Foreign Relations of the United States: Diplomatic Papers, 1944, The American Republics, Volume VII

740.24112 RP/6–2744: Airgram

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

La Paz, June 27, 1944—5:00 p.m.
[Received July 5—2 p.m.]

A–292. Reference is made to the Department’s instruction No. 1049 under date of October 4, 1943,⁴⁴ which enclosed copies of notes exchanged between the Department and the Bolivian Ambassador in Washington^44a regarding financial assistance to be extended by the Export-Import Bank of Washington in connection with the replacement of Axis firms in Bolivia.

This Embassy has every expectation that the question of the status of the notes under reference and the question of financial assistance in connection with the replacement of Axis firms will shortly be raised by the newly-recognized Bolivian Government.

In anticipation of the Bolivian Government’s raising the question, this Embassy should greatly appreciate the Department’s reviewing the subject of financial assistance in connection with the proposed replacement program with the Export-Import Bank and informing it of the policy to be adopted in respect of (a) the status of the notes, and (b) the broad general question of financial assistance. The essential question would seem to be whether the offer made to the Peñaranda Government redounds to the benefit of the Villarroel Government in the event the latter fulfils the necessary conditions enumerated in the Department’s note, or whether the failure of the Peñaranda Government to fulfil the necessary conditions may be asserted as a sufficient reason to consider the offer as having lapsed. Until guidance on these questions has been received, the Embassy does not feel that it is in any position to discuss the question of financial assistance and this may delay the formulation of a method of implementing the proposed replacement program as it is certain that the majority of the responsible members of the Bolivian Government who are interested in the replacement program believe in the necessity of financial assistance.

As of possible assistance to the Department in reviewing this subject, the following points are made:

1. It appears entirely possible for the Bolivian Government to execute an effective replacement program without United States financial assistance (see this Embassy’s telegram 515 of February 19, 1944), but it is highly probable that it will not do so, unless concrete financial help is provided by our Government.

2. Although no encouragement has been given to the present Bolivian Government, it appears to assume that the offer of financial assistance made to the Peñaranda Government will redound to its benefit. It understands, of course, that certain conditions and standards prescribed by the Bolivian Development Corporation must be met. If the conditions and standards of the Development Corporation are met there is a very strong possibility that an effective replacement program will be executed.

3. The present Bolivian Government is in no position to accept or to implement the Department’s offer of financial assistance and has done nothing to implement the expropriatory features of the expropriation decree-laws promulgated by it (see this Embassy’s despatch No. 3692 under date of May 8, 1944). If, however, the Department’s offer is stated to apply to the present Government, it is believed that there is a strong possibility that the Government will sponsor in the Congress which will evolve from the forthcoming Constitutional Convention in August the legislation necessary to establish the legality of the expropriation of Axis interests and to guarantee the repayment of such Export-Import Bank credits as may be used to finance such expropriatory action.

4. Although a number of small Axis enterprises have been replaced on a voluntary basis (which raises no legal problem and no problem of United States financial assistance), it is very improbable that the large Axis “spearheads” may be replaced in this manner. Firms such as Zeller de Mozer y Cía (PL), Kyllmann, Bauer y Cía (PL), Juan Eisner y Cía (PL), Schweitzer y Cía (PL), and Ferreteria Findel (PL) have already served notice that they intend to resist expropriation and replacement. It appears that the only method in which such large and entrenched firms may be replaced is for them to be expropriated under legal process and for their assets to be sold. It appears very unlikely that the Bolivian Government will undertake such far-reaching action unless it has what it terms as the “moral support and the concrete support of the United States” in the form of some type of financial assistance.

5. Although conversations have not been held on the subject with the Bolivian Development Corporation and will not be held until the Department’s reply is received, it is believed that the Corporation is willing to proceed to administer any Export-Import Bank credits extended in connection with the proposed replacement program on the same basis as formulated in the discussions held last year. It is known that Alberto Crespo, president of the Corporation, believes the proposed replacement program impossible of accomplishment without United States financial assistance.

6. Embassy studies reveal that the “barebones” value of Axis assets encompassed within the proposed replacement program considerably exceed US$4,000,000.

Woodward

44. Not printed.
45. Notes dated September 16 and October 4, 1943, Foreign Relations, 1943, vol. v, pp. 604 and 605, respectively.