Office of the Historian

740.24112 RP/57: Telegram

The Chargé in Bolivia (Woodward) to the Secretary of State

La Paz, February 19, 1944—4 p.m.
[Received February 20—4:35 a.m.]

515. Reference my telegram No. 507, February 18, 1 p.m.32 and 514, February 19, 3 p.m. In connection with the viewpoints expressed by Junta Ministers that it might well be perilous for the Junta to proceed to transfer and replace Axis firms without the financial assistance of the United States the following points are set forth.

1.
To the best of my knowledge there has been no intimation by anyone connected with the American Government in Bolivia to any person having connections with the Junta that financial assistance might be expected or that the Export Import Bank credit made available by the October exchange of notes33 might be made available to a newly recognized Bolivian Government. Egger asserts that he has made this point clear to Villarroel who expressed his understanding of the fact that the conditions under which financial assistance was offered to the Peñaranda Government of course do not exist at the present. I have asked all United States Government personnel to avoid discussion of the possibility of such financial assistance if confronted with the question; the point is appreciated fully by members of the British Legation who are in contact with Junta Ministers.
2.
Egger, McConaughy34 and Ramsey, the persons who have the most intimate knowledge of the possible necessity of financial assistance, all believe that it is entirely possible for the Junta to proceed with the replacement program without our financial help. They believe that the most appropriate procedure to follow is for the Junta to sell bonds to the Banco Central for the amount of the sale price of each expropriated property as it is expropriated, to have the bank purchase such bonds by simply entering a credit to the frozen accounts of the dispossessed owners in the amount of the face value of the bonds thus sold, and to have the new purchasers make progress payments into a special fund to retire the bonds. This technique would require no exchange of money (except perhaps in a bookkeeping sense), would require no advance of money except such as might be withdrawn from frozen accounts for subsistence expenses, would not tend inflate the currency and would not increase the internal debt. Progress payments (which should be rapid in connection with stocks because of the quick turnover) should more than offset [Page 518] necessary advances of money for subsistence expenses. Furthermore, this technique would in the opinion of qualified Bolivian lawyers satisfy the Bolivian constitutional requirements of compensation for expropriated properties whereas there is considerable doubt whether the issuance of government bonds directly to dispossessed owners would satisfy these constitutional requirements. It would appear that payments for expropriated stocks should certainly be before the termination of the war (at which time presumably frozen accounts would be unblocked) and that substantial payments for expropriated real estate might also be made during such period. Any balance owed on frozen accounts at the time of their being unblocked might be well within the capacity of the Bolivian Government to finance at that time.
(3)
According to El Diario of February 17 the Junta believes that the value of the Axis properties marked for expropriation and transfer is approximately $4,000,000 dollars. With this figure in mind I believe the above procedure is feasible.
(4)
Although the above procedure appears to be one which would obviously suggest itself to the Junta there is no assurance that it has been considered.
Woodward
  1. Not printed.↩
  2. For texts of the notes, dated September 16 and October 4, 1943, see Foreign Relations, 1943, vol. v, pp. 604 and 605, respectively.↩
  3. Walter P. McConaughy, Commercial Attaché in Bolivia.↩