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

89616. Subject: Possible Demarche to President Padilla on Deteriorating Situation

1. (S–Entire text)

[Page 439]

2. We agree with the approach you suggest in para. nine of reftel.2

3. You have made a convincing case that major effort to correct any of major economic problems is not possible in immediate preelection period. What you suggest is that some of downhill plunge might be avoided at least in terms of management. We wonder if it is possible to use this preelection time also for planning and preparation for later moves in area of institutional reform. Widespread belief here is that major institutional strengthening from tin and petroleum enterprises to agricultural bank are essential to put Bolivia on track for steady long-term development. A new government in August will be faced with so many economic problems in exchange rate and incomes policy areas that institutional issues may be left for a never-never future. One of issues here on which we would welcome views is extent to which institutional reform is sine qua non for successful economic performance in next government.

4. We have continued to examine possibility of program-type loan from us for new government in September or October. We are inclined to the view we should be thinking in terms of how we show strong psychological support for the new government, and for its economic program, if viable, but we should not try to provide significant short-term B/P financing.

  1. Source: National Archives, RG 59, Central Foreign Policy File, D790165-0700. Secret; Priority; Exdis. Drafted by Bushnell; cleared in ARA, ARA/ECP, ARA/AND, EB/OMA, HA/HR, and S/S-O; approved by Bushnell.
  2. Presumably telegram 3016 from La Paz, April 5. Boeker summarized his meetings with Prado and Alba and reported: “My assessment is that an approach to Padilla pressing for adoption of one or more serious economic measures (higher petroleum product prices in particular) would almost surely fail.” He continued: “This assessment, if you share it, does not rule out a heart-to-hearter between Padilla and me although it would be different in nature from what we had initially contemplated. I could urge him to govern a bit, instead of just surviving, to shape up customs, revenue, and general public administration, to cut back arms purchases, to avoid borrowing of the type that would collateralize gold reserves and future exports, and to tighten up financial management generally.” (National Archives, RG 59, Central Foreign Policy File, D790156-0446)