Foreign Relations of the United States, 1969–1976, Volume E–11, Part 2, Documents on South America, 1973–1976

71. Paper Prepared in the National Security Council Interdepartmental Group for Inter-American Affairs¹

Washington, undated.

Reassessment of NSDM 160 of April 14 [4], 1972: Situation and Outlook in Bolivia

Problem: NSDM 160 approved a forthcoming U.S. assistance policy toward Bolivia in response to the unique circumstances existing at the time. Specifically, large inputs of military and economic assistance were endorsed on the basis of political rather than traditional development or security assistance criteria. The circumstances in Bolivia have changed markedly, calling into question the continued validity of the policy conclusions and recommendations contained in NSDM 160.

Environment at Time of NSDM 160: On August 22, 1971, the Armed Forces of Bolivia, leading elements of the private sector, and several major political parties jointly overthrew the military government of Gen. Juan José Torres. Col. Hugo Bánzer Suárez was named President and head of the civilian-military coalition which functioned as the Nationalist Popular Front (FPN).

The Torres regime had been marked by chaotic political conditions and dependence on extremist elements in the universities and labor unions. A deteriorating political situation was punctuated by the expropriation of major U.S. investments and, in June 1971, the ouster of the Peace Corps. During the 10 months Torres held office, foreign private and public investment came to a virtual halt.

The Banzer Government inherited an economic crisis; unemployment had risen to 25–30% of the work force, with its heaviest incidence among laboring groups which had been radicalized by Torres’ supporters. Bolivia faced massive balance of payments and budget deficits. Extreme political instability made it politically impossible for the government to adopt an IMF standby agreement which would have alleviated the critical balance of payments problem. The nation’s deteriorating economic situation nevertheless posed a serious threat to the Banzer Government’s future and presaged the possible return to power of leftist elements hostile to the United States. Those groups, some of them operating from exile in Chile under the protection of the Allende Government, were actively engaged in planning and promoting the overthrow of the Banzer regime.

These, then, were the circumstances which led to the NSDM 160 response supporting rapid and large-scale U.S. assistance. NSDM 160 called for a forthcoming development assistance program without requiring the negotiation of an IMF Standby Agreement as a precondition; further, it instructed the Defense Department to be responsive to Bolivian requests for military assistance and endorsed a three to four year Military Assistance Program in order to fully equip 5 “TIPO” regiments for internal security purposes. NSDM 160, in short, recognized the extraordinary circumstances of that period and was premised on the assumption that the success of the Banzer Government—or, at least, the prevention of a return to power by the extreme left—was in the U.S. national interest.

Current Environment: Bolivia is currently experiencing a period of relative political stability and improved economic prospects. The political stability—President Banzer has been in power over three years—is due in large part to Banzer’s proven adroitness in detecting incipient coup plotting and thwarting conspirators. This stability has been accompanied by a decrease in the likelihood of an early return to power by the extreme left, a result both of Banzer’s internal policies and the increasingly hostile climate toward radical Bolivian exiles in neighboring countries. Those neighbors, especially Brazil, contribute to Bolivia’s stability in another way: they appear to have a greater appreciation of the value to themselves of a stable Bolivia and consequently a greater willingness to play a role in maintaining it. Finally, political stability has permitted reasonably coherent development planning within the Bolivian Government and has encouraged the accretion of competent technical skills in the bureaucracy.

The economic crisis described in NSDM 160, in addition, has largely receded and Bolivia faces greatly improved economic prospects. In 1974, Bolivia enjoyed a substantial balance of payments surplus, due to high world prices for its major exports (tin and other minerals, oil and gas, cotton and sugar), although a balance of payments surplus in 1975 is problematical. The internal budget in 1974 will either balance or be in only a slight deficit position which will drop in 1975 to a moderate deficit requiring around $boliviano 300 million (US$ 15 million) in Central Bank financing.

In short, the political and economic circumstances which prevailed during the Torres period and which led to the policy response contained in NSDM 160 no longer reflect current Bolivian realities. That is not to say, however, that Bolivia is on the verge of resolving its long-standing basic political and economic difficulties. Although the threat posed by the extreme left has receded, civilian political institutions remain fragile and the armed forces dominate the political system. There is constant plotting against Banzer and the likelihood of an eventual extraconstitutional change of government is virtually certain. Per capita income is still the second lowest in the Western Hemisphere, and perhaps as much as half of the population still do not fully participate in the national economy. Favorable world prices for Bolivia’s major exports cannot be relied on indefinitely, and the cost of essential imports continues to rise. But progress—at least for the short term—is being made. Bolivia is, for example, investing much of its newly acquired wealth in developing the country’s infrastructure in an attempt to maintain or increase the export base.

Conclusions: The NSC–IG/ARA concludes that while Bolivia’s development needs remain great, they can now be met by more normal development techniques. Bolivia’s current difficulties are those faced by many other lesser developed nations which receive U.S. assistance. U.S. development assistance policy toward Bolivia, therefore, should employ normal development criteria, taking into account Bolivia’s status as one of the least developed states in the Hemisphere.

The NSC–IG/ARA further notes that many of the special circumstances which prompted the extraordinary military assistance program called for in NSDM 160 no longer exist. The military institution in Bolivia, however, has grown in political significance since NSDM 160 was issued, and a forthcoming military assistance policy will remain a key element of our policy toward Bolivia. Once the Military Assistance Program approved by NSDM 160 has been completed, however, more normal policy and program criteria can be employed in developing military assistance programs for Bolivia.

NOTE: The Military Assistance Program undertaken in response to NSSM 160 is scheduled for completion by the end of FY 1976, by which time the last of the Bolivian Army’s five mobile (TIPO) regiments will have been equipped.

1. Summary: U.S. officials reassessed NSDM 160 and recommended that development assistance to Bolivia be allocated based on economic, as opposed to political, criteria.

   Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–232, National Security Decision Memoranda, NSDM 160. Confidential. Sent by Rogers to Scowcroft under a February 5, 1975, covering memorandum. NSDM 160 is Document 111 in Foreign Relations, 1969–1976, Volume E–10, Documents on American Republics, 1969–1972.