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

150. Memorandum of Conversation¹

La Paz, October 21, 1979, 6 p.m.–7:20 p.m.

SUBJECT

• The Secretary’s Meeting with Bolivian President Walter Guevara Arze

PARTICIPANTS

• U.S.

  • The Secretary
  • Ambassador Boeker
  • Ambassador Vaky
  • Mr. Robert Pastor, NSC
  • Mrs. Stephanie van Reigersberg, Interpreter and notetaker

• Bolivians

  • President Walter Guevara Arze
  • Mr. Walter Guevara Anaya, Secretary to the President

President Guevara:

First, I should like to extend to you a very cordial welcome. We in Latin America know you well, and I hope that once the effects of the altitude are past the rest of your stay will be to your complete satisfaction.

Now I would like to speak today of three matters, plus any you may wish to add. The topics will be the political situation in Bolivia, the problem of Bolivia’s outlet to the sea, and the unavoidable subject of the sale of 35,000 tons of tin. In connection with that last matter, I will add a few thoughts on more general economic subjects.

First, on the political situation as I see it: I believe that we are living in a most viable political atmosphere, and that this political situation is supported by two elements: first, the general consensus in the country, and, second, the decision of the armed forces to let the plan reach its culmination. However, there are some difficulties with the consensus, difficulties which, as paradoxical as it may seem, have to do with certain attitudes in our Parliament. Here as in the United States relations with Parliament are not always easy. The essential difference here, however, is that after 15 years the Bolivian Parliament is just now re-learning how to function. This is creating expectations and certain situations which are not being dealt with as seriously as one might wish. Our relations with the Parliament are complicated by the decision of some political factions to participate in the government. I have no objection to that, but the situation gets difficult for the reason I will now explain.

Unfortunately, there are features in our relations between the Parliament and the Executive Branch which are relatively complex. The Parliamentary resolution whereby I was made President only established my appointment as President and that elections would be held in May of 1980, nothing else. And the decision to hold elections in 1980 only applies to the President and the Vice President, not to the Deputies or Senators. The logical consequence of this is that the President and Vice President will only have a three-year term instead of four years, as the Constitution stipulates, in order that the terms of the Deputies and Senators, who would have already served one year, may coincide with the term of the new President and Vice President.

Another alternative is to elect the President and Vice President for four years and extend the term of the Deputies and Senators to five years. However, neither of these is really viable.

There is another side to this problem. Although the Congressional resolution says nothing about economic problems, this government must confront them. It must confront them because they have been set aside and ignored for the last three to four years, with the result that all of the difficulties have become cumulative. Thus, it is hard to wait any longer to face the problems and start solving them. So, combining the political aspect relating to the duration of the term of the President and the terms of the Deputies and Senators with the problems having to do with our economic realities, it is obviously necessary to establish a general political framework within which the problems can be confronted.

I have pointed out the relationship between these two aspects because representatives of the International Monetary Fund have mentioned this subject to me and have asked what will happen next year. Moreover, any other sources of financing to which we might recur (because obviously we need more financing than what we can get from the IMF) would not fail to raise the same question.

Now the circumstance of this problem is now being used in Parliament by two or three Deputies from the MNR/Alianza Front, headed by Paz Estensoro, who is, unfortunately, not here in Bolivia but who had all the necessary information in hand before he left. So it is difficult to know whether the problem being created by these two or three Deputies is being created with the support of Paz or not. The main difficulty is that these two or three Deputies are going to certain sectors of the armed forces and making proposals to bring a general officer named Natush Busch to the Presidency, to maintain the Parliament open, and to forget about trying General Banzer in order to get Banzer’s votes in Parliament.² This plan would certainly not be accepted by Paz if he were here, but he is not.

Now to get back to the beginning, what is basic in the Congressional resolution is to maintain the democratic process and to conduct the forthcoming elections with reasonable impartiality. Now if only one of the two main factions enters the government, that of Paz or that of Siles, and if the elections were held in 1980, it will be practically impossible to implement the second aspect, which is preserving reasonable impartiality in the elections. Let me clarify what I mean. If only the MNR/Alianza enter the Cabinet, then Paz’ supporters will naturally be interested in influencing the elections, something which has traditionally been possible in Bolivia. In that case, my personal alternative would be to go ahead with the elections knowing what I was doing, because I would know that the MNR/Alianza candidate would win. That is why I have proposed that both factions enter the government, both that of Paz and that of Siles. After all, both of them originally belonged to the same party, the MNR. Finally, I should say that whichever group enters the government now is almost guaranteed victory if the elections are held in 1980. But if the elections are postponed until 1981, that possibility is considerably reduced.³

Vance:

I appreciate very much your offering me this background on the political situation in Bolivia, and for explaining it so very clearly. We agree wholeheartedly that the democratic process must be maintained, and that elections must be reasonably impartial. How do you see developments going forward in the immediate future?

Guevara:

Even while the OAS meeting is going on, I will be suggesting to the Parliament the alternative of holding elections next year (which I am prepared to do), or the alternative of facing our economic problems, dealing with stability this year and development next year, and of holding the elections in 1981. I will comply with whatever decision they take. Also, I will propose that Paz’ Alianza enter the Cabinet, and providing that the elections are held in 1981, I will do this even if Siles refuses to let his people join the Cabinet, because, as I explained, if the elections are held in two years, it is less probable that their results can be determined in advance. This change in the Cabinet could take place soon after the OAS meeting. One other important point of information: some Deputies and Senators belonging to Siles’ faction are ready to abandon him and join the Cabinet along with Paz’ people. This is not an ideal solution, but perhaps it could work.

Vance:

While we are here, we will be saying in the OAS and outside how much stress we lay on the maintaining of the democratic process and we will be speaking of our great admiration for what you have achieved so far. Perhaps that will be of some value.

Guevara:

I think that what you will say will be of value and that it will influence the armed forces and some political sectors.

Vance:

I have here a letter to you from President Carter which covers several matters, but which, in its last paragraph, speaks of his admiration for what you have done and of the importance of maintaining the democratic process. Let me just read that last paragraph:

Let me take this occasion, Mr. President, to reiterate that the recently initiated democratic process in Bolivia has our full support. The gains in civilian, constitutional government which Bolivia has succeeded in bringing about are worthy of the most profound respect and praise. I believe it is in the interests of every republic in the hemisphere to do everything feasible to secure and consolidate these advances. (Full text of letter attached).⁴

Guevara:

Thank you. I think that is all I had to say on the political subject.

Let me proceed to the matter of our outlet to the sea. We have the greatest interest in securing U.S. support, support which we hope you will express by influencing other Latin American countries, for a demarche which we hope to carry out in the OASGA. Unfortunately, this is not a simple problem either. We are really on the horns of a dilemma—that of asking the OASGA for something which we cannot obtain or for something which would not even be useful in terms of implementation. What I am saying is that we will ask the OAS to have Chile return to us the territory it took during the War of the Pacific. This would divide Chile in half, and would give us 20 percent of Chile’s continental land area. This is not viable, but this is what Bolivian public opinion wants. The other alternative is to get friendly countries to present another proposal, contrasting with that of Bolivia, using terms which are more viable and which, if supported, could be useful for Bolivia. It is in connection with this second alternative that we need your support. Basically, without going into details which would not be useful at this time, this is what we want. Ambassador Vaky has the initial texts, and we will be giving him others as drafts come in from third countries.⁵

Vance:

I discussed this matter with your Foreign Minister in Quito and told him that we would be glad to help.⁶ Since then, Ambassador Vaky has seen two drafts, and this afternoon we received a new draft, more general than the first two. At first reading, I found it to be quite good. I will study it further tonight, and perhaps it will come up in the meeting with the Andeans this evening.⁷

Guevara:

That third draft was given to you before we were consulted. It is not a draft which is useful to us. We are working on a new draft and will give it to Ambassador Vaky either later tonight or tomorrow morning. So there is no need to waste time studying that draft which is not a useful one at all.

Vaky:

Mr. President, from your point of view, how specific should it be? As you know, the more specific it is, the more problems there are. And we thought that the third draft had at least the element of being a framework which could lead to other things. So, without going into detail, just how specific must it be?

Guevara:

Any draft must cover two aspects: first, it must say that the problem of the landlocked situation of Bolivia is not a bilateral problem, but is one which concerns the entire hemisphere. It would seem relatively possible to get broad acceptance for that. Secondly, it should somehow express the basic concepts which must be agreed to in order to solve the problem. It is here where it is difficult to get general agreement. Obviously the text we gave to Ambassador Vaky represents an extreme position, but it should be possible to get another text which is much more dilute, but not totally useless.

Vance:

Ambassador Vaky and I have discussed this subject on a number of occasions, and when I spoke to the Foreign Minister we also discussed how general or how specific the resolution should be.

Guevara:

Let me interject an inconsequential note. I have also been Foreign Minister, and I know that from the diplomatic point of view it is very easy to get agreement on texts that don’t say very much, not to say nothing at all. But when you look at the same situation from the vantage point of President it looks very different.

Now on the economic issue, there are two aspects I would like to deal with. The first one you know very well and relates to the sale by the United States of 35,000 tons of tin. The difficult aspect here is that of explaining not only to public opinion but to leaders of public opinion, newspaper publishers and others, the complexities of the U.S. Government. In Bolivia, it is very difficult to understand how the Senate can approve the sale, with the agreement of the Executive Branch, of this amount of tin, which means nothing to the American economy, nor does it have any political significance in the United States. It would seem to be a matter of no importance to the United States, whereas, in Bolivia, its economic importance is great. As you well know, with every drop of one cent in the price of tin, based on a production of 30,000 tons, it makes a difference of more or less $1 million. Unfortunately, our production now is somewhere around 20,000 tons, but the problem remains the same. I really don’t know what can be done at this point.

Vance:

In his letter, President Carter speaks of the tin sales. He fully understands, as I do, the complexities of such sales by the US, and their political effect on Bolivia. On the other hand, the problem in the United States is that we are short of a certain number of strategic reserves and have excesses in others. We have a very tight budget situation, with the President trying to balance the budget, particularly in an election year, which is a complicating factor. The result is that the action which was taken in Congress⁸ was one which recognized the imbalance in our strategic stocks, and which was directed at obtaining the funds necessary to buy what we do not have.

Guevara:

Yes, we understand that the idea was to sell tin in order to buy copper, and that this would tend to relieve pressure on the US budget in an election year. But at the same time perhaps the added factor of the external significance of this measure should also be taken into account.

Vance:

It is clearly recognized. What the President is suggesting is the possibility of holding discussions on how a regime could be worked out between the two countries by means of which the sales could take place over a period of years in a manner which would not be disruptive of price and would not cause negative effects on Bolivia. That is what we would suggest, if you find such discussions to be desirable.

Guevara:

The trouble is that this has already occurred twice in the past, and the people who dealt with the situation here in Bolivia on the prior occasions say that promises were made by the US Government to sell certain amounts over given periods in order not to influence prices. However, after the executive decision was taken, the implementation was left to lower levels, I imagine to the GSA, which sold the tin under difficult circumstances for the producers and in a manner which did not take the producers’ interests into account. The fear is that the same thing will happen again this time.

Vance:

We must discuss this and find ways to ensure that this not happen again. We have to work out ways to monitor the lower levels of the government sufficiently so that they will not sell in a falling market and will in a rising one. I think it can be done, and I fully understand your concern. Both the President and I are aware of the problems and of the need to set up procedures, including a monitoring and reporting system, so that these lower levels cannot act independently.

Guevara:

By its very nature, the problem will take several years to work out, and it is difficult to establish a procedure which will really be complied with over that many years. I really cannot imagine such a procedure.

Vance:

I agree that the longer it lasts the more difficult it becomes, but there are procedures which can be established. We can have someone, either a Cabinet officer or a Special Assistant to the President, function as a monitor on the GSA. I do agree, however, it isn’t easy.

Guevara:

A letter from the US Government referring to these antecedents may be something which could calm people here, especially if such a letter were to include the additional promise that the United States would avoid acting in the future as it had in the past.

Vance:

That makes sense. I will discuss that with the President.⁹

Guevara:

The second economic aspect I wanted to raise has to do with the stabilization process. Above and beyond the help we can expect from the IMF, we will be needing additional financing. The deficits of the central government and of the state agencies, including COMIBOL, FPB, CBF, the railroads and others, amount to some hundreds of millions of dollars. The relationship between the Bolivian peso and the US dollar is already artificial. The measures which have to be taken must necessarily be very unpopular and even risky, especially given the political situation I have described.¹⁰ All of this leads to the conclusion that we will be needing additional help besides what is forthcoming from the Fund and other public sector sources. I would like to hear your comments on the possibilities of such additional help.

Vance:

It is obvious that the first step has to be taken with the IMF. And once that is in place, we should sit down and discuss with your Cabinet officers and with your banks, who have a very important role to play, what we can do. As I told your Foreign Minister in Quito, whenever you are ready to discuss it, we would be most happy to do so. I cannot make any specific promises now in terms of specific dollar amounts, but we can discuss this together and hopefully make progress. When do you expect action could be taken?

Guevara:

It is our hope that by Friday, November 15, the necessary decrees will be ready, providing we obtain from our Congress the special powers which we need to act. Otherwise, if the problem has to go to Congress to be dealt with in detail, the situation will become cataclysmic. The other difficulty is that of arriving at a common plan with the IMF. The IMF adopts extreme views, since, after having given their views, the IMF officials take their leave and do not run the risk of being stoned in the street. (laughter)

Vance:

I would think that to follow up the IMF meetings here, meetings in Washington would be useful. Although our influence is limited, we do have close relations with people at the Fund and we would be glad to do what we can.

Ambassador Boeker:

Mr. President, from our own experience, and we have been close to the people from the Fund, I think that they understand Bolivia pretty well. They are more realistic than they would be in dealings with some other country. They have been working with Bolivia for two years now in order to develop ways and means to correct the distortions in the economy, and have been frustrated by governments unwilling to take the difficult decisions necessary to place the economy back on a sound footing. I think that they have learned from their frustrations.

Guevara:

I hope they have learned, but their first suggestion, not to call it a demand, is that we float our currency. We do not know what consequence this would have, but the peso could well go from 20 to 30 to a dollar. This might correct itself over time, but would provoke a very difficult political shock.

I think enough has been said on these subjects, as far as I am concerned. I would only thank you for the time you have spent in coming here, and for the time you have spent in dealing with problems of interest to Bolivia. I hope that collaboration between us on the topics I have mentioned will be useful; if so, it will be a collaboration for which we will be very grateful.

Vance:

It was a great privilege to come here and meet with you. I am grateful to you for having spent so much time explaining your concerns to me. I think that we can work together. We are prepared to do so. We will stay in close touch, both now and later, with a view to solving all these problems. I know, and I want you to know, the feelings of President Carter, who has great admiration for what you have done and what you are doing. So whatever we can do to promote the movement toward democracy we feel will be in the interest of the whole region and, indeed, of the hemisphere.

Guevara:

Thank you very much. Please tell President Carter that as his decision on the Panama Canal will go down in history, I hope that his influence on the matter of the outlet to the sea for Bolivia will likewise be a factor of great historic value. Thank you, Mr. Secretary, and I thank all of your colleagues for coming.

Vance:

I should just like to ask you how I should deal with the press, how much or how little you would like me to say. We would be happy to say whatever would be appropriate from your standpoint.

Guevara:

From our point of view, it would be very useful for you to say that we have dealt with these three aspects and, although it may be disproportionate, perhaps you could emphasize the matters dealing with the 35,000 tons of tin and the outlet to the sea.

Vance:

Certainly. Thank you very much.

Guevara:

Thank you very much.

1. Source: Carter Library, National Security Affairs, Staff Material, North/South, Pastor, Country Files, Bolivia, 1-12/79. Confidential. The meeting took place in the President’s Palace. Drafted by Van Reigersberg and approved December 10 by Bremer. Vance was in La Paz for the OAS General Assembly meeting.
2. In telegram 8491 from La Paz, October 5, the Embassy reported that the Bolivian Congress was considering indictment of Banzer and an “undefined group” of “his associates.” (National Archives, RG 59, Central Foreign Policy File, D790457-1124)
3. In telegram 8986 from La Paz, October 22, the Embassy reported on Vance’s meeting with Guevara and noted: “To strengthen his government, Guevara said he was willing to bring into it the two major political fronts, the MNR and the UDP, but Hernan Siles, head of the UDP, was not willing. To bring in only Victor Paz’ MNR and hold a quick May 1980 election would mean, Guevara felt, that the governmental machinery would be abused to assure the election of Victor Paz, a result not consistent with Guevara’s mandate to preside over impartial elections.” (National Archives, RG 59, Central Foreign Policy File, D790483-1223)
4. Letter is not attached; printed as Document 149.
5. In telegram 259707 to La Paz, October 3, the Department forwarded to the Embassy two alternative draft resolutions on Bolivian access to the sea that Guevara had given to Mondale at their October 1 meeting in Panama. (National Archives, RG 59, Central Foreign Policy File, no film number) See Document 49.
6. See Document 147.
7. Not found.
8. See footnote 6, Document 123 and footnote 2, Document 125.
9. A record of a meeting between Vance and Carter on this topic was not found. On a cover sheet for this memorandum, a follow-up note dated November 30 stated, “We have approached the new GOB proposing bilateral negotiations on tin, and await their response.” (Carter Library, National Security Affairs, Staff Material, North/South, Pastor, Country Files, Bolivia, 1-12/79)
10. In telegram 9104 from La Paz, October 24, the Embassy reported that during an October 22 reception at the Government Palace, Guevara told Vance privately that “he desperately needed a personal economic advisor who could help him prepare by November 15 the essential decrees implementing an economic stabilization program. Guevara said he felt helplessly caught between standard proposals of IMF staff (in particular for a floating exchange rate) which may be technically faulty in the Bolivian context and the inability of his economic team to either perfect the IMF proposals or propose alternatives.” In response, Vance “said he wanted to help out on this request and would try to find such a person on his return to Washington.” The Embassy commented that Vaky and Boeker believed Sidney Weintraub “would be an ideal person for this job.” (National Archives, RG 59, Central Foreign Policy File, D790488-0265) Weintraub was an economist at the University of Pennsylvania.