21. Memorandum of conversation, October 23, among Kennedy, President Paz, and U.S. and Bolivian officials1

Part III (of 4)
[Facsimile Page 1]

SUBJECT

  • Meeting between President Kennedy and President Paz of Bolivia: US Aid Program; COMIBOL; Alliance for Progress

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
    • Dr. Carlos Serrate Reich, Private Secretary to President Paz
    • Under Secretary for Foreign Relations Luis Alberto Alipaz
    • Mr. Jorge Paz, President Paz’ uncle
    • Mr. José Paz, President of Bolivian Oil Enterprise (YPFB)
    • 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 suggested that the discussion return to some of the items considered in the previous day’s conversation. He asked Mr. Moscoso what had been worked out in the interim.

Mr. Moscoso said it had been agreed in July that AID would send an engineer to look into the matter of road no. 2 when requested to do so by the Bolivian Government. Now that Mr. Gumucio has made the request, an engineer will be sent immediately. The problem of a management contract for a group of state (COMIBOL) mines had been discussed with President Paz and Felipe Herrera, President of the Inter-American Development Bank. The Bank has the names of a number of management firms, one of which will be agreed upon with Dr. Bedregal, the President of COMIBOL, when he comes to Washington. It has been generally agreed that President Paz’ idea of utilizing this firm for a limited number of mines is very good.

Mr. Moscoso added that financial controls in COMIBOL are also necessary. There is no requirement that the firms that have been involved in discussions of this matter to date should be used, but some firm of good reputation should be selected not only to train COMIBOL people in financial control procedures but actually to keep COMIBOL accounting up to date in the interim period. The need for improved financial controls has been agreed upon with Dr. Bedregal but there are disagreements over how much improvements should cost and with regard to personnel to be trained. AID and the IDB are willing to finance the training of COMIBOL employees in financial control techniques for the one-year period considered necessary.

President Paz said he would like to make one clarification with regard to Minister Gumucio’s remarks of the day before. The Bolivian Government thinks that regulations—not persons—impede progress. No one could seek to be more helpful than U.S. officials like Mr. Moscoso. However, the problem is to establish which requirements are really necessary and which others can be dropped in the interest of speed and flexibility.

[Typeset Page 55]

In this connection President Paz said he did not consider the Lleras-Kubitschek proposals concerning the Alliance as a solution. Implementation of their proposals would only [Facsimile Page 3] involve new delays. Ultimately the decisions must be made by the United States. Dr. Paz said he had told Kubitschek as much when he was in La Paz. Moreover, he said, in any organizational structure controlled by the Latin Americans, Argentina, Brazil, and Chile are going to take the lion’s share of Alliance help without regard for the problems of the smaller countries. The Bolivian Government definitely prefers to deal bilaterally with the United States with regard to the Alliance.

Mr. Moscoso said we had thought it desirable that Latin Americans be more involved in the Alliance. He expressed the opinion that the CID could, if organized, make recommendations on procedures as to how to accelerate the Alliance effort. He noted that it was precisely in response to a request to Dr. Lleras and Mr. Kubitschek for recommendations on such procedures that they had produced their report recommending the CID. On the other hand, he noted that AID is improving its procedures. Regional administrators now have authority to approve loans up to $2.5 million and he would like to redelegate that authority to the field.

President Paz said this was a notion Bolivia had favored for some time. The people in the field know the problems and are capable of dealing with them. Referral to Washington inevitably involves delays because Washington is dealing with the problems of the world.

President Kennedy wondered how many of the delays were due to statutory limitations, how many were the result of Congressional caprice, and how many had been created by the country involved. Mr. Moscoso noted that long lists of statutory criteria must be satisfied for the approval of a single project and someone must certify on each point that we are not violating the law. Some of our requirements are related to our serious balance of payments problem.

President Kennedy inquired about Bolivia’s balance of trade with the United States. President Paz said Bolivia imports from the United States about ten times its exports to the United States. It was observed that the difference is made up of loans, direct investments, and sales to Europe.

[Facsimile Page 4]

President Kennedy said it was precisely on the basis of situations like this that he had made the point to Congress that Latin American trade is so oriented that the dollar loss involved in the Alliance effort is much less significant than in the case of Europe.

President Paz said Bolivia was experiencing some difficulty in the use of dollar aid. Not only do existing documentation requirements involve delays but purchases of certain items in the United States are significantly more expensive than elsewhere. Tires, vehicles, milk and milk products are prominent examples. This has a cost-of-living effect [Typeset Page 56] which creates certain problems. He said a memorandum had been left with Mr. Moscoso on this subject. President Kennedy said that the problem is that in the last eight or nine years the U.S. has lost in the neighborhood of $15 billion. This creates tremendous pressure for cuts in the aid program and a retrenchment in our military security efforts. Moreover, if the loss were to continue at this rate it would seriously jeopardize the entire exchange system of the Western world.

Minister Gumucio said Bolivia expected to resolve difficulties on use of dollars by working with AID, although flexibility in the application of the procedures would be needed to avoid a sharp impact on prices.

President Paz said that Bolivia is now sending some 5,000 tons of tin ore a year to Wah Chang in Texas City. It seems that Wah Chang is not in good financial condition. As a result Wah Chang is unable to make advances on ore shipments. The transactions with them thus turn out to be less advantageous than those with the British smelters. These advances on ore shipments are extremely important because there is a six-month delay before final settlement for ores shipped to the smelters. As a result the Bolivian Government has a need to finance the maintenance of this ore pipeline. A similar problem is the financing of the Bolivian sugar harvest. At present counterpart funds are used to finance the harvest but this immobilizes funds which otherwise might be used for development purposes for which they are badly needed. The Bolivian Government has tried to interest Grace in financing this harvest because Grace [Facsimile Page 5] is the sugar distributor in Bolivia, but Grace is not willing to substitute its financing for the present system of counterpart financing. Mr. Moscoso said that these are essentially commercial banking problems and we are exploring the possibilities of interesting U.S. banks in doing this financing. It may be possible to use the investment guaranty to encourage this. We are also talking to the International Monetary Fund about these problems.

President Paz said he would like to endorse Mr. Gumucio’s remarks in the previous meeting concerning the need to fill the gap between the present and the full-scale work on large projects. Last year’s $3 million for public works had been very useful and very visible. Mr. Moscoso said that we were prepared to look at projects of this kind. He suggested that an effort be made to combine public works projects with the layoff of surplus workers from COMIBOL.

President Paz said that this could be done to some extent but not completely. The fact is that miners tend to be miners for life and are not easily transferred to other employment. A much better device for absorbing excess COMIBOL workers is the expansion of private mining activities on the basis of credits from the Mining Bank. He agreed that U.S. funds were available for the bank, once prerequisites have been met, and acknowledged that responsibility for the delay was on the Bolivian side.

  1. Alliance for Progress; U.S. assistance. Confidential. 5 pp. DOS, President’s Memoranda of Conversation: Lot 66 D 149.