Foreign Relations of the United States, 1977–1980 Volume XXIV, South America; Latin America Region

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

Washington, August 28, 1979, 0300Z

225771. Subject: Bolivian Stabilization Program.

1. C–Entire text.

2. Department welcomes President Guevara Arce’s apparent determination to implement a realistic stabilization program.² In your conversation with ForMin Fernandez and with Guevara Arce, you should encourage this decision, which we believe is an intelligent response to Bolivia’s present economic crisis.³

3. As you are aware, apart from Title III and AID project loans there is essentially nothing significant which USG can do to provide the “cushion” Guevara Arce would like to have. We can—and assuming the stabilization measures go forward will—see whether faster disbursements might be made on existing or new credits, recognizing fully that at the maximum such adjustments would have little effect on Bolivia’s deteriorating reserves position. We are certainly interested in any symbolic support we could provide, such as timing of signature or other announcements of economic aid projects.

4. However, we are concerned that postponement of exchange rate action with complementary monetary constraints—and also other actions such as increases of POL prices—until mid-October or later, if that is what is envisaged, would risk undue hemorrhaging of reserves and debilitating debate. We therefore believe quick action more prudent. You may make this point.⁴ (FYI only we have compared notes on this with Walter Robichek in IMF, who shares our puzzlement over the concept of moving slowly on the necessary measures at the same time as Bolivia’s foreign exchange position is deteriorating so sharply. He has been in touch with IMF permanent representative who evidently now has come up with an alternative approach which he has not yet discussed with Bolivian officials. Robichek also says that he could field an IMF mission very quickly if needed. We of course do not want to get out in front on specifics of program, but we wish to be supportive. But we would also like to be sure that Guevara Ace’s opportunity—with the MilGov just departed, and their financial mismanagement well recognized—is not lost. We think it would be better to move quickly in some areas; gain IMF and other international implicit or explicit recognition for those results; and then move as quickly as possible to get agreement with the IMF on the extended fund facility. End FYI)

5. In view of foregoing considerations, Department doubts a visit to Washington by the Ministers of Foreign Affairs and Finance would be useful at this time. We certainly would not wish to contribute to any let down in government’s determination to carry out necessary remedial measures. However, we would not repeat not wish to suggest or imply that USG can and will be in a position to provide the “cushion’ assistance which the new government wants. The best channel for productive discussion at this stage would be IMF, with the USG to remain fully informed on the progress of IMF-GOB negotiations.⁵

6. Embassy should be aware Bolivian Embassy has asked for a meeting for ForMin Fernandez with the Secretary, without repeat without stating what subjects would be covered. No decision has been reached on scheduling this meeting.⁶ Department’s view in preceding paragraph only applies to financial discussions rather than to other aspects of bilateral relations.

Christopher

1. Source: National Archives, RG 59, Central Foreign Policy File, P840175-1659. Confidential; Niact Immediate; Nodis. Sent for information Immediate to the White House. Drafted by Bushnell; cleared in ARA, ARA/ECP, EB/IFD/OMA, and S/S-O; approved by Barnebey.
2. In telegram 7260 from La Paz, August 25, the Embassy reported that Guevara was “moving as quickly as possible to negotiate a thorough economic stabilization program with the IMF.” (National Archives, RG 59, Central Foreign Policy File, P840175-1662)
3. In telegram 7331 from La Paz, August 28, the Embassy reported on Boeker’s meeting with Fernandez that day, during which they discussed the timing and actions of the economic stabilization program. (National Archives, RG 59, Central Foreign Policy File, P840175-1656)
4. In telegram 7331 from La Paz, August 28, the Embassy reported that Boeker told Fernandez that “the effects of a first round of economic measures would probably end the government’s current honeymoon period and create a less, not more favorable climate in the congress and the trade unions for a second round.” (National Archives, RG 59, Central Foreign Policy File, P840175-1656)
5. In telegram 7471 from La Paz, August 31, the Embassy reported on ongoing GOB-IMF negotiations. (National Archives, RG 59, Central Foreign Policy File, D790399-0678)
6. In telegram 7331 from La Paz, August 28, the Embassy reported that Fernandez had decided to postpone his trip to Washington. (National Archives, RG 59, Central Foreign Policy File, P840175-1656)