141. Telegram From the Department of State to the Embassy in Bolivia1

75649. Subject: Possible Demarche to General Padilla on Deteriorating Economic Situation. Ref: La Paz 2349 and Previous2

1. (S–Entire text)

2. We share the concerns expressed in your recent messages with the continuing economic and institutional deterioration presided over by the Padilla government such as: replacement of career officials with unqualified military and political appointees; refusal to undertake any economic measures whatsoever, including even enforcement of existing tax laws leading to inadequate collection of customs duties; and over $100 million purchase of military equipment when foreign exchange reserves are evaporating. We are concerned that this trend could continue at least through the proposed August 6 inauguration.

3. As you are aware, such worsening internal administrative and economic disorganization make it even more difficult for us to justify assistance for Bolivia given the many competing end-users for our limited resources worldwide. While we recognize that General Padilla has heretofore refused to undertake the economic measures that are necessary, we would like your opinion as to whether General Padilla and his government leaders might be persuaded to take at least some measures to slow the economic decline. We are thinking of such limited measures as: increases in the prices of hydrocarbons; freeze on additional public sector employment; minor devaluation of the exchange rate; and reductions of the quantities of military equipment ordered; or, alternatively if they did a thorough job of one measure rather than [Page 438] partial jobs of several. From this vantage point a 100 [percent] increase in hydrocarbons might be the best legacy Padilla could leave his successors.)

4. We appreciate that return to civilian rule is our highest priority goal in Bolivia. However, we also realize that there is a substantial probability that the new civilian government will not stick, and that the more desperate the economic situation it inherits, the greater will be the pressure for its early demise. Hence, while continuing to support return to civilian rule, we would prefer that the turn-over not be made under circumstances which contain the seeds for its destruction.

5. We would appreciate your reaction, analysis, evaluation, and recommendation as to the probable effectiveness of an approach to the GOB, and perhaps to the leading political figures, along the lines of para 3 and perhaps our encouraging similar approaches by other governments and international agencies. Demarche could be made in terms of our wanting to continue to be able to assist Bolivian development as we have in the past, but that recent developments make this increasingly difficult. We realize that General Padilla’s government is largely a caretaker operation. But we are concerned that there be something left to be taken care of—other than large foreign debts, bloated bureaucracies, and inoperable military hardware—when the civilian government hopefully assumes office.

  1. Source: National Archives, RG 59, Central Foreign Policy File, D790140-0487. Secret; Immediate; Exdis. Drafted by Knepper; cleared in ARA, ARA/ECP, ARA/AND, S/S-O, and LA; approved by Bushnell.
  2. In telegram 2349 from La Paz, March 16, the Embassy summarized recent arms purchases of the Bolivian armed forces and reported that “the size of these purchases is reflective of the Padilla government’s disregard for the present and future economic health of Bolivia.” (National Archives, RG 59, Central Foreign Policy File, D790122-0415) (S) In telegram 2023 from La Paz, March 8, the Embassy reported that “while human rights and the electoral process have thus far fared well, the Padilla regime has in the meantime mired itself down in a shabby display of infectious venality and incompetence that has tarnished its image and raised some doubts about its ability to carry forward its well advertised objectives for Bolivia’s democratization.” (National Archives, RG 59, Central Foreign Policy File, D790111-0612)