be well to begin with a limited group of mines. This would be a step toward decentralization of the vast state mining enterprise and would provide a test of the effectiveness of the arrangement. If it is successful, further efforts can be made in the same direction. If not, other approaches will have to be tried. In response to President Kennedy’s question, President Paz said that the problem of achieving more efficient production in the mines had originally been one of labor discipline but that this problem has been overcome and the problem now is one of effective management.

[Facsimile Page 3]

President Kennedy inquired whether an American firm contracted for this purpose would be resisted as exploiters; would it be preferable to get a Canadian, German, French or other firm? President Paz said either alternative would be acceptable. He said that just as the trade union leaders have not received support in their resistance because the Government had allowed attitudes to mature and a consensus to develop before acting, so there is now a consensus for more efficient operation of the mines. President Kennedy said we would examine this proposal and be in touch with the President concerning it after his talks with the Inter-American Bank and others.

President Paz said the matter of the mines was the most important problem; however, there are others. He said the Minister of Economy would be talking to the World Bank and to Mr. Moscoso about some problems connected with roads.

President Paz then drew attention to the problem of petroleum. He said the Bolivian Government had pursued a very realistic petroleum policy. Bolivia has opened her doors to private capital in this field, and a number of private companies are at work. The Gulf Petroleum Company has found oil. At the same time the Bolivian Government wants to preserve the state petroleum company (YPFB) to supply the [Typeset Page 47] internal market while allowing Gulf to produce for export. Certain problems have arisen because YPFB must conduct exploration in order to be able to supply the domestic market. Failing that, significant amounts of foreign exchange will have to be spent for petroleum imports.

President Kennedy inquired about the status of Gulf’s offer to loan $5 million to YPFB and the question of whether Gulf can sell natural gas to companies engaged in production for export. With regard to the latter problem, he said large companies operating internationally do have a problem of precedents inasmuch as actions taken in one place affect their situation elsewhere. He hoped that something could be worked out to permit Gulf to begin exporting because this will provide important new foreign exchange earnings. President Paz expressed [Facsimile Page 4] confidence that a solution to the problem with Gulf would be worked out. He said the Government was preparing a decree which they would be showing to Gulf. The Government believed that it would be appropriate to permit Gulf to make sales directly to new companies entering Bolivia to produce for export and which would be consumers of large quantities of natural gas. President Paz said that Bolivia needs the loans both from the United States Government and from Gulf.

President Kennedy said he understood that we would be able to make our decision on the basis of the DeGolyer-McNaughton report which will be submitted next month and that meanwhile the Bolivian Government will be talking with Gulf in the hope of working something out.

President Paz observed that any loan from the United States Government to YPFB had psychological impact out of all proportion to its financial magnitude. He said such a loan, because of its great psychological value, would be very helpful in connection with a Government agreement with Gulf.

The Minister of Economy introduced himself as the expert in negotiations with the United States. He said he did not know why this should be so, since he speaks no English, but he has been successful in these negotiations and over the past years U.S. aid has come to help the Bolivian economy. He described Bolivia’s situation as one great mining camp with very limited work opportunities in other fields. President Paz is anxious to provide new job opportunities. Thanks to U.S. help, Bolivia has contracted for engineering studies of the roads on which her future depends. Naturally the inauguration of projects such as road construction takes time. This means that there is an anguishing delay between the first consideration of these projects and their actual inauguration. U.S. officials in the field are great friends of Bolivia and are doing all they can, but there are many delays in the program which create problems. The Bolivian Government believes [Typeset Page 48] the program should be accelerated to permit the Government to meet the promises it has made to its people. Mr. Gumucio pointed out the interim help obtained in the form of a public [Facsimile Page 5] works program last year, though small, had been very helpful. He said that interim help of the same character was badly needed to cover the next 18 months or so because the Alliance is not fully under way. Its machinery is still being built.

On the other hand, the Peace Corps, of which the Minister said he had originally been very skeptical, has been a genuine success. Americans are present in the villages and jungle areas of Bolivia sharing the day-to-day life of the Bolivian people. Civic action programs also have been successful. Nevertheless there remains a requirement for activity to fill the waiting period and the Alliance should be more flexible with fewer rigid requirements for an endless series of feasibility and other studies.

President Kennedy remarked that he believed Mr. Moscoso had heard this before. Mr. Moscoso said we are doing better in Bolivia. For example, in August we signed $17 million in loans. There are delays but they are not greater than elsewhere nor are they unusual given the extremely difficult problems posed by Bolivian topography. It is true that the new roads under construction are the hope of the future. This is demonstrated by the important impact of the Cochabamba-Santa Cruz Highway. However, there will soon be not this one but seven or eight roads from the highlands to the eastern lowlands. Naturally there are difficulties. We are using aerial photography for surveys and bad weather delays completion of these studies. On the other hand, activity is under way. Contracts for the construction of the first of these roads should be let in about six months. The El Alto road should be contracted out next April or May and the El Alto warehouse construction in four or five months. The latter was delayed for lack of a decision as to where it should be located. El Alto Airport is about finished, although we must now consult with the FAA on a possible runway extension since Panagra says it believes an extension will be required in order to permit jet service. Mr. Moscoso observed that elections are in the offing in Bolivia and that perhaps with their advent we shall see a more rapid utilization of public works monies the United States has already made available. In any case, it seems clear that such action would help in the situation the Minister described.

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President Kennedy asked whether it was Mr. Gumucio’s feeling that feasibility studies were not required. The Minister said he had been working in the engineering field for some 24 years, although not an engineer, and was well aware of the necessity for feasibility studies. On the other hand, he believed that if given the funds he could have the feasibility studies done in half the time presently required. He said [Typeset Page 49] these delays have serious effects. For example a road study project under way last year has now become bogged down and if the problem is not resolved it will be necessary to lay off some 300 or 400 workers, each of whom has several mouths to feed. President Kennedy suggested that we look into the problem of this road very carefully.

President Paz said that with regard to the Alliance it is apparent that at the outset the United States lacked the machinery to implement its new approach to Latin America just as the Latin American countries lacked machinery for taking full advantage of it. Nevertheless, both sides are improving. There is great concern, however, at the attitude of the U.S. Congress toward the Alliance. The history of the Alliance might be summarized as follows: First, President Kennedy’s speech launching the Alliance; then delays in its implementation; finally, action which has led to popular belief in the Alliance. This confidence in the Alliance is in the interest of Latin American governments and of the United States Government. However, if Congressional cuts are made in Alliance funds, the effect will be very disillusioning. The President said he agreed completely and hoped President Paz would express himself in exactly these terms to the Congressional leaders with whom he would be in contact. He noted that some success has been achieved in restoration of Alliance funds and we shall continue to attempt to obtain the funds needed.

President Paz referred to Bolivia’s long-standing desire for a tin smelter. He said Bolivia was asking that the United States finance a study of the feasibility of a Bolivian tin smelter. This would require no new funds. One million dollars remain of monies previously authorized for feasibility studies. [Facsimile Page 7] The Bolivian Government would like to devote these funds to contracting a United States firm to study the feasibility of a tin smelter. President Paz added that the political effect in Bolivia of mentioning a tin smelter in the joint communiqué would be very great. Mr. Moscoso pointed out that we already have a flotation research project under way seeking to improve methods of treating Bolivian ores. The Bureau of Mines has sent a man to Bolivia in connection with this project. President Kennedy asked to be informed when the results of that study might be expected in order that this matter might be considered further. He expressed his appreciation for this opportunity of talking with President Paz and looked forward to the opportunity to continue the discussion on the following day.

  1. Alliance for Progress; U.S. aid to Bolivia; development assistance; petroleum. Confidential. 7 pp. Kennedy Library, National Security Files, Countries Series, Bolivia, Paz Visit, 10/63.