HOLLAND, E. J. A Historical Study of Bolivian Foreign Relations, 1935-1946

68-2915
HOLLAND, Emmett James, 1937-

A HISTORICAL STUDY OF BOLIVIAN FOREIGN
RELATIONS 1935-1946.
The American University, Fh.D., 1967
Political Science, international law and relations
University Microfilms, Inc., Ann Arbor, Michigan

©Copyright by
Emmett James Holland
1968
A HISTORICAL STUDY OF BOLIVIAN FOREIGN RELATIONS 1935-1946
BY
EMMETT JAMES HOLLAND
Submitted to the
Faculty of the School of International Service
of the American University
In Partial Fulfillment of
The Requirements for the Degree
of
Doctor of Philosophy
Signatures of Committee:
Chairman:
Dean o cnoo
Date:
f
Date: /"7 . . p t L . m ?
AMERICAN UNIVERSITY LWR*»V
SEP 11 1257
M V S’
TABLE OP CONTENTS
CHAPTER PAGE
I. INTRODUCTION............. 1
II. THE CONTEXT OP BOLIVIAN FOREIGN RELATIONS .. 13
Geography and Demography .................... 13
The History of Bolivian International
R e l a t i o n s ........................... 16
Economic and Financial Factors .............. 35
' Politics and Government ............ 42
III. BOLIVIA AND THE CHACO PEACE CONFERENCE . . . . 57
A Brief Background Survey .................. 58
The A r m i s t i c e ......................... 69
The Chaco Peace Conference .................. 82
The Prisoners-of-War Issue .................. 87
The Security and Transit Issues . . . . . . 106
Inter-American Conference for the Maintenance
of Peace (December 1-December 23 > 1936) . 113
Security and Transit Issues Continued . . . 121
The Territorial Issue ...................... 127
The Peace Treaty and Arbitral Award .... 157
Analysis and Conclusions .................... 169
IV. BOLIVIA*S POST-CHACO WAR DIPLOMACY
( 1 9 3 5 - 1 9 3 9 ) ........................... 182
ill
CHAPTER PAGE
Postwar Foreign Relations During the
Tejada Sorzano Regime ..................... 185

The Toro Presidency--Foreign Relations and
Foreign Policy ........................... 199
Relations with Brazil ..................... 201
Bolivian relations with Argentina ........ 207
The Standard Oil Company c a s e ............... 213
Bolivian-United States relations ........ 219
Bolivian-Peruvian relations .............. 224
Relations with Chile ..................... 228
Additional foreign policy concerns .... 232
Post-Chaco War diplomacy— the formative
s t a g e ..................................... 236
Andean Foreign Relations during the Busch
Years (1937-1939)......................... 239
Prompt recognition ................ ... 240
Bolivian-Argentine relations ............ 241
Relations with Rio ....................... 249
La Paz and Santiago de C h i l e ...............261
Relations with P e r u ......................... 264
Uruguay and P a r a g u a y ....................... 267
Relations with the United States ........ 270
Relations with Germany, Italy, and Japan . 275

iv
CHAPTER PAGE
Eighth International Conference of
American States .............. 279
Immigration policy 281

Diplomacy of the Busch years— conclusion . 283
Post-Chaco War Diplomacy— Conclusions . . . . 289
V. THE PERARANDA ERA: PART I. THE DIPLOMACY OF
ALBERTO OSTRIA GUTIERREZ 1939-1941 295
The Panama Meeting of Foreign Ministers . . . 299
Relations with the United States .......... 306

Asuncl6n and Buenos Aires .................. 324
Bilateral Relations with the other Bordering
States 342
The Second Meeting of Consultation, Havana
(July 194<)............................... 356
The Regional Conference of the Countries of
the Rio de la Plata .................. 360

Bolivia and the Axis Powers 370
Analysis and Evaluation ................ 378
VI. THE PERARANDA ERA: PART II. THE DIPLOMACY OF
THE MIDDLE WAR YEARS 1941-1943 ........ 381

The Diplomacy of Eduardo Anze Matlenzo
1941-1942 ......................... 382

War comes to the hemisphere 383
V
CHAPTER PAGE
The Third Meeting of Consultation,
Rio de Janeiro (January 1942) .......... 3&5
Closer ties with Washington............. 390
Relations with Argentina .............. .. 403
Bolivian foreign relations on other
f r o n t s ............................... 409
The work of Anze Matlenzo— conclusions . . 413
The Diplomatic Work of Tom&s Manuel Elio
1942-1943 415
Major developments in Bolivian-United
States relations ...................... 413
The portuary issue with Chile ............ 423
La Paz— Buenos A i r e s ................... 437
Additional diplomatic developments .... 441
Carlos Salinas Aramayo (1943) .............. 444
Bolivian Foreign Relations 1939-1943.
Analysis and Conclusions ................ 433
VII. THE DIPLOMACY OF THE VILLARROEL REGIME
1943-1946 ................................... 466
The Guanl Doctrine and Bolivia's Isolation . 469
Andean Diplomacy In the Final Year of
the W a r ................................. 496
Disappointed diplomacy in Washington .. . 497
Bolivian diplomacy with her neighbors .. . 512

Vi
CHAPTER PAGE
Bolivia and the international conferences—
Mexico City and San F r a n c i s c o .............530
The Postwar Foreign Relations of the
Vlllarroel Government ..................... 546
Bolivia, tin, and the United States . . . . 547
Argentina and B r a z i l ....................... 553
Other considerations in Bolivian foreign
relations after the w a r ................... 561
The end of the Vlllarroel government . . . 569

Analysis and Conclusions .................. 571
VIII. AN ANALYSIS AND SOME C O N C L U S I O N S ............... 581
S u m m a r y ....................................... 581
An A n a l y s i s ................................... 588
Policy objectives ......................... 588

Instruments of policy . . . . . ........ . 593
The matter of c o n t i n u i t y ...................599
Policy sources and formulation .......... 601
Basic policy positions .................. 607
A historical perspective ................ 617
• C o n c l u s i o n ................................... 621
BIBLIOGRAPHY ......................................... 63O

LIST OP FIGURES
FIGURE PAGE
1. Bolivia's Original Territorial Claims, 1825 • • • 17
2. The Structure of the Bolivian Service of
Foreign Relations According to the
Organic Statute of 1939 ...................... 56
3. Lines of Separation of the Bolivian and
Paraguayan Armies, July 2, 1935; Chaco Peace
Conference Proposal of October 15, 1935 . . . . 108
4. Proposals for Settlement of the Territorial
Question made by the Chaco Peace Conference
and by Paraguay during the Final Phase of
Negotiations and the Arbitral Award of
October 10, 1938 159
5. B o l i v i a .......................................628
CHAPTER I
INTRODUCTION
The major problem of this Investigation is the
foreign relatione of Bolivia in the period between the
signing of the protocol of June 12, 1935* which ended
hoetllltlea in the Chaco War* and the ouster of the Qualberto
Vlllarroel regime on July 21* 19^6. Primary emphasis will be
placed on the most important problems of Bolivia's diplomacy
during those years and on the policy positions assumed by the
Andean nation with respect to those problems.
Bolivia's relations with the five bordering states*
Argentina* Brazil* Chile* Paraguay* and Peru* are of
fundamental significance in this investigation. By the time
the peace treaty was signed with Paraguay in 1936* each of
these neighbors had managed to incorporate within its
boundaries a portion of the territory which Bolivia had
claimed at independence. What was the nature of Bolivia's
relationships with these states in the 1935-1946 period?
Were they friendly or strained* fruitful or simply cordial?
Did special relationships exist with any of these neighbors?
What were the problems in these relationships?
The scope of the study is not restricted to Andean
contacts with the surrounding countries* however. Bolivia's
more far-reaching relations with important nonbordering

states and with International organizations also will be
considered.
A description and an analysis of Bolivian foreign
policy constitute other essential objectives of the study.
Among the questions to be answered In this regard are the
following: What were the basic objectives and instruments
of Bolivian foreign policy? How and why did this policy
assume the dimensions that it did? Was it an adequate
policy, that Is, In light of the given circumstances, were
Its objectives and methods reasonable and effective?
Two propositions support the claim for the importance
of the investigation. One is that the 1935-19^ period was
a significant era In the history of Bolivian diplomacy.
During those years, the Andean nation endeavored to realize
a policy of practical contacts with her neighbors. At the
same time, noteworthy developments took place In Bolivia's
relations with the United States and other nonbordering
countries. A second proposition is that the Investigation,
through Its concentration on a single period in Bolivia's
experience in foreign affairs, contributes to an under
standing of what may be called the nation's "diplomatic
style" by Identifying certain characteristics that tend to
be constants in Andean diplomacy. Such knowledge should be
useful in Interpreting Bolivia's foreign policy before and
after the period under consideration in this study.

I
The subject of Bolivian foreign relations has received
the attention of both national and foreign writers. The most
useful Bolivian contributions, however, often lack
comprehensiveness, important factual information, and a
reasonable degree of objectivity. North American studies,
for the most part of excellent quality, have been devoted
primarily to specific problems or episodes.
Bolivian literature on Andean foreign relations
includes at least two general diplomatic histories, Historla
intemacional de Bolivia (1919* 1930) by Niguel Neroado
Moreira and Historla diplornAtlea de Bolivia (1933) by Carlos
Alberto Salinas Baldlvleao. Mercado MoreIra's lengthy and
valuable study concentrates on Bolivia's boundary disputes.
Salinas Baldlvleso's general summary is useful for obtaining
in fewer pages an overview of Bolivia's diplomatic experience.
However, neither of these histories treats the 1935-19^
period except for the five-page section on the Chaco War and
the Chaco Peaoe Conference in the study by Salinas Baldlvleso.
Several national writers have contributed to the
literature on the Chaco War and the Chaco Peace Conference.
The latter subject is treated in studies by Roberto Querejazu
Calvo (Maaamaolay, 1965)1 Miguel Mercado Moreira (Historla
diplomatics de la Querra del Chaoo, 1966), Bautista Saavedra
(B1 Chaoo £ la Conferencla de Paz de Buenos Aires, 1939 ) »
and Justo Rodas Egulno (La Querra del Chaco, 1933). The
studies by Querejazu Calvo and Mercado Moreira provide

useful Information about the negotiations at the Peace
Conference based on primary sources. However, the treatment
in Masamaclay Is brief and incomplete, and Mercado Moreira
spends too much of his time justifying his opposition to the
peace negotiations in Buenos Aires to give adequate coverage
to the subject. Bautista Saavedra's book offers a good
critical firsthand account of the negotiations from May 1935
until August 1935 when he retired from the Bolivian
delegation. Rodas Egulno's study Is useful for Its Insights
Into specific episodes at the Peace Conference and for Its
description of Individual negotiators, but It Is not a
systematic investigation and was completed before the Peace
Conference concluded Its labors.
Literature on Bolivia's foreign relations in the
1935-1946 era aside from the Chaco Issue Is scarce. The
principal contributor In this field was one of the Important
participants In the shaping of post-Chaco War Andean foreign
policy, Alberto Ostria Outllrrez. He renders an extremely
valuable account of his diplomatic activities In the
1936-1943 period in his Una obra £ un destlno (1946). This
study not only gives Ostria Outltfrrez's Interpretation of the
rationale of Bolivian foreign polloy after the Chaco War, but
also provides the texts of many significant documents.
Emphasis Is placed, of course, on those matters in whloh the
author was personally involved, and the consistent objective
of justifying his action Is prominent throughout. His

description of the struggle between pro-Allied and pro-Axls
forces In Bolivia during the early years of World War II in
Una revoluol6n tras los Andes also contains important
documentary Information.
Another noteworthy contribution to the literature in
the field Is the study by Federico Avila, Bolivia en el
conclerto del Plata (19^1). Avila provides much detailabout
Bolivia's relations with her neighbors to the east after the
Chaco War. However, his interpretation of those events
suffers from a failure to take into account the international
political factors that affected Andean ties with those
countries.
Important studies pertaining to Bolivia's post-Chaco
War foreign relations also have been made by the North
American scholars, Bryce Wood and David H. Zook. Wood has
examined two specific aspects of United States relations with
Bolivia, the United States role in the Chaco dispute in his
The United States and Latin American Wars 1932-1942 (1966)
and the Standard Oil Company case in his The Making of the
Qood Neighbor Policy (1961). David Zookjs The Conduct of the
Chaco War (I960) is probably the most adequate study of the
Chaco War available, although his consideration of the Chaoo
Peace Conference is understandably brief.
The purpose of this investigation is to make an
additional contribution to the body of literature currently
available on Bolivia's foreign relations. It is believed

that through an examination of a wide range of Bolivian
interests in foreign affairs will eome the perspeotive best
suited for an accurate interpretation of that nation's
foreign policy and foreign relations. In this way, specific
bilateral negotiations or pnoblema and multilateral
discussions may be seen as components within the overall
pattern of Bolivia's foreign relations. As an obvious
example, Bolivian negotiations with Brazil often are better
understood when one also takes into account Bolivian-
Argentine relations. This larger view also should allow for
a better understanding of the general direction and
orientation of Andean foreign policy.
Another advantage of the comprehensiveness of this
investigation is that it allows for the examination of certain
aspects of Bolivia's foreign relations in the years 1935-1946
which heretofore have received little attention. One can
include in this category the Bolivian“diplomacy at
international conferences, the Andean policy in respect to
its Pacific port aspiration, and the foreign policy and
foreign relations of the Vlllarroel government.
The limitations of the investigation must be
acknowledged. Restricting the problem of the study to a
limited time period of eleven years offers some difficulties.
Can an Isolated period in a nation's historical experience be
Interpreted adequately without reference to its historical
context? Assuming that this cannot be done in an

investigation of this nature, a summary of Bolivia's
diplomatic history until the Chaco War is Included in the
following chapter. However, it should be made clear that a
detailed comparison of the diplomacy of the 1935-1946 period
with Bolivia's earlier diplomacy is not a basic objective of
this study. Also, the task of tracing the course of
Bolivians foreign relations in the years after 1946 has been
left for study at a later time. Nevertheless, it is believed
that on the basis of the historical sketch in Chapter II and
the examination of Andean diplomacy in the 1935-1946 period,
certain valid, if tentative, conclusions may be drawn about
the characteristics of Bolivian diplomacy.
Other limitations also must be noted. In spite of the
plan to examine a wide range of foreign affairs concerns,
consideration has been given primarily to the most important
economic and political Issues in Bolivia's international
relations. Cultural agreements, minor communications and
frontier traffic arrangements, and less Important
international conferences are not treated. Bolivia's
relations with nonbordering American states, except the
United States and Uruguay, and with most of the extra-
continental countries also are not examined. Therefore, this
study cannot be regarded as an exhaustive study of every
facet of Andean foreign relations.
Data for the investigation was gathered from a number
of primary sources. The most valuable single source of data

was the collection of unpublished diplomatic correspondence
and papers located in the archives of the Bolivian Ministry
of Foreign Relations in La Paz. Documents, reports, and
bulletins published by the Foreign Ministry also were useful
Information was obtained from collections of Bolivian
newspapers. In addition, a number of prominent Bolivians
who were active in the post-Chaco War period contributed
their views and recollections in personal interviews and
correspondence•
Valuable data pertaining to Bolivian-United States
relations was obtained from unpublished United States
Department of State records located in the National Archives
The series of volumes, Foreign Relations of the United
States, and other State Department publications also were
utilized.
Some material that may add perspective to the study
has been left for later examination. German Foreign Office
documents pertaining to that nation's ties with Bolivia,
which are located in the National Archives, must be included
in this category.
A historical approach and an analytical method were
utilized in the Investigation. The subject was regarded as
a problem pertaining to a definite time period in which a
limited number of actors and specific events were Involved.
As already noted, historical documents, diplomatic
correspondence, personal memoirs, and newspaper accounts

were principal sources of data. A set of theoretical
questions was Instrumental In the Investigator's efforts to
organise the data and to analyze and understand the problem.
The first phase of the study led to the division of
the 1935-1946 period into sub-periods corresponding to
developments on the International scene or in Bolivia's
Internal affairs. In each of these sub-periods the total
field of Andean foreign relations was reviewed In order to
identify the most Important problems and concerns.
When the central problems were identified, the
following set of questions was used to manage the pertinent
data and to gain a better understanding of Bolivian foreign
relations and policy. First, how did the Bolivian government
evaluate the general International situation or a specific
problem therein? Did leaders perceive threats or
opportunities? Second, what was the Bolivian response to
this evaluation? What objectives were formulated? What
programs of action or Inaction were considered? What
instruments of policy were contemplated and selected? Third,
how did the factors of economic, political, and social change
within Bolivia affect the nation's foreign relations? Pourth,
how did developments on the international scene affect Andean
foreign relations? Fifth, how effective was Andean foreign
policy? Were policy objectives achieved or not? Sixth, how
can Bolivian foreign policy be described most accurately?
Was it reactive, always responding to foreign initiatives,

10
or was it aggressive, initiating discussions and programs?
These questions reflect certain of the basic
assumptions underlying the investigation. One such
assumption is that a nation's foreign policy is shaped by a
multitude of factors, domestic and foreign, private and
public. A second assumption is that foreign policy is
formulated on the basis of the decision-maker's interpreta
tion of a situation or problem, even though that
Interpretation may diverge considerably from an accurate or
objective view of the situation. Another assumption of the
investigator is that the people who act in the field of
diplomacy are guided in their conduct by the concept of
national Interest. Nevertheless, each diplomat's under
standing of the nation's Interest in any given situation is
invariably Influenced by his own background, interests, and
ambitions.
Several important concepts and terms are used
frequently in the following study. Therefore, at this point,
it might be useful to define certain of these words and
phrases in order to add precision and clarity to the
presentation. Referenoe is often made to foreign policy and
foreign relations. Foreign relations refer to the interaction
between two or more actors on the international scene. To
speak of the foreign relations of Bolivia is to imply
relations with another party in which there is some degree of
regular contact, either on an official or unofficial level.

Poreign policy, on the other hand, Is more exclusively the
product of a single nation. It refers to the governing plan
or program of action followed by one nation in its relations
with other parties. It includes a definition of the objectives
sought in those relations and a determination of the methods
to be utilised In the achieving of those objectives. A
foreign policy objective conveys the meaning of a specific
and Immediate end or aim that is being pursued within the
context of a relatively well-defined situation or problem.
Poreign policy goals, however, refer to long-range alms that
do not necessarily correspond to specific or immediate
problems or situations.
Decision-makers are those people who partlcfpate
directly In the task of formulating the government's foreign
policy and who are held responsible for it. The decision
making process is the system of consultation, persuasion,
and decision that produces the official policy. A person may

*
- be involved in this process on a consultative* basis without
being a decision-maker If he bears no real responsibility for
the final product. Such a person would belong to what might
be called the decision-making elite.
The presentation of the study follows a chronological
order. A useful perspective of the dissertation perhaps
will be gained through a preview of the chapters which follow.
Chapter II presents the framework within which Bolivian
foreign relations must be understood. A summary of Bolivia's

12
diplomatic history Indicates the most Important foreign
relations problems that mere faced In the years prior to
1935* The economic and political conditions of the country
in the 1935-1946 period also are briefly described.
Chapters III and IV Include the study of Bolivia's
foreign relations in the period between the end of hostilities
in the Chaco in June 1935 and the outbreak of the war In
Europe In September 1939. Chapter III treats the subject of
Andean diplomacy at the Chaco Peace Conference in Buenos
Aires. The problems in Bolivian foreign relations In that
same period, apart from the Chaco Issue, are considered In
Chapter IV.
The three chapters that follow deal with Bolivian
foreign relations during World War II and In the immediate
postwar period prior to the fall of the Vlllarroel government
in July 1946. The diplomacy of the Pefiaranda government
(1940-1943) is the subject of Chapters V and VI. Chapter VII
considers the Andean nation's International relations during
the presidency of Major Oualberto Vlllarroel (1943-1946). A
final analysis and conclusions are presented In Chapter VIII.

CHAPTER II
THE CONTEXT OP BOLIVIAN FOREIGN RELATIONS
This chapter la devoted to a description of the
factors that made up the framework or milieu of Bolivian
foreign relations In the post-Chaco War-World War II period.
This framework was composed of geographical, historical,
economic, and political conditions, each affecting In one
way or another the way that the Andean nation performed In
International relations. A brief description of these
elements, therefore, should contribute to a more complete
and adequate understanding of Bolivia's diplomacy.
It must be acknowledged that the purpose of this
chapter precludes any possibility of a comprehensive
treatment of Bolivia's geography, history, political
development or economy. Only those aspects of these subjects

• *
that are relevant to our central problem can be presented, a
criterion that calls for selectivity and a high level of
generality.
I. GEOGRAPHY AND DEMOGRAPHY
Bolivia is a landlocked country of considerable
expanse and varied topography. Estimates of Its size vary,
but most authorities accept a figure between 411,127 square
miles and 424,162 square miles. This would make the country
14
only slightly smaller than the combined areas of Texas and
California. Topographically, says Harold Osborne, this
Andean state is three countries, not one .1 The three
regions to which Osborne refers are the high country of
mountains and plateaus, the steep valleys of the Yungas,
and the northern and eastern lowlands.
The western part of the country Is dominated by two
ranges of the Andes that enclose the high and barren plateau
known as the Altlplano. This dry and rocky plain, which
averages eighty-five miles in width and stretches five
hundred and twenty miles north to south, must be included
among man's more hostile environments. Nevertheless, here
reside about 70 per cent of the nation's population. La
Paz, the nation's capital, nestles in a valley on the edge
of the Altlplano at about 11,000 feet.
To the east of the Andes lie the Yungas, a semi-
tropical region of steep mountain valleys. Here, In
contrast to the Altlplano, moisture Is abundant, and a
variety of agricultural products are grown. But the nature
of the terrain makes the transport of these products to
market a serious problem.
Bolivia's eastern lowlands, the Oriente, account for
well over half the nation's area. To the north, In the
departments of Pando, Beni, and Santa Cruz, is the low
^-Harold Osborne, Bolivia, A Land Divided (third

edition; London: Oxford University Press, 190^), p. 4.
15
tropical region which la one of the country's major cattle
raising areas. Transportation In this region Is provided
mainly by the rivers that flow through It and by air. The
central Orlente conslate of extensive plains covered by
rough pasture, scrub, swamp, and woodlands. Still farther

p
to the south are rolling pastures and dry, open woodlands.
Although accurate statistics relating to Bolivia's
population are not available, the approximate figures
clearly Indicate that In comparison with the nation's size,
the number of Inhabitants Is small. Bolivia's population In
1935 was estimated at 3,170,807; this figure had Increased

to 3*533*900 by 1942.3 on the basis of this latter figure,
Bolivia's population density per square mile in 1942 was
8 .5 .^ However, population density varied greatly among the
nation's nine departments. The three departments of the
eastern lowlands which border Brazil and Paraguay, Pando,
Beni, and Santa Cruz, had an average population density
per square mile of less than two.
Bolivia '8 population Includes a high percentage of
Indians, many of whom are members of either of two large
language groups, the Aymara and the Quechua. Although
2Ibld., p. 24.
Ûnited States Department of Commerce, Bolivia,
Summary of Blostatlstlcs, Washington, 1945, pp. 32-33.
4Ibld., p. 39.
16
Spanish Is the nation's official language, one Bolivian
source estimated that in 1947, only 43.2 per cent of the

5
population could speak it.
II. THE HISTORY OP BOLIVIAN INTERNATIONAL RELATIONS
Bolivia has had an unfortunate and tragic history of
foreign Involvement, playing a role described by Whitaker as
important but "largely passive and sacrificial.”^ The
nature of that experience can be explained to a large
extent by the liabilities with which the Andean country was
burdened when it gained its independence. Not the least of
these disadvantages was the new state's size in comparison
to its scant population of about a million inhabitants, the
overwhelming majority of whom were Indians. In 1825
Bolivia possessed vast frontier regions which were Isolated
from the largest cities, lightly populated or still unex
plored, and located contiguous with the territory of more
powerful neighbors. In this very situation lay the
essential problem that was to absorb most of Bolivia's
diplomatic energies until 1938.
The first important problem faced by the leaders of
5Jorge Pando Qutilrrez, Bolivia y el^ mundo.

Qeografia econ6mlca (La Paz, 1947), I, 41.
6Arthur p. Whitaker, The United States and South

America, The Northern Republics (Cambridge: Harvard
WniversityTress, 194h), p. lo.
ALTO PERU OR THE AUDIENCE OF
CHARCAS ACCORDING TO THE
UTI POSSIDETIS JURIS OF 1810.
70 M 90 SB
70 U SO 55
FIGURE 1
BOLIVIA'S ORIGINAL TERRITORIAL CLAIMS, 1825
♦Centro de Propaganda y Defenaa Nacional, "Bolivia

and the Chaco Boreal" (La Paz; Llto. Unldaa, 1932).
18
Upper Peru, as Bolivia was known In I825, was whether or not
this vast colonial audlencla would remain a separate and
Independent state. Leaders of the General Assembly of Upper
Peru, meeting In Chuqulsaca (today Subre) In 1825, were
divided among those who favored union with Lower Peru,
those who favored union with the United Provinces of Rio
de la Plata, and those who advocated continued
independence.' Andres Santa Cruz, elected president of
Bolivia in 1828, was an ardent supporter of confederation
with Peru. After temporarily subduing warring caudlllos in
Peru, Santa Cruz proclaimed the Peru-Bolivian Confederation
in 1836. The next year the political constitution of the
Confederation, the Pact of Tacna, was signed.
The birth of the Confederation immediately aroused
the opposition of the neighboring countries, especially
Argentina and Chile who declared war on the new union. The
combined challenges of internal dissension and foreign
invasion proved too strong for the shaky Confederation.
Shortly after Chilean forces defeated troops of the
Confederation at Yungay, Peru, on January 20, 1839, the
Bolivian Congress declared Bolivia's Independence of the
?N. Andrew N. eleven, The Political Organization of

Bolivia (Washington, D.C.: Carnegie Institution of
Washington, 19^0), p. 72.
19
Q
union. Thus, by 1839> the power configurations on the
Pacific Coast that were to Influence much of Bolivia's
history in foreign relations already had taken shape.
Chile had served ample notice that any appearance of a
Bolivian-Peruvian alliance would be regarded as a threat
in Santiago and that counterveiling action to offset such a
situation might be expected.
Relations between Bolivia and Peru were precarious
following the collapse of the Confederation. Peruvian
torces under Agustln Oamarra Invaded Bolivia in 1842 in an
attempt to create still another confederation. But Oamarra
was defeated near La Paz at Vlacha by Josi Balliviin in a
battle that, according to Salinas Baldivieso, finally

"affirmed Bolivia's nationality."9
After 1842 Bolivia's relations with Chile took on new
Importance. At stake were the guano deposits and mineral
wealth located in Bolivia's desolate coastal region. In
1842 Chile laid claim to the guano deposits in the Atacama
Desert and to ownership of the coastal region northward to
the bay of Mejlllones, considerably above the boundary
®Carlos Alberto Salinas Baldivieso, Hlstorla

dlplomitlea de Bolivia (Sucre: Editorial Charcas, 1938),
pp. 42-43.
9Ibid., p. 53.
1
accepted by Bolivia.1^ For the next twenty years Bolivian-
Chilean relations were marked by frequent and serious
differences as Chilean Influence continued to grow In the
disputed area. Bolivia, plagued by political Instability
and lack of communications with her littoral zone, could
make but a feeble response, usually In the form of diplo
matic protests. On June 5, 1863, a special session of the
Bolivian Congress authorized the Chief Executive to declare
war on Chile if no honorable arrangement through peaceful
procedures was possible.1^ The reappearance of the Spanish
threat on the Pacific Coast in 1864 may well have been all
that prevented the outbreak of Bollvlan-Chllean hostilities
in the mid-i860's.
A costly reconciliation was effected with Chile
during this period by Bolivian President Mariano Melgarejo
(1864-1871). His decision to Join the Chilean-Peruvian
alliance against Spain was followed by the signing of
agreements with the Chilean government and with Chilean
capitalists in respect to the coastal region. The Treaty of
10Daniel Sdnchez Bustamante, Bolivia su estructura v

sus derechos en el^ Paciflco (second 53TFTonjH^“Taz1^Kirn3’
Hermanos, iy2T7» p. 117. Bolivia claimed a region on the
Pacific Coast between the Loa River on the north (about
21030*) and the Salado River on the south (about 25°31'), a
distance of about 240 miles.
^Miguel Mercado Moreira, Hlstorla lnternacional de
Bolivia (second edition; La Paz: Imp. "/tenea," 1930),
pp. 408-409.
August 10, 1866, fixed the boundary between the countries at
the twenty-fourth parallel and provided for Joint exploita
tion of guano deposits within a zone between the twenty-
third and twenty-fifth parallels. Taxes from minerals
exported from this zone were to be equally divided. Bolivia
was obligated to habilitate the port of Mejlllones and to
grant Chile special tariff and export tax privileges. In
1868 Melgarejo granted even more generous terms to the
Chilean-owned Compafiia explotadora del deslerto de Atacama,
allowing it the exclusive privilege of exploiting,
developing, and freely exporting nitrates of the Atacama
Desert for fifteen years in return for ten thousand p#sos .12
The attempts by Melgarejo's successors to restrict
these wide concessions led to the War of the Pacific. When
early diplomatic attempts to modify the Melgarejo conces
sions failed, Bolivia sought allies in Lima and Buenos Aires.
A treaty of defensive alliance was signed with Peru on
February 6 , 1873. Bolivian and Peruvian efforts were made
to have Argentina Join the pact. Although these overtures
at first received a favorable reception in Buenos Aires,
Argentina eventually refused to commit herself to the
arrangement. According to Argentine Chancellor Carlos
Tejedor, one obstacle to adherence to the Bolivian-Peruvian
12Ibld., pp. 421, 466-467.

22
alliance was the territorial question pending with Bolivia.
Relations with Chile Improved somewhat In the early
l8TO's when Bolivia obtained favorable modifications In the
agreements signed under Melgarejo. The Bolivian-Chilean
treaty of August 6, 1874, set the boundary at the twenty-
fourth parallel and reduced Chilean privileges In the zone
between the twenty-third and twenty-fourth parallels. But
the treaty also provided that for twenty-five years the
export taxes on mineral exports from the Bolivian zone would
not be raised. La Paz also added new restrictions to
concessions granted earlier to the private Chilean company.
However, when the arrangements with the company was submitted
for congressional review In 1877> approval was given on the
condition that the company pay a ten centavo tax per
hundred pounds of nitrates exported. This new tax provoked
Chile*s protest and led to the War of the Pacific which
began on February 14, 1879, when Chilean forces seized
Antofagasta. When Lima disclosed the existence of the
Bolivian-Peruvian defensive alliance of 1873, Chile declared
war on both states on April 5, 1879.
Chile was better prepared for war and decisively
defeated the forces of the Andean nations, occupied Bolivia's
13Ibld., p. 445; Robert N. Burr, The Stillborn

Panama Congress (Berkeley and Los Angeles: tJniverslty of
California press, 1962), p. 29.
23
littoral, and conquered extensive regions of southern Peru.
The Treaty of Anc6n ended the war between Peru and Chile In
1883. However, Bolivia, hoping that Chile might agree to
cede her an outlet to the Pacific at a later time, signed a
pact of truce on April 4, 1884. This indefinite arrangement

14
persisted for twenty years.
Bolivia's experience with Brazil over the Acre region
was similar to her Pacific episode with Chile. After an
early period of easy concessions and lax administration, a
Bolivian attempt to consolidate her authority in the area
led to its loss. On March 27, 1867* Melgarejo*s Foreign
Minister Mariano DofSato Murtaz signed a boundary treaty with
the Brazilian minister in La Paz, an agreement which,
according to the Bolivian hlstorlah Mercado Morelra, ceded
to Brazil an area of 130,000 square kilometers that belonged
to Bolivia as the result of definite colonial agreements.1^
The boundary line determined in the 1867 treaty was
not marked, however, in the rubber-rich area west of the
Madera River, a region to which numerous Brazilian settlers

*♦
were attracted in the latter part of the century. Disturbed
about growing Brazilian influence in the Acre River region
claimed by Bolivia under the terms, of the 1867 treaty, the
Andean government established Puerto Alonso in 1899 to
1^Mercado Moreira, o£. clt., p. 479.
J-Slbld., pp. 20-21.

collect duty on the rubber being exported from the area.
Apparently, this display of Bolivian authority was instru
mental in provoking a secessionist revolt whose leader,
Luis Q&lvez, proclaimed the Independence of a new state
on July 15* 1899.^ Although limited in number, Bolivian
forces managed to quell the revolt.
Now seriously concerned about ways of developing and
holding the troubled region, La Paz decided to deliver the
Acre region to the control of a private stock company, the
Bolivian Syndicate of New York. The contract signed on
July 11, 1901, granted the company the authority to admin
ister the area and to collect there for a thirty-year
period all revenues due the state. In return, the company
was to receive 40 per cent of the taxes collected and
special exploitation privileges within the area.1^ As
Mercado Morelra states, Bolivia was seeking to create a
powerful ally in her struggle to hold on to the rich but
lebelllous region. Brazilian reaction to the contract,
however, was critical and harsh. Rio de Janeiro demanded
that the contract be rescinded, and Brazilian authorities
closed the Amazon River and its tributaries to river traffic
to and from the region. Although Bolivia agreed to cancel

25
the contract, she continued In her efforts to enforce
Bolivian sovereignty In the region. On August 6, 1902, a
second separatist revolution broke out.
The decisive difference in this second separatist
movement was that Brazil supported it politically and later
militarily. In lb99 Rio de Janeiro had followed a hands-off
policy, a position interpreted in Bolivia as definite
recognition of her legal ownership of the region. Now,
however, Brazil's new foreign minister, Bar6n de Rio Branco,
declared the entire area in litigation. In January 1903
the Brazilian Chancellor notified his diplomatic missions
abroad that Brazilian troops had occupied the disputed
region pending the outcome of discussions' in respect to its

18
boundaries. Bolivia, militarily incapable of coping with
the Brazilian challenge, had little choice but to accept
the modus vlvendl proposed shortly afterward by Rio Branco.
The Acre question was settled by the Treaty of Petr6polis
of November 17, 1903.
By the terms of the Treaty of Petr6polls, the
frontier between the two countries was drawn to allow Brazil
to incorporate the Acre region. Brazil agreed to pay two
million pounds sterling as indemnity for the territory and
committed herself to the construction of a railroad
l8Ibld., pp. 129-130.

connecting the Bolivian town of Villa Bella, located at the
point of convergence of the river Beni and the river Mamor£,

19
with Brazil1a railroad system. This latter stipulation
proved impractical, however, and at least four additional
agreements with respect to the Brazilian railroad obligation
were signed prior to the Chaco War. On December 25* 1928,
the Fabldn Vaca Chavez-Octavio Mangabeira Treaty of

to *
Boundaries and Railroad Communications was signed. Article
5 of this agreement provided that Brazil's commitment to
railroad construction would be fulfilled with the contri
bution of a million pounds sterling to a program of railroad
construction designed to link Cochabamba with Santa Cruz and
Santa Cruz with the Brazilian rail system on the river
Paraguay and with a port on the Amazon River system .20
Bolivia's early relations with Argentina also were
troubled by territorial questions. The two regions in
dispute were the territory of Tarija and the central Chaco,
the latter located south and west of the Pllcomayo River.
Although efforts to reach a settlement were initiated
immediately after Bolivia gained her Independence, not until
19Ibid., pp. 143-146.

20Ibld., p. 157; Luis de Iturralde Chinel, Coleccl6n
de tratados Vlgentes de la republlca de Bolivia, Minlsterlo
<Je Re lac lone s Ext er lore s- ^ vols.; La“Faz: Editorial
"Universe/ 1 1940), IV, 265. (Hereinafter cited as Coleccl6n
de tratados vlgentes.)
the l880's did both countries seriously seek a final agree
ment. Bolivia, sobered by the results of the War of the
Pacific, recognized the necessity of establishing better
relations with Buenos Aires.21 On May 10, l889» Bolivian
Minister Santiago Vaca Guzman and Argentine Foreign Minister
Norberto Quirno Costa signed a boundary treaty which gave
Bolivia dominion over Tarija and recognized Argentine
sovereignty over most of the central Chaco and half the

oo
Puna de Atacama. After modifications in this treaty were
made which left virtually the entire Atacama plain to
Argentina, ratifications were exchanged on March 10, 1893.
Through the work of their demarcation commission,
the two governments soon discovered that the boundary
determined by the 1889 treaty was inapplicable on the
terrain. Towns like Yaculba, traditionally Bolivian, were
found to be located within Argentine territory uninten
tionally. The long process of treaty modification began in
1897 which eventually culminated in the boundary treaty of
July 9 , 1925# signed in La Paz by Argentina's minister,
Horaclo Carrillo, and Bolivian Foreign Minister Eduardo
Dlez de Medina.23 By the terms of this agreement, Bolivia
21Salinas Baldivieso, o£. clt., p. 105.
22Colecci6n de tratados vlgentes, op. clt., IV, 70.
23ibid., p. 99; Mercado Moreira, 0£. clt., p. 366.

28
retained Yaculba within her borders and Argentina gained
oh
compensatory territory elsewhere on the common frontier, ^
The first Argentine-Bolivian railroad convention,
projected to link Argentina's North Central Railroad with
the growing Bolivian rail system of the Altiplano, was
signed In 1894. Later agreements signed in 1906, 1922, and
1923 contemplated the extension of the Argentine North
Central Railroad to Yaculba and on to Santa Cruz. However,

25
none of these agreements had practical effects. ^
After the War of the Pacific, questions arose
regarding the boundary between Peru and Bolivia in a region
north of Lake Titicaca in the former colonial province of
Chanohes. In this area, each government was conceding land
grants and extending its jurisdiction by establishing
customs agencies. On December 30, 1902, a treaty was signed
in La Paz by Bolivia's Foreign Minister Eliodoro Villaz6n
and Peru'8 minister, Felipe de Osma, by which the two govern
ments submitted the boundary question to the government of
the Argentine Republic for legal arbitration.2^ By the
terms of the arbitration compromise, the Judge was to
render his decision in conformity with the "Leyes de la
22*Mercado Moreira, ibid., p. 397.
25colecci6n de tratados vigentes, o d . cit.. IV.

113-114.------------------------ 8----- ---
26Ibid.. V, 413.
29
Recopilaci6n de Indlas, C^dulas y Ordenes Reales, las
Ordenanzas de Intendentes" and all documents of an official
character. In cases In which such documents did not provide
clear title for either country, the question was to be re
solved equitably. Claims based on territorial possession
were not to prevail against royal titles or dispositions.27
Argentine President Jos£ Figueroa Alcorta delivered
his decision on July 9, 1909* The award acknowledged that
official documents had failed to provide an adequate basis
for the decision and, therefore, that the determination had
been made In accordance with the principle of equity.
Although Bolivia received 3*110 square leagues of the 6,432
square leagues submitted for arbitration, she protested the
decision, claiming that by disregarding the factor of
possession, the arbiter had acted outside the provisions of
the compromise. The Andean refusal to accept the award
soon led to a rupture of diplomatic relations with Argentina
and raised the threat of war with Peru. Lima was concilia
tory, however, and agreed to a modification of the arbitral
decision favorable to Bolivia In the S&nchez Bustamante- •
Sol6n Polo treaty of September 17, 1909.
The Bolivlan-Peruvian boundary south of the line
27Ibid.
2®Ibid., p. 428; Mercado Moreira, op. clt., pp. 554-

561. ---
determined by arbitration also lacked demarcation. A
protocol signed on June 2, 1925, divided this unmarked
frontier Into three sections. The northern sector above
Lake Titlcaca was marked in 1925* Efforts to mark the
central or lake sector raised additional questions that were
resolved by the Julio A. Outilrrez-Carlos Concha protocol of
January 15, 1932. In this protocol the governments agreed
to exchange small areas In the Copacabana peninsula of Lake
Titlcaca. Peru's repossession of the province of Tacna as
a result of the Chilean-Peruvian treaty of 1929 left the
southernmost sector of the Bolivian-Peruvian frontier
unmarked at the outbreak of the Chaco War in 1932.29
Bolivia'8 1884 truce with Chile remained in effect
until 1904, even though earlier efforts to reach a settle
ment were realized. In one of three protocols signed
between the countries in 1895, Chile promised to deliver to
Bolivia either the Peruvian provinces of Tacna and Arica if
they eventually came under official Chilean dominion or,
failing this,, the Bay of v£tor, each at a price of five
million silver pesos.3° However, Chile's willingness to

consider cession of a sovereign port to Bolivia must be
29coleccl<5n de tratados vigentes, op. cit.. V.

474-475. ------------------- ----- --
3®Mercado Moreira, op. clt., pp. 484-487.
31
understood in terras of Santiago's frontier difficulties with
Argentina, Bolivia's improved relations with Argentina
following the War of the Pacific constituted a threat to
Chilean Interests in matters pending with both Argentina
and Bolivia. Chile's offer of Tacna and Arlca to Bolivia,
therefore, was, quite likely, an attempt to counter the
growing La Paz-Buenos Aires friendship and to place new
strains on Bolivian-Peruvian relations.^1
When Argentine-Chilean relations improved in 1896,
Bolivian hopes for a sovereign outlet on the Pacific waned.
The protocols of 1895 remained without effect. A note
dated August 13, 1900, from the Chilean minister in La Paz,
Abraham KSnlg, to the Bolivian Foreign Ministry* symbolized
Chile's new mood of confidence. He wrote: "Chile has
occupied the littoral and has taken possession of it with
the same title with which Germany annexed to its rule Alsace
and Lorraine, with the same title with which the United
States of North America has taken Puerto Rico. Our rights
originate from victory, the supreme law of the nations ."-^2
Unable to depend on foreign support in her dispute
with Chile, Bolivia decided she must come to terms with
reality; the Treaty of Peace and Friendship with Chile was
31s4nchez Bustamante, oj>. clt., pp. 189-190.
32Mercado Morelra, o£. clt., p. 489.

32
signed In Santiago on October 20, 1904. By the provisions
of this agreement, Bolivia ceded her littoral provinces to
Chile in return for the following:
1. Chilean construction of a railroad linking

Arlca with La Paz, the Bolivian section to
pass to Bolivian ownership fifteen years
after its completion.
2. Limited Chilean financial support for railroad

construction within Bolivia.
3. Cancellation of all Bolivian debts relating

to the ceded zone.
4. Freedom of commercial transit through Chile*s

ports and territory.
5. Three hundred thousand pounds sterling.33
Bolivia’s desire for a sovereign port on the Pacific
was not extinguished with the treaty of 1904, however. The
Wilsonian principles of justice and law in international
relations and the foundation of the League of Nations
inspired new hope in La Paz. In the 1910's two positions
with respect to the Pacific question crystalized on the
Bolivian political scene. The Liberal party government was
identified with the pr&ctlclsta position which favored the
acquisition of the former Peruvian provinces of Tacna and
Arlca as the most logical Pacific Ocean outlets for the
nation. In 1919* following World War I, the Bolivian
representative to the Paris Peace Conference made this
33coieccl6n de tratados vlgentes, o p . clt ., IV, 394.

position known; naturally, It provoked strong protest from
Peru and harsh criticism from the opposition Republican
party. The Republicans were, for the most part,
relvlndlcaclonlstaB who favored the reincorporation of the
territories lost to Chile in the War of the Pacific through
revision of the treaty of 1904. When the July 12, 1920
revolution in Bolivia brought the Republicans to power, the
shift in Andean foreign policy on the port question was
evident at the League of Nations. The Bolivian delegation
passed a note to the Secretary General of the League on
November 1, 1920, which defined the government's position:
Bolivia Invokes Art. 19 of the treaty of Versailles

with a view of obtaining from the League of Nations
the revision of the treaty of peace signed between
Bolivia and Chile on October 20, 1904.34
Bolivia's policy of seeking support within the League
of Nations for the revision of the 1904 treaty was seconded
by Peru. Overall, however, the response to Bolivia's
initiative was disappointing to the Andean nation, and in
1921 her delegation withdrew its request to have the matter

placed on the Assembly's agenda.
In 1926 Bolivia fully supported the proposal by
United States Secretary of State Frank Kellogg that Chile and
Peru escape the Tacna-Arlca dilemma by ceding both provinces
to Bolivia. However, those countries preferred another type
34nercado Moreira, op. clt., p. 508.

34
of settlement. On June 3, 1929, they signed a treaty by
which Chile retained Arlca and returned Tacna to Peru. In
a confidential complementary protocol of the same date, both
countries agreed neither to cede to a third power any of the
territory Involved In the treaty nor to build railroads
across It without prior consent by the other country.35
Bolivia, of course, protested against the secret
protocol. Foreign Minister Tomis Manuel Elio described the
policy represented by the protocol as unfriendly and capable
of arousing profound resentments within the Bolivian
conscience. Bolivia, he added, refused to renounce her
Intentions of regaining her maritime s o v e r e i g n t y . ^
These have been the highlights of Bolivia's unfortu
nate diplomatic history, with the exception of relations
with Paraguay, a subject treated In the next chapter.
Writing In 1947> Pando Gutierrez summarized the results of
his country's foreign involvement by saying:
Bolivia was founded in 1825 with a territory of

343*769 square kilometers. The present area Is
2 ,
1,069 » 094, that Is to say, she had lost 54 per cent
of her original extension.37
When the armistice protocol was signed with Paraguay on June
12, 1935* Bolivia had lost more thanhhalf of her original
35ibld., pp. 525-526.
36ibld., p. 526.
37pando Gutierrez, 0£. clt.. p. 114.

35
territorial claims to her five neighbors. It was a bitter
legacy for the Bolivian diplomats who managed the nation’s
international relations after the Chaco War.
III. ECONOMIC AND FINANCIAL FACTORS
Another essential component of the context of
Bolivian diplomacy in the 1935-1946 period was the nation’s
economic and financial condition domestically and
internationally. In this section, consideration will be
given to the predominant features of Bolivia's national
economy, foreign trade, and general financial situation.
In the period after the Chaco War, most Bolivians
earned their livelihood in agriculture. It was a primitive
type of cultivation for the most part. Less than 1 per cent
of the nation's total land area was worked. Although almost
all of the agricultural production went to supply the
domestic market, even then it was inadequate for feeding the
Bolivian population. Relatively large quantities of sugar,
wheat, rice, and other foodstuffs were imported.
Bolivia's small manufacturing capacity was
concentrated in textiles and in food and beverage processing.
A miscellany of other goods, almost all of it for the
^Ûnited States Tariff Commission, Economic Controls

and Commercial Policy in Bolivia (Washington, b.fl., 194oj,
p. 2.
domestic market, was produced, Including shoes, hats, woolens,
matches, cement, cigarettes, and glass. The total value of
nanufacturlng production in 1939 stood at about $10.2
million. Of this amount, food and beverage processing and

39
textiles accounted for approximately 75 per cent.
Bolivia's major export Industry was mining. The
preponderance of mining in Bolivia's foreign trade is seen
in the fact that in the 1938-1946 period, mineral exports
accounted for over 90 per cent of the nation's foreign
exchange earnings. Tin was by far the most Important export
commodity. It provided about 70 per cent of export earnings
during the years 1940-1946.^° Bolivia also exported
substantial quantities of antimony, copper, lead, zinc, and
tungsten.
Before World War II (1938), Great Britain, the
principal center for the smelting of Bolivian tin, was the
Andean nation's biggest customer, receiving 63 per cent of
total exports by value. Belgium, also a large mineral
purchaser, took 22 per cent. With the outbreak of the
Second World War, these trade patterns were affected
^Ûnlted States Tariff Commission, Mining and

Manufacturing Industries in Bolivia (Washington! £>.£., 1945),
fable 4, p. 8.
^°Direcci<5n Naclonal de Estadlstica y Censos,

Boletln Estadistlca No. 77, cited in Cornelius H. Zondag,
wProblems In (the Economic Development Of Bolivia,” United
States Operations Mission to Bolivia, La Paz, 1956, p. 237.
37
significantly. By 1942 the United States had become the
leading purchaser of Bolivian exports, and Great Britain was
second. Together they bought about 90 per cent of the
Andean nation's exports.
The value of Bolivia's imports was usually
considerably less than that of her exports. The Andean
nation'8 foreign exchange holdings Increased from five to

iiO
twenty-six million dollars between 1939 and 1945, A large
percentage of Bolivia's imports was manufactured goods.
Throughout the period 1935-1946, the United States ranked
as the first supplier of goods. Although Germany ranked
second to the United States in this category in 1938,
providing 18 per cent of Bolivia's imports, Argentina had
taken over that position by 1941.^3
Tariffs and export taxes were used by the Bolivian
government both as regulatory devices and as revenue
^•United State b Tariff Commission, Economic Controls

and Commercial Policy in Bolivia, op. clt., p. 4;
"Activities o t the CoorcTinator of Inter-American Affairs in
Bolivia. Introduction: Political, Geographic, Social, and
Economic Conditions," May 1943, p. 2.
^Laurence Duggan, The Americas; The Search For

Hemisphere Security (New York: rienry Holt and Company, 1949),
^"Activities of the Coordinator of Inter-American

Affairs in Bolivia. Introduction: Political, Geographic,
Social, and Economic Conditions," loc. clt.; Economic
Controls and Commercial Policy in BollvIaT op. cit.T~P. 4.
producing measures, although they probably were most valuable
as sources of revenue. In the five years preceding 1940,
import duties provided 17 per cent of the government's
revenue. Although export taxes in the years before 1940
accounted for only 10 per cent of annual government income,
by 1942 it was estimated that 60 per cent of state revenue

44
came from that source.
Foreign exchange control was in effect throughout
the 1933-1946 period with the exception of a short time in
1937. Companies operating in Bolivia were required to
deliver a percentage of their earned foreign exchange to
the appropriate government agency at the official exchange
rate. Through the system of foreign exchange distribution,
the Bolivian government sought to exercise import controls.
Bolivia's foreign trade was related in no small
measure to the international tin cartel which Andean
producers, most notably Slm6n Patifio, had helped to
establish. Representatives of the governments of Bolivia,
British Malaya, the Netherlands Indies, and Nigeria, whose
producers accounted for nearly 90 per cent of world tin
production, signed the International Tin Agreement on
February 27, 1931. The International Tin Committee, composed
of representatives of the participating governments, managed
^ Economic Controls and Commercial Policy in

Bolivia, ibid., pp. 6, i7.
39
the new cartel.
The tin agreement was Important for Bolivia because
It guaranteed the Andean nation a relatively large quota
within the formula for a restricted world production. This
was especially significant for Andean producers due to their
high cost operations. Bolivian leaders were pleased with
the results of the original agreement. In 1935 the
Andean representative to the Tin Committee, Ricardo
Martinez Vargas, pointed out that tin prices had risen
between 1932 and 1933 from an average of 13b pounds sterling
a ton to an average of 199 pounds sterling per ton . ^
Subsequently, the agreement was renewed in October 1933, In
January 1937* and in September 1942. After the outbreak of
World War II, many of Asia's tin-producing areas fell into
Japanese hands and, consequently, the agreement remained
without effect. Nevertheless, Bolivia retained her interest
in reviving the arrangement at the end of the war.
Bolivia was plagued by constant economic unrest
following the Chaco War. The cost of living index traced
the rising prices. Using the base figure 100 to indicate
the cost of living in 1931* prices by January 1940 had
risen to 746 and by December 1942 to 1,497.^ Higher prices
^5e i Dlario, October 10, 1935, P* 4,

46
wEcom>inic Controls and Commercial Policy in
Bolivia, op. clt., p. 25.
40
were accompanied by devaluation of Bolivia's currency from
a rate of 4.3 bolivianos to the dollar in 1935 to an exchange
value of 42.4 bolivianos to the dollar in 1946. As might be
expected, these developments caused persistent
dissatisfaction among the Bolivian populace.
The post-Chaco War situation also was characterized
by tension between the Bolivian government and the mining
Industry which was dominated by the Slm6n Patiflo, Carlos
victor Aramayo, and Mauricio Hochschild interests. The
conflict resulted for the most part from the continuation
of the government's requirement that the companies deliver
a high percentage of their foreign exchange (42 per cent)

47
to official agencies. The mining companies had borne
much of the expense of the Chaco War and now were eager to
gain relief from official demands. The post-Chaco War
military governments continued to spend at a relatively high
rate, however, and felt the need for revenue gained from
exchange transactions. Although government-mining industry
relations were poor during the presidency of Colonel David
Toro, they reached a low point on June 7, 1939* when
President Oerm£n Busch decreed that all foreign exchange be
^Despatch 154, to Washington, R. Henry Norweb,

March 8, 1937* file number 824.6354/133. Unpublished
document of the United States Department of State, National
Archives, Washington, D.C. Hereinafter cited with
abbreviation (DS) followed by file number.
41
deposited In the Banco Central. The situation Improved
somewhat under the more conservative Peflaranda government,
but new tensions developed with the coming of the
nationalistic Vlllarroel regime in 1943*
Bolivia's international credit rating during the
1935-1946 era was prejudiced by a large unpaid foreign debt.
The Andean nation, suffering from the effects of the world
depression, had defaulted on its service of several large
dollar loans In 1931* President Tejada Sorzano announced
In his message to the Bolivian Congress on August 6, 1935,
that the nation's external debt was $62,403,373. Apparently,
the Andean President was referring to the debt less accrued
interest. On December 31* 1939* Bolivia's Central Bank
placed the consolidated foreign debt at $100,202,549.^®
The economic and financial conditions of the Andean
nation had a strong influence on Bolivian diplomacy in the
post-Chaco War-World War II era. Bolivian spokesmen were
never isolated from the realities of the country's economic
condition and needs. The manner in which these
considerations affected Bolivian foreign relations will be
readily apparent in the following chapters.
**®La Raz6n, August 6, 1935* second edition, p. 1;

Charles Earle Punk (ed.), The New International Year Book
(1940) (New Yorks Funk and Wagnalis Company, I94i), p. 79.
IV. POLITICS AND GOVERNMENT
The results of the Chaco War had a devastating effect
upon the traditional parties that had dominated the nation's
political scene for almost half a century. The sure signs
of their disarray appeared soon after the slgftlng of the
June 1935 protocol that ended hostilities with Paraguay.^
At the same time, new political parties and policies emerged
that were destined to have an Important role In Bolivia's
history for years to come. An acquaintance with the political
developments of those years, therefore, must be considered a
prerequisite for understanding the Bolivian foreign relations
of the era.
In November 193^ President Daniel Salamanca was taken
captive by the Army High Command in Villa Montes and
replaced as the nation's chief executive by Vice-President
Jos! Luis Tejada Sorzano. The episode represented not only
the return to power of the Liberal party for the first time
since 1920, but also the beginning of an era of active
military participation In the affairs of government that was
to continue for a dozen years. The Liberal party was one of

four pre-Chaco War political groupings identified with the
^Herbert Sanford Klein, "The Impact of the Chaco War

on Bolivian Society," (unpublished Doctoral dissertation.
University of Chicago, 19o3). Klein argues persuasively that
the devastating effect or tne Chaco War upon Bolivia's
traditional political parties was the most important result
of that conflict within Bolivian society.
Interests of Bolivia's middle and upper social classes. The
others were the Partldo Republictno Qenulno, the Partido
Republicano Soolallsta. and the Partldo de Unl6n Naolonal.
Soon after fighting stopped in the Chaco,
significant developments took place in Bolivia's political
life. The Nationalist party, divided by differing political
outlooks, dissolved in October 1 9 3 5 The successors of
thxs party, together with several small socialist groups,
then comprised the leftist sector In Bolivian politics.
Several unsuccessful attempts were made to unify the
leftists Into a unified party. Nevertheless, within this
leftist sector the dissatisfaction and resolution of many of
Bolivia's young intellectuals, students, veterans, and labor
leaders found expression.
During this same period, returning war veterans were
forming politically significant groups. The Legldn de
Bx-Combatlentea was organized In 1933; the Asoclacl6n de
Bx-Prlsloneros was formed In 1936. Among the prisoners held
captive In Paraguay, two secret organizations also had been
formed among the professional officers. Both were dedicated
to the renovation of the republic that, in their view, had
failed them so miserably. They were the Logla Marlseal Santa
Cruz and BADBPA (Raz6n de Patria).-*1
5°Klein, ibid., pp. 289-291.

51Ibld., p. 341.
44
Tejada Sorzano's Liberal government was unable to cope
with the nation's postwar problems. The disorganized
civilian parties were unable or unwilling to give the regime
their support. The Army at first supported the government,
but later, recognizing its unpopularity and weakness, began
to make overtures toward other civilian groups. Even the
Liberal party announced that it would abstain from voting in
the general election scheduled for May 31, 1936, because of a
rumored socialist-military coalition.52 The Liberal reign
ended on May 17, 1936, when Tejada Sorzano was ousted by the
Army in a bloodless coup d'etat.
The mixed civilian-military Junta that was organized
after the fall of the Liberal regime lasted about a month
before the Army assumed full control of the government on
June 20, 1936. Colonel David Toro Rullova, head of the
military Junta, then launched a period of experimentation in
state socialism. New Ministries of Labor and Social Welfare
and of Mines and Petroleum had been established under the
mixed Junta. Now, Toro, without convening a congress or
calling elections, decreed that labor was obligatory for all
Bolivian males and that syndicate membership was mandatory for
everyone engaged in "the production, distribution, and use of

wealth."53 Bolivia's political life was to be restructured on
52E1 Dlarlo. May 3* 1936, p. 7.

53porflrlo Diaz Machlcao, Historia de Bolivia. Toro.
Busch, Quintanilla, 1936-19% (La TIE ! "lMlTOIET^*JuvenEua\"
19br),pp. 35-36j El Dlarlo. July 26, 1936, p. 7.
43
the basis of functional syndicates In which labor would have
a large voice . ^
The Toro program left almost everyone dissatisfied.
Conflict ensued between the mine owners and the government
over taxation and exchange requisition. From the other
direction, the nationalistic-socialist groups described the
government as an agent of the oligarchy.55 Labor was
disappointed by the lack of improvement in its condition
despite glowing promises. But the decisive blow to the Toro
government came from the Army. On July 13* 1937, L t .
Colonel GermAn Busch, Chief of the General Staff, and
General Enrique Pefiaranda told President Toro that the Army
had withdrawn its support. The same night, Toro resigned.
Lt. Colonel GermAn Busch, one of the true Bolivian
heroes of the Chaco War, assumed the post of provisional
president. Widespread discontent with the previous regime
was converted rapidly into general acceptance and approval
of the new Junta. The Army pledged its allegiance to the
new government as did the three parties of the liberal
tradition, the Oenulnos, the Republicano Socialistas, and
the Llberales, in a document on July 27, 1937.^

At the outset, Busoh's government appeared to be a
5 ^ 1 Dlarlo, July 28, 1936, p. 5.

55Augusto cAspedes, El dlctador suiclda (Santiago:
Editorial Universitaria, S.17, 195&), p. 154.
56E1 Dlarlo, July 28, 1937, P. 5.

46
conservative reaction to the radical concepts espoused by
Toro. The mining interests, especially those associated
with Patifio, apparently had supported the movement against
Toro.
57 The new President even had to deny rumors that his
government planned to return Standard Oil Company's
properties that had been confiscated by the Toro regime.
Busch's adherence to the Interests of the mine
owners and of the traditional parties was more apparent than
real, however. Elections In March 1933 created a National
Convention containing many members of the leftist sector.
The Bolivian writer Augusto c£spedes states that a nucleus
of the nationalistic left took shape in the 1938 assembly
which may be regarded as the forerunner of the Movlmlento
Naclonallsta Revoluclonarlo (MNR). This group helped to
write the important new constitution of 1938 which President
Busch promulgated in October 1938.58 Early In 1939, the
liberal parties aligned themselves In a concordancla that
assumed a sharply critical stance toward the Busch govern
ment and called for the Army to retire from its involvement
^Despatch 271, to Washington, John J. Muccio, July

9» 1937 $ United States Department of State, The American
Republics (Vol. V of Foreign Relations of the“TTniteci States.
diplomatAe Papers 1937* Washington 1 Government Printing
Office, 1953)* 249. (Foreign Relations volumes are
hereinafter cited as FffTJ
^clspedes, 2E* ♦, P« 138.

in politics.59
On April 24, 1939# Busch converted the government
into a dictatorship and dissolved the Congress. A labor
code which gave organized labor new guarantees and power
was decreed on May 24. The next month, on June 7# Busch
Issued a decree placing heavy new obligations on the mining
firms. It required that the mining firms deliver all their
foreign currency drafts to the Central Bank. Although the
populace acclaimed Bolivia's economic liberation, new
problems arose to plague the young President. Apparently
overwhelmed by frustration and by disappointment, Busch
committed suicide on August 23, 1939.
A restoration of traditional party domination took
place after Busch's death. Provisional President General
Carlos Quintanilla Quiroga (August 1939-April 1940) and
constitutional President Enrique Pefiaranda Castillo were
identified with the parties of the Concordance. Official
demands upon the mining Industry were modified. During
Pefiaranda's presidency, however, two important opposition
parties were formed; the Partldo de la Izquierda
Revoluclonarla (PIR) was formed in 1940 under the leader
ship of Jos4 Antonio Arze, and in 1941 the Movlmlento
Naclonallsta Revoluclonarlo (MNR) was organized as a
nationalist pro-labor party. The Partldo de la Izquierda
59Porfirlo Diaz Machicao, op. cit., p. 92; El Diario

March 22, 1939, p. 6. ---- -------------------
43
Revolucionaria was Marxiat in ideology, but claimed to be
independent of international affiliation.^ At the same
time, many of the self-styled socialists were grouped in
the Unified Socialist party.
The traditional party domination continued until
December 20, 1943* when a young army officer- MNR-led
movement overthrew the Pefiaranda government. Major
Oualberto Vlllarroel, a RADEFA member, assumed the
presidency. Although ostensibly worker-oriented, the new
government was only partially successful in obtaining labor
support. PIR's Chief Josl Antonio Arze attempted to Join
the nationalist coalition, but he was rebuffed. Apparently,
RADEPA's authoritarian mentality was incompatible with the
socialism advocated by Arze. The Vlllarroel government
showed little political aptitude, however. Besieged by
strong opposition from the liberal civilian elements and
threatened by an unfavorable International climate, the
regime crumbled under a popular assault in July 1946.
The structure of Bolivia's government in respect to
the conduct of foreign relations was not distinctive. A
succession of constitutions established the traditional
sharing of responsibilities in foreign affairs between the
legislative and executive branches of government. In the
60Ui S. Army Area Handbook for Bolivia, Speoial

Operations Research Office, Foreign Areas Studlea Division,
The American University (Washington, 1963), p. 37.
49
following section, the responsibilities and prerogatives of
these two branches of government in the field of inter
national relations, as defined in the political constitutions
of 1931 * 1938i and 1945, will be considered.
According to Article 39 of the Political Constitution
of the Republic of Bolivia of 1931# the Congress had the
following direct responsibilities relating to foreign
relations: (l) to "permit the transit of foreign troops
across the territory of the Republic, and determine the
period of their stay therein" (clause 9 ), (2 ) to "approve
or reject treaties or conventions of all kinds" (clause 14),
and (3 ) to "permit the national troops to leave the
territory of the Republic, fixing the time of their return"
(clause 11).^ Article 6l of the Constitution authorized
the two chambers of Congress to meet Jointly to "declare war
upon request of the Executive" (clause 7). The Chamber of
Deputies also had the right to Impeach the ministers of state
"for offenses committed in the discharge of their respective
functions" (Article 67 > clause 1) and to pass a vote of
censure against the political acts of the Executive as a
measure designed to modify such acts (Article 8 0 ) . ^
Congress also had the right to hear annual reports

from the president and his ministers of state and to receive
61
OACleven, o£. c i t p. 215.
62Ibid., pp. 215-216, 218.

50
from them all the information that Mas needed for specific
legislative purposes. However, the executive enjoyed the
privilege of omitting "everything relating to any
diplomatic business which, in his Judgment, should not be
made public."^
The Constitutions promulgated by (terrain Busch in
October 1938 and by Qualberto Vlllarroel in November 1943
differed from the Constitution of 1931 by increasing
congressional prerogatives in international affairs in two
ways. The Constitutions of 1938 and of 1943 not only gave
the legislature the authority to approve or reject treaties
and international conventions of all types, but also
granted it the prerogative "to exercise the right of
diplomatic Influence upon lmcompleted acts or international

6 il
commitments of the Executive Power." A second
strengthening of the legislature's voice with respect to
foreign affairs came through a provision that allowed for
increased congressional surveillance of executive behavior.
Each of the Constitutions granted Congress the authority to
request the presence of ministers of state in its chambers
to present reports regarded by members of Congress as

desirable for legislative ends or for purposes of inspection
3Ibld.. p. 221.
64IUi.6n Salinas Marlaca, Las constltuclonea de

Bolivia-(La Paz: Imp. y Editorial Artistioa), pp. 2^7-275.
(Constitution of 1938, Article 3d, clause 16; Constitution
of 1945, Article 39, clause 16).
51
or of the discharge of public duty. J The importance of this
new instrument of review was enhanced by the fact that the
executive's privilege of withholding sensitive diplomatic
matters was abrogated in the Constitutions of 1938 and of
1945.
These constitutional changes cannot be regarded as
radical departures from earlier practice. Limited
provisions for review and ministerial reports were incor
porated in earlier constitutions. Nevertheless, these
changes may be viewed as steps by which the Congress
further curtailed the power of the executive in his conduct
of foreign affairs. The right to call the foreign minister
into the chamber for a report on his foreign policy was
exercised frequently in the years 1938-1946. Much of the
Influence of the vociferous nationalistic congressional
minority was derived from this power.
Each of the two chambers of Congress had a permanent
commission on foreign affairs. The Chamber of Deputies
counted among its nineteen commissions the Comlsl6n de
Negoclos Dlplomitlcos. which had eight members. The
Chamber of Senators operated through ten permanent
commissions including the Comlal6n de Negoclos InternaclonsJss
65Ibid., pp. 246, 276-277. (1938, Article 8l; 1945,

Article 6^TTI
52
£ Culto .88 The National Convention of 1933 had its Comlal6n
de Negooioe Dlplomitlcos.
The executive branch of government had primary
responsibility for conducting the foreign relatione of the
nation. The Constitution of 1931 listed first among the
powers of the president the right to:
Negotiate and conclude treaties with foreign nations,

ratify and exchange them when approved by the Congress,
appoint consuls, consular agents, and diplomatic
ministers, admit foreign functionaries of the same -
character, and conduct foreign relations generally.®'
The president also had the power to "conduct the operations
of war which has been declared by law, and personally
command the forces of the Republic" (Article 96, clause 2)
and to "preserve and defend ... the external security of
the Republic in accordance with the provisions of this
Constitution" (Article 96, clause 22)
The Minister of Foreign Relations was officially the
president's chief collaborator in international questions.
He was in charge, therefore, of the Ministry of Foreign
Relations and Religion.
The functions of the Foreign Ministry are described
by eleven in this way:

The Ministry of Foreign Relations has general charge
^Cleven, ofc. cit., pp. 107-108, footnote 3; p. 109,

footnote 3*
^7lbld., p. 220 (Article 96, clause 1).
68Ibid., pp. 220, 222.

53
of the International relatione of the country, under
the direction of the president of the republic. It
has control over the consular and diplomatic service
of the national government. It has control over the
negotiation of treaties, conventions, and agreements
with foreign countries. It also has charge of special
conventions and international conferences. It conducts
the correspondence of the national government with
foreign governments. It has a division of boundaries,
and has charge of the archives of the ministry.69
Plrst established In 1888 as a separate ministry,
it was not until after the Chaco War that the internal,
organization of the Foreign Ministry was given much
attention. The Rules and Regulations of Administrative
Organization, basic to the entire national government, was
the only guide in this regard. Although several laws and
diplomatic regulations pertaining to service outside the
nation existed, they were inadequate acoording to Foreign
Minister Alberto Ostria Gutierrez. On December 28, 1939,
provisional President Carlos Quintanilla promulgated by
decree the Estatuto org&nlco del servlclo de relaclones

■M M M M M BM M M BM M M O M M M m M M M M H M ^M N M ^ M M
exterlores.7°
The new Organic Statute was largely the work of
Bolivian Foreign Minister Alberto Ostria Gutierrez, who
desired to promote stability and specialization within the
"Service of Foreign Relations" in order to create the
70Bollvla, Minlsterio de Relaclones Exteriores y

Culto, Mentoria. 1940 (La Pazs Editorial Unlverso, 1940),
p. 158.
54
expert public official. He realized that In the long run
this objective would be achieved only with the creation of
a general administrative statute that would give the public
employee security from economic need and political Inter
vention. However, as a start In the right direction, the
Organic Statute was decreed.?1
Ostria Outllrrez's basic concept In this regard was
that the Porelgn Ministry should be the training ground
for the officials who staffed the diplomatic missions
abroad. To this end, the Organic Statute established a
mandatory rotation system for members of the diplomatic
service with the exception of chiefs of mission.?^ The
statute also organized the Foreign Ministry Into
departments, established a scale of Job ranks throughout
the ministry, the diplomatic and consular services, and
Instituted entrance examinations and other requirements for
those desiring to Join the ministry or either of the two
services. In short, the estatuto organico of 1939 was the
first significant attempt to provide the Ministry of Foreign
Relations and the services responsible to that ministry with
a sound and efficient administrative policy. Figure 2, page
5$, Indicates the structure of the Foreign Relations Service
?2Bolivia, Mlnlsterlo de Relaclones Exterlorea,

Estatuto orginlco del servlolo de relaclones exteriorss. La
#az7 19^0, pp. b-7. (Articles
55
as defined In the Organic Statute.
These are the components of the framework in which
Bolivia's foreign policy was formulated and implemented In
the post-Chaco War-World War II years. Their effects upon
Andean policy and performance in international affairs were
direct and indirect. In the following chapters, the direct
influence of certain of these factors will be noted. A
more complete evaluation of their Impact upon Bolivian
diplomacy, however, will be reserved for the final chapter.

Foreign
Minister
General Secretary to
Adviser Minister
Under
Secretary
Registry & Rank

of Personnel
Ministry of Diplomatic Consular
F o reig n .A ffairs Service Service
Special Office of
partment s Departments Protocol
Boundaries Political &

Diplomatic
Affairs
b reaties & AMER EUROPE
b
Congresses ICA ASIA
Ranks Within Foreign Ministry
and Diplomatic Service
Intellectual Economic
Cooperation Policy 1. Ambassador
2. Minister Plenipotentiary
3. Counselor
Propaganda Consular 4. First Secretary
Publicity Affairs 5. Second Secretary
6. Attach^
Archives Juridical
Correspondence Department Ranks Within Consular Service
Translation
1. {no equivalent ranks)
Religious 2. (no equivalent ranks)
frourlsm Relations 3. Consul General
4. First Consul
5. Second Consul
Code 6. Chancellor
dministration
ccountlng
Services
Telephone operators,
Chauffeurs. etc. FIGURE 2
THE STRUCTURE OF THE BOLIVIAN SERVICE OF

FOREIGN RELATIONS ACCORDING TO
THE OROANIC STATUTE OF 1939
CHAPTER III
BOLIVIA AND THE CHACO PEACE CONFERENCE
The purpose of this chapter is to describe and
analyze Bolivian foreign policy with respect to the Chaco
Issue after the signing of the peace protocol of June 12,
1935* This description and analysis will endeavor to go
beyond the recounting of the work and difficulties of the
Chaco Peace Conference to a more exact understanding and
accurate interpretation of Andean diplomacy as it related
to the major problems of the Conference and to the basic
territorial dispute with Paraguay.
In the quest for an adequate picture of Bolivia's
Chaco policy, the following questions will be utilized.
First, what was the Bolivian appraisal of the set of
circumstances surrounding both the issue as a whole and
specific problems related to it? For example, how did
Andean army and political leaders evaluate the military
situation in Nay 1935 and relate it to the diplomatic
possibilities available to them in Buenos Aires at the same
time? Second, what was Bolivia's policy response to this
appraisal? What objectives and taotlcs were selected?
Specifically, to what extent did the Bolivian Chaco policy
rely on juridical principles and moral argument, and to

what degree did it give consideration to traditional power
factors? Third, how did domestic change affect Bolivia's
policy? Fourth, what conclusions may be drawn concerning
the effectiveness of Andean diplomacy?1
The material will be presented In a chronologically
oriented but problem-centered outline, beginning with the
negotiations of the armistice protocol and concluding with
the dissolution of the Conference In January 1939* Since
the Chaco Peace Conference actually represented the
conclusion of the long story of the Chaco Issue, brief
consideration first must be given to the highlights of the
development of the Bolivian-Paraguayan struggle for this
disputed territory.
I. A BRIEF BACKOROUHD SURVEY
When Bolivian Foreign Minister''Tomds Manuel Elio
(b. 1886) signed the protocol of June 12, 1933, the halfway
mark In the Chaco episode of the 1930's had been reached.
The Chaco Issue as such, however, had its origins in the
vague and conflicting divisions of Spain's new world
colonies, in this case, the Real Audlencla de Charcas and

the Provincia del Paraguay.2 In the fifty years after
^The author has neither devised nor used a precise

Instrument for gauging effectiveness In foreign policy.
The general criteria used here are adequacy of objective.
in terms of the contextual framework, and the ability Eo
obtain objectives.
2Numerous studies exist on this subject. Among the
best Bolivian works are those by Miguel Mercado Morelra. See
Bolivia gained political independence in 1825, the Andean
nation had little interest in the distant Chaco. In the
I85O's, Bolivian spokesmen asserted Andean sovereignty on
the western banks of the river Paraguay southward as far
as 26°54', well below Asuncl6n.3 Following the War of the
Triple Alliance (1865-1870), Paraguay's claim to the
disputed territory of the Chaco Boreal (the area enclosed
by the rivers Paraguay and Pllcomayo) was strengthened.
A boundary treaty with Argentina in 1876 recognized
Paraguay's ownership of the Chaco zone between the river
Verde and Bahia Negra. In 1878 United States President
Rutherford B. Hayes awarded Paraguay the Chaco territory
southward from the Verde to the confluence of the rivers
Paraguay and Pllcomayo as the result of arbitration
proceedings between Argentina and Paraguay. Coincidental
with the Hayes award, the disastrous War of the Pacific
with Chile erupted in early 1879, soon depriving Bolivia of
sovereign access to the Pacific. These developments were
no doubt influential in prodding La Paz into action on the
Chaco question.
Bolivia's minister in Buenos Aires, Antonio Quljarro, ~
his Hisfetria internaclonal de Bolivia (second edition; La

Paz, Bolivia: imp. "Atenea,1^ ^ ) , pp. 159-312. A useful
survey of this background period is provided by David H.
Zook in his The Conduct of the Chaco War (New York: Bookman
Associates, 1$60), p. £5 .
3zook, ibid.. p. 3 .
60
was ordered to Asuncl6n in 1879 where he managed to sign a
boundary treaty with Paraguay's foreign minister, Jos£
Decoud. By the terms of the treaty, the two countries agreed
to the division of the Chaco Boreal along a line traced from
the mouth of the river Apa on the east to a point on the

2i
river Pilcomayo south of D'Orbigny to the west. However,
Paraguay's Congress failed to approve the treaty and
Bolivia's legislative ratification was delayed for several
years; the pattern of futile and frustrating negotiations
was thereby established that would continue until the Chaco
War.
At times, during the last quarter of the nineteenth
century, the governments of both countries appeared willing
to accept a compromise settlement. From the very early
years of discussions, however, influential sectors in Paraguay
recognized the potentially crucial Importance of the Chaco
for the nation's future, as well as their country's
strategic geographical location with respect to the disputed
region. Paraguay's access to the area was in vivid contrast
to the vast distances that separated the Chaco from
Bolivia's population centers. These and other factors
determined the failure of two additional boundary treaties,
signed in 1887 and 189^, and led to an Impasse in which both

countries claimed title to the entire Chaco Boreal.
^Mercado MoreIra, o£. clt., p. 223.

61
Additional attempts to reach a diplomatic settlement
of the Chaco question were realized In the early twentieth
century. With the good offices of Argentina, Bolivian
Foreign Minister Claudio Plnllla and Paraguayan Minister of
Finance Adolfo Soler signed a protocol agreement In 1907
that established a status quo arrangement with respect to
possessions In the Chaco and provided for arbitration of
the dispute by Argentine President Figueroa Alcorta.^
When this plan foundered, a new protocol agreement was
reached In 1913 that called for full discussions of each
country's legal claims to the Chaco.^ But a fruitless
exchange followed between Bolivia's Ricardo lujla and
Paraguay's Fulgenclo Moreno that eventually broke down in
1918.
Discussions then lapsed until 1927 when the two
parties accepted Argentine Invitations to discuss the
matter In Buenos Aires. By that time, however, the
political and psychological setting In each country was
hardly conducive to a settlement. Bolivia had established
new military outposts (fortlnes) in the Chaco; Paraguay had
proceeded with her colonization program In the region.
Compromise was difficult if not impossible to contemplate.

Therefore, the Buenos Aires Conferences of 1927 and 1928
5Ibld., p. 262.
^Zook, o£. clt.. p. 34 .

62
failed to provide a solution In the dispute.
On December 5, 1928, the dispute turned from the
conference table to the battlefield when a small Paraguayan
force captured and destroyed Bolivia's Port Vanguardla* and
Bolivia retaliated by seizing Paraguay's Port Boquer6n.
The Initial attack occurred Immediately prior to the
meeting In Washington of the International Conference of
American States on Conciliation and Arbitration.7
Arrangements were made at the conference for halting the
hostilities and for establishing a five-member Commission
of Inquiry and Conciliation made up of representatives from
Colombia* Cuba* Mexico* the United States* and Uruguay. The
commission managed to have the two forts returned* and
diplomatic relations between the two countries resumed. It
was unsuccessful* however* In promoting the settlement of
the basic territorial question or In later arranging a
nonaggression pact between the parties to the dispute.
Meanwhile* m Asuncl6n and La Paz preparation for war
continued.
In mid-June 1932 Bolivian troops reached one of the
few lakes of the arid Chaco* Laguna Pltiantuta* and

scattered the small Paraguayan detachment that manned
?An excellently documented study of the peace-seeking

efforts of the United States and of other American Republics
is Bryce Wood's The United States and Latin American Wars
1932-1942 (New York* Colombia Unlversity Press* 1966)" For
this episode* see page 21.
63
Q
nearby Fort Carlos Antonio L6pez. When Paraguayan forces
retook that position a month later, Bolivian President
Daniel Salamanca, deciding that his country's honor
demanded a striking reprisal, Issued orders on July 18 for
the capture of the Paraguayan forts of Corrales and Toledo
within forty-eight hours.9 Despite serious reservations on
the part of Chief of the Oeneral Staff General Fillberto
Osorio Tellez and other high-ranking Bolivian Army officers
who were worried about the nation's lack of preparation for
such military operations, Andean troops In late July 1932
attacked and occupied the Paraguayan forts of Corrales,
Toledo, and Boquer 6n.
The new outbreak of hostilities In the Chaco
prompted a flurry of inter-American diplomatic activity.
On August 3* 1932, the United States government and
representatives of the other American states in Washington
addressed a joint appeal to Paraguay and Bolivia urging
them to adopt peaceful means of settlement in the dispute .10
The message also contained the following declaration:
The nations of America likewise declare that they

will not recognize any territorial arrangement of this
controversy which had not been obtained by peaceful
o
Zook, 0£. c l t p. 69 .
^Querejazu Calvo, o£. clt., p. 51.
10The Chaco Peace_ Conference. A Report of the Delegation

of the United States of America to tKe peace Conference Held
3 E Buenos Aires, JulyT, 193^-January 23. 1939 (Washington:
Government PrintIng Office, 1940), p. 5 .
64
means, nor the validity of territorial acquisitions
which may be obtained through occupation or conquest
by force of arras.H
Although the Bolivian government adhered to the
declaration of August 3* neither official nor public
opinion received it gladly. President Salamanca and Foreign
Minister Julio A. Gutilrrez both expressed resentment
toward the new American doctrine. They pointed out that the
principle of nonrecognition of territories acquired by force
was being Introduced against Bolivia, the South American
country which in their opinion had suffered more from

12
conquest than had any other. However, Andean support for
the declaration grew during the next three years as
Bolivia's military position deteriorated.
Following the armed clashes of June and July 1932,
there began a round of almost innumerable efforts to stop
the fighting in the Chaco. For the purposes of this study,
however, reference will be made only to the major ventures.
The Commission of Neutrals, chaired by United States
Assistant Secretary of State Francis White, took the
immediate Initiative. Early proposals contemplated an
immediate truce to be followed by a mutual withdrawal by

the armies to the positions held on June 1, 1932.^ In
l^The Chaco Peace Conference, op. clt., p. 5.
12QuereJazu Calvo, op. clt., p. 65 } Wood, op. clt.,

p, 45. ---
13Wood, ibid.; Zook, op. clt., p. 77.
65
response to this theme and its variations, Bolivia held
out for a truce on the basis of positions of the moment and
for a definite agreement providing for settlement of the
territorial issue through arbitration.1^ In December 1932
the neutrals presented a final formula that included provi
sions for mutual troop withdrawal (Paraguay to the river
Paraguay and Bolivia behind a Balllvlin-Vltrlones line) and
an arbitral settlement. When this proposal failed, the
initiative passed to the neighboring countries.
On February 1 and 2, 1933, the foreign ministers of
Argentina and Chile, Carlos Saavedra Lamas and Niguel
Cruchaga Tocornal respectively, met in Mendoza, Argentina,
to discuss means of promoting a peaceful settlement. The
result of the conference was a new formula presented to the
two nations in late February and supported not only by
Argentina and Chile, but also by Brazil and Peru (the ABCP
group). The Mendoza proposal suggested a cessation of
hostilities, demilitarization of the disputed zone, the
reduction of effectives, and an arbitral settlement
Bolivia accepted the formula "in principle" but suggested
amendments that substantially changed the proposal. These

Bolivian qualifications eventually frustrated the efforts
li+Querejazu Calvo, 0£. clt., pp. 65-66 .

^ B o l i v i a , Mlnlsterio de Relaclones Exterlores, La
conferencia de Mendoza y el confllcto del Chaco (La Paz:
imprenta "ElTctrica,"1933T* pp. $-10.
66
of the ABCP group. When Paraguay declared war on Bolivia on
May 10* 1933* the stage was ready for the appearance of the
League of Nations as It endeavored to achieve what the
neutrals and the neighboring countries had not been able to
do.
The Council of the League of Nations resolved on
May 20, 1933* to establish a committee to deal with the
Chaco conflict. After further mediation efforts by the
bordering states failed, the League's Commission of Inquiry
organized in Montevideo on November 3, 1933.^ Bolivia,
favoring continued mediation by the neutrals and the ABCP
nations, was hostile at first toward the League's overtures.
Harboring a general misgiving about the ability and the will
of the League to achieve an arrangement satisfactory to
Bolivia, the Chancellory in La Paz opposed the despatch of
a League commission that lacked specific objectives and
i n s t r u c t i o n s . 1 ?: However, the uncooperative pose on the
part of Chancellor Demetrio Canelas with respect to the
League initiative was challenged by Bolivia's Senate. As
a result, Canelas lost a vote of confidence from that body
and resigned his post. The League commission traveled to
La Paz in early December 1933*
Following staggering Bolivian military reversals in
16
Zook, 0£. clt.. p. 170; Querejazu Calvo, oj>. clt.,
P. 251.
^Querejazu Calvo, op., clt., p. 253.
December 1933, the commission arranged a general armistice
18
19 to 30 December. Hopes were high that a final settlement
could be reached, but after one extension of the truce,
hostilities resumed January 6, 1934,
Por La Paz, 1934 brought two Important developments
in the Chaco picture. One was further degeneration on the
military front. By December Bolivia's forces had been
practically expelled from the Chaco Boreal and were fighting
in the foothills of the Andes dangerously near the petroleum
region of Camlrl. A second was the direction taken by the
League's efforts for peace. In September 1934 the League
Assembly appointed a Commission of Conciliation; in
November the Assembly approved that commission's
recommendations to the belligerents.1^
The League proposal embodied much of Bolivia's
position, but, unfortunately, ignored the military realities
of the moment. Paraguay had Just reeled off several
stunning victories and was in no mood for a peace-making

formula that threatened her dominant position. Therefore,
^Zook, 0£. olt., p. 171.

1^Querejazu Calvo, op. clt., p. 348. The League
recommendations were as followst (1) a cease-fire within six
days of acceptance, (2) withdrawal of fifty kilometers by
each army, the Intermediate zone to be under neutral control,
(3) a conference in Buenos Aires within thirty days of the
cease-fire, (^) in the case of no direct settlement, the
Permanent Court of International Justice, after examining
the respective titles and hearing the cases, would deliver a
final award.
68
when Paraguay's reply to the recommendations was Interpreted
by the League as a rejection, the Assembly voted In January
1935 to lift the arms embargo against Bolivia that In 1934
had been imposed on both parties. Consideration also was
given to the Imposition of additional sanctions against
Paraguay. Naturally, La Paz embraced the League's
recommendations and proposals wholeheartedly, but Asunci6n
announced its intention to retire from the League.2®
In February 1935 Argentina and Chile again tried to
bring peace to the Chaco. American sentiment opposed
League-imposed sanctions against Paraguay. At the same
time, leaders In Buenos Aires and Santiago were aware that
Asuncl6n was prepared for a settlement on the basis of her
military position. On February 18 Chilean foreign office
adviser F^llx Nieto del Rfo carried a new proposal to La
Paz that provided for the suspension of hostilities to be
followed by discussions in Buenos Aires concerning an
arbitral solution to the basic territorial issue.2^
The Chilean envoy immediately encountered the
opposition of Bolivian Foreign Minister David Alv^stegui,
architect of the Bolivian policy at the League .22
Alv^stegui objected to the Chilean formula on two grounds.
20Zook, op. clt., p. 219.

21QuereJazu Calvo, 0£. clt., p. 421.
22Ibld., p. 344.
69
First, the proposal was much less favorable to Bolivia than
were the League recommendations. Second, Alvlstegul

believed that the Andean military situation was much
Improved and that substantial gains could still be made
against the Guarani on the battlefield.2^ Alv£stegui was
out of step, however, with the sentiments of other members
of the government and submitted his resignation to President
Jos£ Luis Tejada Sorzano on February 27, 1935 (Tejada
Sorzano had succeeded to the presidency upon Salamanca's
ouster by the Army In November 1934). His successor,
Tom&s Manuel Elio, was named to the post on April 12, 1935.
II. THE ARMISTICE
On April 1, 1935 t Argentina and Chile Issued
Invitations to Brazil, Peru, and the United States to form
a mediation group to bring the war to a close, Peru and
the United States accepted the offer. But Brazilian Foreign
Minister Jos6 Carlos de Macedo Soares, irritated because
his country apparently was not to be included in a
conference proposed by Argentina and Chile to treat economic
problems related to a Chaco settlement, issued invitations
to the ministers of Bolivia and Paraguay in Rio de Janeiro
to enter into peace discussions under the auspices of
2Îbid., pp. 421-423; Alv4stegui reiterated this

position in a personal interview in Cochabamba on
September 2, 1966.
70
O il
President Oetullo Vargas. When Santiago and Buenos Aires
Insisted that Brazil's omission from the list of partici
pants In the proposed conference was a mere oversight,
Brazil agreed to Join the other four nations In a peace -
seeking effort.
Brazil's efforts to gain the glory of peacemaker
were not finished, however. Macedo Soares suggested that
the chancellors of Bolivia and Paraguay meet In Rio de
Janeiro for an Interview prior to the projected conference
In Buenos A i r e s . T h e proposition was accepted In La Paz,
and the Andean minister In Rio de Janeiro, Carlos Calvo,
was Instructed on May 7, 1935* to deliver Bolivia's agree
ment to President Vargas.^ At the same time, Bolivia
sought the support of other American republics for a
preliminary chancellors Interview In Rio, convinced that the
proposed Brazilian-sponsored meeting would offer more
promising opportunities for the Andean cause than would
the conference in Buenos Aires. Determined Argentine and
24reiegram 57 » to Brazil, April 20, 1935, United

States Department of State, The American Republics (Vol. IV
of Foreign Relations of the United States. Diplomatic Papers
193$. Washington: Government P r i n t i n g W i c e . lS^J), 4 I T ^
(Foreign Relations volumes are hereinafter cited as PR.}
s^Querejazu Calvo, 0£. clt., p. 423.
^Cable 247, to Rio de Janeiro, Tomis Manuel Elio,

Nay 7, 1935# "Legacidn de Bolivia en el Brasil" (Mayo-Agosto
^935)* Unpublished diplomatic correspondence located In the
archives of the Bolivian Foreign Ministry. Hereinafter such
material will be denoted with the abbreviation ABFM.
71
Chilean opposition to the plan prevailed, however; the Rio
Interview failed to materialize.
Diplomatic representatives of the five mediating
nations met in Buenos Aires on Nay 9, 1935* end agreed to
invifee the Uruguayan government to Join the group. Two
days later, the mediatory group appealed to the chancellors
of Bolivia and Paraguay to come to the Argentine capital
for peace-seeking negotiations.
In Bolivia, preparation for the peace talks was
underway. Following a presidential sounding of the Army's
position on the peace overtures, Chancellor Elio and former
President Bautista Saavedra traveled to the Chaco for
conferences with members of the High Command. Saavedra
reported that Colonel David Toro Rullova, Chief of the
General Staff, indicated his conformity with a peaceful
settlement "without victors or vanquished" and with the
condition that "it preserve the dignity of the country and
army,"2? Toro asked, however, for a delay in the cease-fire
to allow for the completion of the second phase of Bolivia's
counteroffensive (launched in April with partial success).
When Elio returned to La Paz, he declared, "In general I
carry from the Chaco a very favorable impression of the

military situation of our army ... This permits us to faoe
^Bautista Saavedra, El Chaco y la Conferencla de

Paz de Buenos Aires (Santiago: kditorialTKasoimiento. 15^9).
ppT 3J-557
the approaching peace negotiations with the greatest
a Q
spiritual reassurance.
On the eve of the delegation's departure for Buenos
Aires on Nay 22, 1935* the group met with President Tejada
Sorzano to discuss its mission. The President Instructed
the delegation to seek two ports in its negotiations, one
on the river Paraguay above Fuerte Ollmpo, a second in the
navigable waters of the Pllcomayo River below the Esteros
d« Patifio to serve the future needs of the southern region
of the republic.2^ Tejada Sorzano also told the members of
the Andean delegation to return to La Paz if they were
unable to obtain an honorable and equitable peace since the
government possessed the resources necessary for prolonging
the defense of the nation. Earlier, the Bolivian President
had told reporters, "We are going to Buenos Aires with the
firm purpose of obtaining the final solution of the matter
and not to lend ourselves simply to the task of obtaining
a cessation of hostilities. That is why we are sending a

complete delegation."30
28E1 Diario, May 18, 1935* P. 5.
2^Bautista Saavedra, o£. cit., pp. 51-52.
3°La Raz6n. Nay 21, 1935* p. 4; Bolivia's delegation

to Bueno8~XlFl"l "Sons isted of chairman Tomas Manuel Elio,
Carlos Victor Aramayo, Juan Marla Zalles, Carlos Calvo, and
Bautista Saavedra. Advisers and staff members Included
Eduardo Dlez de Medina, Miguel Meroado Morelra, Pedro
Zllveti Arce, Carlos Romero, Carlos Salinas Aramayo, Co A.
Pelipe M. Rivera, Major Max Espafia, Mario Flores, and
Carlos Dorado Chopitea.
73
When the delegation arrived in Buenos Aires,
Chancellor Elio immediately sought out Brazilian President
Oetulio Vargas (on an official visit to the Argentine
capital) and his foreign minister, Nacedo Soares. In
conversations on May 27 President Vargas urged Elio to
accept a temporary truce during which an armistice agreement
could be reached and the fundamental territorial issue
could be decided.31 chancellor Macedo Soares indicated
that Brazil would retire from the mediation group if the
truce proposal was not accepted.
That same evening, May 27, Elio met with the
mediation group and explained his nation's position in
favor of a definitive settlement of the basic territorial
question through arbitration.3s The mediators then
informed Elio that, following the recommendation of the
Brazilian chancellor, the commission believed that peace
talks could only proceed on the basis of a cessation of
hostilities.33 Elio agreed to communicate with his
government on the formula.
When the truce proposal of May 27 failed to prosper,
there followed a series of formulas designed to reconcile
3Âcta No. 1, Tomis Manuel Elio, May 28, 1935,

"Delegaci6n de Bolivia a la Conferencla de Paz* (1935), ABFM.
32ibid.
33relegram 55, to Washington, Alexander W. Weddell,
May 27, 1935, PH, IV (1935), 64.
n
the conflicting baBlc positions held by the governments of
Bolivia and Paraguay. Bolivia was seeking definite
guarantees that the territorial difference would be submitted
to legal arbitration if direct negotiations failed. Elio
Insisted, therefore, that a definite arbitral agreement be
reached before the Andean nation demobilized her forces.3**
Paraguay, on the other hand, favored an arrangement provid
ing for an immediate cease-fire, demobilization, and
security guarantees prior to discussion of the territorial
issue.
Bolivia's fears with respect to the Paraguayan thesis
were voiced most fervently by former President Saavedra.
He saw in the Quaranl position the objective of eliminating
Bolivia's military threat to the occupied Chaco. Once this
was accomplished, he felt that Asuncl6n would be unlikely too
submit to arbitration the territory that she possessed
through military occupation. Therefore, Saavedra believed
that the best policy was for Bolivia to continue the war.33
On June 5, 1935* the Bolivian delegation assembled to
consider the most recent formula of the mediator group. The
proposal gave chronological priority to suspension of
hostilities, but provided for Juridical arbitration by the

Permanent Court of International Justloe if direct
34
Telegram 59, to Washington, Weddell, June 1, 1935,
FR, IV (1935)* 67.
"Saavedra, o£. clt., pp. 71-75.
75
negotiations did not succeed.^ Elio Informed the
delegation that President Tejada Sorzano had suggested some
amendments to the formula, the most important of which
stipulated that "If the peace conference should not succeed
in providing for arbitration within the fixed period, the
question in all its aspects will pass, ipso facto, to the
Permanent Court of International Justice at The Hague for
juridioal arbitration."^ La Paz also suggested a
revision requiring congressional ratification for any
agreement that would mean demobilization and a reduction of
military effectives.
Chancellor Elio then presented his analysis of the
situation confronting the Bolivian delegation and nation.^®
He urged the members of the group to examine the reality of
the moment "in all its magnitude and crudity," declaring:
The briefest analysis of these facts carries us to

the following conclusion: We have detained the enemy
advance at the doors of Santa Cruz and almost at the
edge of the petroleum wells, and according to the
opinion of the most distinguished officers, our
military situation will not be Improved in the future,
which means that at present we have no political reason
for prolonging the war, but that with the least
misfortune we run the risk of losing the departments of
Santa Cruz and Tarlja with their fabulous riches ...
^Telegram 61, to Washington, Weddell, June 3, 1935,

£R, IV (1935)* 68 .
37Teiegram 65, to Buenos Aires, Cordell Hull, June

6 , 1935* TO* IV (1935), 72.
3®Acta Ho. 7* Tomis Manuel Elio, June 5 . 1935,
"Delegaci6n de Bolivia a la Conferencia de Paz" (1935), ABPM.
76
Practically we have loat the Chaco. Today, the

problem of the war Is linked to the disintegration
of the departments of Santa Cruz and to the loss of
our petroleum wealth.39
Elio favored the mediator group's formula with minor
modifications.
Most of the delegation was Inclined to accept the
Chancellor's position. Importantly, the military advisers
recommended that the peace formula be accepted. Colonel
Felipe N. Rivera said that It was unthinkable to consider
prolonging the war; Colonel Angel Rodriquez stated that
unless the Army could be provisioned Immediately with men
and materiel, the peace should be accepted while the armies
were in a state of equilibrium.^ Carlos Victor Aramayo,
Minister of Finance, and one of Bolivia's three large mine
owners, described the critical financial situation of the
country and joined those supporting the Foreign Minister.
Saavedra, however, dissented. Convinced that
Bolivia's military situation was not so serious, he urged
the delegation to hold out for additional guarantees of an
arbitral settlement. "We are obliged," he stated, "to
sustain ourselves a little longer In our points of view; a

prudent intransigence will be favorable for us In obtaining
39jbid.; Querejazu Calvo, op. olt., p. 431. Except

as otherwise indicated, all translations from Spanish texts
are by the author.
40
Querejazu Calvo, 0 £. clt., p. 432.
77
some modifications advantageous for our country."^1
Although the delegation approved the formula "in
principle," Silo was alked to seek favorable modifications.
One of these would have included the old neutral commission
group together with Ecuador and Venezuela as members of the
peace conference. Another was designed to delay implementa
tion of any demobilization agreement until the territorial

42
question was decided. President Tejada Sorzano's
suggestions were also to be Incorporated. Later, however,
when the Bolivian counterproposals were rejected by
Paraguay, the Andean nation found herself increasingly in a
"take it or leave it" position. In the early morning hours
of June 9, 1935* as the mediators sought Bolivia's
acceptance of a slightly revised draft peace protocol, Elfo
demanded to know, "Who guarantees me that we will not be
swindled on the arbitration, that all the lands in liti
gation will be submitted to arbitration?"^ The mediators
responded by pledging the word of honor of their governments
not to retire their delegates from the conference until the
last "palmo de tierra" in litigation was determined by

arbitration. Elio signed the draft protocol.
4l
Acta No. 7, o£. clt., pp. 14-16.
42Miguel Mercado Morelra, Historla diplomatlea de la

J uerradel Chaco (La Paz* Talleres oraricos Bolivianos"
55577 P. ? W .
^Querejazu Calvo, o£. clt., p. 437.

78
On June 10 Elfo reported his decision to the Andean
delegation, stating that the protocol had been submitted to
La Paz for the government's consideration. He explained hla
action in the following way:
I have not been able to achieve more because the

interests with which I fought were very strong. The
Paraguayan Intransigence favored by a victorious
military position and especially by the decided
cooperation of elements of which we are aware, plaoed
me in the prime dilemma of accepting the protocol or
continuing the war. I have decided on peace without
any hesitation, confident that with the document to
which I have given my acceptance, the country concludes
honorably an unfortunate war and submits to solutions
of a juridical order the possession of territory that
the enemy now occupies.^
The adverse factors against which Bolivia was
struggling at Buenos Aires, according to Elfo, were the
"victorious military position" of Paraguay and Argentina's
political support for Asuncl6n. In his judgment, he had
obtained the best agreement possible under these
circumstances, one which provided reasonable assurances that
the Chaco issue would be settled by arbitration. Elfo
told the delegation that if his decision was not supported
by the government, he would resign as foreign minister to
leave La Paz at liberty to replace him with someone who
advocated continuing the war . ^5

In La Paz the cabinet and prominent political,
^ A c t a No. 9, TomAs Manuel Elfo, June 10, 1935,

"Delegacl6n de Bolivia a la Conferencla de Paz" (1935), A B M .
45Ibid., p. 3.
financial, and military leaders considered the protocol and
decided to ask Elio to seek modifications in the agreement.
The most Important amendment would have provided that if a
direct agreement or an arbitral compromise was not reached
within ninety G aya, the matter would pass automatically to
The Hague Court.^ When Elio refused to reopen negotiations,
all the Bolivian delegates in Buenos Aires, with the
exception of Saavedra, wired La Paz expressing support for
the Foreign Minister and urging that the recommended
revisions be retired. The government, although not fully
satisfied with the agreement, was unwilling to Jeopardize
it by Insisting on revision. President Tejada Sorzano
authorized Elio to sign the protocol.
On June 12, 1933* Bolivian Foreign Minister Elio
and Paraguayan Chancellor Luis A. Riart signed the protocol
that soon ended hostilities in the Chaco W a r . T h e
agreement provided for the convening of a peace conference
and defined its responsibilities (Article I). It also
(1) provided for the cessation of hostilities on the basis
of the positions of the armies at the time, as well as for
a twelve-day truce during which time a neutral military

commission would fix intermediary lines between those
^Mercado MoreIra, o£. clt., p. 222; Querejazu Calvo,

o p . clt., pp. 437-438.
47
'The text of the protocol, together with all the
major documents of the Chaco Peace Conference, is available
in The Chaco Peace Conference. op. clt.. p. 49 .
80
positions (Article II), (2) established security measures
such as demobilization, reduction of military effectives,
restricted war material purchases, and a nonaggression
promise (Article III), (3) recognized the declaration of
August 3> 1932, and (4) arranged for the cease-fire to
begin at noon on June 14, 1935* An additional protocol was
also signed by which the parties requested the immediate
despatch of the Neutral Military Commission to the Chaco
and agreed to a provisional cease-fire to be in effect
pending congressional approval of the principal protocol

4ft
within a ten-day period. w
The general Bolivian response to the protocol of
June 12, 1935* was more one of relieved resignation than of
satisfaction. Within the delegation, Miguel Mercado Moreira
Joined Bautista Saavedra in noting the weaknesses of the
agreement. Saavedra was intensely dissatisfied with the
protocol since it did not guarantee that Bolivia would have
the opportunity to capitalize on what he considered to be an
especially strong Juridical position in the territorial
dispute.2^ At the same time, he considered his country's
military capacity adequate enough to allow the Andean
negotiators to hold out for a guaranteed arbitration

agreement. In effect, his analysis of the military and
48The Chaco Peace Conference, ibid., p . 53 .
^^Bautista Saavedra, 0£. clt., p. 110.

diplomatic situation varied sharply from the view held by
Elio and by the other delegates.
Although the Bolivian National Congress approved the
protocol on June 21, 1935, it, too, expressed definite
dissatisfaction with the agreement. In a communication to
President Tejada Sorzano, the legislative body urged that
agreements complementary to the protocol of June 12 be
negotiated In Buenos Aires. Those agreements were to
guarantee the realization of arbitration within a short
time If no direct settlement could be reached, would safe
guard Bolivia's rights In the occupied Chaco, and would
provide for the Immediate repatriation of prisoners-of-

war.50
Other prominent Bolivian leaders criticized the
protocol. Former President Salamanca felt so strongly that
the protocol as written did not assure a settlement that he
took Issue with the congressional members of his Genuine
Republican party who had voted in favor of the agreement
and of the communique of diplomatic Influence cited earlier;'
he would have preferred an attitude of frank opposition.51
Former President Hernando Siles found fault In the protocol

because It did not uphold Bolivia's traditional reliance on
5°Cablegram 1650, to Buenos Aires, Tejada Sorzano,

June 22, 1935, Included In Aota No. 10, "Delegacl6n de
Bolivia a la Conferencla de Paz" (Actas de 1935), ABFM.
51Querejazu Calvo, o£. clt., p. 454.

82
the rule of utl possidetis of 1810.52 Enrique Pinot
expressed disappointment because Bolivia had not remained
firm in her insistence on guarantees for an arbitral
settlement, adding, however, that if the Andean military or
economic situation had deteriorated badly, the nation had
to be prepared to make the necessary s a c r i f i c e s .53
Recognition of the shortcomings of the a£ referendum
protocol was not limited to Bolivian observers, however.
The United States delegation's report later commented on
the agreement by saying:
The protocol of June 12, 1935* was drafted under

urgent pressure and, unfortunately, contained many
ambiguities. In addition, some of the shortcomings
of the protocol were knowingly accepted because there
seemed no other possible means to satisfy the
diametrically opposed positions of the two parties.
However, it did bring about the cessation of a tragic
war, and, despite its deficiencies, it was the only
basis for action by the mediatory group.5^
Attention must now be given to Bolivian foreign
policy with respect to the work of the Peace Conference
and to the larger Chaco issue.
III. THE CHACO PEACE CONFERENCE
After the signing of the protocol of June 12, Bolivia
52Note 124, to La Paz, Hernando Siles, June 29, 1935,

"Legaci6n de Bolivia en Chile" (1935), ABFM.
53Note 57* to La Paz, Enrique Finot, June 20, 1935*
"Legaclon de Bolivia en Estados Unidos de Norte America"
(1935), ABFM.
54The Chaco Peace Conference, op. clt., p. 7.
83
began to seek ways of improving her diplomatic situation at
the forthcoming Chaco Peace Conference. Andean leaders
showed a special interest in the composition of the various
delegations to the Conference. Simultaneously another
attempt was made to expand the Conference's neutral
membership.
With respect to the nature of the delegations,
Bolivia sought the designation of special representatives
who, if not partial to the Andean cause, would at least be
impartial and relatively free of the Influence exerted by
Argentine Foreign Minister Carlos Saavedra Lamas. The
Andean Chancellory wanted special delegations to the
Conference Instead of representatives of the mediator
nations who also were accredited before the Argentine
government. It was feared that such dual-representatives
would allow their responsibility vis-a-vis the Argentine
government Influence their view on the Chaco issue, thus
further enhancing Argentina's already predominant role in
the proceedings.
Bolivian diplomats were partially successful in their
efforts to persuade the mediator governments to designate
special delegates. Hugh Gibson, United States ambassador to
Brazil, represented Washington on the mediator group and in
the early months of the Conference. Brazil named special

representative Josl de Paula Rodrlques Alves. Chile
continued to be represented by Nieto del Rio and Luis

84
Alberto Cariola, the latter Chile's ambassador to Argentina.
Bolivia's minister in Lima, Alberto Ostrla Outllrrez,
reported on June 20, 1935 > that the Peruvian government,
after having resolved earlier to send a special delegate
to Buenos Aires, had just appointed its ambassador to
Argentina, Barreda Laos, as delegate to the Peace
Conference. Ostrla Gutierrez described Barreda Laos as a
"violent adversary of Bolivia" who was "absolutely obedient
and subservient to Saavedra Lamas."55
Ball6n Mercado, Bolivia's minister in Montevideo,
notified La Paz on June 22 that Uruguay had selected as its
special delegate Pedro Manini Rios. Mercado described
Manlnl Rios as a man of high moral authority who was honest,
Juridically competent, and unswervingly impartial, and
regarded his appointment as a Bolivian diplomatic victory
since it separated Uruguay's Conference delegation from its

56
diplomatic representation in Buenos Aires.
Bolivia also supported the United States plan for
increasing the membership of the Conference to Include
Mexico, Cuba, Colombia, and Ecuador. This position was
made clear in the counterproposal drafted by Bolivia in

reply to an early Chilean formula for a treaty complementary
S^Note 242, to La Paz, Alberto Ostrla Gutierrez,

June 20, 1935* "Legacl6n de Bolivia en el Peril" (Mayo-Agosto
1935)> ABFM.
5&Note 124/101, to La Paz, Ball6n Mercado, June 22,

1935* "Legaoi6n de Bolivia en el Uruguay" (1935), ABFM.
85
to the protocol of June 12. The Bolivian plan contemplated
adding the countriee named above to the Peace Conference.^7
Nevertheless, In the face of opposition from the other
mediator countries who argued that an Increased number of
participants would complicate efforts to gain a satisfactory
settlement, the desire for expansion was frustrated.
During the days prior to the opening of the Chaco
Peace Conference and extending Into the early days of July,
the Neutral Military Commission (NMC), with the cooperation
of the High Commands of the opposing armies, had been at
work in the Chaco determining and marking the lines of
separation between the forces. On July 2, 1935, the lines
of separation were fixed, And the ninety-day period for
demobilization b e g a n , B a u t i s t a Saavedra later recorded
that, during this time, the Bolivian delegation in Buenos
Aires was not informed of the work being carried out by the
Neutral Military Commission (NMC) in collaboration with the
Bolivian High Command and the government.59 This lack of
coordination between the three centers of Bolivian decision
making, Buenos Aires, the Chaco, and La Paz, had serious
consequences in later discussions of Paraguayan control over
^ H o t e 10, to La Paz, Sl£o, July 16, 1935,

"Delegaclon de Bolivia a la Conferencia de Paz de Buenos
Aires" (1935), ABFM.
58The Chaco Peace Conference, op. c l t pp. 12-13.
^^Bautista Saavedra, o£. clt., p. 148.
86
the strategic Villa Montes-Boyulbe road.
On July 1, 1935, the Chaco Peace Conference oonvoked
by Argentine President Agustln P. Justo had its first
session. Among its responsibilities as defined by Article
I of the protocol of June 12 were the following:
1. To ratify the protocol.
2. To resolve the practical questions arising from

the execution of the adopted security measures.
3. To promote the resolution of the differences

between Bolivia and Paraguay by direct agree
ment and if that was not possible to declare
terminated the first phase of negotiations;
the conference would then remain in session
until an arbitral compromise was agreed upon
between parties. (The Permanent Court of
International Justice was designated arbiter.)
4. To promote agreement with respect to the

repatriation of prisoners of war.
5. To promote the establishment of transit facilities

and additional conventions to stimulate the
development of the belligerent countries.
6 . To constitute an international commission to

study the responsibilities of each party
arising from the w a r . o O
At the initial session of the Conference, the peace
protocol of June 12, 1935* was declared ratified by virtue
of the congressional approval that it had received in
Paraguay and Bolivia on June 20 and 21. On July 15 the
Conference members decided to treat the basic territorial
issue each Wednesday and to deal with the other questions
60The Chaco Peace Conference. op. clt., p. 50.

87
arising from the protocol alternately on Fridays. Agreement
was reached on July 19 to begin discussions on the matter
Included in section 4 of Article I, the repatriation of war
prisoners.
IV. THE PRISONERS-OF-WAR ISSUE
The question of the prisoners-of-war proved to be a
difficult and trying problem for the Chaco Peace Conference.
Unavoidably, this secondary issue was transformed
temporarily into the focal point of conflict between the two
contenders, reflecting their basic Interests and positions
with respect to the Chaco difference as a whole.
Contributing to the problematic situation were the
ambiguity of the protocol provision on the subject and the
unequal number of prisoners held by each side. The
protocol of June 12 authorized the Conference to promote
"when it is deemed opportune, agreement between the parties
with regard to the exchange and repatriation of prisoners,
bearing in mind the practices and principles e£ international
law ."**1 But did the reference to "exchange and repatriation"
signify a single operation or two separate ones? In regard
to the number of prisoners involved, no one was sure (not
even Paraguay) how many Bolivian prisoners were in Paraguay,

although there was general agreement that the Ouaranl held
6*The Chaco Peace Conference, op. clt., p. 16.

88
many more war captives than did Bolivia. Asunci6n later
released or accounted for 17,174 compared with only 2,578
held by Andean authorities .^2 However, in July 1935
estimates of the number of Bolivian prisoners-of-war ran as
high as 30,000J63
The Paraguayan interpretation of the protocol
provision was that the return of prisoners involved two
separate operations: (1 ) the exchange of prisoners on a
man-for-man basis until all Quaranl prisoners had been
returned and (2 ) the repatriation of the balance of the
Bolivian prisoners after the definitive peace treaty had
been signed.^ Elio explained the Paraguayan position as
an expression of fear that the immediate return of all
Andean captives would lead to the renewal of hostilities
in which Bolivia's utilization of the returned prisoners
would give the Andean nation a decided military advantage
Bolivia's delegation defined its initial position with
respect to the prisoners-of-war question by saying:

Our points of view are the following: The prisoners
62Ibid., pp. 93-94.

63This was the estimate submitted by U.S. delegate
Hugh Gibson to Washington. Telegram 140, to Washington,
Weddell, July 19, 1935, FR» IV (1935), 101.
^^The Chaco Peace Conference, o p . clt., p. 16.
^ A c t a No. 11, Tomis Manuel Elio, July 12, 1935,

"Delegacl6n de Bolivia a la Conferencla de Paz" (Actas de
1935), ABFM.
should be repatriated proportionally [With] the
repatriation and exchange beginning immediately, in
such a manner that when demobilization is terminated
there will be no prisoners in either of the two
countries. We consider that we are not obliged to
pay anything for the upkeep of the soldiers, and we
shall reject any request that is made in this
respect.6®
On July 19 the Peace Conference organized a special
committee on the prisoners question, selecting as chairman,
Hugh Gibson. In an attempt to reconcile the Bolivian and
Paraguayan positions on the subject, the prisoners-of-war
committee first informally submitted several proposals to
the delegates of those countries and then presented a draft
agreement for their consideration on August 11. Both
countries rejected substantial segments of the formula.
Bolivia proposed amendments that would have deleted
provisions for a partial repatriation and stipulated the
return of all prisoners following the Peace Conference's
declaration of the termination of the war scheduled to
follow the completion of the ninety-day demobilization
period. El£o's written reply to Gibson, dated August 12,

. %
1935, stated that if the Bolivian-proposed modifications
could not be adopted, his government had given the
delegation instructions to seek a postponement of the issue
^ N o t e 10, to La Paz, Tomis Manuel Elio, July 16, 1936,

"Delegaci6n de Bolivia a la Conferenola de Paz, correspond,
envlada a la Canclllerla" (Julio 1935-Dieiembre 1936), ABFM.
90
until the Conference declaration terminating the war.^?
On August 13 Elio handed a note to Conference
President Saavedra Lamas, requesting that additional
attention be given by the negotiators to the basic
territorial Issue. The note also Indicated that his
government supported the Peruvian proposal to postpone any
decision with respect to the constitution of a war

68
responsibilities commission until a later date.
Bolivia's obstlnancy on the matters of prlsoners-of-
war and war responsibilities reflected Elio's plan to force
the Conference Into an Immediate consideration of the
territorial matter. Apparently, he was convinced that a
deadlock In the negotiations of a direct agreement would
follow In which case he would demand an arbitral decision
either through a compromise arranged with Paraguay as
provided for In the peace protocol of June 12 or through
unilateral recourse to The Hague Court. United States
Ambassador Hugh Gibson explained the Bolivian strategy In
terms of Elio's own political ambitions and of the domestic

political situation In the Andean n a t i o n . ^9
S’T’Note 8 , to Hugh Gibson, Elio. August 12, 1933,

"Delegaclon de Bolivia a la Conferenola de Pas, correspond,
envlaoa a varlos (Junlo 1935-Octubre 1938), correspond, a
Conferenola de Paz (Julio 1935-Bnero 1939) " ABFM; The
Chaco Peace Conference, op. clt., pp. ?4-75.
M68Note 9, to Carlos Saavedra Lamas. Elio, August 12,
1£35« Correspond, envlada a varlos" (Junlo 1935-Octubre
l93o), ABFM.
6 9Teleg ram 180. to Washington, Gibson, August 16,
1935, TO, IV *1935), 126.
91
The effect of Bolivia's shaky domestic situation was
being felt in the negotiations at the Chaco Peace Conference
in the latter half of 1935* In La Paz, the government was
facing the inevitable postwar pressures from returning
veterans, volatile student groups, and a disillusioned
populace. On August 2 a special Congress extended
President Tejada Sorzano's term for one year. Chancellor
Elfo, a fellow Liberal party member, ranked high among the
President's most likely successors, a factor that must be
taken into account in explaining the policy of the chief
Bolivian delegate in Buenos Aires. Elio had great interest
in promoting an arbitral settlement since he had signed the
protocol of June 12. A definitive and favorable arbitration
decision in the Chaco issue would probably have guaranteed
him the presidency.
However, widespread scepticism pervaded Bolivian
press and political circles concerning the Liberal
government's ability to last its term. None of the other
civilian parties were willing to support the government.
Despite assurances from high army leaders that they desired
to stay out of politics, the question of the Army's role in
the political wars loomed larger after the return of the
General Staff from the Chaco to La Paz on October 5, 1933.
One of the most sensitive problems facing the

government was that concerning the war captives held in
Paraguay. The domestic disquiet centering around this issue
aleo was felt strongly In the Bolivian delegation at Buenos
Aires. Elio told the delegation in August 1935 that he was
being closely Informed concerning the course of

70
congressional debate on the prisoner matter. In September
President Tejada Sorzano Instructed Elio not to accept
proposals that provided only for the exchange of sick and
mutilated prisoners because "the national atmosphere
agitated by political Interests would be induced to think
that we have settled for accepting their repatriation [while]}
abandoning the rest."71 Elio, therefore, on September 28,
1935* notified Olbson of his government's refusal to
consider partial repatriation since such an arrangement had
no support within Bolivian public opinion.72
In October 1935 the Conference, frustrated by the
failure to make headway with a piecemeal approach, submitted
to the interested parties a proposal for the solution of the
entire Chaco issue. Then, while awaiting the official
replies to this proposition, the Conference declared on
70Acta No. 21, Tom£s Manuel Elio, August 12, 1935,

"Actas de 1935, Delegaci6n de Bolivia a la Conferencla de
Paz," ABPM.
7lNote 5* to La Paz, September 24, 1935* containing

text of cablegram from Tejada Sorzano to Elio during week
of 17-24 September, 1935* "Delegaci6n de Bolivia a la
Conferencla de Paz, correspond, envlada a la Cancillerfa"
(Julio 1935-Dieiembre 1936)* ABPM.
72Note 15, to Hugh Gibson, Elio, September 28. 1935,

"Corresp. enviada a varios" (Junio 1935-Octubre 1938), ABBM.
October 25 that the war between Bolivia and Paraguay was
terminated. Although both countries rejected the
Conference's proposal of October 15, the declaration of the
war's termination had a favorable effect upon the prisoners
question. The mediatory delegates were In agreement that
the Neutral Military Commission's responsibility and
authorization for maintaining the lines of separation in
the Chaco had lapsed with the declaration of October 25.73
Shortly after the declaration, Paraguay indicated that she
would discuss the possibility of returning all the Bolivian
prisoners in return for renewed security guarantees and a
cash payment from La Paz.
In essence, Paraguay hoped to trade the approximately
17*000 Bolivian prisoners-of-war for an Andean commitment to
respect the line of separation in the Chaco "as though It
were a definite boundary" together with a substantial sum of
money. 7^ Although Bolivia yielded on the matter of payment
of indemnity, she refused to consider an indefinite exten
sion of the security measures. In fact, the Bolivian
Chancellor tried to condition any reaffirmation of security
guarantees upon the adoption of a definite time limit for
73Teleg ram 256, to Washington, Qlbson, October 24,

1935, TO, IV (1935), 169.
7i*Tele gram 271, to Washington, Qlbson, November 7,

1935, PR, IV (1935), 177; Telegram 295, to Washington,
Spruills Braden, December 12, 1935, PR, IV (1935), 189.
94
reaching an arbitral compromle to settle the territorial
issue. Upon expiration of such a period, If no arbitral
agreement had been formulated, La Paz would submit the Issue
unilaterally to The Hague Court
After arduous negotiations, the parties finally
reached a compromise on the prisoners question that was
incorporated into the Protocolized Act of January 21, 1936.
In the agreement Bolivia and Paraguay confirmed their
obligations deriving from the protocol of June 12, 1933,
Including the stipulations relating to the means of security
and the recognition of the declaration of August 3 , 1932.
Article IV of the Protocolized Act provided for the recipro
cal return of prisoners-of-war beginning within thirty days
of the final legislative approval of the agreement and
continuing until the total liberation of the captives.
Bolivia agreed to pay Paraguay slightly more than 132,231
pounds sterling; this amount was to be held by the Argentine
foreign minister until the repatriation process was
officially concluded. The two^partiestagreed in Article IX
to resume diplomatic r e l a t i o n s . ^ The Special Repatriation
Commission stipulated by Article V of the Protocolized Act
75relegram 283, to Washington, Spruille Braden,

November 23, 1935, PR, IV (1935), 182.
76por the text of the Protocolized Act of January 21,

1936, see The Chaco Peace Conference, op. olt., p. 83 .
95
was established by Conference resolution on February 3, 1936.
Legislative approval for the agreement was granted by the
Paraguayan and Bolivian congresses on February 7 and 8 , 1936.
While discussion of prisoner repatriation was going
on In Buenos Aires In 1935, representatives of the Andean
nation were busy In the other American capitals trying to
strengthen Bolivia's case In this issue. Missions In the
field were Instructed in August and September to carry out
an active propaganda supporting Bolivian efforts at Buenos
Aires to obtain the immediate release of all the prisoners.
To illustrate the nature and scope of this larger Bolivian
strategy, two specific instances will be mentioned.
On September 7» 1935* Oulllermo Francovlch, Bolivia's
charg£ d'affaires in Rio de Janeiro, was Instructed to
raise the prisoners issue in the Pan American Red Cross
Conference scheduled to meet that month In the Brazilian
capital. The Andean nation hoped to strengthen her hand at
Buenos Aires by getting the Red Cross Conference to adopt a
resolution condemning Paraguay's policy concerning the
prisoners-of-war. However, Francovlch immediately
encountered the opposition of United States Ambassador Hugh
Olbson and Brazilian Foreign Minister Macedo Soares. Both
agreed that any moves along these lines could Jeopardize
the success of the negotiations then underway at the Peace
Conference. Opposition to the introduction of such a

resolution was mobilized, and Francovlch notified La Paz on
September 14 that the prisoners Issue, despite his efforts,
had been definitely eliminated from consideration by the
Red Cross Conference.^7
In Washington, Bolivian Minister Enrique Finot was
Instructed, well before the Conference declaration
terminating the war, to negotiate the suspension of the
United States embargo on arms and munitions to Bolivia and
Paraguay that had been promulgated by President Roosevelt
on May 28, 1934.7® According to the Bolivian point of view,
extension of the embargo reinforced Paraguay's position on
the prisoners question. Asuncl6n, of course, argued that
the prisoners-of-war could not be returned until the
definitive peace treaty was signed. In early conversations
on the matter, United States officials stated that
suspension of the embargo would be considered when the
period for demobilization terminated and when the Peace

Conference declared the war at an end.79 jn early November
77jjote 334, to La Paz, Guillermo Francovlch,

September 14, 1933* "Legacldn de Bolivia en el Brasil”
(Septlembre-Dlclembre 1933)* ABPM; Note 337, to La Paz,
Francovlch, September 16, 1933* (same volume as Note 334);
Telegram 218, to Washington, Gibson, September 9 , 1933, PR*
IV (1933)* 133; Telegram 201, to Washington, Allan Dawson,
September 10, 1935* PR, IV (1935)* 136.
7®Note 99, to La Paz, Enrique Finot, October 3, 1933.
^Legacl&i de Bolivia en Estados Unidos de N. America" (1933)
^ A l d e -M&noire, to U.S. Department of State, Enrique

Finot, NoveraFer 2, 1935 (DS)824.113/569.
97
Finot protested to the Department of State the delay in
lifting the embargo despite the Conference's declaration
that the war had ended. He pointed out that Paraguay's
stand would definitely be strengthened if Washington now
failed to end the e m b a r g o . T h e prohibitions were
suspended a short time later.
La Paz sought in at least one other way to
influence favorably the negotiations on repatriation of
prisoners. The Bolivian missions in the bordering countries
were instructed to seek the suspension or nullification of
neutrality declarations and restrictions effected by those

Ql
countries during the course of the Chaco War. Abrogation
of these neutrality measures would further reinforce the
Bolivian argument that the war was definitely over and that
the hostilities could not possibly be resumed.
After the signing of the Protocolized Act of January
21, 193^, the Peace Conference entered into recess,
entrusting to an Executive Committee the general direction
of negotiations and to the Special Repatriation Commission
all matters relating to the return of prisoners. In the
months that followed, a number of questions arose regarding

the repatriation process, many of which Involved the concept
« W
®*Note 401, to La Paz, Alberto Ostria Gutierrez,
November 7 , 1935* "Legaci6n de Bolivia en el Perd"
(Septlembre-Dlclembre 1935 ) » ABPM.
of the total return of all prisoners, by that time the
cornerstone of the Bolivian position. Negotiations were
complicated by changes of governments in both Paraguay and

Bolivia. On February 1J, 1936, Paraguayan President Eusebio
Ayala was forced to resign, leaving the government in the
hands of Colonel Rafael Franco. Three months later
(May 17), elements of the Bolivian Army ousted President
Tejada Sorzano and Colonel David Toro Rullova assumed
leadership of the Andean government. Carlos Calvo, who had
become Bolivia's chief delegate at the Peace Conference
upon Chancellor Elio's return to La Paz in late January 1936,
was in turn replaced by Carlos Salinas Aramayo on June 13,
1936.
In May 1936 Bolivia's minister in Buenos Aires,
Justo Rodas Egulno, reported the paralysis of prisoner

82
repatriation at the Argentine rail center of Formosa.
Rodas Egulno Interpreted the development as a move on the
part of the Argentine government, in collaboration with the
recently exiled Paraguayan leaders, to prevent the
consolidation of the new Franco regime by threatening to
withhold the prisoner Indemnification money. However,
Argentine Chancellor Saavedra Lamas explained that he
planned to retain the funds only until Paraguay agreed to
®2Note 141, to La Paz, Justo Rodas Egulno,

May 26, 1936, "Legacl6n de Bolivia en la Argentina"
(Enero-Junio 1936;, ABFM.
99
abandon exclusive control of the Villa Montes-Boyuibe road
which traversed that nation's zone of occupation. The
Andean minister also suggested the possibility of a direct
arrangement with the new Paraguayan government in which, in
return for the delivery of the money, Asunci6n would retire
her troops from the strategic road and consider an arbitral
compromise. The Bolivian bid for a direct understanding
with Paraguay, presented by Colonel Oscar Moscoso on a
confidential mission to Asunci6n, was rejected by
Paraguayan President Franco.
In June 1936 Bolivia's objective of repatriation of
the total number of prisoners held in Paraguay was
challenged. Carlos Salinas Aramayo, Andean delegate to the
Peace Conference, reported that repatriation was likely to
be concluded within a matter of weeks, but that he had been
informed that Paraguay Intended to retain a large number of

84
prisoners, about 3*500* He added that the Conference
representatives of Brazil, Chile, and the United States, as
well as the president of the Special Repatriation
Commission, were in full agreement with him that delivery
^3tfote 147, to La Paz, Rodas Egulno, June 9k 1935,

"Legacl6n de Bolivia en la Argentina” (Enero-Junio 1936),
ABPM.
84Note 168, to La Paz, Carlos Salinas Aramayo,

June 23* 1936, ”Delegacl6n de Bolivia a la Conferencla de
Paz, correspond, envlada a la Canclllerla" (Julio 1935*
Dlolembre 1936), ABPM.
100
of the lump sum payment should not be authorized until
Bolivia was satisfied with the total figure of returned
captives.
The Chancellory In La Paz responded to this report
by Instructing Its representatives on the Repatriation
Commission to ask that a special committee be despatched
to Asuncl6n to guarantee Paraguay's compliance with the
stipulations of the Protocolized Act of January 21, 1936.®5
Until the Bolivian government was assured that all these
requirements had been made, It would not agree to any
declaration that the repatriation process was terminated
or to the delivery of the indemnity funds to Paraguay.
But assurances were difficult to obtain In this regard
since Paraguay, herself, had no accurate records of the
number of Bolivian prisoners-of-war In captivity.
By July 1936, as the prisoners-of-war issue became
a question of whether or not all the Bolivian prisoners
were being returned, the matter of the control of the Villa
Montes-Boyuibe road began to take on new stature. Bolivian
officials recognized that the road Issue was undoubtedly
the next crucial problem that the Conference would have to
confront, but they did not see how it would dovetail with
prisoners question. A note to Carlos Salinas A., dated
®5<jircular 37* to Buenos Aires, July 2, 1936,

"Legacl6n de Bolivia, Buenos Aires, clrculares de M. de
H.R.B.B. de Bolivia" (Marzo 1935-Mayo 1938), ABFM.
101
July 4, 1936* states, "We cannot tie that matter [the Villa
Montes-Boyuibe road question] , of different character, to

the delivery of the check [prisoners payment]* whose destiny
is clearly stipulated."®^
That which the Bolivian government evidently had

not planned to do, however, was attempted in the Peace
Conference by Saavedra Lamas. The Argentine Chancellor
wanted to use the Bolivian prisoner payment as leverage to
gain Paraguay's compliance with the Conference's plan to
establish a neutral police force in the Chaco. Saavedra
Lamas suggested to the Paraguayan delegation that agreement
on this arrangement, which would also place the Villa
Montes road under international supervision, would enable
the Peace Conference to declare terminated the repatriation
process and would allow him to authorize delivery of the
money to Asuncidn.®^ Tom&s Manuel Elio, who on August 3,
1936, had resumed leadership of the Bolivian delegation,
wired La Paz on August 7 that the Conference planned:
(1 ) to assume control of the neutral zone and to establish
^ N o t e 65, to Buenos Aires, July 4, 1936, "Delegaoldn

de Bolivia a la Conferencla de Paz, correspond, reolblda de
la Canclllerla" (Mayo 1935-Dlclembre 1936), ABPM.
^Cablegram (no number available), to La Paz, Elio,

August 7 , 1936, contained in Note 179, to La Paz, Elio,
August 18, 1936, "Delegaci6n de Bolivia a la Conferencla de
Paz, correspond, envlada a la Cancillerla" (Julio-Dielembre
1936), ABPM.
102
vigilance over the Villa Montes-Boyuibe road, thus
guaranteeing free transit on the road for Bolivia, (2) to
declare virtually terminated the repatriation of prisoners,
proceeding to the delivery of Bolivia's payment to Asuncl6n,
and (3 ) to seek agreement between the two parties for a
resumption of diplomatic relations. With respect to
repatriation, subcommissions of the Special Repatriation
Commission were to be maintained in each of the countries
to guarantee the return of any additional prisoners .®8
The Bolivian Chancellory's views with respect to
the relationship between the prisoners-of-war issue and the
road issue had changed by this time. La Paz now insisted
that the prisoner payment not be authorized until guarantees
of free transit on the international road had been obtained.
A cable to Elio on August 10 stated:
Government ... considers necessary to subordinate

delivery funds Paraguay to constitution international
police Villa Montes-Boyulbe road, obtaining that
manner effective guarantee.@9
On August 11 the Chancellory reiterated that no Bolivian
authorization for delivery of funds should be made without
first receiving effective assurances with respect to free
88Ibld.
^Cablegram 1563* to Elio, Ministry of Poreign
Relations, August 10, 1936, contained in Note 179, op.
clt., (see footnote 87).
103
transit on the Villa Montes-Boyuibe road.
In Buenos Aires, however, the Paraguayan delegation
resisted the Conference's moves to establish its control
over the neutral zone. United States representative
Spruille Braden Indicated that one reason for Paraguay's
position was undoubtedly her desire to retain the Villa
Montes-Boyuibe road as a trading element in the territorial
negotiations.^0 Neutral members of the Conference finally
decided on a resolution by whlth the Peace Conference would
reassume police functions in the Chaco by virtue of its
authority derived from the Protocolized Act of January 21,
1936. Bolivia and Paraguay would be notified of the
resolution, but no formal endorsement would be required.
Saavedra Lamas told Elio that the Conference would resolve
the prisoners question and provide for free transit on the
international road through two Conference resolutions. By
expediting both resolutions at the same time, the Conference
apparently hoped to tie the delivery of funds to guarantees

Ql
of free transit.
On August 21 the Chairman of the Conference,
Saavedra Lamas, addressed identical notes to the delegations
^Telegram 1 5 9 , to Washington, Braden, August 12,

1936, PR, V (1936), 57.
^ N o t e 180, to La Paz, Elio, September 1, 1936,

"Delegaci6n de Bolivia a la Conferencla de Paz, correspond,
envlada a la Canclllerla" (Julio 1935-Dieiembre 1936), AB9M.
104
of Bolivia and Paraguay in which they were informed of the
Conference's decision to reassume the police functions
between the lines of separation determined by the Neutral
Military Commission. The same day, the Peace Conference
decided to authorize the delivery of the Bolivian prisoner
payment to Paraguay. Also, on August 25 an act was signed
by the delegates of the two countries declaring the
reestablishment of diplomatic relations.
While the Conference resolutions of August 1936
effectively liquidated the prisoners question, they did not
resolve the problem of security in the Chaco or provide for
free transit on the international road. Paraguay, whose
representatives had stated throughout the discussions of
August that the domestic political situation within that,
country would not permit any arrangement which meant
abandoning the disputed road, rejected the Conferenceis
proposal on neutral control of the zone of separation. The
official reply, delivered on September 11, 1936, Indicated
that Paraguay not only refused to accept international
policing in the zone of separation, but also denied the
existence of any such zone. It alleged that "there is only
one line or lines which is the line of Hitos.
Almost Immediately Elio came under sharp criticism
^êlegram 193* to Washington, Braden, September 13,

1936, PR, V (1936), 63.
105
from the new Bolivian chancellor, Enrique Finot. Curiously
enough, Finot seems to have reprimanded Elio initially for
not keeping La Paz adequately Informed with respect to the
Paraguayan rejection of the security arrangement.^ When
Elio replied by submitting his resignation, Finot accused
him of failure to comply with the Chancellory's explicit
instructions to subordinate the delivery of prisoners funds
to a system of neutral policing on the international road
that was acceptable to both parties.^ Brushing aside
E116's resignation, Finot declared that the Bolivian
delegate had a moral obligation to remain at his post in
order to rectify his errors. When Elio reiterated his
resignation, the Bolivian government relieved him of his
responsibilities both as chief delegate at the Conference
and as minister to Argentina. Carlos Romero was ordered
from Montevideo to Buenos Aires to assume Interim command
of the Bolivian delegation. When Finot announced that the
presidency of the Bolivian delegation had been offered to
David Alv^stegui, one of the Conference's most persistent
critics, the road to a final settlement promised to be a

long one.
93gl Diario. October 2, 1936, p. 6 .
94Ibid.
106
V. THE SECURITY AND TRANSIT ISSUES
This discussion of the major Issues of the Chaco
Peace Conference Is being presented In order to describe
the dynamics of the negotiations that occupied the Bolivian
government and Its representatives In Buenos Aires.
Although the most important Issues came to the center of
the diplomatic stage at different periods in the
Conference's history, they were, of course, concurrently
present at all times, always demanding at least minimal
attention from the participants. Therefore, the treatment
of the issues necessarily involves some chronological back
tracking to trace the development of the major questions in
the peace negotiations. This overlapping of Issues has ap
peared in the discussion of the prisoners question, and
later It will be seen that the security and transit Issues
simply fade into the final negotiations on the territorial
question. Attention must be given at this point to the evo
lution of the controversy revolving around security measures
in the Chaco and transit on the Villa Montes-Boyuibe road.
The protocol of June 12, 1935 » provided for the
cessation of hostilities on the basis of the positions held
at the time by the belligerent armies. The Conference's
instrument for supervising the cease-fire and for
guaranteeing compliance with the protocol's security
stipulations was the Neutral Military Commission (NMC).

The NMC *8 first responsibility was to determine the
line of separation or Intermediary line of hitos between the
forward positions of the two armies. During the early
discussions In the field, agreement also was reached between
the High Commands in the field, the NMC, and the respective
governments for withdrawal by both forces to so-called lines
of separation (See Figure 3> P* 1 0 8 ) . ^ The later dispute
over security measures Involved the question of the
Conference's authority to control the neutral zone
encompassed by the outer lines of separation. Bolivia
argued that the Conference had the authority. However,
Paraguay contended that at no time did she officially
relinquish control of the area between the line of hitos
and the line to which her troops were withdrawn during the
demobilization period. The question was all the more
serious because the important road linking Villa Montes
(and further to the south, Argentina) with Boyuibe and Santa
Cruz traversed the Paraguayan half of the neutral zone.
During the discussions between the NMC and the High
Commands in June and July 1935* Bolivia's insistence upon
the necessity of free transit on the occupied road had been
instrumental in establishing an international police force
composed of soldiers from the two armies under neutral
95rhe Chaco Peace Conference, op. olt., p. 12; Wood,

op. clt., p. ii2 .
iLatS?
n
WJ
•Sfitit.
7,80*000
Conference Proposal, 15 October 1935
FIGURE 3
LINES OF SEPARATION OF THE BOLIVIAN AND

PARAGUAYAN ARMIES, JULY 2, 1935 }
CHACO PEACE CONFERENCE PROPOSAL
OF OCTOBER 15, 1935
♦The Chaco Peace Conference, A Report of the
Delegation or the United States of Rnerica to tKeêace
conferencF HSlZHat Buenos~Alres,~7uly i, 193F-January 23,
1939 (waiKlngton: Government Printing Office, 1940),
pp. 196-197.
109
c o m m a n d . 96 Paraguayan Commander-In-Chief General Josl Flllx
Estigarribia had agreed to a withdrawal of his army, leaving
the Villa Montes-Boyuibe road "In charge of forces of both
armies placed under the orders of a member of the Neutral
Military Commission."^ Uruguayan Colonel Jos£ E. Trabal
was appointed commander In the zone by the NMC, and his
designation was accepted by both commands.
The International police arrangement proved to be
unsatisfactory from the Bolivian point of view, however,
because It effectively left control of the road In Ouaranl
hands. On September 11, 1935* Andean General Enrique
Pefiaranda proposed to the head of the NMC, General Rodolfo
Martinez Pita, that there be established a truly Inter
national police force, composed of representatives of the
mediating countries, that would remain In the Chaco until
the dispute was totally l i q u i d a t e d . A c c o r d i n g to a report
later submitted to the Conference by Martinez Pita, Paraguayan
Oeneral Estigarribia and President Ayala expressed their
conformity with the proposal as did Bolivian military and
government authorities. Martinez Pita reported, therefore,
96"Informe del General de Blvlsl6n Don Rodolfo

Martinez Pita" to the Chaco Peace Conference, September 30,
1936, "Delegacl6n de Bolivia a la Conferencla de Buenos
Aires" (193o), ABPM.
97ibld., p. 35 .
110
that it was cause for true stupor and irritation among
members of Bolivia's High Command when they learned that
the chief Andean delegate at the Peace Conference had
chosen to ignore his government's support for the proposal.99
Since Paraguay continued to exercise control over the
strategic road, the issue persisted.
In a report dated October 18, 1935, the NMC notified
the Peace Conference that the security measures that had
been entrusted to it by the protocol of June 12, 1935>
’’have been carried out in their entirety.”1®® After the
Conference's declaration on the termination of the war,
Bolivia and Paraguay ratified the Conference's proposal
for a continuation of international policing in the Chaco
under the supervision of a neutral military authority.
The Protocolized Act of January 21, 1936, confirmed the
security measures stipulated in the protocol of June 12,
1935. However, Bolivia remained dissatisfied with the
control arrangements on the Villa Montes-Boyuibe road.
It has been pointed out that the security and transit
Issues again became paramount in the negotiations of August
1936. Paraguay's rejection of the Conference's resolution
on neutral policing, the Martinez Pita Report of September
99ibld., p. 57.
10®The Chaco Peace Conference, op. clt., p . 6 6 ,

Ill
3©* 1936, and the hilo-Finot incident all served to give
notice that the questions relating to transit on the Villa
Montes-Boyuibe road and to security along the line of hitos
had become the crucial considerations for the Chaco Peace
Cpnference.
In July 1936 Elfo was Instructed to seek arrangements
In which a neutral military commission would control and
watch over the lines of separation. The instructions also
stated that If Bolivia could not regain control over the
strategic road "it will be necessary to obtain the
establishment of an International Police, organized with
troops of one or more mediating countries, so It can control
with maximum efficiency the taafflc that Paraguay presently
controls." The Peflaranda proposal of September 11, 1935,
was still the Bolivian policy .101
Paraguay's rejection of the Conference's resolution
of August 20, 1936, produced a serious conflict between
that nation and the neutral members. In the face of this
difference over the authority of the Conference to exercise
police functions In the Chaco, Bolivia recognized the nee^d
for following a policy designed to enhance the mediating
body's authority. Meanwhile, the Conference on November 2,
101Unnumbered letter, to Tomis Manuel Elio, Eduardo

Anze Matlenzo (Political and Diplomatic Department,
Bolivian Porelgn Ministry), July 11, 1936, "Delegaci6n de
Bolivia a la Conferencla de Buenos Aires" (1936), ABPM.
112
1936, resolved to establish a Special Military Commission
consisting of representatives of the neutral and ex-
belllgerent nations to draft regulations of control and
vigilance in the Chaco.
In La Paz, hopes for energetic and effective
Conference action to overcome Paraguay's obstlnancy vis-a-vis
neutral control in the Chaco were waning. A growing
pessimism with respect to the course of the negotiation at
Buenos Aires pervaded the Chancellory. Foreign Minister
Enrique Finot, whose candid appraisal of Bolivia's situation
at the Conference perhaps accounted for this gloomy outlook,
wrote Carlos Romero, Andean delegate, that:
The form in which the Conference received the

Paraguayan note (of September 11, 19361, which was
characterized by its gross and intransigent terms,
reveals its [the Conference's} reluctance to conduct
the negotiations In an energetic and decided manner.102
At this point, a new possibility appeared for the
Bolivian government. The Inter-American Conference for the
Maintenance of Peace, proposed by United States President
Franklin D. Roosevelt, was scheduled to convene in Buenos
Aires in December 1936. Perhaps this meeting could be
utilized either to fortify the work of the Chaco Peace
Conference or, conceivably, to find some way to resolve the
102Note 221. to Buenos Aires, Enrique Finot,

November 9 , 1936, f,Delegacl6n de Bolivia a la Conferencla
de Paz, correspond, reclblda de la Canclllerla" (Mayo 1935-
Dlclembre 1936;, ABPM.
113
whole Issue through an acceptable binatlonal agreement. The
Bolivian Chancellory turned its attention to the question of
how best it might proceed at the Buenos Aires Conference in
support of it8 objectives vis-a-vis the Chaco issue.
VI. INTER-AMERICAN CONFERENCE FOR THE

MAINTENANCE OF PEACE
(December 1 -December 2 3 , 1936)
Bolivian President Tejada Sorzano's first response to
the invitation of United States President Roosevelt to
express an opinion regarding a possible Pan American
conference to consider ways of avoiding future hostilities
in the hemisphere was based on the misunderstanding that
the proposed conference would have as its chief objective
the settlement of the Chaco i s s u e . I n his reply, the
Bolivian President expressed fear that a new general confer
ence might Jeopardize the work of the Chaco Peace Conference.
Once the purpose of the conference was clarified, the Andean
response was generally favorable. Bolivian Minister Finot
wrote from Washington that "the present situation with
Paraguay cannot help but make us see with satisfaction a
conference that will serve to support pacific principles and
103Bolivla, Mlnisterio de Relaclones Exteriores,

Conferencla lnteraaericana de consolldaci6n de la paz (Buenos
Aires, 1936)* Informe de lalTelegacldn de BoTTvTa (Ea Paz:
Lib. e Imp. Arn6 Hnos., 1937)* p. 4. Hereinafter cited as
Conferencla de consolldaclon de la Daz.
114
proceedings In the solution of International conflicts.10^
The following discussion of Bolivian diplomacy
relating to the Inter-American Conference for the Maintenance
of Peace will focus on the ways In which La Paz sought to
utilize the meeting to further Its Chaco policy, leaving
for the next chapter a brief consideration of other aspects
of Bolivian activity at the meeting. Without doubt, for
Bolivian policy the Chaco issue was the major consideration
to be treated at the Maintenance of Peace Conference which
was to be attended by the chancellors of most of the
American republics as well as by the presidents of Argentina
and the United States.
Three objectives guided Andean preparation for action
at the conference. The major objective was to get the
participants In the meeting to persuade Paraguay to
accept a settlement of the territorial issue satisfactory
to Bolivia. A second purpose, one to which Andean Poreign
Minister Finot devoted much attention, was to use the
occasion of the Maintenance of Peace Conference to force the
Chaco Peace Conference Into more vigorous Implementation of
Its resolutions, especially with regard to control and
vigilance In the Chaco. Bolivian spokesmen were also
1Qi*Wote 22, to La Paz, Enrique Plnot, February 26,

1936# "Legaci6n de Bolivia en Estados Unldos de Norte
America" (1936), ABPM.
115
interested, if no settlement was possible at the Maintenance
of Peace Conference, in obtaining agreements that would set
a fixed time limit for direct negotiations in the Chaco
Peace Conference. Such agreements also would provide that
after this period had expired, the Conference, again
within a specified period, would seek to promote an arbitral
compromise.
Bolivia's fundamental concern In preparation for the
meeting was to line up support among the other American
states, especially those already active in the Chaco Peace
Conference, for raising the Chaco question at the
Maintenance of Peace Conference. On November 12, 1936, the
Bolivian minister in Rio de Janeiro, Ostrla Qutilrrez, wired
La Paz that Brazilian Foreign Minister Maoedo Soares was
solidly in favor of having the Maintenance of Peace
Conference resolve the basic Issues of the Chaco question
and had offered his support in the effort.*®^ initial
Argentine reaction to Bolivian soundings with respect to
consideration of the Chaco issue at the forthcoming
conference was also favorable. But both nations later
modified their positions by demanding that any efforts to
raise the Chaco issue at the special meeting be made with
^^Note 3^2, to La Paz, Ostrla Qutilrrez, November 12,

1936, "Legaol6n de Bolivia en el Brasil" (Septiembre-
Diclembre 1936), ABFM.
116
the approval and support of the neutral delegates at the
Chaco Peace Conference.
ba Paz found little encouragement among the neutral
delegates at the Peace Conference for the plan to have the
Maintenance of Peace Conference consider the Chaco question.
In a series of discussions at the Peace Conference,
Bolivia's ne« ehief delegate, David Alvlstegul, discovered
that the United States representative, Spruills Braden,
thought It Inadvisable to have the Chaco Issue raised at
the Inter-American Conference, but that the Brazilian
delegate, Rodrigues Alves, favored some special action on
the matter on the occasion of the Maintenance of Peace

106
Conference. Rodrigues Alves felt that the chancellors
of the American nations, especially those whose countries
were represented in the Chaco Peace Conference, should meet
to see if a final Chaco settlement could be reached or if,
at least, some progress could be made In correcting the
weak points of the earlier protocols.
Although, as mentioned earlier, Bolivia's major hope
at the Maintenance of Peace Conference was a final overall
settlement of the Chaco question, her most Immediate
106Note 23-47, to La Paz, David Alvdstegui,

November 21, 193o, "Delegaci6n de Bolivia a la Conferencla
de Paz, correspond, envlada a la Cancillerla" (Julio-
Dlciembre 1936), ABPM; INote 24-46, to La Paz, Alvlstegul,
November 21, 1936 (same volume as Note 23-47).
117
objective was to have the Chaco Peace Conference Implement
Its resolution on neutral policing In the Chaco. To achieve
this, Flnot saw but a single course of action. The Bolivian
Chancellor reported to President David Toro on December 15
that, In an early discussion with the Chaco mediators, he
had threatened to take the Chaco Issue before the larger
conference If the Chaco Peace Conference had no Intention
of taking effective action, especially with respect to
International policing in the neutral zone.^ 7 Bolivia's
delegation to the Maintenance of Peace Conference had also
drafted and presented a resolution on boundary arrangements
that was intended to be a censure of the "dilatory
proceedings of the Chaco Conference."1®®
In response, the mediators offered Flnot sui
arrangement whereby, in return for the retirement of his
draft resolution, the Chaco Peace Conference would send the
recently organized Special Military Commission to the Chaco
to proceed with its task of establishing neutral control
there. Flnot said that he accepted the suggested bargain,
but warned the Peace Conference that he retained his
freedom to act If the Special Commission did not fulfill its
107
Flnot letter to President David Toro, December
1936, 'Legaci6n de Bolivia en la Argentina" (Julio-Diciembre
1936), ABFM.
10QIbld.
mission.
Pinot's policy was a delicately balanced one in which
he hoped to coerce the Chaco Peace Conference into effective
action by the threat of exposing its Ineffectual proceedings
to the Inter-American Conference and, through it, to the
entire hemisphere. As he wrote President Toro, "the fear of
showing its failure is the only Inducement that now moves
the mediators of the C h a c o . H o w e v e r , at the same time,
Flnot did not want to go too far, fearing to take action
that would lead to the dissolution of the Chaco Peace
Conference which he considered "with all its faults, the
only means at ou£ disposal for containing Paraguay in her
excessive pretensions."110
The Chaco Peace Conference delegates were also eager
to take advantage of the presence in Buenos Aires of the
foreign ministers of the mediatory governments. On
Beoember 9 the Chaco Conference organized a special
committee, the "Committee of Three," consisting of the
foreign ministers of Brazil and Chile, Macedo Soares and
Cruehaga Tocornal, respectively, and the United States
delegate, Sprullle Braden. Its primary task was to carry
out discussions with the two parties on the fundamental

119
territorial question. Since this committee's work
vie-a-vis the territorial question will be discussed later
in the chapter, only a brief overview is needed here.
The Committee of Three presented a number of
suggestions for a final settlement to the Paraguayan
delegate, J. Iiidro Ramirez, and to Bolivian Porelgn
Minister Plnot. Paraguay's foreign minister, Juan Stefanlch,
who apparently had refrained from attending the Maintenance
of Peace Conference for fear that his presence there would
provoke debate on the Chaco question, accepted an invitation
to enter into discussions with Flnot and members of the
Committee of Three. In a December 24 meeting, Stefanlch
told the Committee that the domestic political situation In
his country made it virtually impossible to hope for a
final settlement at that time.111 Flnot suggested that a
secret agreement could be reached which would fix the
basis for a settlement. Paraguay later rejected an
announcement drafted by the Committee of Three that
attempted to prescribe time limitations for negotiations of
a direct arrangement and of an arbitral compromise.
Stefanlch told Flnot that Paraguay, under no circumstances,
would retire her police control from the Villa Montes-Boyulbe
111Memo of Ambassador Spruills Braden, Activities of

the Committee of Three (Buenos Aires, May 20, 15377*
"!k)elegaol&n de~5blivla a la Conferencia de Paz, correspond,
enviada a la Cancilleria" (Enero 1937-Dieiembre 1937), ABPM.
120
road.*-^2
The Inter-American Conference closed on December 23,
1936, while the special committee continued its labor for

several more days without significant results. The last
resolution approved by the Maintenance of Peace Conference
(LXIV), the gathering's only official action relating to
the Chaco issue, Included a vote of commendation to the six
mediatory governments as well as an appeal to Bolivia and
Paraguay to arrive at a definitive understanding through

113
direct negotiations or an arbitral compromise. J In his
final address to the Inter-American Conference, Flnot
stressed that the approved resolution demonstrated that the
Chaco question was still vary much a live issue, capable
of erupting into violence once again if the differences on
security measures and the territorial question were not
satisfactorily resolved.11^
The Bolivian delegation returned to La Paz following
the Maintenance of Peace Conference claiming that its
efforts had met with partial success in Buenos Aires despite
Paraguay's opposition. Flnot gave the Andean delegation
112Ibid., p. 17 .
1-^Report of the Delegation of the Unltad States of

America to the Interlinerlean conference for the Maintenance
of Peaoe, (Washington: Government Print Ing’TftTTce, 1.937) >
255.
13,i*Conferenola de consolldacl6n de la paz, op. cit.,
p. 99. ---
credit for everything that had been done by the Chaco Peace
UK
Conference with respect to the Chaco Issue. J This
Included the organization of the Committee of Three and the
despatch of the Special Military Commission to the Chaco by
the Chaco Peace Conference, the trip by Stefanlch to Buenos
Aires, and the Maintenance of Peace Conference Resolution
(LXIV). Actually, except for the military commission's
departure, the credit for most of the developments of
December goes to the neutral members of the Chaco Peace
Conference and the visiting Brazilian and Chilean
chancellors. However, Flnot's threat to raise the Chaco
Issue In the Inter-American Conference must be Included
among the factors that encouraged the Peace Conference to
act. A hard look at those developments reveals, however,
that very little had actually been accomplished. Certainly,
no dramatic breakthrough In the negotiations occurred.
VII. SECURITY AMD TRANSIT ISSUES CONTINUED
Negotiations at the Chaco Peace Conference In 1937
bore little fruit. They consisted primarily of resolutions
left without effect, proposals and counterproposals, and
^^Clrcular 55, to Buenos Aires, December 28, 1936,

"Legacldn de Bolivia, Buenos Aires, circulares de M. de
R.R.S.S. de Bolivia" (Marzo 1935-Mayo 1938); Circular 1,
to Buenos Aires, January 4, 1937 (same volume as Circular
55), ABFM.
protests of violations of security regulations In the Chaco.
Little or no progress was made In the discussions of the
basic territorial Issue despite attempts by Argentina,
Brazil, and the United States to break the deadlock.
Discussions In Buenos Aires were characterized by frequent
Bolivian charges of violations of the Intermediary line by
Paraguayan patrols and by protests against Illegal
Paraguayan acts of occupation in the disputed territory.
Rumors circulated almost continually about the aggressive
Intentions of both parties, the Increased acquisition of
war material, and the mobilization and movement of troops
on both sides of the line of hltos. Bolivian officials
became more pessimistic about the chances for a satisfactory
settlement through the Conference's labors. Constant
disappointment In efforts to establish security arrangements
in the Chaco tried the patience and the energy of the
neutral delegates. Braden wrote In August, "The Conference
during 1937 can point to little, if any, constructive
accomplishment.
Early in the year, on January 9 , 1937> Paraguay's
Poreign Minister Juan Stefanioh and Bolivia's first delegate,
David Alvlstegul, signed an agreement which established the
bases for drafting regulations of control and vigilance in
H6*pelegram 474* to Washington, Braden, August 4,

1937, PR, V (1937), 19.
123
tfte Chaco. The Special Military Commission was Instructed
to draft the set of regulations. On April 23 the
Conference resolved to assume the functions of control and
vigilance In the Chaco through neutral military observers
and in accordance with the transit and security regulations
derived from the earlier established bases. In Chapter I
of these regulations, free transit on the Villa Montes -
Boyulbe road was established; Chapter II provided for the
withdrawal of troops and commands behind the established
lines of separation and for the creation of a civil-police
force to function in the zone of separation under the

1 1 7
supervision of neutral military observers. 1 Since the
regulations substantially represented the Bolivian thesis
regarding freedom of transit on the disputed Villa Montes-
Boyulbe road, the Conference's resolution received the full
support of the Andean government. On May 7, 1937,
Alv£stegui notified Saavedra Lamas that Bolivia accepted
the regulations adopted on April 23 and the obligations
deriving from them, expressing the view that the Conference
could now turn its attention to the basic territorial
question.11®
Paraguay also accepted the Conference's resolution
11^The Chaco Peace Conference, op. cit., p . 108.
u ®Ibid., p. 115.
124
of April 23. But the provisions in the regulations
providing for free commercial transit on the Villa Montes-
Boyulbe road and for retirement of Guarani troops from
advanced positions proved unacceptable for important
segments of the Paraguayan population. President Franco
was placed under pressure not to comply with the
Conference's resolution by military leaders who were said
to be encouraged in their opposition by exiled political
leaders of the Liberal p a r t y . C o n s e q u e n t l y , efforts to
implement the security and transit regulations were frus
trated again; plans for a resumption of diplomatic relations
between the parties also were laid aside.
Although the bases of January 9, 1937, and the
regulations of April 23, 1937, were not implemented because
of Paraguay's opposition, their initial acceptance by
Asuncion may well have been an Important factor in the
ouster of the Franco regime by the military on August 15,
1937* Earlier, in July, the Toro government in La Paz had
been replaced by that of Oerm£n Busch. In this latter case,
however, Bolivia's delegate at the Conference, David
Alv£stegui was reconfirmed in his post by the new govern
ment. Now, spurred by the hope that the new Liberal party
^^Clrcular to Buenos Aires, Flnot, June 14,

1937, "Legaol6n de Bolivia, Buenos Aires, clrculares de M.
de R.R.B.E. de Bolivia" (Marzo 1933-Mayo 1938), ABFM.
125
government In Asuncidn, headed by provisional President
F£lix Paiva, would prove more conciliatory, an optimism
neither shared by Alv^stegui nor supported by logic, the
Conference renewed its efforts to enforce the security
regulations. On September 16, with the persistent urging
of Alv£stegul, the Conference once again resolved to place
in effect the regulations of April 23.
In October 1937 Paraguay's new delegation, now
headed for the second time by Oer6nlmo Zublzarreta, denied
that the Conference had the authority to effect either the
bases of January 1937 or the regulations of April 1937
without the prior congressional approval of both parties
since neither was authorized by the earlier protocols,
^graguay suggested, however, a substitute arrangement that
was presented in draft form to the Conference on
November 6.12** Alv^stegui reported to the Chancellory in
La Paz that the situation suggested two alternatives:
(1) Bolivia could demand compliance with the April 23
regulations, thus provoking a possible breakdown of the
mediation efforts or (2) she could resign herself, in order
to avoid the rupture, to a continuation of negotiations
through a conference shorn of authority and governed by
Paraguay.121 He urged the Chancellory to devise a third
12C?The Chaco Peace Conference, op. clt., pp. 24, 123.
l'21flote 235/172, to La Paz, David Alv^stegui,

126
alternative that would avoid the liabilities of these
courses of action.
Personally, Alv^stegul was Inclined to reject the
proposed nonaggression agreement. He told the representa
tives of Chile, Brazil, and the United States that only if
the Conference would energetically refute the Paraguayan
thesis that challenged the Conference's authority would
Bolivia be willing to leave the regulations in suspense and
to settle for the modus vlvendl security arrangement .122
However, Alv^stegui was apparently dissatisfied with this
conciliatory position. Early in January 1938, he
acknowledged a difference of opinion between himself and
the nation's foreign minister, Eduardo Diez de Medina.
While the Chancellor favored the acceptance of the
provisional security arrangement, Alv^stegui stated that
an absolute rejection of the proposed modus vlvendl, even
if it meant the rupture of the mediation, would be
preferable to the risks involved in accepting it.123 He
November 9, 1937, "Delegaci6n de Bolivia a la Conferencia

de Paz, correspond, enviada a la Canclller£a" (Enero 1937-
Diciembre 1937), ABPM.
122jjote 246/183, to La Paz, Alv^stegui, November 1*6,

1937, "DelegacltSn de Bolivia a la Conferencia de Paz de
Buenos Aires" (1937), ABPM.
123Note 7-6-38, to La Paz, Alv^stegui, January 4,

1938, "Delegacion de Bolivia a la Conferencia de Paz de
Buenos Aires" (Enero-Mayo 1938), ABPM.
127
counseled, rather, a counterproposal which would uphold the
Conference's authority. Bolivia finally decided that her
Juridical position in the Conference would best be upheld
by a rejection of the modus vivendl proposal, and the
Conference was so notified on January 24, 1938. At the same
time, however, the Andean reply left the door open for
negotiations on the fundamental territorial issue.
The unyielding positions assumed by both parties
vis-a-vis the security question so frustrated and wearied
the representatives of the mediatory governments that by
early 1938 indications were increasing that the conciliation
efforts would not continue indefinitely. The Conference
decided that the time had come to make a concerted effort
to gain a final settlement of the Chaco issue. On March
8, 1938, a committee, chaired by Sprullle Braden, was
designated to realize intensive negotiations on the

124
territorial question.
VIII. THE TERRITORIAL ISSUE
The major responsibility of the Chaco Peace
Conference was to resolve the fundamental territorial
difference between Bolivia and Paraguay. Although relegated
to the background, at times, during the life of the
124
Tsl.graa 49, to Washington, Bradsn, March 8, 19381.
TO, V (1938), 92.
128
Conference, the basic question remained, "Where will the
definitive boundary be established between these American
republics?" This section will be devoted to describing
and analyzing the process that culminated in the answer
to that question in July 1938. The evolution of Bolivia's
policy in the issue will be fehe focal point of the
discussion. What were the specific objectives of that
policy? How and why did they change? What positions with
respect to the issue were taken by the Andean delegates
and political leaders? The reply to these queries first
requires that consideration be given to the early proposals
for a settlement.
During 1935 two major proposals were presented to
the governments of Bolivia And Paraguay in efforts to settle
the basic territorial dispute. One was made by Chilean
Foreign Minister Cruchaga Tocornal in June; the second was
proposed by the Conference on October 15. Bolivia's
response to these formulas, plus the early statements by
Elio, give a relatively complete picture of the Andean
position vls-&-vl8 the territorial issue in the early stages
of negotiations.
The Chilean plan presented to the mediation group by
Foreign Minister Cruchaga Tocornal in late June 1935
proposed that the Peace Conference first obtain the agree
ment of Bolivia and Paraguay to a treaty complementary to

129
the June 12 protocol which would establish perpetual peace
between the two countries and provide a prescribed formula

125
for reaching a final settlement. The draft treaty
provided for the creation of an international commission
that would prepare a comprehensive formula for the final
arrangement of the dispute within a year of the signing of
the agreement. If the commission's proposition was not
accepted by either of the parties, the commission would
then seek to promote an arbitral compromise within three
months, after which time the two countries would be obligated
to accept an arbitral compromise drafted by the commission.
The case then would be submitted to The Hague Court. A
territorial status quo would be maintained pending final
settlement.
Bolivia's negative response to the Chilean proposal
took the form of a counterproposal. Stressing the country's
reliance on the declaration of August 3* 1932, it declared
that Paraguay's "momentary and precarious occupation of
territories through force" gave that country no legal
rights to possess the disputed area or to exercise acts of
dominion within it. The reply also contained provisions
12^Telegrara lCH, to Washington, Hugh Gibson, June 25,

1935/ PR, IV (1935)4 00; "Proyecto de tratado formulado por
el Bxemo. Sefior Canciller de Chile, don Niguel Cruchaga
Tocornal," "Actas de la Conferencia del Chaco" (1935-1938),
ABPM.
12^Note 10, to La Paz, Silo, July 16, 1935* "Delega-

cion de Bolivia a la Conferencia de Paz de Buenos Aires"
(1935)4 ABPM.
130
for enlarging the membership of the Peaoe Conference and for
restricting discussion of a direct settlement to a period
of thirty days, after which time the whole issue would pass
to the Permanent Court of International Justice without
need for additional agreement between the parties. In
short, Bolivia Included in her reply to Cruchaga many of
the provisions she had sought in the protocol of June 12,
1935* and had failed to obtain. More Importantly, the
Andean reply Indicated that Bolivia relied quite heavily
on the declaration of August 3, 1932, in the early

127
negotiations for a final settlement.
One of the clearest definitions of the early
Bolivian position on the basic territorial issue was
contained in a presentation by Foreign Minister Elio
before the mediators on July 31, 1935. The Bolivian
Chancellor argued that according to Article IV of the
protocol of June 12, 1935* ho weight should be given in
the negotiations to territorial possession gained through
127
Bryce Wood, in his previously cited study. The
United States and Latin American Wars 1932-1942. claims that
Bolivia placed little or no reliance on the August 3 , 1932,
declaration following an Alvlstegui reference to it two
months prior to the signing of the peace protocol of June
12, 1935 (p* 163). Although the hard facts of the situation
precluded any reliance on the declaration in latter stages
of the negotiations, Bolivian representatives did utilize it
at least in the first year of negotiations and referred to
it often in later protests against Paraguayan actions in the
occupied territory.
131
■»oft
arm8. The primary territorial objective sought by Elio
was recognition of Bolivia's right to a littoral zone on
the Paraguay River no leas than that contemplated in the
Ichazo-Benitez Treaty of 189^* that la, extending northward
to Baftlm Negra from a point three leagues above Fuerte
Ollmpo. In the interior of the Chaco, Elio stated that
his government would consider a boundary based on the
possessions of each country prior to the war, although it
reserved the right to olalm the entire Chaco in the event
that the matter went before an arbitral court. The
Bolivian Foreign Minister declared that "it would be a
matter lrreconcillable for us in this negotiation to accept
a divisory line between Bolivia and Paraguay without a

1 2 9 * 1
proper littoral zone on the River Paraguay." Elio said
that if Bolivian rights to a sovereign area on the river
were not recognized in a direct settlement his government
preferred to take the entire dispute before an arbitral
court since the people would acquiesce in an adverse
decision by such a tribunal.
On October 13, 1935* the Conference presented to the
"Exposici6n por Tomis Manuel Elio, Pres. Delegacl6n

antes la Conferencia," July 31* 1935* "Delegaci6n de Bolivia
a la Conferencia de Paz,de Buenos Aires" (1935); Telegram
161, to Washington, Hugh Gibson, July 31, 1933, FR, IV
(1935), 108. ~
1 2 9 « B x p o s i c i 6 n por Tomis Manuel Elio," op. cit.,

pp. 27-28. ---
132
consideration of the parties a "comprehensive proposal"
designed to resolve the basic territorial difference as

130
well as the other questions In dispute. J The proposal
suggested a frontier extending from a point slightly north
of Bahia Negra on the Paraguay River In the east to Port
D'Orblgny on the Pllcomayo River in the west (See Figure 3,
p. IQS). By the terms of the draft treaty, Bolivia would
receive a diminutive littoral zone north of Bahia Negra
including a point called Puerto Caballo, of little practical
value, but a sovereign port Just the same. The Andean
nation would also be granted a free zone at the Paraguayan
river port of Puerto Casado and privileges equal to those
enjoyed by Paraguay's citizens on the railroad extending
westward from that port into the Chaco and on future rail
and road facilities in the frontier region.
Both parties rejected the Conference's proposal in
notes dated November 3, 1935* However, United States
diplomatic reports Indicated that the Bolivian government
seriously considered accepting the formula.1^1 The Andean
minister in Washington, Enrique Flnot, told Secretary of
State Cordell Hull that the original draft of the Bolivian
130rhe Chaco Peace Conference. op. clt., pp. 77-81,

197.
^Despatch to Washington, John J. Muccio,

October 26, 1935 (1X3)724.34119/270.
I
13|
reply was favorable to the proposition and had been
132
modified only after Paraguay's rejection became apparent.
Flnot added that he regarded the formula as acceptable.
Immediately upon receipt of the proposal, however, the
Bolivian delegation in Buenos Aires had advised the govern
ment to reject it and to formulate a counterproposal urging
the Conference to persist in its efforts in strict accord
ance with the provisions of the protocol of June 12,*33
In a meeting of the Council of Ministers on October
23, attended by an influential group of "notables” including

financial, political, and military leaders, the October 15
proposal was considered. Agreement was reached to submit a
counterproposal to the Conference, taking as the starting
point for discussions the line contained in the Ichazo-
Benltez Treaty.1^2* The most pressing concern of the
assembled leaders, however, was the return of prisoners;
the group unanimously recommended that efforts be made to
divorce completely the territorial difference from the
^^Telegram 136, to Buenos Aires, Hull, October 31,

1935, FR, IV (1935), 172.
^^ N o t e 9, to La Paz, Elio, October 29, 1935,
"Delegaoi6n de Bolivia a la Conferencia de Paz, correspond,
enviada a la Cancillerla" (Julio 1935-Dioiember 1936), ABFM.
■^Cablegram 2601, to Lima, October 24, 1935,

contained in Note 398, to La Paz, Ostrla Gutierrez,
November 5 , 1935, Legacl6n de Bolivia en el Peril"
(Septlembre-Dlolembre 1935), ABPM; El Dlarlo, October 24,
1935, p. 4; Despatch 460, Mucclo, loc.^cTET"
134
prlaoners question.
Bolivia's official reply to the Conference formula
described as "Inequitable" the proposed Bahia Negra-Fort

1 3 5
D'Orblgny dividing line. Relying strongly, at least
officially, on the declaration of August 3, 1932, Foreign
Minister Elio states, 11 ... So far as the territorial
dispute Is concerned, whether it is settled through a
direct agreement or through arbitration, it Is necessary
to act as If the war had never broken out and as If no
changes had occurred in the possessions existing at the
beginning of the war."1^ The Andean reply asked for a
boundary extending from Fuerte Ollmpo on the Paraguay
River to Linares on the Pllcomayo River. Preference for an
arbitral settlement was implied, and Bolivia argued that
the prisoners question should not be linked with the
territorial dispute.
To explain Bolivia's reply to the Conference
proposal of October 15> a number of factors must be consider
ed. First, Chancellor Elio, heading the Bolivian delegation
In Buenos Aires, clearly favored an arbitral solution to the
territorial issue, regardless of Its content. He had signed
and defended the protocol of June 12 as an agreement
The Chaco Peace Conference, op. clt.. p. 128.

136Ibid., p. 129.
providing for settlement by arbitration. No doubt aware of
the political implications of the situation, Elio had
difficulty contemplating a direct settlement that
confirmed Paraguay's possession of much of the Chaco. In
September 1935 Elio had recommended that the Chancellory
advance its preparatory studies for presenting the case
before The Hague Court; in November 1935 he submitted a
memorandum to the government in La Paz which maintained the
right of Bolivia to carry the matter before the Permanent
Court of International Justice unilaterally if such action
proved n e c e s s a r y . ^37 Second, it must be remembered that
the most pressing issue for the Bolivian government at the
time was the prisoners question. The acceptance of the
Conference proposal by Bolivia undoubtedly would have been
interpreted as Andean acquiescence in the Paraguayan
prisoners policy which linked the total repatriation of
prisoners with the peace treatyv Considering this factor,
Bolivia could accept the Conference formula only if the
boundary it contained was acceptable to Paraguay. Otherwise,
the Andean position with respect to the prisoners question
would have been undermined. The knowledge of Paraguay's
Impending rejection of the Conference proposal, therefore,
^Tuote 127, to La Paz, Carlos Calvo, April 7, 1936,

"Delegacl6n de Bolivia a la Conferencia de Paz, correspond,
envlada a la Cancillerfa" (Julio 1935-Dioiembre 1936), ABPM.
must certainly have encouraged not only Bolivia's rejection
of the formula, but also the extreme position taken by
Bolivia in her reply to the Conference. Finally, of course,
the terms of the proposal did not provide the Andean nation
with the territorial objectives and littoral zone which she
sought.
During 1936 the Conference was preoccupied with the
prisoners issue and the increasingly important matters of
security in the Chaco and of transit on the Villa Montes-
Boyuibe road. Discussions on the territorial issue were,
therefore, minimal. Bolivia continued her policy of pro
testing Paraguayan acts of civil Jurisdiction and economic
exploitation in the disputed region. Carlos Calvo, who
headed the Andean delegation early in the year, advised the
Bolivian government to present fundamental reservations
regarding these Paraguayan violations as soon as the
repatriation of prisoners was concluded. At the same time,
Calvo reiterated Bolivia's interpretation of the declaration
of August 3, 1932, which "repudiates the acquisition of
territory by force of armies and carries back the
possessions of Bolivia and Paraguay to the state in which
they were prior to the war, being illegal and usurpative
any action that the invading nation pretends to exercise on
them until such time as a definitive decision of a direct

13?
agreement determines the possessions."^®
Bolivia's official position on the territorial matter
thus remained static for the duration of the Tejada Sorzano
regime. When Tom&s Manuel Elio was returned to Buenos Aires
as the nation's first delegate before the Conference by the
Toro government in August 1936, he carried instructions to
sustain the proposed line contained in the Bolivian counter*
proposal of November 5, 1935* a line from Fuerte Olimpo to
Linares.1^ But Bolivia's new foreign minister, Enrique
Flnot, was nevertheless willing to listen to new suggestions.
Enroute to La Paz from Washington, Finot stopped over In
Rio de Janeiro for discussions with Brazilian Chancellor
Macedo Soares. In the course of the conversations, Flnot
reportedly rejected an idea by Soares that Bolivia obtain

\ ilQ
a port from Paraguay with a cash payment. Macedo Soares
then proposed a possible "arrangement with triangular
negotiations" in which Brazil and possibly other third
parties would cede economic advantages to Paraguay in
*3®Note 127, to La Paz, Carlos Calvo, April 7, 1936,

"Delegacl6n de Bolivia a la Conferencia de Paz, correspond,
envlada a la Canclllerla" (Julio 1935-Dlclembre 1936), ABPM.
1^ % o t e (without number), to Elio, Dept. Politico y

Diplomatico del Mlnlsterio, July 11, 1936, "Delegaclln de
Bolivia a la Conferencia de Buenos Aires" (1936), ABPM.
11+0Note 252, to La Paz, Guillermo Francovlch, August

20, 1936, "Legacl6n de Bolivia en el Brasil" (Mayo-Agosto
1936), Tomo II, ABFM.
138
return for a favorable cession by the latter to Bolivia.143-
According to Querejazu Calvo, Macedo Soares also suggested
this plan during the discussions at the Maintenance of
Peace Conference, offering Paraguay a free port on the
Atlantic, a loan from the United States, construction of a
railroad, and reorganization of the Banco Agr£cola

\ Up
Paraguayo with capital provided by Brazil.
As previously noted, the Inter-American Conference
for the Maintenance of Peace, held In Buenos Aires in
December 1936, was the occasion for renewed efforts by the
Chaco Peace Conference to resolve the basic territorial
question between Bolivia and Paraguay. The Committee of
Three, organized to conduct the negotiations, gave first
consideration to a plan presented by Macedo Soares, the
Brazilian chancellor. The Macedo Soares plan was based on
the assumption that, in order to obtain a lasting peace,
public opinion in Bolivia and Paraguay would have to be
satisfied. Macedo Soares suggested that public opinion in
Paraguay would be content if Bolivia received no sovereign
port on the Paraguay River and that Bolivia, on the other
hand, would be satisfied if she regained control of the
Villa Montes-Boyuibe road. Paraguay could satisfy Bolivia's
141Ibid., p. 5.
l42Querejazu Calvo, 0£. clt., p. 465.

139
river port aspirations by granting free port facilities to
the Andean nation.1^
Bolivia's position in the discussions with the
Committee of Three was more flexible than it had been on
previous occasions. To be sure, the official positions of
the two governments were as far apart as ever. Paraguay's
chief delegate, Isidro Ramirez, stated that his government
would never permit Bolivia to have her own port on the
Paraguay River; Enrique Finot informed the mediators that
the governing Junta in La Paz had voted unanimously,
immediately prior to his trip to Buenos Aires, not to
consider any proposal that did not provide Bolivia with a
sovereign port on the Paraguay R i v e r . N e v e r t h e l e s s ,
while Foreign Minister Flnot and the Andean delegate, David
Alv^stegui, refused to relinquish Bolivia's demand for a
sovereign river port, Flnot was willing to discuss the
possibility of accepting a free port on the Paraguay River.
In addition, on December 16, Finot, reversing an earlier
position, told the Compittee of Three that he personally
thought a cash payment to Paraguay was the easiest way to
1^Memorandum by Spruille Braden, Buenos Aires,

December 10, 1936, remitted with Despatch 327, to
Washington, Braden, December 11, 1936, FR, V (1936), 83 .
"Memorandum by the American Delegate," Braden,

Buenos Aires, December 11, 1936, remitted with Despatch 327,
ibid., p. 88 .
140
reach a final solution to the territorial issue.*^5
Finot'8 statements at Buenos Aires did not
necessarily Indicate that the Bolivian government's policy
had shifted from its earlier position. The official policy
continued to be that the Andean nation would accept no
territorial settlement that did not include a port for
Bolivia. The Bolivian Foreign Minister's remarks may have
been no more than a reflection of his personal position.
Since Finot did not have the personal and political
investment in the protocol of June 12, 1935, that had
straltjacketed Elio, he could more readily afford a
realistic evaluation of Bolivia's poor position at the
Conference and could listen to compromise suggestions.
What was true for Finot, however, was also true for the
Toro regime as a whole. Therefore, in all likelihood,
Finot's more conciliatory attitude was the sign of a growing
conviction in Bolivia's official circles that the provisions
of the June 1935 peace protocol with respect to arbitration
and the nonrecognition of conquered territories were not
going to suffice in the efforts to recoup territory lost in
the Chaco and to gain a sovereign port on the river Paraguay.
On the surface and officially, the Bolivian policy
" M e m o r a n d u m b y the American Delegate," Braden,

Buenos Aires, December 17, 1946, remitted in Despatch 331,
to Washington, Braden, December 18, 1936, FR, V (1936), 97.
141
vis-a-vis the territorial issue did not change in 1937*
Andean-delegate Alvjstegul told Braden and Rodrigues Alves
on October 13 that Bolivia's position on the territorial
question contemplated a sovereign port on the Paraguay

146
River as a sine qua non of a direct agreement. Beneath
the surface, however, the soul searching which was to
culminate in the final settlement in July 1938 i went on.
One reason for this reappraisal was, of course, the slow
progress of the Conference. In August 1937, Alv^stegui
wrote Chancellor Fabl&n Vaca Chivez:
To my judgment it would be a dangerous illusion to

believe that exclusively through the means offered by
the protocol of June 12, 1935* ** can obtain a
satisfactory solution of the Chaco question.147
A second reason for the reappraisal was the discovery
that apart from the general objectives such as "a sovereign
port" and "an arbitral settlement," a great deal of
uncertainty existed about the content of Bolivia's policy
on the question. Alv6stegul complained that he did not have
explicit instructions to guide his negotiations. In a note
to La Paz in August 1937* AlvSstegui wrote, "I am moved to
take advantage of the present opportunity to request of the
l46jfote 214-133, to La Paz, Alvlstegui, October 26,

1937* Delegaclon de Bolivia a la Conferencia de Paz,
correspond, envlada a la Cancilleria" (Rnero 1937-Dieiembre
1937)* ABPM.
^^ N o t e 117-70, to La Paz, Alv4ategul, August 9, 1937,
"Delegaclon de Bolivia a la Conferencia de Paz, correspond,
enviada a la Cancilleria" (Bnero 1937-Dieiembre 1937)* ABPM.
Foreign Minister that he make known to me the plan that the
government has for facing the grave problem of the Chaco

ijig
In Its multiple and disquieting aspects. ^ At about the
same time, however, Foreign Minister Vaca Ch&vez was
seeking suggestions from the nation's diplomatic representa
tives abroad in respect to such a policy, an act that also
may be interpreted as an Indication that Bolivia lacked a
firm Chaco policy at the time.
In 1937 at least two different courses of action
emerged as possible alternatives for Bolivia with respect
to the Chaco issue. Both were based on the assumption
that the nation could not rely solely upon the juridical
and moral provisions of the protocols of June 1935 and
January 1936 and upon the Peace Conference. Alv£stegul,
for example, advised the national government to activate
a vigorous diplomatic campaign with the mediatory govern
ments to gain their support at Buenos Aires. At the same
time, he recommended a policy of gaining time to "make
ourselves strong so that we will be taken into account In
the negotiations," adding that if the nation were to become
dangerous, it would be even better.1^ Enrique Flnot also
sought to shift Bolivia's policy to more realiatlc bases and

became the spokesman for a course of action favoring the
creation of economic ties between the Andean nation and her
neighbors, especially Argentina. Pinot's basic premise was
that economic Interests determine a nation's policy;
therefore, In order to gain the support of Buenos Aires In
the Chaco Conference, Bolivia should promote Argentina's
economic Interest In the disputed zone In such a way that
it would be to her advantage to back the Andean nation in
the negotiations. The subject of Enrique Finot's foreign
policy as foreign minister will be considered more fully in
the following chapter. However, brief reference must be
made here to certain developments in Bolivia's relations
with Argentina and Brazil in the 1936-1938 period.
Enrique Pinot's policy was based on the presupposi
tion of Argentina's centrality in the Chaco negotiations
and was designed to strengthen Bolivia's relations with
that important neighbor. In December 1936 Pinot signed
with Saavedra Lamas an agreement to establish a binational
economic study group. Then, in March 1937 the Andean
government confiscated the properties of Standard Oil
Company of New Jersey in Bolivia and assumed ownership of
the nation's petroleum resources. Pinot hoped that
Argentina's interest in Bolivia's oil could be converted
into active Argentine support for the Andean cause in the
Chaco negotiations at Buenos Aires. Later that same year,
in September 1937# an Argentine-Bolivian agreement was

144
reached providing for Immediate study of the long-proposed
railroad from Yaculba, on the Argentine-Bolivian frontier,
to Santa Cruz. The route of the projected railroad was
the same as that of the Villa Montes-Boyulbe road, passing
for some sixty kilometers through territory occupied by
Paraguay. The implications of the railroad agreement for
the Chaco negotiations were clear. Buenos Aires
contemplated a settlement in which Paraguay's withdrawal in
the Villa Montes-Boyulbe sector was imperative. Alv£stegui
haildd the railroad study agreement as a diplomatic victory
that would cause Argentina to side with Bolivia in the
territorial dispute with Paraguay .1**0
La Paz also sought closer relations with Brazil.
Discussions were realized by Alberto Ostrla Gutierrez with
officials of the Palaclo de Itamaraty, Brazil's foreign
office, about topics not dissimilar to those being
considered with Argentina. As a result, protocols were
signed in November 1936 providing for blnatlonal study
commissions that would explore the possibilities of Joint
railroad construction and petroleum development in Bolivia's
Orlente. Treaties were signed on these matters In February
1933, at which time Brazil Issued a declaration clearly
pledging support only to a Chaco territorial settlementthat
Despatch 481. to Washington, Braden, August 31

1937 (DS)724.34119/1008.
145
was fully acceptable to Bolivia.
Late in 1937 and early in 1933 Enrique Pinot, now
Bolivia's minister in Buenos Aires, reported to La Paz
that Argentine officials were suggesting a solution to
the territorial dispute that would allow for the
construction of the Yacuiba-Santa Cruz railroad and that
Paraguay would be willing to accept. The outline of the
proposal, presented to Pinot by J o si Casado, Argentine
President Justo's brother-in-law, and Saavedra Lamas,
provided for a Paraguayan withdrawal from the Villa Montes-
Boyulbe road and a free port for Bolivia at Puerto Casado.
In return for these concessions Bolivia would agree to, and
possibly finance, the construction of a railroad link
between Puerto Casado and the petroleum deposits at Camiri
and would permit indirect, but unspecified, Paraguayan
participation in the exploitation of her petroleum.^51
Casado reportedly told Pinot that the suggested territorial
arrangement would still be provisional and that economic
arrangements would likely facilitate a final and more
satisfactory settlement.
In reporting the proposal to the Chancellory, Pinot
pointed out that the Argentine initiative had caused
1^1Note 270, to La Paz, Pinot, December 1, 1937,

"Legacl6n de Bolivia en la Argentina” (Septlembre-Dlclembre
1937), ABPM.
disquiet in the Conference end had aggravated the sharp
personal differences that existed between Saavedra Lanas
and the representatives of the United States and Brazil.
He suggested, however, that La Paz not reject the idea
completely since, in his opinion, only a peace plan in which
Argentina had an interest would prosper. When the new
foreign minister in La Paz, Eduardo Diez de Medina, indicated
that consideration would be given to the proposal, Flnot
reiterated his view that "no solution will be viable while
Argentine interest is not linked to it or while other
Argentine interests, rooted in Bolivia, are not sufficiently
strong to counterbalance those that presently exist in
Paraguay.
At the Peace Conference, Bolivia's delegate David
Alv£stegul told the mediators that his government probably
would agree to an arrangement similar to that suggested by

153
Argentina. '*'* His reports to La Paz, however, revealed
that personally he was not in sympathy with the proposals
emanating from Argentina. Although he agreed to continued
efforts at rapprochement with Argentina, Alvlstegui urged
that La Paz "in no case accept the commercial facilities

i
■^-^Note 289» to La Paz, Pinot. December 28, 1937,

"Legacl6n de Bolivia en la Argentina" (Septiembre-Dieiembre
1937)* ABPM.
^ D e s p a t c h 57^, to Washington, Braden, December 3,

1937* VR, V (1937)* 39.
147
offered ua as instruments of sufficient compensation to make
us renounce the territory of the Chaco and the possibility,

154
although remote, of recovering our own port on the river." ^
Apparently, Alvlstegui had supported a suggestion that the
Chancellory seek to encourage a neutral bloc within the
Conference, consisting of Chile, Peru, Brazil, and the
United States, that would seek to pressure Paraguay into a
settlement. Bolivia had approached the United States on
this possibility without success.1-^ This abortive strategy
illustrated Bolivia's ambivalent attitude toward Argentina
during the Chaco Peace Conference. Finot attempted to win
Buenos Aires to the Andean cause. His successor, Vaca
Ch£vez, considered the possibility of siding with a bloc
within the Conference to override Argentine Influence.
Increasingly, the Bolivian delegate's position in
the negotiations was becoming more difficult. The
divergence of views between Finot and Alv£stegul was
accentuated by the Chairman of the Conference, Saavedra
Lamas, who regarded the Bolivian delegate as an obstacle to
success in the negotiations. On several occasions the
■^Slote 268/205, to La Paz, Alvlstegui, Deoember 7*

1937, "Delegacion de Bolivia a la Conferencia de Paz,
correspond, envlada a la Cancilleria" (Enero-Dieiembre 1937),
ABFM.
of Conversation, Washington, Sumner

^ ^ M e m o ra n d u m
Welles, October 19, 1937, F&, V (1937), 26.
148
Argentine Chancellor expressed his desire that Finot assume
leadership of the Bolivian delegation.1^
In early February 1938 Argentine Foreign Minister

Saavedra Lamas made a last attempt to obtain a settlement
of the territorial dispute, proposing to Finot that, as a
transitory arrangement permitting the immediate construction
of the Yacuiba-Santa Cruz railroad, Paraguay could retire
from the occupied road in return for territorial
compensation farther to the north. ^ 7 Argentine special
envoy Horacio Carrillo was despatched to La Paz with this
proposition which recommended a frontier along the
D'Orbigny-Ravelo-Bahfa Negra line.
Bolivian Foreign Minister Diez de Medina, however,
told Carrillo that the formula was unacceptable because it
amounted practically to the conversion of the line of hltos
into the boundary line and even deprived Bolivia of a free
port on the Paraguay. The Chancellor also reminded the
Argentine representative that the negotiations were in the
hands of the Peace Conference
■^^Note 266/203, to La Paz, Alv^stegui, December 7 ,

1937* "Delegacidn de Bolivia a la Conferencia de Paz,
correspond, enviada a la Canciller£a" (Enero-Diciembre 1937),
ABFM.
157note 22, to La Paz, Finot, February 1, 1938,

"Legacl6n de Bolivia en la Argentina" (Enero-Abril 1938),
ABFM.
^^Deapatch 64l, to Washington, Braden, February 17,

The Carrillo visit to La Paz in February 1938
indicated two things. First, the Finot policy of
rapprochement with Argentina had reaped few immediate
benefits in the Chaco dispute. Saavedra Lamas was unwilling
or unable to persuade the Paraguayans to retire very far
from their advanced positions. Second, Bolivia*s policy in
February 1938 still maintained much of its original
firmness. Dlez de Medina and AlvAstegui received commenda
tions in February from the Centro Naclonal de Propaganda jr
Defensa Naclonal, a patriotic civic organization, for their
performances in defense of Bolivia's rights in the Chaco.*59
At the same time, the Bolivian Chancellory announced that a
special commission had been organized to prepare the
nation's case before The Hague Court; Tomis Manuel Elio was
named chairman of the group.
This refusal on Bolivia's part to capitulate before
Paraguay's intransigence with respect to substantial
territorial concession has many explanations. The Andean
1938 (DS)724.34119/1233; Note 60, to AlvAstegui, Diez de

Medina, February 8 . 1938, "Correspond, recibida de la
Cancillerla" (1938), ABFM.
*59Note 25, to Alvlstegui, Diez de Medina,

February 25, 1938, "Correspond, recibida de la Cancilleria"
(1938), ABFM. The Centro Naclonal de Propaganda y Defensa
Naclonal was a civic organization established in l92*TTb "
promote patriotic causes. Its membership included many of
the nation's industrial, banking, social, and political
leaders. (El Dlarlo, April 22, 1936, p. 4.).
150
nation may have been encouraged early In 1933 by the
likelihood that her old nemesis, Saavedra Lamas, would be
replaced as foreign minister as the result of the change of
government In Argentina scheduled for February 1933. Elio's
reappearance on the scene as chairman of the special
arbitration commission, more than a year after the
September 1933 episode with Finot, perhaps indicated that
more serious consideration was being given to this possible
course of action. Then, too, Bolivia had undertaken a
program of rearmament In the latter half of 1937.
In March 1938 AlvAstegui reported to his government
that the Conference had Initiated a phase of Intense
negotiations to reach a final settlement and that he was
being submitted to severe pressures to renounce the
nation's port aspiration.^ 0 "Would the national govern
ment be willing to accept a settlement that did not Include
a sovereign port ?11 he asked. For some time, AlvAstegui and
Finot had told the mediators that they thought the
government would accept a free port in place of a sovereign
port. Therefore, what AlvAstegui was really asking,
apparently, was whether or not the government was now ready
to change Its official policy. The time for decision had
l60flote 90/ 83/ 38, to La Paz, AlvAstegui, March 15,

1938, "Delegaclon de Bolivia a la Conferencla de Paz de
Buenos Aires” (Enero-Mayo 1938), ABFM; Note 97/89/38, to
La Paz, AlvAstegui, March 22, 1938 (same volume as Note
90/83/38.
151
come.
Diez de Medina's answer was ambiguous. Officially,
the government was not prepared to relinquish its demand
for a sovereign port. However, If this objective was
unobtainable, the Bolivian government would consider a
formula providing for a free port and sufficient territorial
compensations. Most importantly, the Foreign Minister
declared that a settlement without a sovereign port would
be preferable to another war. All viable proposals that
"do not contend against the interests of the country or
against its prestige and dignity must be considered ."1^1
The AlvAstegui-Diez de Medina dialogue continued
throughout March and April 1938* AlvAstegui persistently
reiterated his solidarity with "the policy of firm defense
of the material and moral integrity of our country" and
declared that the Instructions directing him to seek for
Bolivia a sovereign port "mark the only policy to which I
can lend my collaboration."1**2 Diez de Medina argued that
multiple reasons warranted "a reexamination of our policy"
among which were the possible consequences of a sovereign
.^^Note 116, to AlvAstegui, Diez de Medina, March 23,

1938, Correspond, recibida de la Canclller£a" (1938),
ABFM.
^^Note 120/110, to La Paz, AlvAstegui, April 4,

1938, "DelegaclAn de Bolivia a la Conferencla de Paz de
Buenos Aires" (Bnero-Mayo 1938), ABFM.
153
port obsession, the scant practical advantages of a
"psychological port," and the possibilities of equivalent

compensations In other arrangements.1^ a note dated
ApriA 18 AlvAstegui, acknowledging that his position
differed fundamentally from that of the Chancellor, told
La Paz he would accept reassignment because "the weight of
my convictions is In me superior to every class of
consideration."1^
While this exchange of views between AlvAstegui
and Diez de Medina was going on, the Chaco Peace Conference
despatched special commissions to the capitals of Bolivia
and Paraguay to determine the maximum concession each of
those governments would make. The commission that
traveled to La Paz on April 6 , 1938, consisted of the
United States representative, Spruille Braden, Uruguay's
Manlnl Rios, and Brazil's Orlando Lelte Rlbeiro. The
commission's proposal for a boundary was immediately
rejected by Chancellor Diez de Medina who informed the
special delegation that his government's policy had two
objectives, the reintegration of Bolivian sovereignty on
^^Note 134, to Buenos Aires, Diez de Medina,

April 18, 1938, "Correspond, recibida de la Canclllerla"
(1938), ABFM.
l6Siote 144/127/38, to La Paz, AlvAstegui, April 18,

1938, "DelegaclAn de Bolivia a la Conferencla de Paz de
Buenos Aires"(Enero-Mayo 1938), ABFM.
the Paraguay River and the separation of Paraguay's forces
from Bolivia's petroleum zones.^ 5
As it turned out, Bolivia's "maximum concession" was
actually a series of concessions advanced by various sectors
or persons in the government. Braden reported that official
opinion was divided in two groups: (1) one, represented by
President Busch, wanted peace and would grant more generous
concessions in the interior but demanded Bahia Negra, and
(2) the group headed by the Minister of War "uninterested
in any settlement confident Bolivia with greater economic
and numerical strength having learned lessons of last war
can and should look only to a war of revenge."1^ In the
contest to see which group would determine official
Bolivian position, the latter group prevailed in a Junta
meeting on April 13. The official "maximum concession,"
therefore, was a boundary drawn from Linares on the
Pilcomayo to Ingavi and on to Puerto Pacheco (Bahia Negra)
with no payment to Paraguay.^67 Foreign Minister Diez de
Medina, however, told the commissioners that if the
Conference would offer Guachalla (considerably to the north
^ ^Note 135, to Buenos Aires, Diez de Medina, April

18, 1938, "Correspond, recibida de la Cancillerla" (1938),
ABFM.
l^Telegram 14, to Washington, Braden, April 12,

1938, FR, V (1938), 107-108.
^ T e l e g r a m 16, to Washington, Braden, April 13,

1938, FR, V (1938), 108.
154
and west of Linares, therefore, an additional concession),
27 de Novlembre, Ingavi, and Puerto Pacheco (Bahia Negra),
plus a Bolivian payment of 200,000 pounds sterling, he

168
would vigorously defend the offer. In a confidential
meeting between Braden and President OermAn Busch on the
night of April 13, the Bolivian President went even
further, pledging his word that he could and would obtain
the approval by the Junta and the incoming Congress of a
boundary from D'Orbigny (to the north of Ouachalla) to 27
de Novlembre, Ravelo, and Puerto Caballo, plus a 200,000
pound p a y m e n t . B r a d e n later described the lines offered
by Diez de Medina and President Busch as "more than fair to
Paraguay ."170
The most important aspects of the La Paz discussions
were, of course, the unofficial concessions advanced by
President Busch and Diez de Medina. In none of the
concessions, however, was Bolivia willing to relinquish her
port demand. Busch indicated, however, that Puerto Caballo
would be accepted instead of Bahia Negra. Andean use of the
declaration of August 3, 1932, recognized in the protocol of
l68Ibid.
l8%elegram 18, to Washington, Braden, April 14,

1938, (DS)724.34119/1305.
170Telegram 93* to Washington, Braden, April 19,

1938, PR, V (1938), 110.
155
June 12, 1935* continued. Diez de Medina told the
commissioners that the nonrecognition doctrine precluded
Bolivia's acceptance of their first formula.1^1
While the mediators formulated plans for a final
attempt to promote a settlement between the parties, the
Diez de Medina-AlvAstegui difference resulted in a change
of delegates in Buenos Aires. Following the Conference
commission's April trip to La Paz, AlvAstegui was Instructed
to support in the negotiations the government's official
position (Linares, Ingavi, Bahia Negra), although he was
granted permission to consider modifications to the north
of Linares and toward 27 de N o v l e m b r e . 1^ This vagueness
apparently was the Foreign Minister's attempt to correlate
the Junta's decision with his personal proposal. His
understandable lack of candor, however, placed AlvAstegui
in a difficult position. On April 25 AlvAstegui informed
the Chancellory that the commissioners who had returned
from La Paz were claiming that Bolivia's concessions had
been greater than those reported by Diez de Medina. The
line quoted by the commissioners and to which AlvAstegui was
^lcircular D.P.D. 9» to Buenos Aires, Diez de

Medina, April 19, 1933, "LegaciAn de Bolivia, Buenos Aires,
circularss de M. de R.R.E.E. de Bolivia" (Marzo 1935-Mayo
1938); Telegram 12, to Washington, Braden, April 11, 1938,
PR, V (1938), 107.
*^Note 135* to AlvAstegui, Diez de Medina, April 18,

1938, "Correspond, recibida de la Canciller£a" (1938), ABFM.
156
referring was, in fact, the boundary offered unofficially by
the Foreign Minister. AlvAstegui, declaring that "the
boundary line accepted by Bolivia Is for me completely
unacceptable," said he would not sign an agreement

1 7 3
Incorporating such a frontier.
AlvAstegui's refusal to support the unofficial
proposal of Diez de Medina had been preceded by the
government's rejection of a personal formula that the
Andean delegate, himself, had suggested to the mediators.
It consisted of the Linares-Ravelo-Bahia Negra triangle.
The most objectionable aspect of AlvAstegui's formula,
according to the Foreign Minister, was that it carried the
frontier northward to Ravelo, a position dangerous to the

174
security of Santa Cruz. Yet, President Busch's maximum
concession to Braden had granted not only Ravelo, but
accepted Puerto Caballo in place of Bahia Negra!
Faced with AlvAstegui's stated refusal to sign an
agreement on the basis of concessions which Diez de Medina
had offered, the Chancellory had little choice but to
replace him. On May 9, 1938, AlvAstegui notified the
Conference that his reassignment to a diplomatic post in
1^^Note 151/ 133/ 38, to Diez de Medina, AlvAstegui,

April 25, 1938, "Delegacion de Bolivia a la Conferencia de
Paz de Buenos Aires" :(Enero-Mayo 1938), ABFM.
174(jirCuiar D.P.D. 9, 0£. clt., p. 4.

157
Europe required his immediate departure. Enrique Pinot,
Bolivia's minister in Buenos Aires, was appointed to the
presidency of the delegation. On the day on which he was
officially Incorporated into the Conference, May 16, the
Conference chairman, Argentine Foreign Minister Joa4 Marla
Cantllo, issued invitations to the chancellors of Bolivia
and Paraguay to travel to Buenos Aires for one additional
effort to reach a final peace settlement.
IX. THE PEACE TREATY AND ARBITRAL AWARD
Bolivia's new delegate at the Conference, Enrique
Finot, recommended that Diez de Medina accept the
invitation to enter into discussions in Buenos Aires, but
warned against excessive optimism regarding the forthcoming
talks.^75 He reported that he did not share the conviction
held by certain mediators that the Argentine government of
Roberto M. Ortiz was prepared to exert firm pressure on
Paraguay to make additional concessions. His own plans for
obtaining Argentine support in the Chaco discussions had
been frustrated by domestic opposition to closer ties with
that country, by the Army's refusal to permit railroad
related studies by Argentine engineers in strategic frontier
175Note 177/147/38, to La Paz, Finot, May 17, 1938, *

envlada a la Cancillerla" (Enero 1938-Enero 1939), ABFM.
158
areas, and by Diez de Medina's rejection of Carrillo's
formula in February 1938. * ^ Braden shared Finot's
appraisal.
In the last analysis, Paraguayan acceptance of the

Conference proposal will depend upon degree of
pressure put on Paraguay by Argentina. While the
promises in this particular made to mediators by Ortiz
and Cantilo are satisfactory, nevertheless, I am
disturbed because I sense a certain underlying
timidity (especially in the latter) in their taking
the steps recognized as necessary.177
On May 27, several days after the arrival in Buenos
Aires of Foreign Ministers Eduardo Diez de Medina and
Cecillo Baez, the Conference presented its proposal for
a boundary settlement. By the terms of the formula, the
dividing line would extend from Esmeralda on the west
(below D'Orbigny on the Pllcomayo River) through 27 de
Novlembre and a point located between Ingavl and Ravelo
to kilometer 1,257 on the Paraguay River slightly upstream
from Bah£a Negra but below the mouth of the Otuquis River
(See Figure 4, p. 159). Bolivia would receive Puerto
Caballo and pay two hundred thousand pounds sterling to

178
Paraguay. Foreign Minister Diez de Medina accepted the
J Note 119, to La Paz, Finot. May 10, 1938,

"Legaclon de Bolivia en la Argentina'1 (Mayo-Agosto 1938),
ABFM; Note 122, to La Paz, Finot, May 17, 1938 (same volume
as Note 119).
177Telegram 113, to Washington, Braden, May 18, 1938,

VR> v (1938), 122.
Conference Proposal, 27 May 1938
Paraguayan Proposal, 24 June 1938
FIGURE 4
PROPOSALS FOR SETTLEMENT OF THE TERRITORIAL QUESTION

MADE BY THE CHACO PEACE CONFERENCE AND BY PARAGUAY
DURING THE FINAL PHASE OF NEGOTIATIONS AND THE
ARBITRAL AWARD OF OCTOBER 10, 1938
*The Chaco Peace Conference, A Report of the

Delegation of the tJnlted States of America to the Peace
Conference Held at Buenos Aires, July 1, 1935-January 23
1939 (Washington; Government Printing Office, 1940), p.
#Davld H. Zook, The Conduct of the Chaco War (New

York; Bookman Associates, 1560).
160
Conference'a proposition without reservations on May 31.
Paraguay replied, however, that the proposal was unsatis
factory and categorically rejected the cession to Bolivia
of any point on the river Paraguay helow tAe Otuquis.1^
The mediators continued their efforts; additional
pressure was placed on the two parties, especially Paraguay.
Although Paraguay's representatives agreed to continue
negotiations on the Conference line of May 27, less the
littoral zone, their counterproposal of June 24 was
described by neutral Conference members as "totally ,

iQa
unacceptable." The mediators were willing to ask
Bolivia to sacrifice her river port demand, but they made
clear to Paraguay their expectation of Guarani conformity
with the Conference line in the interior, Bolivia
responded to the June 24 counterproposal with a memorandum
angrily denouncing Paraguay's Intransigence and withdrawing

lDi
her acceptance of the Conference line of May 27. Diez
de Medina agreed to suspend the publication of the memo,
however, while the Conference sought a more satisfactory
^^Telegrara 136, to Washington, Braden, June 1, 1938,

FR, V (1938), 130.
1 Qa
Telegram 164, to Washington, Braden, June 24,
1938, FR, V (1938), 146.
1 Qi
For text, see Bduardo Diez de Medina, o£. cit.,
p. 363; Telegram 166, to Washington, Braden, June 25‘7"T938,
FR, V (1938), 147.
l6l
proposal from Paraguay.
By June 28 the terms of a satisfactory compromise
agreement had been almost worked out. Bolivia would
relinquish Puerto Caballo and accept slight modifications
in the Conference line of May 27; Paraguay would agree to
a line in the interior of the Chaco approximating the
one proposed by the Conference on May 27 and ask for no
cash payment. Braden reported " ... a meeting of the minds
has been almost achieved. The peace depends on our
discovering the right procedure to follow."1®^
The "right procedure" that took shape over the next
few days has recently been called a "gem of diplomatic
finesse" by Bryce Wood.1^ Only its essential elements can
be described here. Actually Braden's quote immediately
above perfectly describes the dilemma; the mediators and
the parties had agreed essentially upon a boundary line.
What was needed was a procedure that would make the
settlement palatable to public opinion in both nations.
The Conference decided that the objective could be achieved
by ostensibly submitting the zone lying between the
Conference line of May 27 (less the littoral zone) and the
line of Paraguay's counterproposal of June 24 to an
l82reiegram 171 » to Washington, Braden, June 28,

1938, PR, V (1938), 153.
^Sjjryce Wood, o£. clt., p. 150.

arbitration ex aequo et bono, the decision being made by
the presidents of the six mediatory governments represented
by their delegates at the Peace Conference. However, it
was understood that the arbitral award would be the boundary
line accepted by both parties in prior secret agreements

184
with the mediators. According to the plan, the peace
treaty would be submitted to a plebiscite in Paraguay.
The raison d'etre for this procedure was, of course,
to allow the Paraguayan leaders to accept the compromise
boundary without having to bear full responsibility for the
concessions which it Involved. Provisions for arbitration
and for approval by plebiscite permitted the delegates
to share that responsibility both with the mediatory
governments and with the Paraguayan populace.
Final arrangements were worked out early in July.
The United States delegate reported the following on
July 4s
Both parties have agreed secretly with mediators

Individually that the line of award in the arbitration
under consideration shall be Esmeralda, 27 of November,
Captain Ustares, Palmer [Palmar] de las Islas f-,-j
^^Braden first reported the plan to Washington on

June 29, 193$, in the following reference. Telegram 172,
to Washington, Braden, June 29# 1938, FR, V (1938), 153.
For a good analysis of the many aspects of the plan, see
Wood's discussion— Bryce Wood, o£. clt., p. 150.
163
Chovoreca, mouth of Otuquis.1®^
On July 9 the draft treaty was Initialed by the foreign
ministers of Bolivia and Paraguay. After approval of the
draft agreement by the governments of the two states, the
Treaty of Peace, Friendship, and Boundaries between the
Republics of Bolivia and Paraguay was signed in Buenos
Aires on July 21, 193d.
In accordance with instructions from La Paz in the
final days of June, Bolivia had agreed to abandon her
demands for a littoral zone on the Paraguay River in
return for Paraguay's acceptance of the balance of the

i fife
Conference line of May 27. However, the Andean
spokesmen in Buenos Aires were particularly concerned in
the final phase of negotiations that the final arbitral
award conform with the line accepted by the two parties,
especially on the west in the region near the Villa Montes -
Boyulbe road and Camlrl. At first, Bolivia wanted to have
the western line of the award (Esmeralda, 27 of November,
Captain Ustares) written into the arbitral compromise.
On the night of July 5, agreement was reached that
^^Telegram 182, to Washington, Braden, July 4, 1938,

FR, V (1938), 160.
186
A W Telegrara 172, to Washington, Braden, June 29,
1938, FR, V (1938), 153*
^^Telegram 182, loo, cit.

164
guarantees of the western line to be awarded would be given
in secret notes between the parties and the Conference.1®®
At the time that the draft treaty was Initiated on July 9,
a secret agreement also was signed which stated that the
arbitral award would not deviate from the boundary fixed

189
by common.agreement. On July 19 Diez de Medina notified
Conference Chairman Jos6 Marfa Cantllo that Bolivia would
sign and ratify the treaty always with the understanding
that the secret convention that was signed on July 9
would form part of an Indivisible whole with the formal
treaty.19**
Bolivia's determination not to accept arbitration
without prior guarantees with respect to the eventual
award rested on her unwillingness to consider major
concessions In the May 27 Conference line other than
relinquishing the littoral zone. This position must be
understood In part by the friction that developed between
Enrique Finot and Foreign Minister Diez de Medina soon after
the letter's arrival in Buenos Aires. Finot had opposed the
1®®Telegram 184, to Washington, Braden, July 6 , 1938,

(DS)724.34119/1448.
l89Note 174/156/48, to La Paz, Finot, July 12, 1938,

envlada a la Canclllerla" (Enero 1938-Enero 1939), ABFM;
Diez de Medina, De un slglo al otro, op. clt., p. 368.
190Diez de Medina, ibid.

163
acceptance of the May 27 line without reservations for fear
that the Conference would exploit Bolivia's approval to
seek additional concessions.191 Diez de Medina, however,
accepted the Conference proposal unconditionally. When
Paraguay rejected that formula, the Foreign Minister was in
an awkward position vis-a-vis Finot. Consequently, he
assumed a firm stance in defense of the May 27 line,
agreeing to make concessions only upon instructions from
La Paz.
The strategy used by Bolivia in the discussions of
June and early July had several dimensions. Most
importantly, Finot and Diez de Medina attempted to emphasize
and utilize Bolivia's sound record of compliance with
earlier protocols, of cooperation with the Conference, and
of conciliatory attitude as opposed to Paraguay's
intransigence. Her objectives were to win wider moral
support, especially from the Buenos Aires press, and to
place new pressure on the mediators to break down Paraguay's
resistance to concession. To gain these objectives, Bolivia
wanted the Conference to place on record Paraguay's
rejection of the May 27 proposal in contrast to the Andean
191Note 166/148/38, to La Paz, Finot, June 14, 1938,

"Delegacl6n de Bolivia a la Conferencla de Paz, correspond,
envlada a la Cancillerla" (Enero 1938-Enero 1939), ABFM;
Note 174/156/38, to La Paz, Finot, July 12, 1938 (same
volume as Note 166/148/38).
acceptance.1^2
The Andean spokesmen also pointed out that the
Andean nation would prepare for war If the mediators did
not comply with the obligation they had assumed In the
protocol of June 12, 1935, that is, to continue their
efforts until agreement was reached on an arbitral

Io q
compromise. The Conference was aware that Bolivia had
initiated a rearmament program in 1937» that the newly
Installed National Convention had just authorized the
government to raise a million pounds sterling primarily
for the purchase of arms, and that Bolivian troops were

19k
being concentrated in the Chaco area. However, President
Busch's sympathies in favor of a peaceful settlement were
also known, and the Chaco hero's position had been
strengthened on May 27 by his election to the presidency
by the National Convention. Busch's willingness to
sacrifice the river port, Paraguay's concession on the
western line, and the arbitration plan devised at the
19%elegram 140, to Washington, Braden, June, 1938,

PR, V (1938), 133; Telegram 182, to Washington, Braden,
July 4, 1938, FR V (1938), 159; Note (unnumbered), to Joel
Marla Cantilo,“Eiez de Medina, July 2, 1938, "Delegaci6n de
Bolivia a la Conferencla de Paz. correspond, enviada a
varios (Enero 1935-Ootubre 1938), correspond, a Conferencla
de Paz" (Julio 1935-Bnero 1939), ABPM.
^^Telegram 145, to Washington, Braden, June 7, 1938,
PR, V (1938), 136.
^•^^Despatch 75. to Washington, Robert 0. Caldwell,

November 19, 1937 (DS)724.34119/1122; Despatch 618, to
Conference enabled the mediators to promote the treaty of
July 21, 1938.
In the Peace Treaty of July 21, 1938, Bolivia and
Paraguay agreed that the dividing line between them would
be determined by arbitration aequo et bono, the decision
to be awarded within two months of the date of the treaty's
ratification. Immediately upon notification of the award,
the parties were required to organize a mixed commission
to mark the frontier. The governments also agreed to
proceed to the accreditation of diplomatic representatives
within thirty dayB after the arbitral decision. Paraguay
guaranteed to Bolivia free transit of merchandise through
its territory, especially Puerto Casado, where the Andean
nation was authorized to establish customs houses and to
construct depots and warehouses. The two governments were
later to negotiate bilateral commercial and economic
conventions. Both countries renounced all claims deriving
from responsibilities for the war, and the nonaggression
pledge of the June 12, 1935 protocol was renewed.
The Bolivian response to the signing of the Peace
Washington, January 18, 1938 (06)724.34119/1186; Despatch

256. to Washington, Walter T. Prendergast, June 29, 1938
(08)724.34119/1490 cited in Bryce Wood, op. clt., p. 148;
Telegram 182, to Washington, Braden, July 4, 1938, PR,
V (1938), 160. —
195rhe Chaco Peace Conference, op. clt., p. 148.

16$
Treaty of July 21 was one of resignation and disappointment.
Enrique Finot, writing from his post in Buenos Aires, said
that the Bolivian sacrifice represented by the agreement
was necessary in order to allow the country to regain its

196
tranquility and to reestablish its economy. From La Paz,
United States Charg£ d'Affaires Walter Frendergast reported
that no public celebrations were held nor were expressions
of gratitude forthcoming; rather, the official and public
reaction to the treaty was that Bolivia once again had
been submitted to territorial sacrifices and mutilation.
The only public manifestation related to the coming of the
peace was the ceremony of August 23, 1938, In which the
municipality conferred upon Foreign Minister Eduardo Diez
de Medina and former Foreign Minister Tom&s Manuel Elio

198
the honor of "Favorite Son of La Paz."
If no joy pervaded the Bolivian capital as a result
of the peace treaty, its terms were nevertheless acceptable.
On August 10 the National Convention approved the agreement
of July 21 by a vote of 102-9; the plebiscite held the same
day in Paraguay ratified the treaty by an overwhelming
196Note 17V156/38, loc. clt.
^Despatch 280, to Washington, Walter T. Prendergast,

July 25, 193S (DS)724.34119/1525.
-^Despatch 315* to Washington, Caldwell, August 31*

1938 (DS)724.34119/1606.
16$
margin, 135*385-13*204. ^ 9 Ratifications were exchanged in
Buenos Aires on August 29. The Chaco Arbitral College was
constituted on September 2 and on October 10, 1938, Issued
its decision, fixing the definitive boundary between the
two countries in accordance with the agreement that had
been reached between the parties and the Conference in
Buenos Aires. Both countries accepted the award
unconditionally and proceeded to the tasks of evacuation and
occupation, completing this by December 28, 1938. Diplo
matic relations were resumed on November 26. After more
than three and a half years of labor* the Chaco Peace
Conference dissolved on January 23, 1939 .200
X. ANALYSIS AND CONCLUSIONS
The central problem for Bolivian diplomacy during
the years 1935-1938 was the Chaco dispute with Paraguay.
That is not to say, of course, that the Andean nation had
no other important foreign policy concerns or that no
significant issues were pending with other nations. But
the statements and the activities of Bolivian officials
during this period show clearly that the conflict with
199porfirlo Diaz Machlcao, Historia de Bolivia. Toro,

lusch, Quintanilla, 1936-1940, Vol. TV- (La Paz:"'Editorill
"Juventud", 1957J* 83-o4; The Chaco Peace Conference, op.
clt., p. 154.
^ Qrhe Chaco Peace Conference, op. cit., p. 30.

]
I
I
170
Paraguay was of primary Importance. Therefore, the Chaco
negotiations In Buenos Aires often affected and sometimes
determined Bolivia's diplomacy In other areas.
The way In which much of Bolivia's foreign policy was
influenced by the Chaco problem can be Illustrated with
several examples. It has been noted already that a steady
stream of instructions flowed from La Paz to the missions
In the field, directing them to realize an active
propaganda In behalf of Bolivian positions at Buenos Aires
while seeking to enlist the support of the other American
governments in the same cause. In addition to this
activity in bilateral relations, Bolivia also sought to
utilize inter-American and International organizations and
conferences in support of its Chaco policy, specifically,
the Inter-American Conference for the Maintenance of Peace
in Buenos Aires (1936) and the Red Cross Conference in Rio
de Janeiro (1935). In November 1935 the Bolivian Ministry

of Foreign Relations, in reporting its unsuccessful attempts
to obtain a seat for the nation on the Council of the League

of Nations, explained its action by stating, "The desire of
Bolivia to obtain its entrance to the Council of the League
was and is rooted in the importance of the Chaco problem.”
In mid-July 1936, the Bolivian delegation at the League of
201Circular 5985* from La Paz, Luis Fernando

Guachalla, November 8, 1935* "Circulares" (Marzo de 1935 a
Enero de 19^0), ABFM.
171
Nations was Instructed, with respect to the Italian-
Ethlopian conflict, to guide its conduct by the principles
which support the Juridical position of Bolivia at the

202
Chaco Peace Conference. But while these marginal
activities continued, the fundamental Chaco negotiations
were centered, of course, in Buenos Aires. Consideration
now must be given, therefore, to an analysis of Bolivia's
Chaco policy at the Peace Conference.
The cornerstone of Bolivia's Chaco policy was to
consider the Chaco Peace Conference and the provisions of
the peace protocols (June 1935* January 1936) as the
counterweights to Paraguay's military position and
diplomatic intransigence. Bolivia pinned her hopes on a
favorable interpretation and an effective enforcement of
those protocols by the Conference. The provisions of the
protocols relied on most heavily by the Bolivian government
were those which affirmed the declaration of August 3, 1932,
provided for Juridical arbitration before The Hague Court,
if efforts for direct agreement failed, and guaranteed the
continuation of the Conference until agreement on an
arbitral compromis was reached. In order to strengthen her
position, the Andean nation, while firmly defending certain

key interests, sought to compile a conciliatory record of
202circular 37, to Buenos Aires, July 2, 1936,

"LegacliSn de Bolivia, Buenos Aires, clrculares de M. de
R.R.E.E. de Bolivia" (Marzo 1935-Mayo 1938), ABFM.
172
cooperation with the Conference and of compliance with the
mediatory body's resolutions and with protocol agreements.
In doing this, Bolivian leaders hoped to encourage the
Conference to persuade Paraguay to make the concessions
necessary for reaching a satisfactory settlement (In
Bolivian terms) either by a direct agreement or through
juridical arbitration.
One of the clearest statements of this policy,
especially with regard to reliance on the Conference, Is
contained In the slate of Instructions directed to Charg£
d 1Affaires Justo Rodas Egulno in Buenos Aires by Foreign

i
Minister Luis Fernando Quaeha11a early In 1936.
— Our foreign policy must seek through all the means

possible: First, to give force and authority to the
Conference of Buenos Aires so that It will fulfill Its
Juridical work; second, to prevent any diplomatic
factor from becoming an obstacle or pretext for
detaining the normal development of Its {the
Conference's! functions; third, to form a solid and
unobjectionable awareness that the Chaco conflict
continues to represent a 'causus belli' within the
continent as long as the territorial problem has not
been solved; fourth, Bolivia does not deviate from
the principle of law and Is disposed to adjust her
conduct to the spirit and letter of the Juridical
Instruments worked out In Buenos Aires,203
Ouachalla's message also Indicated that Andean policy
by early 1936 had shifted away from Elio's strategy to force
% o t e 78 , to Buenos Aires, Luis.Fernando Ouachalla,

April 14, 1936, "Argentina, Legaclon en Argentina" (Agosto
de 1934 a Novlembre de 1936), ABFM.
the Conference into a deadlock In direct negotiations in
hope of gaining an arbitral solution. From that time,
Bolivian dependence on the Conference, despite the almost
universal criticism of its slow progress, continued
throughout the negotiations until the signing of the peace
treaty. Flnot's concern with preserving the Conference
has been noted in connection with his action at the
Maintenance of Peace Conference. In 1937 Bolivian Foreign
Minister Fablin Vaca Chivez told United States Minister
Robert 0. Caldwell that the Andean representative in Buenos
Aires had been instructed to further the work of the
Conference in every possible way.
As a part of this policy, Bolivia's delegates at
the''Conference did not fail to remind the neutral members
of their country '8 record of cooperation. In accepting the
Conference's resolution of April 23* 1937* on security
arrangements, Alvistegui wrote:
... Each and every resolution and even simple

suggestions of the mediatory organization have been
promptly executed or heeded by the Government of
Bolivia which, on this occasion as on others, has
given to the Conference concrete proofs of its
loyal collaboration not even falling, when
necessary, in sacrifices of its aspirations or needs
for the accomplishment of the greater purpose of
^^Despatch 56, to Washington, Caldwell, October 29,

1937, FR, V (1937)* 31-32.
17*
reestablishing peace ...
205
In the final phases of the negotiations, Finot and Dlez de
Medina again reminded the mediators of the Andean nation's
conciliatory performance through the years, warning that
if such a course proved futile, another policy was
indicated.
The delays and disappointments encountered in the
course of the negotiations prompted many Bolivian leaders
to believe that the nation's pro-Conference, pro-protocol
Chaco policy was not adequate without some complementary
strategy. Although several alternatives were considered,
the most important complementary strategy was the effort
to develop closer political and economic ties with the
bordering nations, especially Argentina and Brazil. While
there is evidence that Tejada Sorzano's foreign minister,
Luis Fernando Ouachalla, was Interested in moving Bolivia's
relations with the bordering states onto a more practical
plane, it was Enrique Finot who gave real Impetus to this
policy. Finot, convinced of Argentina's decisive role in
the dispute, attempted to offset Argentine Interests in
Paraguay by creating similar Interests in Bolivia. By
confiscating Standard Oil Company's properties, Finot
believed that the Andean nation would gain a powerful
2 °5rhe Chaco Peace Conference, op. clt.. p. 115.

175
resource with which to attract Argentina's support in the
Chaco issue. The agreement on railroad studies also was
designed to strengthen Bolivia's demand that Paraguay
withdraw along the western line in the Villa Montes-Boyuibe
sector. Reference also has been made to the policy of
closer ties with Brazil implemented by Ostrla Gutierrez
in the 1936-1938 period.
Another course of action considered by Bolivia
during the negotiations was that of taking the entire
dispute to The Hague Court through unilateral recourse.
The alternative of juridical arbitration, as provided for
by the protocol of June 12, 1935* was an Integral aspect
of the basic Bolivian policy described above. However,
an arbitral settlement, in accordance with the terms of
the June 12 protocol, contended against two obstacles,
Paraguay's opposition to juridical arbitration, especially
before the European court, and the opinions of the mediators
that a direct agreement offered the best possibility for a
satisfactory settlement. Hence, Bolivian delegates, from
Elio to Alv^stegul, suggested to La Paz that it study the
possibility, and prepare for the eventuality, of taking
the case before the Permanent Court of International Justice
unilaterally without a new arbitration compromise. Although
several legal studies commissioned by La Paz upheld Bolivia's
right to take the case before The Hague Court on the basis
of the protocol provisions and of earlier agreements in
176
which both nations had accepted the Jurisdiction of the
Permanent Court of International Justice In their common
disputes, the Bolivian Foreign Ministry never adopted
this policy.
The possibility of a military solution to the
dispute was not entirely ruled out In La Paz. As Bolivia's
hope for effectual action by the Conference waned in late
1937 and 1938 j the Andean government decided to Improve
It8 military posture. A program of rearmament was initiated.
Foreign Minister Dlez de Medina reported to Alv£stegul in
April 1938 that Bolivia's military position In the Chaco
region had been greatly strengthened with the increase by
five times of the number of effectives there. Yet,
this alternative also failed to gain the approval of Andean
decision-makers. Bolivians were a war-weary people; they
also were aware that military action had not served the
nation well in the past. Perhaps more importantly,
President Germ&n Busch, Bolivia's leader during the final
phases of the negotiations, was deeply committed to a
peaceful settlement.
Bolivia's Chaco policy, therefore, did not ignore
the economic and military instruments of foreign policy.
On the contrary, the nation's very awareness of her weakness
s°^Note 126, to Buenos Aires, Dlez de Medina, April

2, 1938, "Correspond, reclbida de la Canclllerla" (1938),
ABPM.
m
In these areas must have convinced the nation's leaders that
a policy utilizing the legal and moral Instruments was the
best course for Bolivia to follow.
How does one appraise Bolivia's Chaco diplomacy? To
make an adequate evaluation. It is necessary to consider the
fact that In the negotiations at Buenos Aires Paraguay held
all the cards. She not only possessed the disputed
territory, but also held many more prisoners-of-war than
did Bolivia and occupied the strategic Villa Montes-Boyulbe
road. Asuncl 6n's military successes had convinced most
Paraguayans that "they won the war, that the Chaco Is
rightfully theirs, that It would be reprehensible to
withdraw one Inch from their present positions or extend
any port facilities to Bolivia and that were hostilities
renewed, they would again be victorious. In short, few
Paraguayan leaders were willing to make the slightest
territorial concessions and even those who were most
conciliatory refused to yield for fear of the political
consequences. The basic problem of the negotiations,
therefore, was how to get Paraguay to make territorial
concessions. Given this set of circumstances, Bolivia had
a severely limited number of alternatives available to her.
^ S p r u i l l e Braden's description of the Paraguayan

attitude. Despatch 406, to Washington, Braden, April 20,
1937, *R, V (1937), 5.
178
The set of factors that severely limited the
alternatives available to La Paz in the Chaco negotiations
also restrict the scope of any critique of Bolivian policy.
A Just evaluation of Andean diplomacy requires that it be
considered vilthin the reasonable limits of possible action.
One of the weaknesses which first appeared in
Bolivia's Chaco diplomacy* especially in the early months
of negotiations* was a lack of realism. This shortcoming
was apparent in the nation's position on the territorial
issue. Andean delegates attempted to defend the thesis
that the declaration of August 3* 1932* recognized in the
June 12* 1935 protocol* completely nullified the results
of the military encounter. Bolivia also sought extreme
objectives in her first proposals for a territorial
settlement— Fuerte 01impo-Linares. Reference has been
made to the political considerations within Bolivia that
may account for such unwarranted optimism.
These early Andean objectives in respect to the
territorial question may be Justified as tactical
objectives designed to express Bolivia's maximum aspirations*
to indicate that Paraguay would be expected to make sub
stantial concessions* and to give Bolivia adequate latitude
for bargaining. However* it appears that Bolivia's

extreme position may well have hardened Paraguay's
determination to yield not an inch of the occupied territory.
Had Bolivia been willing to acknowledge the changes forged

by combat, It is not unlikely that the Paraguayan leaders,
General Estlgarrlbia and President Ayala, might have
considered concessions. At the same time, Bolivia's
refusal to acknowledge the results of the war prevented
her from assuming, right from the beginning of negotiations,
a conciliatory and reasonable position that probably would
have impressed the neutral delegates far more than did the
visionary posture that was taken. It is unlikely, however,
that a more realistic stance In these early months would
have produced better results than the ones eventually
obtained.
To this lack of realism must be added shortcomings
in coordination and communication. When Carlos Romero
replaced Elio as Bolivia's delegate at the Conference in
October 1936, he reported to Finot that, according to the
General Martinez Pita report, a serious breakdown in com
munication regarding transit on the Villa Montes-Boyulbe
road had occurred between the Bolivian High Command in the
Chaco, the government in La Paz, and the delegation in
Buenos Aires. During 1937 David Alv£stegul frequently
reported that he lacked information about developments in
the Chaco and in domestic national affairs, a deficiency
which he said hampered his effectiveness at the Conference.
The Bolivian Foreign Ministry established no procedure for
regularly informing the delegation at Buenos Aires about
such events or for sending instructions with respect to

i8q
them.
La Paz alao failed to support the negotiations at
Buenos Aires at all times with adequate marginal diplomatic
activity. An obvious blunder in overall strategy appears
in the fact that, for considerable periods during the
years 1935-1937* the Andean government did not bother to
name chiefs of mission in Rio de Janeiro and in Buenos
Aires, thus forfeiting opportunities to effectively promote
closer ties with these highly Important states.
Despite these weaknesses and the adverse circum
stances faced at Buenos Aires, it must be agreed that
Bolivian diplomacy was moderately successful. By means of
a persistent reliance on Conference action and dependence
upon the promises of the peace protocols, Bolivia managed
to obtain a settlement providing for a Paraguayan withdrawal
of about sixty miles from the oilfields of Camlrl and the
Villa Montes-Boyuibe road. Paraguay was allowed to advance
a comparable distance in the less strategic northern
sector. Bolivia also gained free port facilities at Puerto
Casado on the river Paraguay. There can be little doubt,
therefore, that the Bolivian policy of supporting the
Conference and the protocols was beneficial to the Andean

cause.
It is difficult to determine, however, Just how
much Bolivia'8 policy of economic rapprochement with

Argentina and Brazil affected the final settlement.
Bolivia's willingness to have the two countries participate
In the development of this potentially rich region was
undoubtedly a factor that encouraged them to support Andean
demands for some Paraguayan withdrawal. Perhaps more
importantly, improved Bolivian relations with Argentina
and Brazil provided the Andean nation with reasonable
assurances that Paraguay would not reopen hostilities
with a drive toward the Camlri ollwells or Santa Cruz.
Thus, Bolivian diplomacy at the Chaco Peace
Conference was creditable. As one Bolivian observer stated,
"Our successive retreats after three years left us with
theory and law opposed to consummated f a c t s . B u t in a
world of sovereign nations, intensely political questions
involving war and territory are seldom determined by law
and theory.
208Note 260, to La Paz, Luis Fernando Ouachalla,

September 22, 193S, "Legaci6n de Bolivia en E.E.U.U. de
America" (Mayo-Dielembre 1938), ABFM.
CHAPTER IV
BOLIVIA'S POST-CHACO WAR DIPLOMACY

(1935-1939)
Bolivian diplomacy In the period after the Chaco
War focused primarily on the Chaco Peace Conference.
Nevertheless, the Andean nation had wider concerns during
those years in the continuing diplomatic relations with
other American and extracontinental countries. In this
chapter consideration will be given to the subject of
Bolivian foreign relations in the 1935-1939 period apart
from the Chaco dispute.
The four-year period encompassed by the end of
hostilities in the Chaco War in June 1935 and the outbreak
of the war in Europe in September 1939 was a significant
era in Bolivia's history. Emerging nationalist and popular
forces wanted to transform the weak and poor country into
a "Patria Nueva." It was an era of experimentation in
military socialism under the guidance of the governments
of Colonel David Toro Ruilova and of Lieutenant Colonel
Oerm&n Busch. Constant tension existed between the political
sectors which favored rapid change through radical means
and the traditional groups which sought the restoration of
civilian constitutional government.
The diplomacy of those years reflected the mood of

163
the country. It, too, was Interested In fostering domestic

development and in correcting the national weaknesses that
had been so apparent in the military encounter with
Paraguay. Bolivia's postwar foreign policy was in no
sense the well-defined, coordinated, or consistent plan
of a single figure or party; rather, it was the product of
formulation by men who, in many respects, shared similar
ideas and perceived similar needs. To this loosely
coordinated set of ideas, Ostrla Gutierrez has given the
name Bolivia's "new policy," a diplomacy whose basic
concept was practical contacts with the nation's neighbors.
Bolivia's "new policy" consisted of establishing new
international economic relations and of strengthening
International political relations. In economic relations,
emphasis was placed on international railroad connections
and on petroleum exploitation and exportation. This
chapter will give particular consideration to the role of
petroleum in Bolivia's international relations, for during
this period, the Andean government expelled the Standard
Oil Company of New Jersey from Bolivia and confiscated its
properties. In political relations, Bolivia's primary
objectives were territorial guarantees and national security.

Paced with the consequences of her landlocked geographical
situation, Bolivia also placed special emphasis on the need
for free transit rights through the encircling territories.
Bolivia's post-Chaco War diplomacy will be described

184
in the following discussion In terms of Its objectives,
developments, and achievements. To accomplish this, a
historical and chronological approach will be employed.

? h re e of the four major sections of the chapter will
correspond to the three Bolivian governments of the period;
so, we shall be speaking of the foreign policies of the
presidential administrations of Tejada Sorzano, David Toro,
and Germin Busch. The final section will be analytical In
nature, reviewing the diplomacy of the period In terms of
Its major characteristics and achievements.
This chapter differs from the preceding one In at
least two ways. First, In the chapter on Bolivia's
diplomacy at the Chaco Peace Conference, attention was
given to a single major problem, the Chaco dispute with
Paraguay. In this chapter, a variety of problems will be
discussed. This contrast makes for obvious difficulties.
Whereas the previous discussion had a single unifying
theme, the subject matter In this chapter Is much more
diffuse; one naturally seeks an ordering principle, some
theory with which to deal with numerous developments on
multiple fronts. With obvious limitations, the concept of
Bolivia's "new policy," as defined above, may be used as
such a unifying theme. Of course, not every aspect of
Andean diplomacy in those years can be Incorporated Into
such a pattern. Nevertheless, the most Important achieve
ments and distinctive features of postwar Bolivian

185
diplomacy may be understood with reference to this policy.
A second way in which this chapter differs from the
preceding one is that many of the problems to be discussed
were not resolved in this four-year period. Some of the
Issues were persistent ones which had direct diplomatic
antecedents, for example, the border demarcation questions
with Peru and Brazil; others, however, were new developments
within Bolivia's diplomatic history, such as those relating
to petroleum development. Our examination of the foreign
relations of Bolivia during the 1935-1939 period, therefore,
will be a survey of the old and the new problems that
together made up the picture of the Bolivian diplomacy of
three presidential administrations.
I. POSTWAR FOREIGN RELATIONS DURING

THE TEJADA SORZANO REGIME
Bolivian leaders surveying the post-Chaco War
international horizon beheld a dismal panorama; Bolivia, they
felt, was Isolated politically in South America. Argentina
had definitely supported Paraguay during the war, and,
according to the Andean viewpoint, Uruguay had followed
Argentina's lead. Brazil was thought to be indifferent
during the Chaco struggle, and her indifference had aided
Bolivia's adversary. Although Chile had generally complied
with her treaty obligations with Bolivia in respect to
freedom of transit, enough costly delays had occurred in

18*
the transit through that nation's Pacific ports to Indicate
that this neighbor was definitely not an ally. Only Peru,
of all the bordering nations, had treated Bolivia
satisfactorily according to Andean standards. And, apart
from the prejudicial policies followed by most of the
neighboring states, Bolivia had been handicapped by the
arms embargo Imposed by the United States In Nay 193^« a
measure which had reduced substantially Bolivia's supply
of war material.
The Andean nation's immediate diplomatic response to
this situation was uncertain and inadequate. Bolivia's
foreign relations under the Tejada Sorzano government were
characterized by an understandable preoccupation with the
Chaco Issue and a corresponding lack of achievement on
other fronts. This is explained, of course, by the fact
that this government, through Its foreign minister, Tom&s
Manuel Elio, had signed the protocol of June 12, 1935, thus
ending the hostilities In the Chaco War, but leaving the
definitive conclusion of the dispute still pending.
Therefore, Foreign Minister Elio spent almost all his time
as chief of the Bolivian delegation in Buenos Aires.
Meanwhile, Tejada Sorzano first made Manuel Carrasco
Jimenez, and later Jos£ Marla Outllrrez, Interim head of the
Bolivian Ministry of Foreign Relations. When Elio resigned
as chancellor in February 1936 in order to run for president

as the Liberal party's candidate in the May elections,
18?
President Tejada Sorzano first offered the post to the
Bolivian minister In Peru, Alberto Ostrla Gutierrez .1 Upon
Ostrla Gutierrez's refusal, the President offered the Job
to Luis Fernando Guachalla, who assumed command of the
Foreign Office on March 6 , 1936. His tenure of office was
brief, however. The government of Tejada Sorzano was
ousted by military leaders on May 17, 1936.
During this period, June 1935-May 1936, Bolivia was
confronted with a series of problems In her relations with
the neighboring states; some of these now began to take on
greater urgency after having been postponed during the
war years. In this section, therefore, we shall outline
the contents of Bolivia's foreign relations and point to
those developments that may be thought to foreshadow the
policy of practical contacts that later assumed definite
form.
Bolivian relations with Argentina, aside from the
Chaco Issue, primarily involved difficulties along the
common frontier of the two nations In an area in the
1Cable 28, to President Tejada Sorzano, Ostrla

Gutierrez, February 17, 1936, cited in Despatch 69, to La
Paz, Ostrla Gutierrez, February 27, 1936, Legacion de
Bolivia en el Peril" (Enero-Abril 1937). Unpublished
diplomatic correspondence located In the archives of the
Bolivian Foreign Ministry. Hereinafter such material will
be denoted with the abbreviation ABFM. In his refusal,
Ostrla Gutierrez expressed his reluctance to assume the
post for fear of unavoidable involvement in domestic
political struggles.
extreme south of the department of Potos£ where the border
was pending final settlement. The Definitive Boundary
Treaty of 1925 had determined the International frontier
In that sector, but It lacked the required approval of
Argentina's Chamber of Deputies. Bolivia's Congress and
the Argentine Senate had already ratified the treaty.
Minor violations of the status quo arrangements in the area
in 1935 and a vociferous antitreaty campaign initiated by
Argentine Senator Matlas 0. S&nchez Sorondo brought the
Issue to the fore. Bolivia feared that Argentina would
reject the 1925 treaty and seek another boundary at the
expense of Bolivian mining interests in that region.
Therefore, on January 27, 1936, prior to Elio's return to
La Paz from the Chaco Peace Conference, the Bolivian
Foreign Minister exchanged notes with Argentine Chancellor
Saavedra Lamas In which the latter promised to submit the
cited treaty to the consideration of the Argentine
Chamber of Deputies. The notes also provided that the
territorial status quo was to be maintained, and the
question of mining and other concessions in the border
region was to be investigated.2
O
Despatch 1038, to Washington, Eugene M. Hinkle,
January 31, 1936, file number 724.3515/37. Unpublished
document of the United States Department of State, National
Archives, Washington, D.C. Hereinafter cited with
abbreviation (DSj followed by file number.
189
No active Argentine-Bolivian discussions with respect
to petroleum took place during this period. Reports from
the Bolivian mission in Buenos Aires in early 193$
indicated, however, that the Argentine government,
especially President Agustln P. Justo and Chancellor
Saavedra Lamas, was interested in studying the matter with
Andean representatives.^ The Bolivian charg£ d'affaires in
Buenos Aires also reported that In official Argentine
circles consideration was being given to a bilateral
Argentine-Bolivian agreement through which Bolivian
petroleum would fill some of the shortages In the Argentine
market.
Meanwhile, Bolivia viewed her relations with Brazil
as a possible counterbalance to the strong Argentine -
Paraguayan friendship that presumably continued after
hostilities ceased In the Chaco. Therefore, when Paraguayan
Minister of Public Instruction, Justo Pastor Prieto, arrived
In Rio de Janeiro In September 1935, ostensibly on a cultural
mission, Bolivia prepared to take appropriate counter
measures. In November of that year, the Chancellory In La
Paz reported to its missions abroad that a visit to Rio de
Janeiro by Elio, probably during a Chaco Peace Conference
^Note 42, to La Paz, Justo Rodas Eguino, February 11,

1936; "Legaci6n de Bolivia en la Argentina" (Enero-Junio
1936), ABPM.
190
recess, had been authorized In order to offset the
Paraguayan effort at approximation with Itamaraty.1* It also
was announced that Bolivia's minister in Rio de Janeiro,
Carlos Calvo, who was then in Buenos Aires as a member of
the Andean delegation to the Peace Conference, would
travel to Rio to prepare the ground for a vigorous Bolivian
policy of rapprochement with Brazil.
In anticipation of the El£o visit, which eventually
failed to materialize, Bolivia's charg£ d ’affaires in Rio,
Guillermo Francovlch, prepared for the Andean Foreign
Office an outline of matters pending with Brazil. Two
Important questions were involved in those relations in
early 1936. One was the work of border demarcation in the
Cuatro Kermanos region, agreement on the boundary having
been reached in an earlier treaty. The second matter
involved the Brazilian financial obligation of a million
pounds sterling, owed Bolivia as the result of the Treaty
of Petr6polis of November 17, 1903.5
The Bolivian charg£ reported that Brazilian Foreign
Minister Macedo Soares wanted to talk to Elfo about a Joint
railroad project from Corumbi (Brazil) to Santa Cruz
^Circular 6l62, from La Paz, November 21, 1935,

"Circular©a" (Marzo de 1933 a Enero de 19^0), ABPM.
5
•'Note 15, to La Paz, Guillermo Francovlch, January
18, 1936, "Legacl6n de Bolivia en el Brasil" (Enero-Abril
1936), ABPM.
(Bolivia), a free port for Bolivia on the Atlantic, and
Bolivian-Brazillan commerce.^ Bolivia, of course, wanted
to discuss the Chaco dispute, as well as the million pound
debt, with Brazilian officials. Early in 1935 Andean
Minister Carlos Calvo had approached the Brazilian Foreign
Office in an effort to obtain this money which was then
urgently needed.by Bolivia for wartime purchases. For
various reasons, the Brazilian Chancellory had replied
negatively to this request, but later had proposed using
the money for financing the construction of a railroad from
CorumbA to Santa Cruz, a plan which, according to Francovlch,
fit neatly into Brazil's policy of keeping Bolivia's Orlente
out of Argentina's sphere of influence.^ In the recent
past, Brazil, expressing an Interest In importing Bolivian
petroleum, also had suggested that the Brazilian debt
might be utilized in the construction of a pipeline from
the petroleum region of Charagua to either Puerto SuArez
or Puerto Sucre near CorumbA.
Brazil also had sought to bind Bolivia's eastern
region to Brazilian Interests by offering on occasion a
free port for the Andean nation either on the Atlantic,
probably at Santos, or on the upper Paraguay River, at

192
Corumb£. Bolivia's consistent policy had been to refuse
the proposals. She feared that such an arrangement would
prejudice her efforts to gain from Asuncl6n a sovereign
outlet on the Paraguay River, since one of her principal
arguments in the matter was the Bolivian need for her own
port,8
Francovich also enumerated other considerations in
Bolivian-Brazilian relations, considerations which, in the
light of the small volume of Bolivian-Brazilian commercial
relations, were primarily political.^ Bolivia, oi course,
needed Brazilian friendship because of Rio's influential
role in continental politics, especially at the Chaco Peace
Conference. Moreover, as Francovich reported, Brazil
wanted to count on Bolivia in her antagonism with Argentina
which had persisted since the War of the Triple Alliance
(1865-1870). In the event of war with Argentina, Brazil,
with Bolivia's friendship, could maintain communication
between her southern states through Bolivian territory.
Brazil also could link her southern regions with the Pacific
through the Andean nation's territory. Given these
considerations, Francovich felt that it was to the distinct
8Ibid., pp. 6-11.
Îbld., p. 2 . Francovich reported that the value of

exports to Brazil in a recent year (no date, presumably
193^ or 1935) had been incredibly low, 1,175 pounds sterling
or less than $6,000.
193
advantage of Brazil to attract the commerce of the Bolivian
Orlente toward her territory, thus counteracting any
Argentine penetration In that region.10
These were the major considerations In Bolivian
relations with Brazil during the Tejada Sorzano regime.
Despite the plans to strengthen relations with that country,
nothing was accomplished or even discussed with regard to
these pending and proposed matters until the visit of
Enrique Flnot to Rio de Janeiro in August 1936.
A heightened interest in promoting increased
commercial relations with Chile was manifested in the work
of Bolivia's commercial attach^ in Santiago, Eduardo Rivas.
As Rivas, himself, said, he devoted his time to studying
the Chilean economy In an attempt to find new markets for
Bolivian products.11 His reporting also Included an
analysis of Chilean-Peruvian commercial relations and their
effect on Bolivia's foreign export markets, as well as
comments on the possibility of obtaining Chilean capital
for financing the Cochabamba-Santa Cruz railroad.
The Bolivian minister in Santiago, former President
Hernando Siles (1926-1930), shared Rivas' Interest In
1QIbld., p. 10.
11Economic Report (unnumbered), to La Paz, Eduardo

Rivas. October 10, 1935* Legaci6n de Bolivia en Chile"
(1935)* ABPH.
194
Improving Bolivian-Chilean commercial relations, but felt
that "the political question ranks above that of mercantile

12
character, or better said, includes it necessarily."
Slles advised the Foreign Office in La Paz to define its
policy with respect to the port question, a matter which
had been relegated during the Chaco War to a secondary
position in the scale of Bolivia's diplomatic concerns.
During the Tejada Sorzano administration, the Pacific
port question appeared on at least two occasions. During
the early phase of negotiations on the Chaco question
in Buenos Aires, Conference Chairman Saavedra Lamas,
apparently distorting an expressed Chilean willingness to
discuss improvements in free transit arrangements with
Bolivia, spread the word that Chile might "let Bolivia have
13
a port near Arlca." Rumors also spread In Buenos Aires
and Santiago to the effect that the final Chaco settlement
might Involve the Chilean cession of Arlca to Bolivia, as
well as financial assistance to the two ex-belligerents
from the United States.^ When these rumors were quieted,
12
cNote 18, to La Paz, Hernando Siles, January 13*
1936, "Legaci6n de Bolivia en Chile" (1936), ABFM.
^^Telegram 130. to Washington, Hugh Oibson, July

15* 1935, F R , V (1935)* 98.
^^taespatch 435* to Washington, Wlnthrop R. Scott

(U.S. chargl d'affaires, Santiago), August 10, 1935
(DS>724.2514/1; Telegram 133* to Washington, Weddell, July
16, 1935 (DS>724.34119/46.
195
the Issue reappeared as the result of a letter written by
the Bolivian President to the school children of North
America which emphasized the unfortunate landlocked
situation of Bolivia and expressed the opinion that Arlca

IK
should be Bolivian. ^ The letter prompted a Chilean note
to the Bolivian Chancellory and a short-lived diplomatic
Incident.
These developments, occasioned by vague statements,
rumors, and probably by the diplomatic and political
difficulties of Saavedra Lamas, Cruchaga Tocornal, and
Tejada Sorzano, were divorced completely from any Bolivian
diplomatic offensive in the Issue. The problem of a
Pacific port was still relegated In La Paz to the category
of a persistent but vaguely defined goal that for the
moment was overshadowed by the Chaco question. And, as
was noted In Chapter III, Chancellor Fernando Ouachalla
wanted to avoid raising any Issue In Bolivia's foreign
relations that might hinder the progress of negotiations at

Buenos Aires.
The matter was not completely Ignored, however. The
continuing concern with the port problem was Indicated by
the Bolivian recommendation that the proposed Maintenance
of Peace Conference scheduled for December 1936 examine
i^Bl Dlarlo, February 17* 1936, p. 5.

196
"the cause8 that might originate future conflicts and the
manner of avoiding them through mutual understanding and
reciprocal agreements between nations which such problems
affect."1^ Foreign Minister Fernando Guachalla made It
clear that one of those problems was the question of the
Pacific and that the Bolivian claim to a port expressed an
inescapable reality that should not be overlooked in any
discussion of peace In the Americas.1?
In terms of achievement and activity, Lima was one
of the busiest centers of Bolivian diplomacy during the
presidency of Tejada Sorzano. On July 17, 1933* the Andean
minister in Peru, Alberto Ostria Gutierrez, reported to La
Paz that he had signed that day a preliminary convention on
the Joint development of the fishing industry in Lake

18
Tlticaca. In December of the same year, Ostria Gutierrez
exchanged notes with Peruvian Foreign Minister Carlos Concha
in which each country agreed not to give asylum or support
^Circular 28, to Buenos Aires, Luis Fernando

Ouachalla, May 13, 1936, "Legaci6n de Bolivia, Buenos Aires,
circulares de M. de R.R.E.E. de Bolivia" (Marzo 1935-Mayo
1938), ABFM.
17Ibld.
^^Note 285, to La Paz, Alberto Ostria Gutierrez,

July 17, 1935* "Legaci6n de Bolivia en el Perti" (Mayo-Agoato
1935 ) » ABFM; Luis de Iturralde Chinel, Coleccl6n de tratados
vlgentes de la republlca de Bolivia, Mlnisterlo de
Re lac lonelHSxFer iore s ( b vols. j La Pazt Editorial "Universo,"
19^0), V, 486. (Hereinafter cited as Coleccl6n de tratados
vlgentes.)
197
to revolutionary groups that Intended to launch subversive
activities against the Institutional order of the other

19
country. * The Bolivian minister also was aware that
during this period fear existed In Lima that Bolivia might
use her troops returning from the Chaco to launch sun
attack against Peru in order to obtain sun outlet to the
sea at Mollendo. In February 1936 Ostria Gutierrez
traveled to La Paz with the outline of a plan of
rapprochement with Peru, a plsun which received the approval
of Chancellor Luis Fernando Guachalla. Instructions
embodying Ostria'8 proposals were issued by the Chancellory
on April 1936 and later were reconfirmed by the new Toro
government after the revolution of May 17, 1936.
Bolivia's foreign relations during this period had
few other significant developments. Relations with the
United States Involved matters either relating to the Chaco
Peace Conference or to the aftereffects of the Chaco War
itself. Bolivia's consul general in New York, Walter J.
Decker, was involved in a United States government lawsuit
against the Curtiss-Wright Export Corporation for violation
of the 1934 arms embargo, but the case had no appreciable
1^Coleccl6n de tratados vlgentes, Ibid., V, 490.
Âlberto Oatria Gutierrez, Una obra y un deatlno

(Buenos Aires: Editorial Ayacucho, 1 5 % ) , p. 467
(Hereinafter cited aa Una obra.)
198
effect on Bolivia's relations with the United States. The
Bolivian government's differences with the mining industry
accounted in part, at least, for a decreasing mineral
exportation that led to the nation's failure to meet her
quota under the International tin agreement. This latter
development not only created difficulties in relations
with the International Tin Committee, but also substantially
diminished the government's revenues.
Bolivia's postwar foreign relations under the Tejada
Sorzano government remained for the most part in a pre-
"new policy" state. Understandably, La Paz was absorbed
with the Chaco negotiations and with the disturbing domestic
political and economic situation. Only slight Bolivian
interest was expressed in strengthening economic and political
ties with the bordering countries, and much of this came
from Andean diplomats in the field such as Ostria Gutierrez
in Lima, Guillermo Francovich in Rio de Janeiro, and
Eduardo Rivas in Santiago. However, Elio's successor in the
foreign ministry* Luis Fernando Guachalla, must be regarded
as an early spokesman for the policy of contacts. In a
letter dated April 1, 1938, to Colonel David Toro, Chief of
Bolivia's General Staff, Fernando Guachalla wrote:
Bolivian diplomacy must move not only in the moral

plane, with a respect for treaties, but also in the
realm of practical negotiations, especially with the
neighboring countries ... In my judgment, Bolivia must
not go with some of her neighbors against the others;
her geographical position calls her to provide
199
equilibrium; her function Is as a land of contacts
and not of antagonisms.*1
11. THE TORO PRESIDENCY— FOREIGN RELATIONS

AND FOREIGN POLICY
Postwar pressures proved too much for the Tejada
Sorzano government. Politically, the disorganized civilian
parties were unwilling to support the Liberal party regime;
almost all of them planned to boycott the elections
scheduled for Nay 31. Economically, rising costs and the
continuation of wartime rates of exchange requisition caused
dissatisfaction in labor and business sectors. A general
labor strike in mid-May 1936 was the occasion for the
demise of the government. On May 17, President Tejada
Sorzano submitted his resignation to Lt. Colonel Germ&n
Busch, acting Chief of the General Staff.
The mixed Junta of Government installed on May 23,
1936, Included representatives of two civilian parties,
the Socialist and the Republican Socialist, as well as
representatives of the Army. Colonel David Toro presided
over the uneasy coalition, and Enrique Baldivleso, a
leader of the Socialist party, was made foreign minister.
21"The Chaco Questions and its International

Repercussions" (translation), A Confidential Report, Luis
F. Guachalla, September 8, 1937, "Legaoi6n de Bolivia en
los Estados Unidos" (Julio-Dioiembre 1937), ABFM.
Baldivieao wrote to Bolivia's diplomatic missions that "the
movement has fixed as its normative idea the economic and
social transformation of the country following the lines of
state socialism of a moderate type."22 On foreign policy,
the new foreign minister stated:
This chancellory desires to guide its conduct

within juridical norms, attempting to substitute
the diplomatic concept which is based on law for
the militant concept based on force.23
He added that Bolivia's situation denied her any security
through force, saying "our guarantee will have to rest on
the juridical conscience of the continent." Baldlvleso
also indicated the need to strengthen relations with the
American countries.2^
The mixed civilian-army Junta was short-lived,
however. On June 22 Colonel Toro announced that the Army
had assumed control of the government. Interim Foreign
Minister Lt. Colonel Oscar Moscoso wrote on June 24 that
the Army understood that its historic mission was to
become the executive organ for fchaplng the "Patria Nueva,"
a concept that had "germinated in the spirit of the war
22Clrcular 31, to Buenos Aires, Enrique Baldlvleso,

May 26, 1936, "Legacl6n de Bolivia, Buenos Aires, clrculares
de M. de R.R.E.E. de Bolivia" (Marzo 1935-Mayo 1938), ABFM.
23Ibid., p. 3.
201
g e n e r a t i o n . "25 x t was the advent of the era of military
socialism In Bolivia. The composition of the Junta was
changed; Enrique Finot, the Andean minister in Washington,

26
accepted the post of foreign minister.
Relations with Brazil. Enrique Finot's active

foreign policy began to take shape even before he reached
La Paz. In a visit to Rio de Janeiro in early August 1936,
the new foreign minister laid the groundwork for a policy of
rapprochement with Brazil. The visit was important first of
all because it dispelled Brazilian coolness toward Bolivia
resulting from the lack of a minister plenipotentiary in
Rio after the departure-: of Carlos Calvo to the Chaco Peace
Conference in May 1933* The Rio discussions of August 1936
also treated major concerns in Bolivian-Brazilian relations,
among others, the Chaco dispute, the possible exportation
of Bolivian oil to Brazil, and the proposed construction
of a highway or railroad linking the Bolivian Oriente to
^Circular 36, to Buenos Aires, Oscar Moscoso, June

24, 1936, ”Legacl6n de Bolivia, Buenos Aires, clrculares de
M. de R.R.E.E. de Bolivia" (Marzo 1933-Mayo 193d), ABFM.
Ênrique Flnot was born in Santa Cruz in 1891.
After several years as a local official and educator, he
entered the diplomatic service in 1917* Flnot was known in
diplomatic circles for his strong-willed, sometimes impetuous,
nature, "the Flnotesque manner." Rodas Egulno wrote, TlHis
principal contribution always has been the vehemence of his
character." Justo Rodas Egulno, La guerra del Chaco (Buenos
Aires: Bernabl y Cla, 1938), p. l?^.
202
Brazil.27
The discussions on petroleum considered a number of
matters. Finot pointed out to Brazilian Chancellor Macedo
Soares that Bolivia would soon have an exportable surplus
of petroleum and that Argentina was interested in it. When
Macedo Soares expressed his government's special Interest
in importing Bolivian crude petroleum, "Sefior Finot referred
to the possibility that the Bolivian government might oust

28
the Standard Oil Company in Camiri." The Brazilian
technicians advised Finot against such action, warning him
of the power of the Standard Oil Company. They recommended
instead that the Bolivian foreign minister enter into
conversations with the company in order to obtain its
collaboration in the construction of a pipeline. The
Brazilian representatives also insisted on the importance of
knowing the production capacity of the Bolivian deposits.
At the conclusion of the discussions regarding petroleum,
Macedo Soares delivered to Finot several suggestions, among
which were the following: (1) that Finot discuss with the
Standard Oil Company of New Jersey the construction of a
pipeline to and refineries in Brazil, (2) that Finot inform
2?Note 252, to La Paz, Ouillermo Francovich, August

20, 193b« "Legacion de Bollvlaien el Brasil" (Mayo-Agosto
1936), II, ABFM.
28Ibid., p. 12.
203
the Brazilian government of the results of those discussions
and of the potential production capacity of the oil deposits
In the departments of Santa Cruz, Tarija, and Chuquisaca,
and (3) that the Bolivian and Brazilian governments should
consider rerouting any proposed railroad so that it
corresponds to the petroleum considerations.2^
According to Finot, Brazil took the initiative in
suggesting the construction of railroad connections linking
Bolivia's Oriente to the Brazilian railroad s y s t e m . T h e
Brazilian proposals were the following: to concede to a
Bolivian-Brazilian company the right to construct and exploit
a railroad from the Ichilo River, through Santa Cruz, and on
to the Brazillan-Bolivian frontier; to build immediately a
highway which would follow the route along which the
proposed railroad would be constructed at a later date; to
apply the Brazilian debt of a million pounds sterling to
the construction of the highway; and, later, to convert the
highway connection into a railroad upon agreement by the two
governments. Finot concurred in the suggestions and agreed
to consider them.
The Rio discussions of August 1936 were another
occasion on which Itamaraty stated that the port of Santos
29lbid., p. 13.
3°ibld., p. 14.
204
could Immediately be made a free port for Bolivia. To this
offer, Finot replied that the commercial realities of the
moment would make such an arrangement of slight importance.31
Bolivian diplomats hailed the Finot talks in Rio as
a significant development In Andean relations with Brazil.
Former Foreign Minister, Luis Fernando Ouachalla, now minister
in Washington, wrote that the visit signified a step
perfectly In accord with the demands of international life,
as well as a significant departure from Bolivia's old
diplomacy, which erred in "its excessive attachment to the
old norms, to abstract formulas, to statements based on
principles, and, It is worth adding, to pure legality empty
of realities ."^2 The officials of the Foreign Office in
La Paz described the Finot visit and its results as milestones
in Bolivia's diplomatic history which would become normative
in future Andean relations with Brazil.33
Another Bolivian response to the Finot visit to Rio
was to define in the following terms the national policy of
caution regarding International railroad connections:
31lbid., pp. 19-20 .
3 % o t e 97 , to La Paz, Luis Fernando Ouachalla,

October 26, 1936, "Legaci6n de Bolivia en loo Sstados Unldos
de America" (1936), ABFM.
33circular 42, to Buenos Aires, Adolfo Costa du Reis,

September 7 , 1936, "Legacl6n de Bolivia, Buenos Aires,
clrculares de M. de R.R.E.E. de Bolivia" (Marzo 1933-Mayo
1936), ABFM.
205
Railroad penetration executed from the periphery
toward the center by a more powerful country Is
dangerous because It can be translated In the long
run Into political penetration and Influence which
Is the most effective method of c o n q u e s t . 34
Circumstances surrounding the announcement of this
policy, however, indicated that It might be questioned at a
later date. In the first place, the circular containing
the policy was signed by Adolfo Costa du Reis rather than
by Chancellor Finot. In the second place, the circular
was dated September 7, 1936, the same day on which Finot
assumed command of the Foreign Office. These factors,
although far from conclusive, suggest that Finot had
neither collaborated in Its formulation nor approved it.
Further close relations with Brazil developed
rapidly. Alberto Ostria Gutierrez, the new Bolivian minister
before the Brazilian government, arrived in Rio de Janeiro
on November 8 , 1936, presented his credentials to President
Getullo Vargas on November 17, and signed two protocols with
Chancellor Macedo Soares on November 24, 1936. One protocol
provided for the establishment of a mixed Bolivian-Brazilian
technical commission to study the problems relating to the
exploitation of Bolivian petroleum and its exportation
through Brazilian territory. The other protocol contained
an agreement to constitute a second mixed Bolivian-Brazilian
3Îbld.
206
technical commission to study the previously proposed
railroad and highway connections between the two n a t i o n s . ^5
During the remaining months of the Toro presidency,
Andean relations with Brazil were concerned primarily with
implementing the November 1936 protocols. At first,
Brazilian Interest in following through with the work of
the mixed commissions was lukewarm, probably because
Bolivia had not been able to present definite evidence
regarding the production potential of her oil deposits.
But development in these discussions was spurred by a
growing Brazilian awareness that Argentine intentions in
Bolivia's Oriente might threaten Brazil's Interests there.
On May 7, 1937* in a meeting between Ostria Gutierrez,
Brazilian Foreign Minister Macedo Soares, and the
Brazilian members of the mixed technical commission who
soon were to travel to La Paz, Macedo Soares expressed
alarm at Argentine plans for economic penetration into
Bolivia's southeast. He promptly discarded the earlier
Brazilian proposal for building a highway from the Brazilian
frontier to Santa Cruz, substituting a proposal for the
immediate construction of the CorumbA-Santa Cruz r a i l r o a d . 36
35outi6rrez, Una obra, op. cit., pp. 95-96.
3^Note 95, to La Paz, Alberto Ostria Gutierrez, May

7* 1937* "Legacion de Bolivia en el Brasil" (Enero-Junio
1937)* ABFM.
If Argentina was planning to finance the construction of a
railroad from Yaculba to Santa Cruz and even, perhaps, to
Camirl, said Macedo Soares, Brazil was "obliged to counter
the Argentine plan" by constructing a railroad to Santa
Cruz from the Brazilian f r o n t i e r . 3? Bolivia found herself
caught In a growing Brazillan-Argentine competition for
Influence In her Orlente. In this situation, the result of
that competition was favorable to the Andean nation since
she definitely preferred a railroad connection with Brazil
to a highway l i n k .^8 The question for Bolivia, however,
was whether that rivalry would be a boon or a curse In the
long run.
Bolivian relations with Argentina. Bolivia's
relations with Argentina were Influenced appreciably by
the prevalent view among Andean diplomats, and especially
Finot, that Argentina, their most powerful and Influential
neighbor, held the key to a satisfactory solution of the
Chaco question. It followed, therefore, that, despite
Argentina '8 pro-Paraguayan Chaco War policy, economic and
political ties with this nation of the Rio Plata should be
^ n o t e 100, to La Paz, Alberto Ostria Outllrrez,

May 8 , 1937, "Legacl6n de Bolivia en el Brasil" (Enero-
Junio 1937), ABFM.
380uti£rrez, Una obra, op. clt., p. 95. Ostria

Gutierrez's Instructions in Brazil were to obtain agreement
on a railroad project If possible; a highway was second
choice.
strengthened by Bolivia. In the last half of 1936 the
groundwork was laid for a Bolivian policy of rapprochement
with Argentina when Finot followed his visit to Rio de Janeiro
in August 1936 with a stopover in Buenos Aires for
preliminary discussions on Bolivian-Argentine relations with
officials of San Martin palace. Those talks continued when
Argentine special envoy Horaclo Carrillo traveled to La
Paz in October 1936. Carrillo's primary mission apparently
was to dissuade Finot from naming David Alvlstegui as Elio's
replacement at the Peace Conference after the Elio-Finot

39
incident in late September. However, La Paz reported that
Carrillo also had traced the outlines of a vast plan of
economic collaboration between the two countries which
"appears favorable to the interests of our country ."^0
Carrillo said that Argentina was disposed to consider the
construction of a railroad from Yaculba to Santa Cruz and
was willing to provide the manufactured articles and
foodstuffs needed to ameliorate the troubled postwar
economic situation in Bolivia. Tentative agreement also was
reached on organizing a binational study commission to
consider ways of strengthening Bolivian-Argentine economic
39Bryce Wood, 0£. clt., p. 116.
^Circular 48, to Buenos Aires, La Paz (unsigned),

October 19, 1936, "Legacl6n de Bolivia, Buenos Aires,
1936), ABFM.
relations .2*1 Later, on December 26, 1936, during Finot's
trip to Buenos Aires for the Maintenance of Peace Conference,
the Bolivian Foreign Minister signed an Acta with Saavedra
Lamas in which the governments agreed to establish the

42
mixed Bolivian-Argentine Commission of Economic Matters.
The Bolivian Chancellory's instructions to the
Andean delegates on this mixed commission disclose the
rationale for Bolivia's policy toward Argentina in mid- 1937,
Finot wrote that the Bolivian government had decided "to
look for a friendship whose influence would be decisive in
the solution of the international problems that affected
the country," especially with regard to the Chaco.^
According to the Bolivian Foreign Minister, Andean diplomacy
should strive to offset Argentina's friendship with and
support for Paraguay by establishing closer Bolivian ties
with Buenos Aires. Finot stated that an Argentine-Bolivian
rapprochement would yield economic as well as political
advantages for La Paz.
Primary attention in the instructions was given to
2*1E1 Dlarlo, November 10, 1936. p. 6 .
^ Coleccldn de tratados vlgentes, op. clt., IV, 114;

Qutllrrez, ttna oTra, op. clt.T~P. 2g8 .
^circular 18, to Buenos Aires, Finot, June 25, 1937,

"Legacldn de Bolivia, Buenos Aires, circulares de M. de
R.R.E.E. de Bolivia" (Marzo 1935-Mayo 1938), ABFM; Gutidrrez,
Una obra, ibid.
the question of the Yaculba-Santa Cruz railroad. Reference
has been made to the Bolivian Chancellory's policy of
caution in respect to international railroad connections
constructed from the periphery to areas within the country
that were Isolated from the nation's population centers.
Here, however, Pinot depreciated the fears expressed In that
policy by referring to Argentina's slight interest in the
project and by pointing out that a useful balance had
resulted from Brazil's interest in constructing the Corumbd-

2l,2i
Santa Cruz railroad. In fact, he believed that only the
Bolivian fear of foreign influence in the Oriente would
ever stimulate the nation to construct lines of communication
connecting the Oriente with the Altlplano. Finot also
mentioned the political and economic benefits of the proposed
railroad, claiming that agreement in this matter would
guarantee Argentine support against Paraguay.
Despite Finot's disparagement of the dangers of
railroad construction from the periphery, he instructed the
Bolivian delegation, headed by Casto Rojas, to seek an
agreement with Argentina that provided for construction of a
branch line from Camlrl to Sucre simultaneously with the
construction of the main Yaculba-Santa Cruz line.4^ ^he
^Circular 18, ibid., pp. 5 -6 .
45Ibid., p. 6 .
211
delegation was ordered not to accept any arrangement that did
not promise to carry the line on to the existent railhead

near Sucre, thus linking the Oriente by rail with the
mountain highlands. With regard to administration of the
line, the Casto Rojas mission was to obtain modifications
in the Argentine-Bolivian railroad protocol of 1923 which
had provided for Argentine management. Bolivia proposed
that the line be administered by a mixed commission,
organized under Joint government auspices. Finot recommended
that the railroad be financed through a loan guaranteed by
the income from Bolivia's newly nationalized petroleum
resources.
The Casto Rojas mission was Instructed to discuss
several other matters with its Argentine counterpart in the
binational commission. Bolivia sought a transit agreement
with provisions for free transit for material of every class,
including war material. Argentina had balked at this type
of agreement in the past and would continue to do so. The
Andean nation also was Interested In obtaining transit rights
through Argentine territory for her petroleum, possibly by
pipeline. Finot understood that, on the basis of the mixed
commission's conclusions and recommendations, consideration
would be given to a new commercial treaty between the two

46
countries.
The work of the mixed commission was begun in Buenos
Aires in July 1937* But before its task was completed, the
Toro government was ousted in La Paz, and Finot was replaced
in the Bolivian Chancellory.
The matter of petroleum, its exploitation and
exportation, already has entered this discussion on several
occasions. In December 1936 the Bolivian government created
a national petroleum company, Yacimientos Petroliferos
Piscale8 Bolivianos (Y.P.F.B.). The new entity was given
responsibility for the exploration and development of
Bolivia's gas and oil deposits. The decree which created
the agency explained that the importance of hydrocarbons
in the world, their economic significance, and their value
to the state made it necessary to place these resources
under direct national control. ^
In early January 1937* Foreign Minister Finot
instructed Bolivian Charg£ d 1Affaires Alfredo Flores to ask
the Argentine government whether or not it was disposed to
grant facilities for the transport of Bolivian petroleum

48
through Argentine territory. Argentina delayed her reply,
Îbid.
Ênrique Mariaca Bilbao, Mlto y realidad del
petroleo Boliviano (La Paz: Editorial Los Amigos DeT~l<ibro,
pp. 09-70.
^®Note 24, to La Paz, Alfredo Flores, February 2
egacion de Bolivia en la Argentina" (Enero-Abril
213
and Flores later wrote that the cause of that delay could be
explained in only one way— Argentina's antagonism toward the
Standard Oil Company and her reluctance to provide facilities

Lq
beneficial to that company in Bolivia. 7
The Standard Oil Company case. On March 13, 1937,
the Bolivian government Issued a decree cancelling Standard
Oil Company's concession in Bolivia and confiscating the
company's properties. Since extensive treatment of the many
facets of this case is beyond the scope of this study, our
concern must be restricted to the meaning of the action for
Bolivia's foreign policy and foreign relations.^
The charges against the Standard Oil Company of
Bolivia, a subsidiary of the Standard Oil Company of New
Jersey, contained in the supreme resolution of March 13,
were not new ones; President Tejada Sorzano had initiated
legal proceedings against the North American company In

*51
October 1935* The basic accusation against Standard Oil
was that it had defrauded the Bolivian government of legally
^% o t e 40, to La Paz, Alfredo Flores, February 27,

1937> "Legaci6n de Bolivia en la Argentina" (Enero-Abrll
1937), ABFM.
50por an excellent study of the Standard Oil Company
case, especially in respect to Its effects on Andean
relations with the United States, see Bryce Wood, "The
Principle of Discrimination: Bolivia," The Making of the Oood
Neighbor Policy (New York: Columbia University Press,“T96iJ.
5!ei Diarlo, October 25, 1935, P. 4.

I
i
214
required taxes and royalties. According to the Bolivian
allegation* in 1925 and 1926 the Standard Oil Company

clandestinely exported oil to Argentina from Its Bermejo
wells. When In 1928 the government sought to collect taxes
and royalties applicable once the company entered into a
phase of production* the company denied that It had begun
its productive phase and* therefore* refused to pay the
taxes i n v o l v e d . I n November 1935 a Standard Oil Company
spokesman admitted the exportation* but claimed that the
operation was realized with the knowledge of Bolivian

53
customs officials.
Although this defraudation was the technical charge
brought against the North American company* Bolivia's basic
grievances against Standard Oil were much more fundamental.
The Bolivian rationale for its action of March 13* 1937, is
explained by a Foreign Ministry circular to Bolivia's
diplomatic mission abroad. In this circular* Foreign
Minister Finot reported that the decision to cancel Standard
Oil Company's concession had been made after careful*
prolonged* and secret deliberations by the cabinet. Writing
in strong language* he claimed that the decision meant the
country*8 liberation from the weight of the tentacular
Êxecutive Resolution of March 13, 1937 (translation),

FR, V (1937), 277.
53e1 Dlarlo, November 8 , 1935, P. 7.

215
organism's dangerous Influence that had been detrimental to
the nation's interest.^
Among the Bolivian grievances expressed In the
circular was the feeling that Standard Oil, after Initiating
Its work In Bolivia In 1922, had followed a passive policy,
making the Bolivian deposits a reserve supply within Its
worldwide system. As the result of this policy, the company
had failed even to provide for Bolivia's domestic needs,
denying to the country the benefits of Its own wealth and
Ignoring Andean interest in economic development. Bolivia
also claimed that Standard Oil had been uncooperative during
the Chaco War, a situation which forced the government to
purchase hydrocarbons from foreign sources. In this action
against Standard Oil, Bolivia also was determined to
demonstrate that she was not the helpless tool of the North
American company nor had she fought the Chaco War In the
company's behalf. An important factor not to be overlooked
In explaining Bolivia's action was the domestic political
capital to be gained from such a move, a matter that the
shaky Toro government undoubtedly considered.^5
Circular 9, to Buenos Aires, Enrique Finot, March

20, 1937* "Legaci6n de Bolivia, Buenos Aires, circulars* de
M. de R.R.E.E. de Bolivia" (Marzo 1935-Mayo 193d), ABFM.
55ibid., pp. 5-6; Despatch 221, to Washington, R.

Henry Norweb (United States minister, Bolivia), May 8 , 1937,
FR, V (1937), 286.
216
A number of factors make It logical for one to
assume that Argentine precedent and pressure were among the
decisive Influences In determining the action against
Standard Oil. These include Finot's views regarding the
primacy of economic matters In international relations and
the hegemony of Argentina in affairs affecting Bolivia, as
well as Argentina's interest In Bolivian petroleum and her
animosity toward Standard Oil. Reports from the United
States Legation In La Paz stated that Argentina recently
had shown a strong Interest In Bolivia's oil deposits.
United States Minister Norweb informed Washington in March
1937 that the Carrillo mission of October 1936 had been the
occasion on which the Argentine government insisted on a
direct agreement with the Andean government for "full
possession of the Bolivian oil resources" in exchange for
Argentine support in the Chaco dispute.^ One may presume,
therefore, that the Finot-Saavedra Lamas conversations in
Buenos Aires during the Maintenance of Peace Conference in
December 1936 considered the question of Standard Oil
Company's future in Bolivia and, perhaps, were determinative
in respect to the Andean decision to act against that
company. However, the nature of Bolivian-Argentine relations
in respect to petroleum after the action against Standard Oil
^Despatch 174, to Washington, Norweb, March 19,

1937, ra, V (1937), 286.
217
support8 the view that no definite plans for the joint
exploitation of Andean oil zones were agreed upon by the two
countries prior to March 13# 1937
In the Chancellory circular of March 20, Enrique
Finot also outlined the implications of the nationalization
of petroleum deposits for Bolivian diplomacy. The pre
supposition of that policy was the Marxian principle that
economic realities determine international relations and that,
therefore, the control of economic resources must be in the
hands of the state. Flnot wrote " ... the International
destinies of people revolve around economic realities that
move with greater Influence than theoretical enunciations and

.,58
Juridical Ideals." Bolivia, he said, was handicapped in
her relations with the bordering states because she lacked
products of export to them. When these countries flooded
the Andean market with their goods, an unsatisfactory trade
balance was the unfortunate result for the Andean Republic.
In addition, Bolivia was faced with the crisis of her
geographical structuring with regard to both the Chaco and
^pionislo Folanlnl, a member of the Casto Rojas

mission to Buenos Aires In 1937# claims that in the December
1936 conversations the decision in respect to the Standard
Oil Company's future in Bolivia waa determined. (Personal
interview, October 24, 1966). However, Justo Rodas Egulno,
former Bolivian charge d'affaires in Buenos Aires, denied
that any agreement on this matter was reached at that time.
(Personal interview, December 16, 1966).
58<jircular 9# oj>. clt., p. 7.

218
the Pacific, and, lacking economic resources, she possessed
little political Influence In the continent.
To rectify these situations, Bolivia now had
petroleum. Flnot wrote: "From the point of view of our
International policy, Bolivia had gained a powerful
resource."^ Economically, petroleum would serve as a
regulating element in Bolivia's commercial relations,
especially with Argentina and Brazil, to balance the trade
disequilibrium existent in those relations. Politically,
it would be the key to Bolivia's rapprochement with
Argentina, the country which would play the most Important
role In settling the Chaco dispute, according to the Andean
Foreign Minister. Flnot, acknowledging again Argentina's
centrality in affairs concerning La Paz, clearly favored
delivering Bolivia's petroleum to Argentine Influence and
coordinating Bolivia's economy and Interests with those of
her larger neighbor on the Rio Plata:
We will obtain nothing with hymns of rebellion

against the Argentine imperialism. Many more
advantages will be gained through the decision to
convert ourselves into a gear of the economic and
political machine established In the Rio Plata.®0
Flnot recognized that his government'# action would
have adverse effects abroad, especially in financial circles
in the United States, and he was fearful that the move
59ibid.
6oIbid., p. 8 j Despatch 221, 0£. cit., pp. 286-288.
219
might hinder the nation's attempts to attract additional
foreign capital. Nevertheless, the Andean Chancellor was
willing to risk United States disfavor in order to gain
Argentina's friendship. Confident of the government's
legal position In the case, he said Bolivia would have to
accept the consequences of her action. He insisted, however,
that the Calvo Clause In the contract with the company
definitely prohibited official United States Intervention in
behalf of the company .^1 The final words of his March 20
circular closed the door to Yankee Intervention: "For
the prestige of the country, for the dignity of the people £,]
and for solidarity with the Latin American nations, Bolivia
cannot open the door to any Yankee Intervention in this
matter.
Bolivian-United States relations. During the period
that David Toro presided over the governing Junta in La
Paz, Bolivia's relations with the United States were
nonproductive on the whole and marred by conflicting Andean
foreign policy objectives. In September 1936 Finot told
United States Minister Norweb that one of his ogjectlves as
chancellor was to conclude a trade agreement with Washington
^Despatch 221, op. clt., p. 286; Despatch 224, to

Washington, Norweb, May 13, 1937, FR, V (1937), 288;
Circular 9, o£. clt., p. 8 .
^Circular 9 , ibid.
on the basis of United States tin consumption.^ In this
respect, Bolivia's minister in Washington, Luis Fernando
Ouachalla, at first found some support for such an
arrangement. One favorable factor was the concern in
certain Washington official circles that the United States
have guaranteed supplies of basic strategic metals, including
tin. To this end, a Congressional subcommittee report of
1935 recommended the establishment of tin smelters in the

64
United States. Fernando Ouachalla also regarded Cordell
Hull's foreign economic policy as represented in the Trade
Agreements Act of 193^ to be. a fortunate factor. These
encouraging signs were illusory, however. The United
States in 1936 and 1937 had scant interest in purchasing tin
from Bolivia so long as refined tin was available from
England. At the same time, Bolivia was not ready to
formulate definite proposals for a trade agreement with the
United States, preferring to continue conversations on a
preliminary basis in the hope that something promising might
evolve from them. In spite of these difficulties, Ouachalla
reported that he had succeeded in having a United States
technical expert, Merwin L. Bohan, sent to Bolivia to
^Despatch 40, to Washington, Norweb, September 25,

1936, ra, V (1936), 237.
6^Note 97, to La Paz, Luis Fernando Ouachalla,

March 27, 1937* "Legaci6n de Bolivia en Estados Unidos"
(Enero-Junio 1937) t ABFM.
221
conduct an economic study with special regard to placing tin
65
In the United States market. ^ Bohan's report concluded that
no basis existed at the time for a mutually beneficial trade
agreement
Apparently, the Bolivian government's interest in
seeking a tin market in the United States arose in part, at
least, from its continuing struggle with the mine owners.
To cover large public expenditures, the mine owners were
required to deliver a high percentage (42 per cent) of their
foreign exchange to the government, a measure which they
resisted by lowering production.^ The government's major
weapon against the Industry was the threat of nationalization.
But Andean officials were aware that the smelters in England,
to which much of Bolivian tin flowed, were controlled by
Patlfio interests and, consequently, might close their doors
to nationalized mine ores. In essence, the government was
seeking an additional market for Bolivian tin to fortify its
position vis-a-vis the mine owners.^®
^ N o t e 75, to La Paz, Luis P. Ouachalla, March 12,

1937, "Legacidn de Bolivia en Estados Unidos" (Enero-Junlo
1937), ABFM.
66
Despatch 248, to Washington, Norweb, June 11, 1937,
FR, V (1937), 274.
^Despatch 234, to Washington, Norweb, May 24, 1937
(DS)824.6354/152.
^Despatch 248, loc. clt . } Despatch 154, to Washington,
Norweb, March 8 , 1937 -(557B22TF354/133; Despatch 184, to
Washington, Norweb, March 25, 1937 (DS)824.635V137.
222
After the March 13, 1937 decree against Standard
Oil, Pernando Ouachalla's fundamental objective was to keep
the United States government from interceding in behalf of
the company. During an interview in early April, the
Bolivian minister told Under Secretary Sumner Welles that
the contract under which Standard Oil had operated contained
the promise that the company would not resort to diplomatic
reclamation, and he pointed out that any such intervention
would be contrary to the principles of the Good Neighbor
policy.^9
Although the confiscation of Standard Oil properties
did not provoke an official United States protest, Pernando
Guachalla soon realized that the issue was definitely am
obstacle to Bolivian relations with the United States. As
early as April 26, 1937, he was pointing out to the
Bolivian Chancellory the link between the Standard Oil case
and his efforts to find a tin market in the United States.
He reported that the Department of State, as well as private
companies earlier interested in a possible tin arrangement,
had suddenly cooled to the idea. The Bolivian minister
suggested, therefore, that the government come to some agree
ment with Standard Oil, possibly through Indemnification,
^ N o t e 103, to La Paz, Pernando Guachalla, April 3,

1937, "Legaci6n de Bolivia en Estados Unidos" (Enero-Junio
1937), ABPM.
223
In order to open the door to the tin market In the United
States.70
Other aspects of the issue also concerned Pernando
Ouachalla. He candidly reported to La Paz that the
Standard Oil decree had actually only aggravated the lack of
confidence in the Toro government that already had pervaded
Washington. He explained that this attitude was the result
of the instability of the present governing Junta in La Paz
and its governance by transitory decree law, without
congressional concurrence. In respect to Flnot's
rapprochement policy with Argentina, Fernando Ouachalla
suggested that the export of tin to the United States might
make possible an arrangement in which Washington would
serve as a political counterbalance to Argentina; he added,
however, that only a transactional compromise with the
Standard Oil Company would make that possible.71 on May 17,
1937, Ouachalla further reported that Sumner Welles had
made it abundantly clear that the discussion of a trade
agreement, the study of tin exportation to the United
States, and all like matters would be suspended pending
7^Note 124, to La Paz, Luis F. Ouachalla, April 26,

1937, ,tLegacl6n de Bolivia en Estados Unldos" (Enero-Junio
1937), ABFM.
71ibid.
224
72
settlement of the Standard Oil question.
The Bolivian government during this time was not
adverse to a compromise settlement with the Standard Oil
Company and responded In this sense to Minister Guachalla,
as well as to a personal message delivered to Plnot on May 8
from United States Secretary of State Cordell Hull. However,
Bolivia refused to cancel or revoke the decree of March 13,
a condition for opening discussions set by the representative
of the North American company. The company, Its eyes on the
repercussions of the Bolivian action on Its holdings In
other countries, was unwilling to acquiesce In the
accusations against It, preferring to delay a final
settlement. Thereupon, Bolivia, now reasonably confident
that the United States would bring no direct diplomatic
pressure to bear in the Issue and assured of strong public
support for the government’s action against the company,
also was prepared to walt.^^
Bolivian-Peruvian relations. Ostria Gutierrez's
active work in Brazil had been preceded by his equally
?2Note 159# to La Paz, Luis P. Ouachalla, May 17,

1937# "Legacl6n de Bolivia en Estados Unldos" (Enero-Junio
1937), ABPM.
^^Telegram 17# to Washington, Norweb, April 1, 1937#

PR, V (1937)# 281; Telegram 30, to Washington, Norweb, May
1^# 1937# PR# V (1937)# 289; Despatch 244, to Washington,
Norweb, June 4, 1937# PR# V (1937)# 290-291.
noteworthy diplomacy in Lima, where several of the basic
objectives of Bolivia's new diplomacy had been given concrete
form. Implementing his plan of action with Peru, which the
Tejada Sorzano government had approved and the Toro govern
ment confirmed, Ostria presented to Peruvian Chancellor
Alberto Ulloa on June 11, 1936, the outline of a Bolivian
proposal for strengthening relations. The plan contained
three major proposals. The first, designed to allay
Peruvian fears regarding a possible Bolivian military or
diplomatic offensive to gain a Pacific outlet through that
country's territory, consisted of a Bolivian declaration
that no territorial questions were pending with Peru and of
a nonaggression agreement. A second proposal provided for a
guarantee of widest freedom of transit for persons and
materials of all classes through Peruvian ports. The third
component of the plan proposed that Peru declare that she
was unopposed to the satisfaction of Bolivia's portuary hope
by means of a friendly understanding between La Paz and

74
Santiago. This last item was an obvious reference to
Article 1 of the complementary protocol of June 3, 1929,
in which Peru and Chile had agreed not to discuss the Tacna-
Arica territory with a third party without mutual
^Siote 169, to La Paz, Alberto Ostria Gutierrez,

June 11, 1936, "Legacion de Bolivia en el Pemi" (Mayo-Agosto
1936), ABPM; Gutierrez, Una bbra, 0£. clt., pp. 47-52.
consultation.
Although the overall Peruvian reception of the
Ostria Gutierrez plan was favorable, Peru's Chancellor
balked at the Andean request that his country declare Itself
unopposed to an amiable Bolivian-Chilean port settlement.
Ulloa told Ostria Gutilrrez that such a statement could
constitute moral coercion against Chile and might strain

7C
Bolivian and Peruvian relations with that country. J Peru,
said Ulloa, would not advance such a declaration publicly or
privately. Ostria later admitted that he was unable to
overcome Ulloa's opposition in the matter and that, during
the course of talks, the Peruvian Chancellor disclosed to
him the existence of still another secret Peruvian-Chilean
agreement on the port problem. Through a set of notes dated
March 17, 193^> exchanged between former Peruvian Foreign
Minister Sol6n Polo and Chilean Ambassador Manuel Rivas
VicufSa, the two countries had agreed upon mutual consultation
about and correlation of their policies relating to the
frontier zones of Tacna and Arlca. Ulloa described the
agreement as a Peruvian-Chilean "broche de uni6n" that

76
sealed the latch placed against Bolivia in 1929.
?5Note 169* Ibid.

^ N o t e 201, to La Paz, Ostria Gutierrez, June 25 .
1936, "Legaci6n de Bolivia en el Peru" (Mayo-Agosto 1936),
ABFM.
227
La Paz, although disappointed at Peru's position In
respect to the port question, still favored an arrangement
with Lima Incorporating the other features of the Ostria
Gutierrez plan. On September 14, 1936, shortly before
Ostria Gutierrez departed for Rio to assume his new
assignment there, he and Peruvian Chancellor Ulloa signed
several agreements, the most important of which was the
General Pact of Friendship and Nonaggression. The most
important provisions of this pact were the following:
1. A mutual declaration that no political or

territorial Issues were pending between
the countries (Art. l).
2. A reciprocal recognition of each nation's

territorial status as defined in effective
agreements (Art. 2).
3. A promise not to resort to force in any

common dispute but to settle all conflicts
by peaceful means (Art. 3).
4. A common agreement to remain neutral in any

conflict in which the other state is
involved (Art. 4).
5. The recognition of free transit rights in favor

of each country across the territory of the
other state for persons and material of every
class (Art. 5).
6 . A mutual agreement not to intervene in foreign

policy matters of special or direct interest
to the other state without its consent
(Art. 8 ).
7. An agreement to consult on matters relating
to continental policy or international
organizations (Art. 9).
8 . An agreement to establish a permanent Commission

of Investigation and Conciliation to handle
228
issues that might arise along their common
frontier (Art. 10).77
Notes were exchanged on the same date which acknowledged
the need to mark the common boundary in the area that had
been returned to Peru by Chile in accordance with their
agreement of 1929; this issue was later to prove troublesome
in the relations between the two countries.
Ostria Gutierrez's successor as Bolivian minister in
Lima, BallcSn Mercado, energetically sought to push the policy
of closer ties with Peru. While continuing discussions with
the Peruvian foreign office (Torre Tagle) about the common
development of fisheries in Lake Tltlcaca, he proposed
another set of agreements on matters of a commercial,
cultural, or administrative nature.^® Completing the pic
ture of Bolivian-Peruvian relations, Foreign Minister Finot
signed a convention on April 26, 1937, with the Peruvian
minister in La Paz, Jos£ Luis Bustamante y Rivero, which
provided for a mixed commission to study the problems relat
ing to the economic relations between the two countries.79
Relations with Chile. The Maintenance of Peace
77coleccl6n de tratados vlgentes, 0£. cit., V, 493;

Gutierrez, Una obra, o£. clt., p . 48.
?®Note ,93-61, to La Paz, BalliSn Mercado, December 15,

1936. "Legaclon de Bolivia en el Peru" (Septlembre-Dlclembre
1936), ABFM.
79coieccl$n de tratados vlgentes, op. clt., V, 505.

229
Conference in Buenoe Airee in December 1936 was the
occasion for another significant development in Bolivia's
post-Chaco War diplomacy. On December 23, 1936, Finot and
Chilean Chancellor Cruchaga Tocornal signed an agreement by
which the two countries promised to establish a mixed
commission to study and propose measures for improving

80
economic relations between the two countries. Although
the agreement stipulated that the commission's work was to
begin in April 1937* not until June 1937 did a Bolivian
commission, headed by Alberto Palacios, travel to Santiago
to Inaugurate these discussions. Finot's June 23 instruc
tions to this Bolivian commission provide a good view of
Bolivia's policy toward Chile in mid-1937.
In these instructions, Finot pointed out that
commercial and transit arrangements with Chile would be
Important means of countering the disadvantages of the
nation's landlocked geographical position .81 But, these
arrangements would be no substitute for a sovereign port;
Flnot stated, "The permanent hope of Bolivia has been and

flo
is to recover its own outlet on the Pacific."
80
Coleccl6n de tratados vlgentes, op. clt., IV, 495.
O-I
^Circular 19* to Buenos Aires, Finot, July 2, 1937,
"Legacl6n de Bolivia, Buenos Aires, circulares de N. de
R.R.E.E. de Bolivia" (Marzo 1935-Mayo 1938), ABFM.
82Ibld., p. 2.
230
Therefore, guidelines for action were given to the
delegation In the following manner.
The Bolivian commission in discreet hut firm form

must take advantage of every propitious opportunity
to suggest to the Chilean commission and to the
persons with whom It comes into contact that the
commercial and political relations between the two
countries will never be perfected while the port
question is not resolved in satisfactory f o r m . 8 3
In his instructions, the Bolivian Chancellor admitted
that the climate was still not appropriate for raising the
question to the diplomatic plans. He Insisted, however,
that the time was ripe for exploration and propaganda to
convince the Chilean leaders that a Bolivian port on the
Pacific was a practical question, the resolution of which
would have definite advantages for both countries.
Aside from the port question, the Bolivian
delegation was instructed to work for the perfecting of the
arrangements for free transit through Chilean ports,
especially Arica, and for the cession by Chile of her
section of the Arica-La Paz railroad to Bolivia. If
cession was not possible, Bolivia would consider renting
the Chilean section.
Prior to the Bolivian-Chilean agreement of December
23* 1936, the relations between the two countries had been
troubled by two developments. One was Bolivians attempt
to shape the purposes of the Maintenance of Peace Conference
8 3ibid
231
to allow her to raise the Pacific port question in that
meeting. As mentioned earlier. La Paz proposed that the
conference consider Inter-American disputes that might be
considered latent threats to continental peace. Since
Chile saw this proposal for what it was, she succeeded In
having It amended with a clause which read "excluding all
questions already settled by treaties."^ Santiago then
refused to retire the amendment despite Bolivian requests
to do so. At the Maintenance of Peace Conference, Plnot,
in a frank but moderately phrased address, said that it
was his duty to call the conference's attention to one of
the true problems facing America, Bolivia's landlocked
position. Bolivia asked for nothing, he said, but the
conference's interest in the question which eventually
would be solved by American cooperation and through

85
practical considerations. J
A second development that bothered Bolivian-Chilean
relations was the nonaggression pact that Bolivia signed
with Peru in September 1936. Chile was suspicious of this
agreement which signaled closer relations between La Paz
Qk
^Bolivia, Minlsterlo de Relaciones, Exterlores,
Conferencla Interaroerlcana de consolldacl6n de la paz (Buenos
Aires, I9^b), Inf'orme de Ia“3elegaci6n de Bolivia (La Paz:
Lib. e Imp. Arn 6 Hnos, 1937 ) » P* 21. (Hereinafter cited as
Conferencia de consolldacion de la paz.
85Ibld., p. 56.
232
and Lima, fearing that such a pact Indicated a tendency to
revive prior Bolivian-Peruvian alliances. Chilean Chancellor
Cruchaga Tocornal was especially resentful toward Bolivia,
since he understood that the agreement was the result of an
Andean initiative.^
Additional foreign policy concerns. Bolivia's
foreign policy concerns extended beyond relations with the
United States and with her more powerful neighbors.
Immediately upon release of the news regarding the Standard
Oil decree, Bolivia's minister In Uruguay, Carlos Romero,
was visited by a group of Uruguayan capitalists Interested
In establishing a mixed company, with the participation of
tne Bolivian state, for exploitation of the newly
nationalized oil d e p o s i t s . A n active Uruguayan interest
in Bolivia's oil resources was to persist for several
years. The perennial Bolivian interest in stimulating
immigration into the country also continued. Representatives
of the Toro government favored entering into official
agreements with other countries to provide for a well-
ordered procedure of immigration and negotiated to this
^Despatch 412, cited in Note 205, to La Paz,

Hernando Slles, October 14, 1936 * "Legaci<5n de Bolivia en
Chile" (1936), ABFM; New York Times, October 1, 1936, p. 3 .
®^Note 41/36, to La Paz, Carlos Romero, March 29,

1936, "Legacl6n de Bolivia en el Uruguay" (1937), ABFM.
233
88
effect with Poland's representative In Buenos Aires.
Meanwhile, Bolivia's difficulty with the International Tin
Committee persisted as the result of the nation's inability
to meet the production quota assigned to her by that body.
At the June 25, 1938 tin committee meeting in Paris, some
representatives suggested that Bolivia's quota deficit be
distributed among the other producers, but the proposal

89
was defeated by Bolivian and Dutch opposition.
Bolivia's diplomacy at the 1938 Inter-American
Conference for the Maintenance of Peace already has been
discussed with relation to the Chaco Issue and the Pacific
port question. Meeting on the eve of the conference's
Inauguration, the Bolivian delegation, headed by Enrique
Finot, agreed unanimously that the fundamental matter of
the conclave for them was the Chaco. They also decided to
give preferential attention to the items on the agenda which
directly Involved Bolivia's national interests. Among the
items which fell into that category were (1 ) freedom of
transit, (2 ) neutrality, (3 ) definition of the aggressor
88Note 46, to La Paz, Tomis Manuel El£o,

September 22, 1936, "Legacion de Bolivia en la Argentina"
(Julio-Dieiembre 1936), ABFM.
8% o t e 60, to La Paz, Luis Romero S&enz, June 26,

1936, "Legaci6n de Bolivia en la Oran Bretafla" (Mayo-Agosto
19361 ABFM.
234
and sanctions, and (4) economic cooperation.9®
In the conference, Bolivia presented a draft
convention for defining the aggressor and for applying
sanctions in cases of aggression. This Andean proposal
was referred by the conference to the Committee of Experts
on Codification of International Law that had been
established by the Seventh International Conference of
American Republics in 1933* In the discussion of
neutrality, the Andean delegation sought to guarantee that
the principles of neutrality accepted by the American states
would in no way Jeopardize Bolivia's right of free transit
through her neighbor's territories. To achieve this end,
Bolivia proposed the following article to be incorporated
in any inter-American agreement on neutrality:
The right of free transit that mediterranean

countries should enjoy across the territory of the
bordering states, will not be affected in time of
war and will be maintained, without any restriction,
independently of the general standards on neutrality
adopted for all the countries.91
Although no new agreement on neutrality was reached
by the conference, Bolivia took consolation in the fact
that Article 6 of the Convention to Coordinate, Extend and
Assure the Fulfillment of the Existing Treaties Between
9®Conferencla de consolldacldn de paz, op. clt., p.
91Ibld., p. 72.
235
the American States provided that the contracting parties
would seek to discourage the spread or prolongation of war
and would consider applying restrictions upon states in
conflict but "without detriment to their obligations
derived from other treaties to which they are or may become

go
parties. Given the existent transit treaties to which
Bolivia was a party and those being discussed with
bordering states, this clause gave the Andean nation some
assurance that neutrality agreements would not endanger
her welfare.
Bolivia was disappointed with the accomplishments
of the Maintenance of Peace Conference. Finot criticized
the meeting for failing to deal with the hard and practical
matters of inter-American relations while occupying its
time with general resolutions of a "secondary order." In
his words, "It has not corresponded to the hopes that it
evoked or to the demands of the h o u r . "93
Throughout this period, Bolivia maintained her
membership in the League of Nations. Arrangements had been
worked out in 1935 for the Andean republic to pay her
financial obligations to the League which had been in
arrears since 1923* In September 1936 Bolivia was elected
92Ibid., p. 73.
93ibld., p. 124.
236
as a nonpermanent member of the Council of the League of
Nations, La Paz, of course, wanted to keep open Its
channels to the League In the event that negotiations at
the Chaco Peace Conference failed.
Post-Chaco War diplomacy— the formative stage,
Bolivia's post-Chaco War diplomacy assumed Its definitive
dimensions under the direction of Enrique Flnot. Flnot's
policy was based on his evaluation of Bolivia's International
situation. He saw the Andean nation surrounded by powerful
neighbors who possessed the capacity to resolve the Chaco
conflict, to stimulate or hinder Bolivia's national
development, and to threaten the very existence of the
republic. His solution to the problem of diminishing the
effects of this hostile environment was to establish closer
practical economic and commercial ties with the bordering
countries, thereby converting a potential noose into a
network of reciprocal economic interests which would
guarantee Bolivia's security and domestic economic develop
ment .
In its scope, Finot's policy was concerned with
promoting economic relations with all the more powerful
contiguous states. Agreements to establish mixed economic
study commissions were signed with Brazil (November 1936),
Chile (December 1936), Argentina (December 1936), and Peru
(April 1937)* But the major aspect of Finot's policy was

237
his attempt to promote closer ties with Argentina, using
petroleum as the basis for a Bolivian-Argentine
rapprochement. Argentina's friendship was considered
essential for obtaining a satisfactory Chaco settlement and
for developing the nation's Oriente, especially with respect
to the petroleum industry. The Bolivian Foreign Minister
also was aware of the Importance of relations with Brazil,
the nation which could counterbalance Argentina's influence
in the eastern region of the country while significantly
contributing at the same time to the development of this
region.
Although Finot was the major contributor to the
formulation of Bolivia's post-Chaco War foreign policy, his
work was complemented by that of Alberto Ostria Gutierrez,
Andean minister in Lima and Rio de Janeiro during this
period. Ostria Gutierrez, while sharing the Foreign
Minister's Interest in establishing closer economic
relations with Bolivia's neighbors, manifested greater
sensitivity to the political aspects of the nation's
diplomacy. He warned that Flnot's policy vis-a-vis
Argentina could lead to Bolivia's servitude to Buenos Aires,
as it had for Paraguay. He favored direct political agree
ments as means for assuring the nation's security, and he
signed, as we have seen, a nonaggression pact with Peru in
September 1936. In June 1937 Ostria Outilrrez wrote Finot

233
from Rio de Janeiro:
Without doubt such a policy of economic under

standing with Argentina Is advantageous, even
Indispensable; but In order that It not be a policy
of subordination and surrender, It must be paralleled
or preceded by a close loyal understanding with Brazil*
In my judgment, on this Atlantic side, we must draw
ourselves closer to Brazil so that Argentina will not
devour us, just as on the Pacific side, we must be
close to Peru so that Chile will not devour us. The
Rlo-La Paz-Lima line should be the axis of the
guarantee of existence and of peace that, like
Switzerland. Bolivia should obtain from all her
neighbors.94
Although the Toro regime endured for little more
than a year, from May 1936 to July 1937* and Enrique Flnot
occupied the Chancellory for less than a year, the
Bolivian Foreign Minister and his collaborators had
charted a relatively well-defined course for Andean foreign
relations. Objectives had been clearly stated and the
strategy for achieving these objectives had been formulated.
Initial steps In Implementing this policy of practical
contacts were taken with the creation of four binational
economic study commissions. But with the fall of
President Toro In July 1937* Finot was replaced in the
Foreign Ministry. Responsibility for Bolivian foreign
relations then passed to Lt. Colonel Qermin Busch and his
foreign ministers.
^ Note 193, to La Paz, Alberto Ostria 0utl6rrez,

June 14, 1937* "Legaci6n de Bolivia en el Brasil" (Enero
Junio 1937)* ABFM.
239
III. ANDEAN FOREIGN RELATIONS DURING
THE BUSCH YEARS
(1937-1939)
Bolivia's post-Chaco War diplomacy during the
regime of Lt. Colonel German Busch had two dimensions. On
the one hand, preoccupation with the Chaco problem
continued. As we have seen, a settlement in that dispute
finally was reached on July 21, 1938. On the other hand,
the Finot plan of Bolivian foreign relations, the program
of economic contacts, entered into a difficult phase of
early implementation. Effective action in foreign affairs
was made difficult by the lack of a unified direction in
the Bolivian Chancellory. Seven different men served as
foreign minister during the Busch presidency. At the
same time, although petroleum became a significant factor
in Bolivia's foreign relations during this period, the
Andean republic had trouble in exploiting her new
petroleum resources. The public petroleum company,
Yacimientos Petrol£feros Fiscales Bolivianos (Y.P.F.B.)
emerged as a second foreign policy-making ministry, at
least in economic matters, and occasionally worked
independently of the Foreign Ministry.
Domestiaally, the Busch government began with almost
a countrywide consensus in its favor, since practically
everyone had been dissatisfied with the policies of the
Toro regime. Congressional elections in March 1938 gave

Busch supporters a wide majority in the National
Convention, and that assembly, in Nay 1938, elected the
Chaco War hero constitutional president with a term
extending until 1942. Gradually, however, Busch's policies
alienated the traditional conservative parties, which were
seeking a return to civilian constitutional rule; conflict
also continued between the government and the mine owners.
In early April 1939* Busch, faced with growing domestic
dissension, assumed dictatorial control of the Andean
government and dissolved the National Convention. Several
months later, on June 7 , he decreed that all foreign
exchange earned from mineral exports was to be deposited
in the Central Bank. Unable to cope with the nation's
many problems and frustrated by the lack of public support
for his programs of reform, Busch committed suicide on
August 23 » 1939* and the dictatorial experiment of five
months duration came to an abrupt end.
Prompt recognition. The Busch government experienced
little difficulty in obtaining diplomatic recognition.
Busch read a statement to the nation on July 14, 1937, In
which he declared that the new government intended to give
strict fulfillment to international treaties, to maintain
public order, and to respect private property legally

241
acquired.95 on July 17 Acting Foreign Minister Gabriel
Gosilvez delivered notes to the foreign diplomatic
representatives in La Paz in which he stated that the
apparent change of government was simply a change of chief
executives within the continuing army government that had
been established in May 1936. In his view, recognition of
the Busch government was not necessary. Gos&lvez wrote
that Bolivia would continue to maintain relations with the
foreign governments just as in the past.

96 Peru and
Ecuador replied to the note on the same day, stating their
intentions to continue normal relations. Most of the other
countries followed suit shortly thereafter. The United
States expressed her Intentions to continue relations in a
note delivered in La Paz on July 22, 1937.9?
Bolivian-Argentine relations. Andean relations with
Argentina continued to rank high among Bolivia's foreign
policy concerns during the regime of Germdn Busch. In those
relations, the matters of railroad connections and
^Telegram 40, to Washington, John J. Muccio, July 14,

1937, FR, V (1937), 251.
^Telegram 45, to Washington, Muccio, July 17, 1937,

TO, ¥ (1937), 256.
^Telegram 47, to Washington, Muccio, July 18, 1937,

FR, V (1937), 257; Telegram 21, to La Paz, Hull, July 22,
1537, RR, V (1937), 270; Telegram 50, to Washington, Muccio,
July 257 1937, FR, V (1937), 270.
242
petroleum loomed largest, aside, of course, from the
Chaco issue.
The mixed Bolivian-Argentine economic study commlssjcn,
constituted as the result of the Pinot-Saavedra Lamas agree
ment of December 26, 1936, realized its labors in Buenos
Aires In July and August 1937• Casto Rojas, chairman of
the Bolivian delegation, said in August 1937 that the mixed
commission had considered many matters, the most Important
of which was the transport of Bolivian oil through

93
Argentine territory.
The results of the mixed commission's work were soon
Incorporated into three Argentine-Bolivian agreements.
The first two of these were signed on September 17, 1937,
by Argentine Foreign Minister Saavedra Lamas and Bolivian
Charg£ d 1Affaires Alfredo Flores. One was a convention on
frontier traffic; the second, and most important, was a
preliminary railroad study convention. This latter
agreement provided for a Bolivian-financed study of the
route of the Yaculba-Santa Cruz railroad, including a
branch line to Sucre. The investigations were to be
realized by a Bolivian-Argentine mixed technical commission
under the direction of the Administration of Argentine State
9Ê1 Diario, August 17* 1937* P. 6

243
Railroads.^9
As an Indication of continuity in Bolivia's Argentina
policy, Enrique Plnot was sent to Buenos Aires in October
1937 as the Andean minister before the Argentine government.
According to Flnot, he had been assigned to Buenos Aires
by the Busch government to conclude the economic agreements
with Argentina that he had initiated as foreign minister.10®
Almost immediately, on November 19, 1937, he signed a
Convention on Petroleum Traffic with Saavedra Lamas that
provided for freedom of transit for Bolivia's petroleum
across Argentine territory. Among the salient features of
the agreement was one which limited this right of free
transit to the production from Bolivian government deposits.
Plnot wrote La Paz that he personally disagreed with this
restriction, but explained that without it, the convention
would have been impossible.1®1 Argentina was taking no
chances that the Standard Oil Company might regain her
possessions in Bolivia and seek to utilize the freedom of
transit privileges accorded in this convention.
^Colecci 6n de tratados vigentes, op. clt., IV,

107-120. :
---------------------------- —
100Despatch 555* to Washington, Braden, November 4,

1937 (DS>824.6363 ST 2/193.
101Note 259* to La Paz, Plnot, November 23, 1937,

"Legaci6n de Bolivia en la Argentina" (Septierabre-Dielembre
1937), ABFM.
244
The November 1937 petroleum transit convention with
Argentina was Intended to alleviate one of the major
problems of Bolivia's petroleum industry, that of
transportation. Bolivia's oilfields were located far from
the nation's centers of consumption on the Altlplano.
Transport by truck and existing railroads was slow and

102
expensive. La Paz hoped to reduce the cost of shipment
to domestic markets by using the northern Argentine rail
roads. This convention also granted freedom of transit
for Bolivian petroleum destined to Argentina and to other
foreign markets, an Indispensable privilege If the Andean
nation was to utilize her hydrocarbon resources In the
important commercial fashion envisaged by Plnot.
Following the signing of the railroad study and
petroleum transport conventions in 1937, however, progress
In these matters for the next two years was slow for a
number of reasons. Opposition to the railroad project
arose within Bolivia from some who feared Argentine
domination in the nation's Orlente. Opposition also came
from regional factions, like that of Tarija, which contended
that the project ignored their departments' interests.*®3
^^Sergio Almaraz, Petr6leo en Bolivia (La Paz:

Editorial "Juventud," 1958), pp. 134^ 140^
103Note 122, to La Paz, Plnot, May 17, 1938,

"Legacl6n de Bolivia en la Argentina" (Mayo-Agosto 1938),
ABPM.
Of course, the unsettled Chaco situation also made progress
difficult. One purpose of the agreement had been to
persuade Argentina to exert pressure on Paraguay to with
draw her troops from the area of the proposed railroad.
However, as was seen In Chapter III, when Horaclo Carrillo
carried an Argentine proposal to this effect to La Paz In
February 1938* Bolivia's Foreign Minister rejected lt.10^
The Chaco uncertainty explained, In part at least, the
Bolivian Army's refusal to give Argentine engineers
associated with the railroad study unlimited access to the
area near the lines of separation of the troops. The lack
of transportation facilities and, Importantly, Bolivia's
delay In providing the necessary funds also hindered
progress in the realization of the railroad studies.
The Bolivian Legation In Buenos Aires also reported
to La Paz that the new Argentine government of Roberto M.
Ortiz, fearing that Its predecessor had overextended Itself
In respect to public finances, was being extremely cautious
about making commitments for additional expenditures.^^
This development converted the question of the financing of
10Îbld.; Despatch 641, to Washington, Braden,

February 177T938 (DS)724.34119/1216.
105"informe acerca de las labores de la Legaci6n de

Bolivia en Buenos Aires durante el afio 193d" (Anexo) Note
169* to La Paz, Julio Tellez Reyes, Nay 31* 1939* "Legacl6n
de Bolivia en la Argentina" (Enero-Junlo 1939), ABFM.
246
the proposed line Into an essential Issue In the discussions.
One positive development in Argentine-Bolivian
relations Mas the approval by the Argentine Chamber of
Deputies on September 7* 193$, of the Carrillo-Diez de
Medina Boundary Treaty of 1925. On March 23* 1939* Bolivians
Minister Plnot signed with Argentine Chancellor Cantilo a
protocol of instructions for the mixed commission that was
to mark on the terrain the newly ratified boundary.1^
In March 1939 Julio Tellez Reyes was designated
Bolivian minister in Buenos Aires to replace Plnot. His
instructions from Chancellor Diez de Medina, dated March
9* 1939* indicate the major issues pending between the two
nations at the time and certain of Bolivia's policy
objectives. The new minister was instructed to reopen
discussions of a customs and transit convention which
would provide Bolivia freedom of transit through Argentine
territory for all types of material, including arms and
munitions, as well as free visas for immigrants en route
to the Andean nation through Argentina. He was directed
to discuss modifications in the preliminary railroad
studies conventions, although the exact nature of those
modifications could not be ascertained. Another important
task assigned to Tellez Reyes was to obtain political
106Bollvla, M i n isterlo de Relaciones Exterlores,

Memfrrla* 1940 (La Paz: Editorial Unlverso, 1940), pp. 4-11.
247
guarantees from Argentina with respect to Bolivia's
territorial Integrity as presently constituted. On the
subject of petroleum, Diez de Medina instructed the Andean
representative to study the possibility of locating
Bolivia's petroleum production in the Argentine market,
while lending his collaboration to Y.P.F.B. which "has
responsibility for these problems."1^ Tellez Reyes also
was instructed to report periodically on the activities of
Y.P.F.B. in Buenos Aires.
The matter of financing the proposed Yacuiba-Santa
Cruz railroad was a matter of major concern in Bolivian-
Argentine relations in 1939* In June Bolivia's minister in
Buenos Aires suggested to Interim Foreign Minister Dionisio
Foianini that the only logical solution was to use Bolivia's
petroleum production as the guarantee sought by Argentina

108
for financing the railroad. Not only would this
arrangement make possible construction of the railroad, it
also would permit the Andean nation to locate her
petroleum in the Argentine market, an accomplishment
hindered by high cost of transportation and by Argentine
10^Letter (without number), to Julio Tellez Reyes,

Eduardo Diez de Medina, March 9, 1939* "Argentina, Legaci<$n
en Argentina" (Octubre de 1938 a Enero de 1940), ABFM.
10SNote 174, to La Paz, Julio Tellez Reyes, June 6 ,

1939# "Legacl6n de Bolivia en la Argentina" (Enero-Junio
1939), ABFM.
243
restrictions on petroleum Imports.
Bolivia's economic relations with Argentina during
the 1937-1939 period were Influenced significantly by
Y.P.P.B.'s needs and aspirations. According to Tlllez
Reyes, the Argentine public petroleum company, Yacimientos
Petrollferos Piscales (Y.P.P.) served as patr6n for Y.P.P.B.

109
in this period. * Dionisio Poianini, head of Y.P.P.B.,
later stated the Y.P.P. provided for the fledgling
petroleum entity in Bolivia a limited quantity of equipment
and recommended retired petroleum engineers who could give
technical assistance to Y.P.P.B .110 The Bolivian petroleum
company also needed capital for development. Operations at
that time were limited to two fields (Camlrl and Sanandita)
and to thirteen wells whose production covered only about
26 per cent of domestic consumption in the 1937-1941

111
period. Since the Busch government could provide only
limited funds for the state industry, Poianini and other
representatives of Y.P.P.B. were seeking substantial
credits in the banking circles in Buenos Aires .112
10% o t e 108, to La Paz, Tellez Reyes, April 18, 1939,

"Legaci<5n de Bolivia en la Argentina" (Enero-Junio 1937),
ABFM.
110In a personal interview with Dionisio Poianini in
La Paz, October 24, 1966.
iiiSergio Almaraz, o£. clt., p. 137.
112Despatch 516, to Washington, Robert 0. Caldwell

(La Paz), May 12, 1939 (DS)824.6363 ST 2/364.
249
The Argentine position In respect to financing the
Yaculba-Santa Cruz railroad was made known to Bolivia's new
foreign minister, Ostria Gutierrez, as he passed through
Buenos Aires en route to La Paz In July 1939. The Argentine
memorandum, dated July 4, proposed that the railroad be
financed by the Bolivian government. However, Buenos Aires
was willing to buy petroleum from Bolivia, and, If a
substantial proportion of that product was from the
Sanandlta fields, she would be willing to construct the
40 kilometer section of railroad from near Yaculba on the

113
Argentine frontier to Sanandlta. J The fundamental basis
for Argentine-Bolivian discussions with respect to railroad
construction had made its appearance. Buenos Aires would
build the railroads If Bolivia could pay for this
construction with petroleum.
Relations with Rio. Bolivia's relations with Brazil
also revolvad around the subjects of railroads and
petroleum. Although the Bolivian-Brazilian protocols of
November 24, 1936, authorized the creation of two mixed
commissions to study these questions, the studies were
realized by a single Bolivian-Brazilian mixed commission
that first met in La Paz in July 1937.
Brazil's rivalry with Argentina for influence in
^^Gutl^rrez, Una obra, op. cit., pp. 234-255.

Bolivia's Oriente again entered directly into the picture
during the work of the mixed commission. Word that Bolivia
was about to sign a railroad study convention with Buenos
Aires and the subsequent announcement of the Saavedra
Lamas-Alfredo Flores agreement of September 17, 1937,
threatened to disrupt Bolivian-Brazillan discussions.
Guillermo Francovlch, Bolivian charge d'affaires in Rio,
reported that the imminent agreement with Argentina had

114
surprised and irritated Brazilian officials. Brazilian
Foreign Minister Mario de Pimentel Brand&o had told
Francovlch in mid-September 1937 that he could not understand
Argentina's economic interest in advancing northward to
Santa Cruz, a point parallel to the Brazilian frontier. In
Itamaraty's opinion, Argentine penetration above the
twentieth parallel was not in Brazil's i n t e r e s t . I n La
Paz, Brazil's delegates on the mixed commission demanded
that the railroad tinder consideration be constructed from
the Brazilian frontier to the Bolivian petroleum center at
Camiri rather than to Santa Cruz.11^ Finot's earlier
114
Note 379* to La Paz, Guillermo Francovlch,
September 15, 1937* "Legacl6n de Bolivia en el Brasil"
(Julio-Septlembre 1937)* ABMF; Note 469* to La Paz,
Francovlch, December 1, 1937* "Legaci6n de Bolivia en el
Brasil" (Octubre-Diciembre 1937)* ABFM.
n 5Note 379, ibid.
• ^ Ibld.; Gutierrez, Una obra, op. cit., pp. 101-102,

Although Ostria Gutierrez refers t o t h e B r a z i l i a n position
251
prediction that Argentine-Brazillan rivalry in the nation's
Orlente would put Bolivia's diplomacy to the test was proved
accurate.
Late in September 1937 Bolivia sought to clarify
the muddled railroad and oil zone picture for Brazilian
officials. In a telegram to Francovlch, La Paz explained
that the September 17, 1937 agreement with Buenos Aires
was preliminary in nature and that it substantially
reduced the Argentine influence that had been contemplated
in earlier railroad arrangements with that country during
the 1920's.1*^ The Foreign Ministry stated that the
railroad under consideration would be under Bolivian
control and, therefore, would offer no Argentine military
threat to Brazil. However, La Paz suggested in the
telegram that the most effective Brazilian counterbalance
to Argentine penetration would be the rapid construction
of the Corumbi-Santa Cruz railroad. In respect to
petroleum, the Chancellory stated that the zone north of
Camiri would remain to provide Brazil's needs, but Camiri
in favor of a railroad directly to Camiri, he completely

omits any reference to the part played by Argentine
competition in the affair.
117Telegram 109, to Rio de Janeiro, Vaca Ch£vez,

September 22, 1937> Included in Note 404 to La Paz,
September 29, 1937* "Legaci6n de Bolivia en el Brasil"
(Julio-Septlembre 1937), ABFM.
252
would be reserved for meeting Bolivia's domestic demand.11®
This telegram and further discussions In La Paz and
Rio de Janeiro apparently succeeded In overcoming Brazil's
misgivings about Bolivia's relations with Argentina. The
mixed commission reached Its conclusions on September 30,
1937* and on November 25* 1937* a Bolivian-Brazllian
protocol ratified the results of the commission's labors.
On the basis of the commission's recommendations and
conclusions, preparation of two draft treaties— one on
railroad connections, the other dealing with a blnatlonal
petroleum project— was initiated in the Bolivian
Chancellory.11^
In December 1937 Ostria Gutierrez, who had been in
La Paz since September participating In the negotiations
centered there, returned to Rio de Janeiro with the draft
treaties and a set of instructions from President Busch.
According to these instructions, the most Important
Bolivian objectives in the negotiations were the following:
1. To modify the 1928 Treaty of Natal to allow for

the application of the Brazilian financial
obligation to the construction of the Corumbd-
Santa Cruz railroad.
2. To make explicit arrangements for payment of the
11®Ibld.
11^Note 61, to La Paz, Ostria Gutierrez, March 2,
1938* "Legaci6n de Bolivia en el Brasil" (Enero-Abril 1938),
ABFM.
253
Brazilian debt of a million pounds sterling
to Bolivia, plus interest.
3* To formulate a plan for financing the

construction of the Corumb£-Santa Cruz and
Santa Cruz-Puerto Orether railroads with
Brazilian assistance.
4. To obtain from Brazil an advance of $750,000

to Initiate petroleum exploration and a
guarantee of free transit for Bolivian
petroleum through Brazilian territory.
5 . To gain Brazil's promise to defend Bolivian

petroleum in case of new hostilities in the
Chaco.
6 . To negotiate an agreement by which Brazil

guarantees Bolivia's territorial integrity. 20
Bolivlan-Brazillan negotiations on the basis of the
Bolivian draft treaties began in Rio de Janeiro on January
14, 1938. Almost immediately the discussions encountered
difficulties. The Bolivian proposition that Brazil pay
interest on the debt owed the Andean nation met Itamaraty's
firm resistance. A compromise was reached when Bolivia
accepted, in lieu of interest payments, Brazil's offer to
finance the construction of the railroad all the way to

121
Santa Cruz. c
On February 25, 1938, three treaties were signed in
Rio de Janeiro between Brazilian Foreign Minister Mario de
120
Ibid.; Gutierrez, Una obra, op. cit_., pp. 105-106.
121Note 30, to La Paz, Ostria Outilrrez, January 28,

1938. "Legaci6n de Bolivia en el Brasil" (Enero-Abril
1938), ABFM.
254
Pimentel Brandfio and Bolivian Minister Alberto Ostria
Gutierrez. The two most important were the Treaty on
Railroad Connection and the Treaty on Export and
Exploitation of Bolivian Petroleum. The third treaty was
an extradition agreement. In addition to these treaties,
the two governments exchanged complementary notes In which
the Brazilian government Issued a series of highly
significant political declarations.
The Treaty on Railroad Connection provided that the
Brazilian debt of a million pounds sterling would be
utilized In the construction of the Corurabd-Santa Cruz
railroad and that Brazil would advance supplemental funds
to complete the project. Bolivia agreed to repay the loan
in twenty equal annual payments, at 3 1/2 per cent interest,
in pounds sterling or hydrocarbons. The production of the
petroleum zones traversed or reached by the railroad was
the only guarantee for the loan. The treaty also provided
that Bolivia was to build and administer a railroad from
Santa Cruz to Camiri and from Sucre to Camiri and would
construct, when opportune, railroads from Vila Vila (near
Cochabamba) to Santa Cruz and from Santa Cruz to Puerto

IPO
Grether or to another port on the Ichilo River. One can
see that the railroad linking Santa Cruz to the Brazilian
12gColeccl6n de tratados vigentes, op. cit., IV, 291.

255
frontier was regarded as a single section of a rail system
that would tie Bolivia's Orlente to the highlands and allow
for the development of the long-neglected eastern region.
The Treaty for the Export and Exploitation of
Bolivian Petroleum provided for the exploration of the
Bolivian subandean petroleum zone from the "river Parapet1
to the north" by a mixed technical commission. The studies
were to be Jointly financed by both governments, but
Brazil agreed to advance its half, $750,000, to Initiate the
work. Bolivia promised to allow exploitation in the cited
zone by mixed Bolivian-Brazilian companies "organized in
accordance with the effective laws in each country."123
These companies were obligated to sell petroleum In Brazil
after Bolivia's domestic needs were satisfied. The
Bolivian government agreed to allow the companies to
construct pipelines from the production areas to the
Brazilian frontier. Brazil conceded the right of free
transit to Bolivian petroleum and petroleum derivatives.*2^
Bolivian Minister Ostria Gutierrez achieved several
other objectives of his Instructions in the Brazilian
declarations contained in the complementary reverse notes
which, according to him, "strengthen from every point of
1 2 3ibld., p. 311.
*2 4 Ibid., p. 309.
256
view her {Bolivia1sj international situation without demand
ing sacrifice, submission, obligation or anything in return
that would not be favorable to Bolivia's own interests."^2^
Although the terms of the Brazilian declarations were
vague, nevertheless, they were favorable for La Paz. In
his note, Brazilian Foreign Minister Pimentel BrandSo
reaffirmed his government's intention to continue in the
Chaco Peace Conference until a settlement was reached.
Acknowledging that certain of Bolivia's difficulties,
especially in the Oriente, were the result of the Andean
nation's landlocked position, Brazil declared her intention
to collaborate in the solution of the problem, but without
prejudice to third parties. The note added that Brazil
was determined to see that no new difficulties were added
to those already existing. She also recognized Bolivia's
territorial integrity as defined by international agreements.
With respect to the boundary line still pending with Paraguay,
Brazil declared that she only would respect an agreement
freely entered into by the Andean nation.12^ Ostria
Gutierrez explained Brazil's cooperative attitude as
manifested in these declarations on the basis of Rio's
understanding of and misgivings about Argentine imperialism.
12^Note 61, o£. clt., p. 12.
12^Colecci6n de tratados vigentes, op. cit., IV,

297-299.
257
He summarized the significance of the declarations by saying:
The certain thing is that as a final result Bolivia

has obtained three fundamental objectives related to
the most grave of her international questions of today:
(1) to counter the Paraguayan political objective of
dismembering Santa Cruz; (2) to frustrate the
Paraguayan economic objective of possessing the Bolivian
petroleum; (3 ) to contribute from without to the solution
of the Chaco problem which appears impossible of
solution solely from within the Peace Conference.127
The February treaties with Brazil were favorably
received in Bolivia, but criticism was not lacking either in
the cabinet or in the National Convention. Within the
Council of Ministers, Dionisio Poianini, Minister of Mines
and Petroleum, and Major Ellas Belmonte Pab(5n, Minister of
Government, expressed reservations about certain aspects of
the agreements. Among the most serious objections raised
with respect to the petroleum agreement were those referring
to the vague delimitation of the zone of exploitation
("desde el Rio Parapet! al norte"), the prerogatives of the
mixed societies within the zone, the uncertainty of the
legal status of the proposed mixed companies, and the
unspecified role of the Bolivian state in the future

128
exploitive operations. Although Ostria Gutierrez
dismissed the criticisms as groundless, the cabinet asked
him to seek modifications in the treaties with respect to
12?Note 61, op. cit., p. 15 .
12®Outi6rrez, Una obra, o£. cit., pp. 149-154.

253
more precise delineation of the petroleum zone In question
and to additional restrictions on the mixed companies,
limiting their exploitive rights only to the wells
developed with their c a p i t a l . O n July 9, through an
exchange of notes with Brazil's new chancellor, Oswaldo
Aranha, Ostria Gutierrez managed to obtain the clarifica
tions sought by La P a z . 1 ^0
Further opposition to the treaties was encountered
in the National Convention, but after brief debate, that
assembly approved the agreements on August 18, 1938, by a
vote of 88-11. Among the Convention critics were Victor
Paz Estenssoro and Augusto C^spedes, the latter a self-
styled representative of Bolivia's "riueva conciencia."1^1
Underlying much of the criticism of the treaties was
opposition to foreign participation of any kind in the
exploitation of Bolivia's petroleum. Standard Oil Company
had been expelled only recently, and nationalistic pride
^^Note 168, to Ostria Gutierrez, Germ&n Busch, June

17> 1938* cited in Gutierrez's Una obra, op. cit., pp. 154-
155.
*30colecci6n de tratadoa vlgentes, o p . cit., IV, 314;
Note 219, to La raz,"’Ostria Gutierrez, July 2 , 19:50,
"Legaclon de Bolivia en el Brasil" (Mayo-Agosto 1938),
ABFM; Note 230, to La Paz, Ostria Gutierrez, July 9, 1938
(same volume as Note 219); Note 235* to La Paz, Ostria
Gutierrez, July 11, 1938 (same volume as Note 219).
^lc^spedes explains the opposition of the "nueva

conciencla" in El dlctador SulcIda (Santiago de Chile:
Editorial Uftiversitaria, S.A., 1956)* pp. 172-185.
259
in Y.P.P.B. as a symbol of the nation's partially recovered
economic sovereignty was manifest in the discussions of
the February treaties. Dionisio Poianini, as chief of
Y.P.P.B., may have felt that the petroleum agreement was
delivering to Brazilian Influence a large zone from which
Y.P.P.B. would be excluded, an arrangement that would
adversely affect the future of the state industry. However,
as a cruceflo, he shared President Busch's desire (Busch
also was a cruceflo.) to see the Santa Cruz region opened
up for development by railroad connections with Brazil.
Therefore, Foianini went along with the agreements as
modified by the July 9 notes.
Ratifications of the February 1938 agreements were
exchanged in Rio de Janeiro on September 15, 1938. On
June 22, 1938, immediately prior to his trip to La Paz to
assume the Chancellory, Ostria Gutierrez signed notes with
Brazilian Foreign Minister Aranha in respect to the 1938
railroad treaty. By the terms of this complementary
agreement, the governments agreed to call for bids for the
construction of the first sections of the railroad. Most
importantly, Brazil agreed to build, at her own expense,
the section of the Corumbfi-Santa Cruz railroad that
linked Corumbi with Arroyo Concepci6n on the frontier with

Bolivia (7.5 k i l o m e t e r s ) .^-82
132coieccl6n de tratados vigentes, op. cit., IV, 303.

260
These matters of railroad construction and petroleum
development were the most important subjects treated with
Brazil during the Busch years, but other problems also
received consideration. One of these involved Bolivian-
Brazilian commercial relations. On August 24, 1938, notes
were exchanged in Rio de Janeiro which guaranteed that the
minimum legal tariff would be applied to Bolivia's exports
to Brazil in accordance with provisions of the Treaty of
Commerce and Pluvial Navigation of 1910.^33 Ostria
Gutierrez sought to Improve the facilities of transport
for Bolivian goods by means of the railroads and rivers of
the Amazon River basin. Agreements also were reached on
the exchange of diplomatic valises (June 17, 1939), &
program of cultural exchange involving student and
professor exchange (June 23, 1939)> and the exchange of
official publications (August 30, 1937).
The 1937-1939 period was a significant time in
Bolivian-Brazilian relations. Definite financial commit
ments of substantial magnitude had been made by both
parties relating to railroad construction and to the
development of Bolivia's petroleum resources. For the
^^Note 282, to La Paz, Ostria Gutierrez, August 25.

1938* "Legaci6n de Bolivia en el Brasil" (Mayo-Agosto 1938),
ABFM.
13^coieccl6n de tratados vlgentes. op. cit., IV, 280,

328, 335.
261
first time In Bolivian history, La Paz was giving preferred
attention to the peacetime development of Santa Cruz and
the Orlente.
La Paz and Santiago de Chile. Although Bolivia was
preoccupied with relations with her eastern neighbors
during the Busch years, the mixed commission authorized
by the Pinot-Cruchaga Tocornal agreement of December 1936
continued its study of the economic relations between
Bolivia and Chile. The commission had two sessions in
1937* first in Santiago, then in La Paz, and it approved a
large number of recommendations for the consideration of
the governments. Most of these had to do with cultural,
customs, passport, and transit matters. Although the
recommendations culminated in an impressive number of
Bolivian-Chilean agreements (about twelve), their
importance was slight. The most significant was a
Convention on Transit signed in Santiago on August 16, 1937,
by the chairmen of the Bolivian and Chilean delegations
to the mixed commission, Alberto Palacios and Jorge Matte.
In this convention Bolivia was guaranteed the right of
free transit for all types of merchandise and at all times
across Chile's territory and through her major ports.
Other provisions of the convention defined the procedure to
be followed in moving Bolivian imports and exports through
Chilean ports and granted Andean customs agents more

262
complete Jurisdiction over the merchandise in transit.1^
On May 21, 1938, representatives of the two countries
also signed a commercial treaty, another matter to which the
mixed commission had given its attention. This agreement
was concluded despite former Bolivian President Bautista
Saavedra's public declaration that the Andean nation had
nothing to sell to Chile and that, consequently, any
commercial treaty would be prejudicial to Bolivia’s
interest.1^ Bolivian Foreign Minister Diez de Medina,
who signed the commercial treaty with Chile, earlier had
begun a campaign to delete the "most favored nation" clause
from Bolivia's commercial agreements because he felt it
was detrimental to the national economy. However, in
discussions prior to the signing of the commercial treaty,
the Bolivian Chancellor acceded to the Chilean request
that the "most favored nation" clause be Included, a move
explained by one Bolivian official as a contradiction in the
service of more Important national interests which he
presumed related to the still pending Chaco issue.1^7 0n
July 30, 1938, an Explanatory Act pertaining to the
135Ibld.. p. 499.
Hora, July 3 , 1937 (no page available).
137circular 11, to Buenos Aires, Julio Tellez Reyes,

May 30, 1938, "Legacion de Bolivia, Buenos Aires, circulares
de M. de R.R.E.E. de Bolivia" (Marzo 1935-Mayo 1938), ABFM.
26i
Commercial Treaty was signed, but both the treaty and the
complementary act were left without effect.
Bolivia's deep-seated aspiration for a sovereign
port on the Pacific had expression at the Eighth
International Conference of American States at Lima in
December 1936. Chancellor Diez de Medina, explaining
Bolivia's position against the reduction of International
trade restrictions, declared that the nation's landlocked
geographical position had prevented the full exploitation
and development of her national wealth. Without offering
suggestions, he submitted the port problem to the
consideration of the a s s e m b l y . 1 ^ However, the address
received little attention in Santiago. Hernando Siles
reported that Chile did not regard Diez de Medina's remarks
as a portuary demand and had reiterated her willingness to
discuss with Bolivia problems relating to freedom of

transit.*39
Early in 1939 the Bolivian Chancellory issued
instructions to its missions abroad to realize an
"intelligent propaganda" along the lines traced by the
■Êduardo Diez de Medina, Diplomacia y polftica

internaclonales (La Paz: Imp. y Editorial Artlstica, 1949),
p. 122; La Razdn, January 1, 1939, P. 9.
139note 168, to La Paz, Hernando Siles, December 20,

1938, "Legaci<5n de Bolivia en Chile" (1938), ABFM.
264
140 Apparently, Diez de Medina, having
Lima discourse.
concluded the Chaco dispute, now wanted to place more
emphasis on the nation's need for sovereign access to the
Pacific.
In July 1939 Bolivia's new chancellor, Alberto
Ostria Outllrrez, sent a letter to Chile's Ambassador
Benjamin Cohen in which he registered Bolivia's reserva
tions with respect to Chile's plans to use the waters of
the Lauca River in a development program. The Lauca was
an international river which originated in Chile and flowed
into Bolivia. The letter was designed to remind Cohen that
Bolivia, in accordance with international law, enjoyed
certain rights with respect to the river in question. This
was the beginning of an issue that has persisted in
Bolivia's relations with Chile until the present year of
1967 .141
Relations with Peru. Significant developments in
Bolivia's relations with Peru failed to materialize in the
1937-1939 period. Enrique Pinot's objective of promoting
more practical commercial relations with Bolivia's
neighbors was hindered in the case of Peru by the fact that
li+0Note 24, to La Paz, Hernando Siles, March 10, 1939,

"Legacl6n de Bolivia en Chile" (Enero-Junlo 1939), ABFM.
l4i
Memorla (1939-1940), 0£. cit., pp. 58-59.
265
the Andean nation had few products to export Into the
Peruvian market. Bautista Saavedra had written of the
difficulties Involved in writing a commercial agreement with
Chile. In respect to economic relations with Peru, Bolivia's
minister In Lima, Ball 6n Mercado, reminded La Paz that
Bolivia had almost nothing to sell to Peru. Instead, he
recommended that Bolivia seek political and economic
compensations for the favorable trade balance enjoyed by
Peru In her economic relations with La Paz.
This thinking apparently Influenced the discussions
of the mixed Bolivian-Peruvian economic study commission
authorized by the Plnot-Bustamante y Rivero convention of
April 26, 1937• This commission inaugurated Its labors In
La Paz on October 19, 1937; on December 15, 1937, the final
act of the commission was signed and twenty-four recommenda
tions were submitted to the consideration of the two
governments. However, the primary objective of the
discussions, to formulate the basis for a commercial treaty
between the two governments, was not achieved. The
Chancellory in La Paz reported that a harmony of views
between the two delegations could not be gained.
Apparently, Bolivia had sought the "compensations" suggested
by Mercado in the form of new railroad construction and
•^Note 420-266, to La Paz, Bail6n Mercado, August 3,

1937» "Legacion de Bolivia en el PeriS" (Mayo-Agosto 1937),
ABFM.
266
ih-i
lower freight rates on existing railroads. J Although
plans for the labor of the mixed commission called for a
second meeting to be held in Lima, La Paz continued to
postpone the travel of the Bolivian delegation. Therefore,
the commission did not reconvene.
Mercado reported that Bolivia's apparent lack of
interest in continuing the work of the mixed commission
and her delay in ratifying the Gutierrez-Concha Protocol
of 1932 on frontier demarcation gave rise to a perceptible
irritation among Peruvian Foreign Office officials.1^
Perhaps this accounts in part for Peruvian delay in
ratifying the General Pact of Friendship and Nonaggresslon
of September 14, 1936. However, Peru's chancellor, Carlos
Concha, explained that President Oscar Benavides, who was
ruling without a congress, lacked authorization for ratifying
international pacts.^ 5 More likely, however, Chile's
displeasure with the 1936 Bolivian-Peruvian agreement had
persuaded Peru to delay approval of the pact.
Therefore, aside from conventions providing for
li|3Memorla (1939-1940), o£. cit., p. 107.
l2^Note 530-295, to La Paz, Mercado, September 21,

1936. "Legaci<5n de Boliviaenel Peru" (Julio-Dielembre
193d)* ABFM; Mote 205-129, to La Paz, Mercado, April 11,
1939, "Legacl<5n de Boliviaenel Peru" (Enero-Junio 1939),
ABFM.
^^Note 8-6, to La Paz, Mercado, January 8, 1 9 3 8 ,
"Legaci6n de Bolivia en el Peru" (Enero-Julio 1938), ABFM.
267
exchanges of publications and Intellectuals signed with
Peru on August 5 , 1938, little progress was made In
strengthening Bolivia's economic and political relations
with Peru during the presidency of Oerm£n Busch. Although
no serious problems troubled those relations, no practical
basis for rapprochement was available.
Uruguay and Paraguay. The Important subject In
Bolivian relations with Uruguay and Paraguay, aside from
the Chaco dispute, was petroleum. Both countries Imported
the product; each hoped that sizeable quantities could be
obtained from Bolivia. From the Bolivian standpoint,
Y.P.F.B. was preoccupied with finding markets for the
nation's petroleum, apparently without regard either for
the industry's production capacity or for the
responsibilities of the Foreign Ministry in matters of
foreign relations.
Instructions to Bolivia's new minister in Montevideo,
Jorge Valdes Musters, in October 1937* directed him to
propose a convention on technical, economic, and Industrial
cooperation with Uruguay that would fit into the general
Bolivian policy of strengthening relations with the

American s t a t e s . I n this regard, however, the lead was
1^Memorandum on personal stationary of Jorge Valdes

Musters signed by Jorge Valdes Musters, October 23, 1937,
"Legaci6n de Bolivia en el Uruguay" (1937)* ABFM.
268
taken by the Bolivian petroleum company. In May 1938
discussions in Montevideo between Dionlsio Foianini, head
of Y.P.F.B., and officials of Uruguay's Administracldn
Naclonal Combustibles Alcohol y Portland (A.N.C.A.P.)
culminated in a commercial agreement in which Uruguay was
to sell Bolivia wheat and rice in return for crude

4
petroleum. Credit was also to be made available in
Uruguay *8 Bank of the Republic for promoting sales of
Uruguayan products to Bolivia.1^
This contract with A.N.C.A.P. proved to be cm
unfortunate one. Uruguay lacked adequate grain reserves;
Bolivia lacked adequate petroleum production, and the
Andean nation had no transport facilities for delivering
the product even if it had been available, since
Argentina had yet to ratify the petroleum transit agreement
of November 1937. The Bolivian Foreign Office was
sceptical about the agreement. It was convinced that
Bolivia's oil production was not adequate to provide the
basis for an equitable commercial arrangement with Uruguay

liifl
at that time. w Therefore, the agreement in most part
was left without effect. Nevertheless, Bolivia was obligated
*^Note 132, to La Paz, Vald6 s Musters, May 16, 1938,

"Legaci6n de Bolivia en Uruguay" (Enero-Junio 1938), ABFM.
148
Note 166, to Buenos Aires, Julio Salm6n, July 20,
1938, "Argentina, Legacldn en Argentina" (Septiembre de
1937 a Octubre de 1938), ABFM.
269
to purchase 10,000 tons of wheat from Oenaro Oarcfa Llmltar
of Buenos Aires through A.N.C.A.P.
Once the Chaco settlement was obtained, relations
with Paraguay also focused on petroleum. Again, the
initiative In fostering economic relations was not taken
by Bolivia's Foreign Ministry, but by the director of
Y.P.F.B., Dlonlsio Foianini. In January 1939 Foianini and
Paraguay's Minister of Finance, Enrique Bordenave, met in
Buenos Aires to discuss the export of Bolivian oil to
Paraguay. Bolivia's first post-Chaco War minister, Fabiin
Vaca Ch&vez, protested to La Paz that the Foianini-Bordenave
meeting had by-passed diplomatic channels and had contra
dicted constitutional provisions for conducting foreign
affairs .149
Apparently Vaca Chdvez's criticism was satisfactorily
answered. In April 1939 a special Y.P.F.B. delegation
journeyed to Asunciin and there signed an ad referendum
contract with Paraguay's Minister of Economy. By the terms
of the agreement, Y.P.F.B. gained exclusive rights to sell
Bolivian oil In Paraguay for thirty years. Bolivia obtained
free transit rights for her petroleum through Paraguay and
two free zones on the river Paraguay south of Puerto Casado
l49Note 30, to La Paz, Fabian Vaca Chivez, February

1939 (no exaat date available), "Legaci6n de Bolivia en el
Paraguay" (Octubre 1938-Junlo 1939), ABFM.
270
for establishing refineries and storage facilities. Paraguay
also granted permission for pipeline construction across
the Chaco and agreed to provide free land concessions for

1*50
this purpose. ^ The provisions of the contract were so
generous for Bolivia# however, that opposition to the
agreement quickly formed in Paraguay and the contract
remained withoutêffect. Nevertheless, Paraguay's interest
in Bolivia's petroleum persisted.
Relations with the United States. During these years,
Andean relations with the United States, except for the
Chaco dispute, were dominated by the Standard Oil Company
question. Shortly after David Toro's ouster, President
Busch's commitment to Standard Oil's expulsion was made
clear in a letter to the veterans, published in La Paz on
July 20, 1937* and in which the Chaco War hero wrote, "We
are going to reaffirm the nationalization of petroleum."^51
Sentiment in Bolivia was overwhelmingly opposed to abrogat
ing the March 13# 1937 decree. However, as mentioned
earlier, certain Bolivian leaders did advise the government
to reach a settlement with the company in order to counter
the adverse effects which the action might have had abroad.
•^^Note 75# to La Paz, Fabiin Vaca Chivez, April 21,

1939# "Legaciin de Bolivia en el Paraguay" (Octubre 1938-
Junio 1939)# ABPM.
151E1 Diario, July 20, 1937# P. 6.

271
Prom the outset, Bolivia's minister in Washington,
Fernando Guachalla, favored a compromise arrangement with
the company. He believed that such an arrangement would
facilitate the task of gaining a commercial agreement with

the United States on the basis of tin exports. But
Guachalla explained that his objective actually was more
political than economic since he sought the backing of the
United States for Bolivia's external s e c u r i t y . I n La
Paz, however, several of Busch's close advisers, took issue
with Guachalla, they were not so eager for a tin-based
commercial arrangement with the United States and argued
that the Standard Oil issue had not been detrimental to the
flow of North American capital to Bolivia.
During a period of consultation in La Paz in early
1939* Fernando Guachalla made a successful attempt to
persuade the Busch government to seek a settlement with the
Standard Oil Company. But discussions with the company,
authorized by the Bolivian government, revealed that the
North American entity was unwilling to accept an arrangement

154
that did not repeal the decree of March 13, 1937. Under
152«^h* Chaco Question and Its International

Repercussions" (translation), loc. clt., (see footnote 21).
■^^Note 113, to La Paz, Fernando Guachalla, July 11,

1939 "Legaci6n de Bolivia en los E.E.U.U. de America"
(Julio-Diciembre 1939), ABFM.
^-^Note 7, to Fernando Guachalla, German Busch,

272
these circumstances, the Bolivian government decided that
no basis existed for further direct discussions with the
company. In Instructions to Fernando Guachalla, President
Busch formulated the guidelines to be followed in
discussions with the State Department about the Standard
Oil difficulty. The most important of these were the
followings
1. The Bolivian government cannot discuss the

legality of Its act of March 13* 1937* or
subsequent acts.
2. The Bolivian government cannot consent to

international arbitration in the case which
essentially is a matter of domestic
jurlsdlcatlon.
3. The Bolivian government cannot accept

diplomatic reclamation by the Secretary
of State in the Issue.
4. The Bolivian government* however* can agree to

an exchange of notes intended to clarify the
legal proceedings against the Standard Oil
Company and to give guarantees to foreign
capital entering the country.
5. The Bolivian government authorizes its minister

to discuss the matter with the Department of
State, to express to United States officials
the Bolivian government's criteria In the
case* and, in friendly and unobligated
deference to the Washington government* If
it persists In a friendly manner to seek some
arrangement in the matter, to listen to Its
proposals and to consider its suggestions if
they remain within the guidelines held by the
Bolivian government.155
Before the Bolivian minister returned to Washington,
l55Ibld
273
Bolivia's Supreme Court ruled on March 8 , 1939* that
Standard Oil Company's demands were Irregular and
inadmissible because of the lack of Juridical competence

156
on the part of its representatives. Therefore, the
local legal remedies that had been available to the company
now were exhausted.
After Fernando Ouachalla's return to the United
States in March 1939* he continued discussions with the
State Department in respect to the Standard Oil matter. On
June 15, the Andean minister received from Under Secretary
Sumner Welles an unofficial proposal for settlement of the
issue between the company and the Bolivian government. The
formula contemplated the organization of a board to
consider the amount of compensation which the Bolivian
government should pay the company for "its property, rights
and interests in Bolivia.m1->7 jjo consideration was to be
given to the question of the validity of the March 13, 1937
decree. Guachalla replied to this proposal on June 26, 1939,
by suggesting that a formula of equity should contemplate
the claims of both parties; he believed that a satisfactory
settlement should be based on the company's unpaid tax
156*1 Dlario, March 9* 1939* P* 6 ; Telegram 9, to

Washington7"CaIdwell, March 9* 1939* FR* V (1939)* 326.
157»j)raft proposed Agreement Between the Bolivian

Government and the Standard Oil Company of Bolivia," FR,
V (1939)* 332.
!
274
obligations, as well as on the value of the company's
158
properties In Bolivia. Thereupon, a second draft agree
ment Incorporating this formula was handed the Bolivian
minister on August 14, 1939. No settlement was possible,
however, before Busch's death In August 1939.
Apparently, Guachalla carried on these discussions In
Washington without consultation with La Paz. On one
occasion, he informed Laurence Duggan, Chief of the Division
of American Republics, that he did not Intend to Inform his
government about the exploratory talks until they had
advanced f u r t h e r . M o s t likely this decision reflected
Guachalla's awareness that strong opposition to any type
of settlement with the company existed within the government.
Whatever the reason, the Standard Oil dispute continued to
aggravate United States-Bolivian relations throughout the
Busch years.
In mid -1939 Guachalla informed La Paz that
California's Senator Hiram Johnson had recently raised the
question of Bolivia's ties with the anti-communist Axis
countries. Indeed, the situation in Bolivia was conducive
to speculation of this sort. President Busch's father was
^■5®"Marginal Notes to the Formula of Agreement

Between the Bolivian Government and the Standard Oil Company
of Bolivia," FR, V (1939), 335.
159
-^Memorandum of Conversation, by the Chief of the
Division of the American Republics, FR, V (1939), 335.
a German Immigrant and his brother-in-law was a Japanese
subject. Recently, reports of Imminent Bolivian-German
commercial agreements had been circulating. Bolivia's army
officers included numerous admirers of Germanic martial
prowess and discipline. And in April 1939 Busch assumed
dictatorial control of the Andean government and dissolved
the National Convention. Although United States press
reports that Bolivia was likely to align herself
politically with the Axis nations were inaccurate, Andean
relations with Germany, Italy, and Japan were assuming more
importance and must be given consideration.
Relations with Germany, Italy, and Japan. German
Influence in Bolivia, especially in military and commercial
circles, had been relatively strong since the early part of
the twentieth century. The chief of the German military
mission who came to Bolivia in 1911, Major Hans Kundt,
played an active role in Bolivian military affairs inter
mittently until 1933 when he was dismissed as Commanding
General of Bolivia's Chaco forces. A relatively large
German colony exerted strong influence in Bolivian business
and education circles. It is not surprising, therefore,
that the ascendancy of the Nazi and Pasclst regimes in
Europe in the 1930's held special attraction for certain
sectors of Bolivia's populace. At the same time, of course,
Bolivians were seeking an answer to their nation's ills and

276
many felt that the strong discipline displayed in German's
recovery was needed to establish the "Patria Nueva."
Something of this admiration and desire for emulation
was displayed when the Bolivian minister in Berlin, General
Julio Sanjin^s, presented his credentials to Chancellor
Adolf Hitler on November 12, 1936. Sanjinls spoke of
Bolivia's admiration for German national socialism which he
compared with the program of reconstruction being attempted
in the Andean nation by the Toro regime. "We admire
especially," he added, "the grandiose conception of the
Hitlerian political regime as opposed to the disintegrative
and anarchical tendency of Soviet communism. Bolivia also
repudiates communism."1^®
Commercially, Bolivia's relations with Germany had
taken on new importance in the decade 1928-1939. In 1938
Germany ranked second among suppliers of goods to Bolivia,
furnishing 18 per cent of all imports. In 1939
discussions of new commercial agreements between the two
countries were carried on in La Paz and Berlin.
On July 6 , 1939# Dr. Walter Becker of the German
Porelgn Office and Horst Koppelmann, Chief of Section of the
•^^Remarks by General Julio Sanjin^s upon

presentation of his credentials as Bolivian minister before
the German government to Chancellor Adolf Hitler, November
12, 1936, "Legaci6n de Bolivia en Alemania, 1936-1937/’
ABFM.
^J-Unlted states Tariff Commission, Economic Controls
277
German Ministry of Economy, presented a series of draft
commercial agreements to the Bolivian Chancellory. The
German proposals provided for a barter arrangement,
facilitated by special accounts and substantial German
credits, in which Bolivia would ship tin, non-stannous
metals, and petroleum to that country in exchange for
manufactured goods. A Bolivian counterproposal dated July
29 suggested a similar arrangement on a more modest scale

and with added guarantees for the nation's low grade ores.
Although interim Foreign Minister Dionisio Foianini signed
a convention along these lines on August 3, 1939, strong
opposition to the arrangement already had formed in
Bolivian government and business circles, a factor that
accounts in part for the fact that the agreement was
never implemented. c
In May 1939 Walter McShring, special representative
for Y.P.F.B., arrived in Berlin to discuss the matter of
German credits for Bolivia's public petroleum company. After
months of negotiations, realized Independently of Bolivia's
legation in the German capital, M&'hring signed a convention
and Commercial Policy In Bolivia (Washington, 1946), p. 4.
^ ^ Memorla (1940), o£. cit., pp. 1-5; Alberto Ostria

Gutierrez, Una revoluclon Eras' los Andes (Santiago:
Editorial Nascindento, 1944J, pp. 68-74; Despatch 583, to
Washington, Prendergast, July 14, 1949 (DS)624.6231/22;
Despatch 590, to Washington, Allan Dawson, August 2, 1939
(DS)624.6231/24.
278
on August 9* 1939* with representatives of Reichs-Kredit-
Oesellschaft A.G. and of the Banco Oerm£nico de la America
del Sud. This agreement established a revolving credit of
four million marks in favor of Y.P.F.B. to be used for
purchase of oilfield equipment in Germany. Bolivia was to
amortize the credit with petroleum and raw materials. The
death of Busch on August 23, 1939* opposition to the
convention from influential domestic groups, and the
outbreak of the war in Europe meant that the agreement was
indefinitely suspended.
Bolivia's relations with Italy and Japan were less
important than were her ties with Germany. Commercially,
relations with Italy were slight, but an Italian military
mission, contracted by the Toro government, was functioning
^Note 120, to La Paz, Hugh Ernst Rivera, September

14, 1939* "Legacl6n de Bolivia en Alemania, Bllglca,
Francia" (1939)* ABFM; Note 13* to La Paz, Alfredo Flores,
February 13* 1940, "Legaciones de Bolivia en Alemania,
Italia, Francia, Santa Sede" (1940), ABFM; Memorla (1940),
op. cit., pp. 5 -6 . Minister of Mines and Petroleum Dionisio
Foianini, who regarded himself as Busch's most intimate
adviser, explained his position in favor of the credit
arrangement with Germany solely on the basis of Bolivia's
need. In a recent interview (September 1966), he stated that
Oermany was willing to provide the drilling equipment which
Y.P.F.B. needed in return for low grade metal ores for which
Bolivia had no market. Foianini said that even after the
outbreak of war In Europe he advised provisional President
Quintanilla to accept the machinery because it was ready for
shipment, and the question of payment could have been post
poned indefinitely. He stated that pressure from British
and American diplomatic missions was Influential in the
suspension of the agreements with Germany. (In a personal
Interview, September 8, 1966, Santa Cruz.)
279
at the Escuela de Armas In Cochabamba. Although Japan
ranked as a minor participant In Bolivia's foreign trade,
interest In Intensifying the commercial relations between
those two countries was growing during the Busch years. In
July 1939 Japan proposed an arrangement providing for
increased Bolivian exports of non-stannous metals to that
country in exchange for Japanese merchandise. Discussions
along these lines continued until the outbreak of the war
in the Pacific in December 1941.^^
Eighth International Conference of American States.
As we have seen, Bolivia utilized the occasion of the Eighth
International Conference of American States to call
attention once again to her inferior geographical situation
within the continent. Therefore, it is not surprising that
one of the major objectives of the Andean delegation to
the conference related to freedom of transit. Bolivia,
through the presentation of a draft convention, sought to
have the principle of freedom of transit for all types of
cargo and at all times incorporated as a principle of
international conduct in the Americas.^ 5 no progress was
l6i*Memorla (1940), op. cit., pp. 76-81; El Diarlo,

August 3 0 , T 9 3 7 7 "p . 4.
^ c i r c u l a r 13, to Buenos Aires, Julio Tellez Reyes,

December 12, 1938* "Legaci6n de Bolivia, Buenos Aires,
1938), ABFM
280
realized In this regard, however.
Among the other Bolivian proposals was a
recommendation that bilateral and regional agreements be
celebrated within the hemisphere providing for government
control of foreign labor, contracting offices, and agents.
This draft proposal was the basis for the conference's
Resolution XLVI entitled "Regulations on Labor Migration."
This project reflected Bolivia's concern with the flight of
workers from the Andean nation into the neighboring
countries of Argentina and Chile, a situation that had
contributed to labor shortages In Bolivia's mines and on
her farms.1^
With respect to the conference resolution entitled
"Reduction of Barriers to International Trade" (II), an act
calling upon the American states to reduce all types of
restrictions on international trade and endorsing "most
favored nation" treatment in commercial relations, Bolivia
adopted an ambivalent position. The delegation cast its
vote in favor of the resolution in the desire "to maintain
harmony with the other nations."1^ However, Diez de
Medina then proceeded to explain why his country could not
l66ibid., p. 6; Report of the Delegation of the United

States of America to the Elghtfi~~lnte'rnatlonal Conrerence~~o7
American States, Lima, Peru. December 9-27, 1938 (Washington:*
Government Printing Office, 1941), pp. 26, 147.
^k^Diez de Medina, op., clt., p. 122.

281
adhere to a policy of free trade or accept the principle of
equality of treatment embodied in the "most favored nation"
clause. Bolivia's unique geographical situation, he said,
had prevented the growth of her national economy. Therefore,
a policy of protection to assist in modifying the present
type of exploitation of her riches and in creating a sound
economy was Justified.
Bolivia's disappointed response to the results of
the Lima Conference was what one might expect from a
country that hoped to find in the loosely integrated inter-
American system remedies for her own particular problems.
Diez de Medina remarked, "The past conference has served
to demonstrate once more that the concepts of Pan
Americanism and continental solidarity still have no
practical realization."1^
Immigration policy. Bolivia continued with a
liberal immigration policy until May 1939 when scandal and
domestic opposition forced the government to prohibit
virtually all immigration. Earlier, La Paz had established
contact with emigrant groups primarily tnrough the
l68Ibld., p. 124.
l8% o t e 35, to Buenos Aires, Diez de Medina, February

10, 1 9 3 9 , "Argentina, Legacl6n en Argentina'! (Octubre de
1938 a Enero de 1940), ABFM.
282
Intergovernmental Refugee Committee. La Paz, however, also
had direct relations with various European governments In
this matter. On December 31, 1937, Enrique Flnot, minister
In Buenos Aires, signed a convention with the representative
of Poland, Kazlmlerz Zdzlslaw Kurnlkowskl, providing for
unlimited Polish immigration to Bolivia over a ten-year

period.1?©
Instructions to the Bolivian delegate to the Inter
governmental Refugee Committee, Juan Fefiaranda Mlnchln, In
October 1938* indicated that the government’s policy of
admitting immigrants at that time was vague. Bolivia, the
Instructions stated, preferred agriculturalists, and all
other immigrants should have sufficient capital .1?1 By
December of that year, however, those requirements had been
refined. The Andean nation was disposed to admit
industrial capitalists with a personal minimum capital of
$5 *000, an unlimited number of campeslnos, but no more than
fifty professionals and technicians annually.1?^
By early 1939 opposition to the government's
immigration policy had developed in spite of the fact that
1?0colecci6n de_ tratados vlgentes, op. clt., V,

545 553
- *
1?1Note 87, to La Paz, Juan Pefiaranda M., October 14,

1938, "Legacldn de Bolivia en la Oran Bretafia” (1938), ABFM.
172Note 5 , to La Paz, Juan Pefiaranda M., January 9 ,
1939* "Legaci6n de Bolivia en Oran Bretafia” (1939), ABFM.
283
Foreign Office figures showed that 5,000 of the 7,000
immigrant arrivals in 1933 had not remained in the Andean
nation. ^73 Discontent had grown because many of the
predominantly Jewish immigrants were locating in the cities
rather than in the campo. There they constituted a threat
to Bolivian capitalists and employees of local firms.
Early in May 1939 President Busch dismissed a
number of Bolivian consular officials who were accused of
selling entrance permits and passport visas to Jewish
emigrants who wanted to travel to Bolivia. The results of
this disclosure were the resignation of Foreign Minister
Diez de Medina, later cleared of any involvement in the
matter, and a rapid retrenchment in Bolivia's liberal
admission policy. A May 3, 1939 supreme decree limited
admission to agricultural immigrants who already had a work
contract and to those persons who could deposit substantial
funds in Bolivia's Central Bank.1^
Diplomacy of the Busch years— conclusion. Andean
foreign policy during the presidential administration of
Germ&n Busch was a continuation and refinement of Enrique
Finot's policy of economic contacts. President Busch desired
173peSpa^cj1 443^ Washington, Caldwell, February 13,

1939 (DS824.55 J/5.
174E1 Dlarlo, May 4, 1939, p. 6 .
284
and recognized the necessity of friendly relations with the
bordering states. He stated on one occasion that Bolivia's
future would be "that which her neighbors decide it may
be."*^ Eduardo Dlez de Medina, Busch’s most durable
foreign minister in terms of length of service, acknowledged
in a letter to Pinot in March 1938 that Bolivia's policy of
solidarity and economic ties with her neighbors had been
initiated by Pinot. He added, "We have persisted in it
without variation because it is the only rational policy

176
advantageous to Bolivia." Emphasis, therefore, was
given in this 1937-1939 period to promoting closer ties with
the bordering countries as a means for gaining support for
Bolivia at the Chaco Peace Conference, for providing
national security, and for obtaining facilities requisite
for domestic economic development.
Under Busch, Bolivia's foreign economic policy moved
away from its formative stage and toward the phase of
preliminary realization. In this transition, a number of
problems were encountered. Soon after the ouster of the
Standard Oil Company, Bolivian leaders realized that the
newly nationalized petroleum industry was in no condition
^^Despatch 72 . to Washington, Robert 0 . Caldwell,

November 17, 1937 (DS)724.00/7.
^ ^ N o t e 87, to Buenos Aires, Eduardo Dlez de Medina,

March 29, 1938, "Argentina, Legacion en Argentina"
(Septiembre de 1937 a Octubre de 193d), ABFM.
285
to fulfill the important role In Bolivia's foreign relations
envisaged by Flnot. At the same time, the labors of the
blnational commissions with Chile and Peru accented the
fact that Bolivia had no exportable goods with which to
balance trade with those countries.
These situations fostered discernible developments
In the policy of economic contacts as defined by Enrique
Flnot. One of these developments was a new and Important
objective In Bolivia's foreign relations, to obtain
technical and financial resources for the development of
the nation's oil Industry. The other development was
signaled by Dlez de Medina's declared intention of abandoning
the "most favored nation" clause in Bolivia's commercial
arrangements.
In a major policy statement to Bolivia's diplomatic
missions in May 1938* the Bolivian Foreign Minister pointed
out that the traditional concession of equality of treatment
had worked to the nation's detriment by granting all
countries the same privileges enjoyed by those nations that
offered reciprocal advantages to Bolivia. Henceforth,
Bolivia would seek to obtain commercial agreements in which
she could expect satisfactory compensations for concessions

177
granted. Since Bolivia's balance of trade with the
■^Circular d #e # 18, Eduardo Diez de Medina, May 11,

1938, "Circulares" (Marzo de 1935 a Enero de 1940), ABFM.
286
neighboring states was unfavorable, reciprocity should be
"through another class of compensations."17® Although the
nature of this other "class of compensations" was not
disclosed, the Bolivian Foreign Minister quite likely had
in mind economic and political considerations that would
support the objectives of security, petroleum development,
and, no doubt, free access to the Pacific. With respect to
nonbordering countries with which Bolivia had appreciable
commerce, three types of compensation were to be
considered: (1) markets for Bolivia's raw materials,
(2 ) capital for exploitation of the country's wealth, and
(3 ) human capital (immigration) As demographic support for
Bolivia's development .179
These new concerns within Andean foreign policy must
be taken into consideration in understanding Bolivian
foreign relations during these years. The most important
achievements in those relations were with Argentina and
Brazil. These countries' interest in Bolivian petroleum
and their rivalry for influence in Bolivia's Oriente enabled
La Paz to reach a number of Important agreements with them.
With Argentina, these were the preliminary railroad study
convention (September 1937) and the petroleum traffic
17SIbid., p. 4.
179Ibid., p. 6.
287
convention (November 1937). The major agreements with
Brazil were, of course, the treaties of February 1938 on
railroad connection and on petroleum export and exploita
tion. Toward the west, however, slight progress was made
in strengthening economic and political ties. The only
accomplishment of note was the freedom of transit
convention of August 1937 with Chile.
The Andean desire to promote development of the
petroleum industry and to gain reciprocity in her foreign
commercial relations was evident in Bolivia's relations
with nonbordering states. Both Japan and Germany showed
interest in balanced bilateral commercial arrangements
in which Bolivia's raw materials would be exchanged for
manufactured goods. Germany also agreed to provide credits
to the Andean nation's national petroleum company.
Relations with Bolivia's major supplier, the United States,
were handicapped by the Standard Oil difficulty. Even
without this issue, chances for a balanced commercial
arrangement with the United States were unlikely.
During the Busch years, the Bolivian government
experienced some difficulty in coordinating its concerns in
petroleum matters with the traditional foreign policy
apparatus. As we have seen, on several occasions the
initiative in promoting international agreements relating
to the export of Bolivia's petroleum was taken by Dionisio

288
Foianini in his capacity as president of Y.P ,s
Minister of Mines and Petroleum. All these
suffered from a common fault— they failed to assess realisti
cally the state industry's capacity for producing sufficient
quantities of hydrocarbons or its rate of expansion.
Consequently, the agreements with Paraguay, Uruguay, and
Germany, for this reason alone, were impractical. La
Raz6n criticized the industry for its premature concern
with closing definite export agreements and compared it to
a man who begins to distribute his wealth to his heirs
before it is definitely in his possession.1®® Meanwhile,
Bolivia's Foreign Ministry had the task of explaining that
the nation had no oil for export, except, perhaps, in the
case of Argentina.
Aside from commercial matters, Bolivia's foreign
policy continued to give high priority to matters of free
transit and security guarantees. The petroleum agreements
signed with Argentina, Brazil, and Paraguay, all provided
for freedom of transit for Bolivia's petroleum. Reference
has been made to the freedom of transit convention with
Chile and to the Andean efforts in behalf of that principle
at the Lima Conference. Although La Paz failed to obtain
a satisfactory agreement of this type with Argentina, the
l8oLa Raz6n, June 4, 1939» P .4.-

289
Treaty of Peace with Paraguay guaranteed Bolivia free transit
rights through that nation's territory. With respect to
territorial security, Ostria Gutierrez managed to obtain
the important Brazilian declarations of February 25, 1938,
which constituted additional assurances of the Andean
nation's territorial integrity.
IV. POST-CHACO WAR DIPLOMACY— CONCLUSION
Bolivia's post-Chaco War diplomacy was oriented
toward three general objectives: (l) to reach a final and
satisfactory settlement in the Chaco dispute, (2) to
provide guarantees of national security, and (3) to promote
domestic economic development. .-Since Chapter III was
devoted to the subject of Bolivia's foreign relations with
respect to the Chaco question, this section will give
consideration to the ways that the objectives of providing
security and of promoting domestic economic development
shaped Andean diplomacy outside the Chaco Peace Conference.
The results of the Chaco War clearly revealed
Bolivia's military ineptitude and national weaknesses.
Paraguay, Bolivia's smallest and poorest neighbor, had
driven the Andean Army almost completely from the Chaco
Boreal. Following the war, Bolivian leaders were concerned,
therefore, about the nation's security. Most immediately,
Bolivia desired security along the lines of separation in

290
the Chaco. Guarani troops were dangerously near Bolivia's
most important oilfields at Camlri. The Isolated province
of Santa Cruz, frequently stirred by secessionist rumors,
also was vulnerable to a renewed Paraguayan attack.
Except for this situation in the Chaco, however,
Bolivian leaders did not seek security guarantees urgently.
No mood of panic swept La Paz or pervaded the Andean
Foreign Ministry. Nevertheless, this examination of
Bolivian foreign policy and foreign relations has shown
that the quest for national security was of fundamental
Importance for the Andean nation in the post-Chaco War
era.
One proof of this concern was the persistency with
which Andean diplomats pursued the Immediate objective of
free transit guarantees. As one Andean official stated,
the Chaco War demonstrated that Bolivia, as long as she
lacked sovereign access to the seas and economic self-
sufficiency, was permanently threatened by the danger of
being deprived not only of arms and munitions in time of
war, but also of the essential imports required for daily

nQi
sustenance. More dramatic evidence was offered by
Bolivia's efforts to reach agreements with her neighbors
idi
Circular 13, to Buenos Aires, Julio Tellez Reyes,
December 12, 193d, "Legaci6n de Bolivia, Buenos Aires,
1938), ABBM.
291
providing either for nonaggression promises (Peru) or for
guarantees of Bolivia's territorial integrity (Brazil,
Argentina). At the same time, several members of the
Andean diplomatic service suggested that Bolivia negotiate
security arrangements with all her neighbors.
The Chaco War also lucidly disclosed Bolivian
weaknesses in the economic sector, especially with respect
to transportation facilities. Therefore, Bolivian foreign
policy was Intent on promoting development on the domestic
economic front. Much attention was given to the task of
ending the isolation of Bolivia's long-neglected Oriente by
constructing railroads between that region and Argentina
and Brazil. Leaders in La Paz, fearing foreign domination
in the eastern area, also wanted to link the Oriente with
the nation's population centers. The Oriente's importance
in national policy in this period also might be traced to
the influence of crucefios within the governments of the
postwar period. Among the most Important were Enrique
Flnot, Dionisio Foianini, and President Busch, men who knew
well the problems and potential of the eastern lowlands.
The strategy for achieving these objectives provided
for the intensification of economic and political relations
with Bolivia's neighbors. Enrique Finot, the first major
spokesman for this policy, emphasized the importance of
economic relations with these countries. He believed that

292
Bolivia's security and economic growth would come through
practical and reciprocally beneficial economic ties with all
these countries. However, Flnot also was convinced that
petroleum and Bolivia's relations with Argentina were of
special importance. Petroleum was the product with which
Bolivia was to balance her foreign trade relations and was
to establish rapprochement with Argentina. In an effort to
gain Argentine support in the Chaco Peace Conference,
Bolivia was willing to risk damage to relations with the
United States in the confiscation of Standard Oil Company
properties.
Flnot*8 successors, however, while maintaining the
intention of establishing closer ties with the bordering
states, were forced to contend with the problems involved
in effecting reciprocally advantageous commercial ties with
these countries. One result of the work of the bilateral
commissions with Chile and Peru was the reminder that
Bolivia possessed no important exportable products to
Chilean and Peruvian markets. Then, too, the persistent
political dispute between Chile and Bolivia over Andean
desires for a Pacific port was a definite hindrance to
promoting significant new commercial arrangements with
Santiago. Bolivian leaders also interpreted the Peruvian-
Chilean agreements with respect to the Tacna and Arlca
territories as the sign of an anti-Bolivian alliance with
293
respect to the port question. Relations with Chile
maintained their Importance for Bolivia, however, because
the Andean mineral exports were shipped through Chilean
ports.
Toward the east, however, prospects were more
promising. Potentially, at least, Bolivia had an exportable
product in her petroleum. And, Instead of a concert of
views detrimental to Bolivian Interests, La Paz saw a
Brazillan-Argentine rivalry that might be turned to
Bolivia's advantage. Consequently, Bolivia's post-Chaco
War foreign policy was oriented toward her eastern
neighbors. Although competition between Argentina and
Brazil occasionally threatened negotiations on matters of
railroads and petroleum, the rivalry apparently encouraged
Brazil to finance the railroad from Corumbl. to Santa Cruz
even without solid guarantees about Bolivia's petroleum
production potential.
Bolivia also wanted to improve her commercial
arrangements with nonbordering countries, especially those
suppliers of manufactured goods like the United States and
Germany who enjoyed favorable trade balances with the
Andean nation. Dlez de Medina was a proponent of trade
agreements in which Bolivia would buy from those states
which purchased Andean minerals and which would provide
capital to expand national industries. Of course, the
Standard Oil difficulty damaged the prospects of locating
minerals in the United States market. But Germany and
Japan appeared willing to enter into arrangements with
Bolivia on this basis. Agreements with Germany were not
reached until August 1939* however, and no definite agree
ments were reached with Japan in the post-Chaco War period.
The death of President Germdn Busch in August 1939
and the outbreak of war in Europe in September of that year
had Important consequences for Bolivia's foreign relations.
In domestic affairs the period of military socialism had
reached its conclusion. Internationally, the nonbordering
states with which Bolivia had her most important relations
were at war or were preparing for war. The effects of
these new international and domestic situations on Bolivian
foreign relations will be considered in the following
chapter.
CHAPTER V
THE PE&ARANDA ERA: PART I
The Diplomacy of Alberto Ostria Gutilrrez 1939-19^1
The death of President German Busch on August 2 3 ,
1939# brought to power in an interim capacity the

Commander-In-Chief of the Bolivian Army, General Carlos
Quintanilla Qulroga. In a meeting of generals on the
morning of August 23, it was decided that, inasmuch as
Busch had established a virtual dictatorship in April in
that year, Vice-President Enrique Baldivieso's claim to
succession was not valid .1 Later, the Council of Ministers
agreed to support the Army's position, delivering the
government to Its charge and prompting General Quintanilla
to proclaim that, as Commander-in-Chief, he was assuming
control of the provisional government by "the will of the
armed forces and with the unanimous vote of the ministers

p
of the cabinet" in order to avoid anarchy.
The composition of Quintanilla's first cabinet
■'■Circular 57 , from La Paz, August 31 » 1939* "Circulares"

(Marzo de 1935 a, Enero de 19^0). Unpublished diplomatic
correspondence located in the archives of the Bolivian
Porelgn Ministry. Hereinafter such material will be denoted
with the abbreviation ABPM.
2Ibld.
296
Indicated that the traditional parties had regained some of
the Influence that had been eroded under Busch. The United
States minister in La Paz, Allan Davison, reported to
Washington that the whole trend of thought in the new
cabinet was conservative.^ Augusto C^spedes, representing
the vociferous ultra-national1sts, described the episode
as a restoration of the Rosea to its privileged position of
power within government circles.^ Alberto Ostria Gutierrez,
who had served briefly as foreign minister in the Busch
government, was named to that same post in the Quintanilla
cabinet.
The major factor affecting Bolivia's foreign
relations during the interim presidency of General Carlos
Quintanilla (August 1939-April 1940) and the Pefiaranda era
(1940-1943) was not the domestic political turmoil, but the
outbreak of the war in Europe on September 1, 1939. As a
result of the shifting International situation, Bolivia's
diplomacy took on still greater significance in the life of
the nation, assuming, at the same time, important new
directions.
^Despatch 621, from La Paz, Allan Dawson, August 24,

1939* file number 824.00/950* Unpublished document of the
United States Department of State, National Archives,
Washington, D.C. Hereinafter cited with abbreviation (DS)
followed by file number.
Âugusto C^spedes, El_ presldente colgado (Buenos

Aires: Editorial Jorge Alvarez &.A., 1966), p. 13.
Andean leaders had a mixed reaction to the onset and
development of the European conflict. Immediate
consideration was given to the possibility that the nation's
vital tin exports might be adversely affected or that
essential Imports might be curtailed. However, as the
United States became more directly Involved In the war,
many Bolivians began to recognize the opportunities for
improving the nation's financial, economic, and social
conditions which existed in the new state of world affairs.
As petroleum Imports Into Argentina and other neighboring
countries from North American companies diminished,
Bolivia's hydrocarbon potential loomed larger as a regional
source. The growing needs of the United States for
strategic minerals and for political cooperation also
placed the Andean nation in a uniquely favorable position
for seeking Washington's collaboration in a program of
national development.
The period under consideration in this and the
following chapter corresponds almost exclusively to the
presidency of General Enrique Pefiaranda Castillo (1940-
1943). In order to divide this era into convenient sections,
attention will be given in this chapter to the diplomacy of
Alberto Ostria Gutierrez, foreign minister under the interim
Quintanilla regime and during the early part of the
Pefiaranda presidency. Ostria Gutierrez served as

chancellor from August 1939 until September 1941, the early
298
years of World War II. The following chapter will treat
Andean diplomacy during the later phase of the Pefiaranda
era, October 1941 -December 1943.

The basic objective of this chapter is to describe
and analyze^ Andean foreign policy and foreign relations
within the new international context shaped by the onset of
World War II. How did the war affect the Andean foreign
policy that had taken shape after 1935? Were new foreign
policy objectives formulated as a result of this change in
circumstances? What new problems arose for Bolivian
diplomacy during these early war years? What official
position did the Andean republic assume with respect to the
war? These are the questions that will be considered in
the following discussion. A more complete analysis of the
foreign relations of the Pefiaranda era will be presented in
the conclusion of the following chapter, however.
The man who directed Andean foreign relations in

this period, Alberto Ostria Gutierrez (1897- ), had worked
intermittently in Bolivian diplomatic affairs since 1917,

when he served as first secretary of the Bolivian Legation
in Buenos Aires. While on other occasions he had served as
professor of International Law at the University of San
Andres in La Paz, as editor of El_ Dlarlo of La Paz, and as
a member of Congress in 1927* Ostria Gutierrez was best
known for his work in international affairs. In addition to
his service in Buenos Aires, the Chancellory had assigned
him to posts in Spain, Ecuador, Peru, and Brazil, designating
him delegate to a variety of international conferences from
time to time. Although Ostria Gutierrez tried to maintain
an apolitical stance with respect to domestic politics, he
was generally regarded as a c o n s e r v a t i v e O n e of his
frequent critics, Dionisio Poianini, also a grudging
admirer, described Ostria as a "fanatical defender of the
Anglo-American line."^ Regardless, the record which Ostria
Gutierrez had compiled as Bolivian minister in Peru
(1928-1936) and in Brazil (1936-1939) definitely ranked him
among the nation's most able and highly regarded diplomats.
Now at the pinnacle of his diplomatic career, Ostria
Gutierrez assumed the difficult task of guiding Bolivia
through a crucial period, first under Quintanilla, then
under Pefiaranda.
I. THE PANAMA MEETING OF FOREIGN MINISTERS
The Bolivian delegation at the First Meeting of
Consultation of Foreign Ministers in Panama (September 23,
1939-October 3* 1939) was guided in its labors by two
^Despatch 595> from La Paz, Dawson, August 4, 1939

(DS)824.OO/936. Of course, this description depended upon
the observer's perspective. United States Minister Allan
Dawson regarded Ostria as a "middle-of-the-roader."
^Statement by Dionisio Foianinl, personal interview,

September 8, 1966, Santa Cruz.
300
c o n s i d e r a t i o n s O n e was to protect the nation's commerce
against restrictive neutrality resolutions or declarations,
while participating In the general discussions of matters of
continental Interest. The second was to obtain the direct
economic cooperation of the United States for solving
several problems of a commercial or financial nature.
Foreign Minister Ostria Gutierrez, chief of the delegation,
later acknowledged that he carried no written instructions
with him to Panama. Instead, he was directed by the above
mentioned considerations which developed out of his
conversations with President Quintanilla and with other

Q
cabinet ministers.
Bolivian officials were seriously concerned about
the possible adverse effects of neutrality declarations on
the nation's shipments of minerals, especially tin, to
England, already a belligerent In the European conflict.
Therefore, the draft declaration of neutrality that was
prepared by the Bolivian delegation for the consideration of
the Conference '8 Commission on Neutrality contained a strong
defense of unrestricted neutral commerce.^ The Bolivian
7La reunldn de consulta entre los mlnlstros de

relaciones exterlores de las repiiblicas Araerlcanas.
(panama, 23 Septiembre^J Qctubre de 1939), Informe de la
delegacldn de Bolivia.(La Paz: Editorial Renaclmlento,
1939), P. 15.
8Ibld.
9ibld., p. 19.
301
delegation also Insisted that mineral products be classified,
together with foodstuffs and clothing products, as a
category of cargo exempt from contraband regulations.1^
Still another aspect of this general Andean effort to
proteet neutral commerce from the harmful effects of
wartime measures was encouraged by Bolivia's National
Chamber of Commerce in a note directed to the delegation
at Panama.11 This private group suggested that a declara
tion be adopted to lessen or eliminate the damage to neutral
commerce caused by the issuance of "black lists." The
delegation's report indicated that all its efforts to this
end were frustrated by the opposition of the United States.
The Bolivian Chancellor's diplomacy at Panama in
pursuit of this objective of protecting neutral commerce
took an interesting turn when he sought to enlist the
support of Paraguayan Foreign Minister Justo Pastor Prieto.
Since Paraguay shared Bolivia's landlocked geographical
situation and faced similar transit difficulties, Ostria
felt that joint sponsorship of certain resolutions would
serve the interests of both nations. The Paraguayan
J-Olbld., p. 29.
11Ibid., p. 30.
foreign minister agreed. Bolivia submitted, therefore, with
the co-sponsorship of Paraguay, a draft resolution to the
Commission on Economic Cooperation designed to guarantee
the right of free transit across the territory of bordering

12
countries regardless of neutrality regulations.
Paraguay, in turn, proposed a resolution in favor of regional
economic meetings and agreements to the same commission
with Bolivia's support.^ This Bolivian-Paraguayan
collaboration was an indication of the direction that
bilateral relations between these countries would take
under Ostria Gutierrez's leadership.
A second report, submitted to President Quintanilla
confidentially by the Foreign Minister, revealed that the
factor that actually persuaded Ostria Gutierrez to head
the Bolivian delegation at the Panama Conference was his
hope of obtaining an agreement with the United States
providing for economic assistance to Bolivia.1^ Prior to
12Ibld.. pp. 38, 40. A portion of this resolution

was Incorporated in paragraph 8 of the Conference Resolution
on Economic Cooperation. The Paraguayan draft resolution
was approved and Included as paragraph 9 of the Conference
Resolution on Economic Cooperation.
13lbld., pp. 38, 41.
•Înforms Reservado (Que presenta el Minlstro de

Relaclones iSxteriores a consideraci6n de S.E. El Presidente
de la Republlca sobre las negociones realizadas en PanaraA
con el Subsecretarlo de Estado, Mr. Sumner Welles, para
obtener la cooperaclon econdmlca de los Estados Unldos a
Bolivia), La Paz, October 17 » 1939. Vol. Mlsl6n Hernando
Slles, Embajada de Bolivia, Oficios de la Cancilleria, 1^39,
KBFW7
303
the Panama Conference, Bolivia's minister in Washington,
Luis Fernando Ouachalla, had been Instructed to negotiate
a $2 million credit that, according to Bolivian sources,
would go to ease the nation's foreign trade difficulties

15
caused by a dollar shortage. The credit was to have
been considered an advance to Bolivia against the delivery
of tin or some other mineral to the United States, since,
with the coming of the war, prospects had improved for the
export of Bolivian minerals to the United States. The
Bolivian proposition had received a positive response in
Washington; therefore, Ostria Gutierrez was hopeful that
some definite arrangement might be worked out at the
Panama meeting.
In a meeting with United States Under Secretary of
State Sumner Welles on September 21, 1939, Ostria Gutierrez
presented the general outline of a plan of binational
economic cooperation.^ The Bolivian Foreign Minister
suggested three aspects of such a program: (1) the United
States would buy Bolivian tin and advance the $2 million
credit, (2) Bolivia's adverse trade balance with the United
States would be rectified by Increasing her mineral exports
^ N o t e 144, from Washington, Fernando Ouachalla,

September 6, 1939* "Legaci6n de Bolivia en los E.E.U.U. de
America" (Julio-Dieiembre 1939)* ABFM; Informe Reservado,
ibid., p. 1.
Înforms Reservado, ibid., p. 2.

304
to that country, and (3) the United States would help
develop tin smelting In Bolivia through technical and
financial cooperation.
Under Secretary of State Welles, responding
favorably to the Bolivian proposal, urged Secretary of
State Cordell Hull, in cables of September 22 and September
26, to seek the authorization of Export-Import Bank
officials for the immediate advance of the credit to
Bolivia.1^ Other United States officials, however, proved
to be less receptive to the Andean proposal. Minister *
Dawson in La Paz was definitely against the credit, and his
position was supported by financial and congressional

lfi
circles in Washington. Secretary of State Hull wired
Welles on September 30 that "the Department has had
difficulty in finding any basis on which extension of
credit could be Justified to public or congressional
opinion here.nl9 On October 3, 1939* Welles told Ostria
that opposition to the credit would, unfortunately, prevent
the signing of any agreement of this nature in Panama,
^Telegram 3, to Washington, Welles, September 22,

1939* Foreign Relations of the United States (FR)* v (1939),
313*
18
Telegram 62, to Washington, Dawson, September 27,
1939, FR, V (1939)* 318.
^Telegram 38, to Panama, Hull, September 30, 1939,

ra* V (1939)* 320.
305
although he left the door open for the continuation of
discussions along these lines through the Bolivian Legation
in Washington.2® The Bolivian Foreign Minister reported
to President Quintanilla that Welles had promised to put
all his personal Influence behind the effort to manage the
achievement of the agreement.
One result of the disappointment at Panama was a
new Bolivian appreciation of the two major obstacles to
fruitful relations with the United States, the default on
her foreign public debt and the confiscation of Standard
Oil Company properties. The Foreign Minister reported
frankly to President Quintanilla that the Standard Oil
case had been the determining factor in the failure of the
Panama negotiations with the United States, hindering
not only the proposed credit arrangement, but also delaying
the development of a program of cooperation with the United
States that would substantially contribute to the economic
21
reconstruction of Bolivia. Therefore, the Bolivian
government was faced with a clear dilemma. It could remain
intransigent with respect to the Standard Oil Company
matter and forfeit, quite likely, any United States assist
ance in developing a beneficial program of economic
20Informe Reservado, op. clt., p , 8.
21Ibid., p. 10.
306
cooperatlon> or, it could seek some compromise settlement
with the North American company and face the Ire of the
public aroused by political opponents. The Chancellor
advised President Quintanilla to consult representative
leaders of public opinion and then choose its course of
action; meanwhile, discussions continued In Washington.
II. RELATIONS WITH THE UNITED STATES
Bolivian relations with the United States assumed

major Importance for the small Latin American country during
the early years of World War II. The international situation
in 1939 created the conditions in which a mutually benefi
cial relationship could be developed between the United
States and Bolivia. The general nature of those relations
can be understood in relatively simple terms. The United
States found a growing need for Bolivia's strategic natural
resources and for her political cooperation. Bolivia, in
return, sought North American economic, political, and
military assistance to strengthen her condition in each of
these fields.
The development of blnatlonal relations along these
lines was a problematical process, however. The stumbling
blocks defined at the Panama meeting had to be overcome.
Closer relations with the Anglo-American alliance would
have unavoidable repercussions in Bolivia's relations with
307
her neighbors and would require fundamental readjustments
in Andean relations with the Axis states. The working out
of this program of collaboration, therefore, Involved the
confrontation of these matters.
On December 26, 1939* Bolivia's minister in
Washington, Luis Fernando Ouachalla, presented for the
consideration of the State Department a general plan for
the economic reconstruction of Bolivia that he had
formulated with his brother, Carlos Ouachalla. The plan
rested on the proposition that the fundamental basis of a
permanent cooperation "consists in the development of
Bolivian [mineral] production and its exportation to this
country [united States] , so that the commercial balance,

OO
today extremely unfavorable to Bolivia might be leveled."
. References were made in the Bolivian plan to: (1) a mixed

technical commission that would prepare a long-range and
comprehensive program of economic development, (2) mixed
stock companies that would exploit new sources of wealth
in Bolivia, (3) special credits for the establishment of tin
smelters in Bolivia and in the United States, and (4) a
team of North American mining technicians that would assist
the Bolivian government in establishing special agencies in
22Text of the Bolivian memorandum of December 26,

1939* contained in Note 22, to La Paz, Fernando Ouachalla,
January 30, 1940, "Legacl6n de Bolivia en Estados Unidos
de America" (Enero-Abril 1940), I, ABFM.
308
that field. The program would be Jointly financed, the
United States advancing $10 million In the form of a loan
to the Banco Central.
The United States reply to the proposal came In
January 19^0 and indicated that Washington still held to
the position that no financial assistance would be
provided to Bolivia until the Standard Oil matter was

23
satisfactorily resolved. The United States did concede,
however, with respect to Bolivia's foreign debt, that:
negotiations pertaining to a program of economic cooperation
could proceed with the understanding that the Bolivian
government also desired an equitable adjustment in the
matter.
Although Luis Fernando Ouachalla was one of the
major promoters of a broad program of economic cooperation
with the United States, he acknowledged in June 1940 that
"the first concern of my mission in Washington is that of
making possible the direct sale of our tin concentrates in
the United States, a concern maximized by the uncertainty

24
of our sales to England." Up until that time, the
23jjote 22, "Record of the Position of the Department

of State as Explained Orally in Response to the Bolivian
Memo of December 26, 1939*" ibid.
oh
nNote 202, to La Paz, Fernando Ouachalla, June 11,
19^0, "Legacl6n de Bolivia en Estados Unldos de America,"
(Mayo-Agosto 19^0), 2, ABFM.
309
Bolivian Minister had been able to report only that United
State8 tin supplies from Malaya and the Dutch Indies had
not been affected by the European war and that, consequently,
United States Interest in buying Bolivian tin was lagging.
Prospects for Bolivian mineral exports to the United
States improved that same month, however. Fernando
Ouachalla was Informed that new congressional legislation
would enable the Reconstruction Finance Corporation to
establish or to assist in the establishment of tin smelters
in the United States. The basic question then was whether
or not the Bolivian Minister could give assurances of a
steady flow of tin ores for such an industry.2-^ By
August 1940 contract negotiations were underway between
United States officials and representatives of the
Bolivian mining industry and government. On November 4, 194Q
an agreement was signed between the Metals Reserve Company
of the United States and the Bolivian producers or their
representatives. The main provisions of the contract were
(1) a duration of five years beginning July 1, 1940, (2) an
annual Bolivian export of tin ore or concentrates sufficient
to produce 18,000 tons of fine tin, and (3) a base price of

48 l/2ji per pound.2^ With the signing of the tin contract
25)4emo of conversation, Washington, D.C., June 26,

19^0, FR, V (19^0), 524.
26por text of contract see Bolivia, Ministerio de
Relaciones Exteriores, Boletin Oflcial. No. 5. Septiembre-
Diciembre 19^0, p. 91.
310
of November 1940, one of the principal objectives of
Bolivia's North American policy was achieved. Ouachalla
stated In a latter to Ostria Gutierrez, "I sincerely
believe that the national economy Is entering a new period
of profitable development through this new association

27
with the economy of the United States." '
As noted above, Andean hopes for a program of
economic cooperation had been thwarted earlier. Now, in
mid-1940, Bolivia sought the collaboration of the United
States on another project, the proposed railroad from Vila
Vila near Cochabamba to Santa Cruz.
In July 1940 the Second Meeting of Foreign Ministers
had approved a resolution that recognized the importance
of the transcontinental railroad that stretched from Arica,
Chile, to Santos, Brazil, across Bolivian territory and
recommended the immediate financing of the uncompleted
section located in Bolivia between Vila Vila and Santa

28
Cruz. w The United States government, "in keeping with the
spirit of the recommendation," notified the Bolivian
Legation in August 1940 that it was willing to despatch a
team of United States Army engineers to Bolivia to make a
s?Note 394, to La Paz, Fernando Ouachalla, November

4, 1940, "Legacl6n de Bolivia en Estados Unidos de America"
(Septiembre-Dieiembre 1940), 3* ABFM.
2®Bolivia, Ministerio de Relaciones Exteriores,

Boletin Oflclal, No. 4, Mayo-Agosto 1940, p. 32.
311
thorough survey of "the desirability, feasibility, and
cost" of building the section of the railroad that had not
been completed.^ Early in 1941 the United States
Legation in La Paz reported that the engineers' study
Indicated that the proposed railroad lacked great strategic
value for the United States, would be expensive to build
(an estimated $29,009,526) and after five years of service
would return a profit too small for paying even the
interest on the required loan. 3° The report raised the
possibility of constructing a modern highway in place of
a railroad in this area.
Bolivian leaders were keenly disappointed with the
United States engineering survey and report. Much of the
earlier domestic criticism of the railroad agreements
with Argentina and Brazil had been based on the fact that
such lines would link the Santa Cruz area with foreign
countries even before the region was effectively connected
with the Bolivian highlands. The Vila Vila-Santa Cruz
line would have effectively countered that opposition.
Then, too, the willingness on the part of the United States
to undertake the feasibility study had led many Bolivian

fj
^Telegram 31, to La Paz, we lies, August 8, 1940,

PR, V (1940), 549.
^Despatch 562, to Washington, Douglas Jenkins,

January 6 , 1941, FR, V (1940), 553.
312
leaders to assume that financial assistance was almost
assured, even though United States Minister Douglas Jenkins
told Ostria Gutierrez that such a study In no way obligated
Washington to finance the work .^1
The negative conclusion of the report, however,
failed either to lessen the Bolivian effort to obtain
United States financing for the railroad or to dampen
Andean optimism about obtaining it. La Raz 6n of La Paz
reported on June 3, 1941, that the United States had agreed
to finance the railroad. Although several days later the
same paper admitted that the United States Department of
State was still considering the matter, it quoted Ostria
Gutilrrez as saying that "I have the impression that the
financing of the Cochabamba-Santa Cruz railroad will be
possible within a relatively short tlme."^2 In Washington,
Fernando Ouachalla addressed a letter to the State
Department's Laurence Duggan in support of United States
financing of the project. J The Bolivian minister
emphasized again the vital importance of the railroad not
3lDespatch 391, to Washington, Jenkins, October 1,

1940, FR, V (1940), 550.
32La Raz 6n, June 3, 1941, p. 4; La Raz<$n, June 6 ,

1941, p. 4 7 --------
33rext of the letter to L. Duggan, dated June 9,

1941, enclosed in Note 219, to La Paz, June 16, 1941,
"Legaci6n de Bolivia en los E.E.U.U. de America" (Abril-
Junio 1941), 2, ABFM.
313
only for Bolivia, but also to the continent for reasons of
strategy and defense. He reminded Duggan of the United
States' public pledge at Havana to support Its construction.
He stated that Bolivia's geographically-determined role as
balancer in southern South America could only be played if
the Andean nation received massive impetus in the form of
long-range credits, adding that "the amount of those credits
cannot be measured by the rod of Bolivia's present capacity
for payment," but only by a realistic appraisal of its

potential.^
United States officials hesitated in completely
rejecting any of the Bolivian proposals for programs of
economic cooperation since, during 1940 and 1941, Washington
was actively seeking to diminish Axis influence in that
Andean country. Bolivian Minister Fernando Ouachalla
informed the State Department on January 2, 1941, that his
government was willing to terminate the contract of the
Italian military mission then at work in Bolivia if the
United States would send a military aviation mission with
adequate equipment as a replacement.^ An agreement to
that effect was signed in Washington on September 4, 1941.
3**lbld.
35flote 4, to La Paz, Fernando Ouachalla, January 2,

1941, "Legacl6n de Bolivia en Estados Unldos de America"
(Enero-Marzo 1941), ABFM.
In January 1941 United States Minister Douglas
Jenkins Initiated discussions In La Paz with Bolivian
officials In respect to the elimination of German influence
in Bolivia's major air carrier, Lloyd A^reo B o l i v i a n o . 36
Although the Bolivian government owned 52 per cent of the
company's stock, the balance was German-controlled and the
company operated under German management and with German
equipment. The Bolivian government favored the United
States proposal that the company be nationalized and issued
a decree to that effect on May 6, 1941. A management con
tract was later signed with Panagra (Fan American Grace Air
Lines) whose representatives had been participating in the
discussions of the issue since early in the year.

1
While the discussions Involving Lloyd Alreo
Boliviano were centered in La Paz, by April 1941, talks
in Washington Included the possibility that United States
military equipment would be available to Bolivia under the
provisions of the Lend-Lease Act. When Under Secretary of
State Sumner Welles suggested an million arms allotment
for Bolivia under the provisions of the program, Fernando
Ouachalla replied that his government would not accept
credits for military equipment while the United States
36Telegram 4, to La Paz, Cordell Hull, January 9,

1941, FR, VI (1941), 403.
315
refused to consider credits for other vital Bolivian needs
because of the Standard Oil c a s e . ^ President Pefiaranda's
main criticism., however, was that the proposed allotment was
smaller than the amounts proposed for Bolivia's neighbors.
Both complaints were heeded. The Lend-Lease agreement
signed on December 6 , 1941, allocated armaments valued at
$11 million to Bolivia, and, prior to that time, United
States government representatives had indicated that
Washington was prepared to enter into a program of economic
cooperation with Bolivia.
The United States program of strategic mineral
acquisition from Bolivia expanded notably in 1941.
Bolivian Minister Fernando Ouachalla, on January 8 , 1941,
suggested a tungsten contract between the two parties for

39
a five-year period. Negotiations were delayed by the lack
of agreement on a suitable price for the material until
April when Secretary of State Hull wired Minister Douglas
Jenkins in La Paz that the United States was prepared to
accept the Bolivian government's offer to sell that country's
^ N o t e 166, to La Paz, Fernando Ouachalla, April 30,

1941, "Legacl6n de Bolivia en los E.E.U.U. de America"
(Abril-Junio 1941), 2, ABFM.
^Despatch 973, to Washington, Jenkins, July 30,

1941, FR, VI (1941), 423.
39relegram 11, to La Paz, Hull, January 28, 1941, FR,

VI (1941), 452. —
total tungsten production for a three-year period at a
price of $17 per unit of twenty pounds .^0 At the same time,
however, Japanese interests, which were already receiving
about one-third of the Bolivian tungsten production, made
a strong bid for the purchase of the Andean nation’s total
output, offering $23 for a metric ton unit of about twenty-

41
two pounds. The competing bids sparked lively debate
within the Bolivian cabinet. Edmundo V&squez, Minister of
National Economy, proposed selling at least a portion of
Bolivia's tungsten to the Japanese buyers, but he was
strongly opposed by Foreign Minister Ostria Gutierrez who
argued that "high national interests" demanded that the
material be sold only to the United States .^-2 Those "high
national interests" probably referred to the potentially
beneficial results of a policy of full cooperation with
the United States, while the advantages of closer ties with
Japan, given Bolivia's geographical situation, were much
less clear. The Chancellor had his way. On May 21, 1941,
representatives of the Metals Reserve Company and of the
^Telegram 32, to La Paz, Hull, April 11, 1941, FR,

VI (1941), 457.
^■Despatch 764, to Washington, Jenkins, April 17,

1941, FR, VI (1941), 457i New York Times, May 11, 1941, p. 33.
^ N o t e CM, to Washington, Ostria Gutierrez, May 16,

1941, "Legacion de Bolivia en los E.E.U.U. de America"
(Abril-Junio 1941), 2, ABFM.
317
Bolivian tungsten producers signed a three-year contract at
the price of $21 per short ton unit.4^ Bolivian
representatives had used the Japanese bid effectively to
gain an Increase of $4 per twenty-pound unit. Ouachalla
reported to La Paz that once again It had been the decisive
intervention of the Department of State in the negotiations,
an intervention guided more by political than by commercial
criteria, that had determined the contract improvements
for Bolivia .44
Shortly after the signing of the tungsten contract,
discussions began regarding United States acquisition of
other Bolivian minerals. Secretary of State Hull reported
to Jenkins in September 1941 that, while negotiations on
antimony sales were at a standstill, both sides were
prepared to enter into contracts for the United States
purchase of Bolivian zinc and lead.4^ Hull added, however,
that an Integral part of these agreements should be the
establishment of export controls by the Bolivian government,
limiting the export of all strategic materials to the
43?or text of contract see Bolivia, Ministerio de

Relaclones Exterlores, Boletin Oficial, No. 7, Mayo-Agosto
1941, p. 149.
44Note 183, to La Paz, Luis Fernando Ouachalla,

May 23* 1941, "Legaci6n de Bolivia en los E.E.U.U. de
America” (Abril-Junio 1941), 2, ABFM.
45
^Telegram 169, to La Paz, Hull, September 17, 1941,
FR, VI (1941), 461.
313
United States, Great Britain, and those American republics
which also had adequate foreign trade controls. The decree
on export restrictions was Issued by President Pefiaranda
on July 31 t 1941 » and zinc and lead contracts were signed in
September and October of that year.
By mid-1941 Bolivia still had not obtained from the
United States the large scale economic and technical
assistance that had been suggested in December 1939. A
number of government leaders, including Ostria Gutierrez,
were convinced that an acceptable settlement with the
Standard Oil Company of New Jersey would contribute to
the efforts to obtain that objective. Therefore, in 1940
and 1941 several feeble and poorly managed attempts were
made to gain public and congressional support for a
settlement with the North American company.
In March 1941 Ostria Gutierrez informed Douglas
Jenkins in La Paz that the cabinet had decided to lay the
Standard Oil case before the Bolivian Senate and public In
the hope that a satisfactory solution to the problem might
be facilitated.^ During March and April the struggle raged
in Congress and in the press between those who favored and
those who opposed some type of settlement; by April 28
Ostria Gutierrez suggested to Douglas Jenkins that the case
llfi o
Telegram 28, to Washington, Jenkins, March 15,
1941, FR, VI (1941), 465.
319
be set aside because it was "too hot to handle.
Indeed, the Pefiaranda government and Ostria Gutierrez
had come under heavy attack from the nationalistic
opposition represented in the Congress by a group
identified as Independent socialists. Carlos Montenegro,
associated with this political sector, founded the Unl 6n
Defensora del Petr<Sleo in 1940; La Calle, one of the voices
of the group, printed in its February 3# 1941 edition a
manifesto signed by 17 per cent of the Chamber of Deputies,
protesting any settlement with the Standard Oil Company.^®
The opposition charged that the government was seeking an
arrangement in which the confiscated oil properties would
be returned to the control of the Standard Oil Company.
This group also argued that the issue did not adversely
affect relations with the United States, since that country
needed Bolivia's minerals anyway and would be willing to
provide loans for Bolivia's economic development even
without a Standard Oil settlement. The critics also took
a strong anti-imperial1st, anti-United States stance in
^Despatch 788, to Washington, Jenkins, April 28,

19^1, FR, VI (1941), 474.
^ A u g u s t 0 C^spedes expresses this opposition point of

view in his doctrinnaire interpretations of the period, El
dlctador sulclda (Santiago de Chile: Editorial Universitarla,
S.A., 1^45), pp. 218-254, and El presldente colgado, o p .
cit., pp. 11-87# Despatch 629,“T o Washington, Jenkins,
February 6 , 1941 (DS)824.6363 ST 2/ 511.
320
their opposition, summoning Foreign Minister Ostria
Gutierrez to report to the Chamber of Deputies on the
measures that had been taken by the Chancellory In

opposition to the imperialistic attitude that the Department
4Q
of State had assumed in the Standard Oil case. ^
Encouraged by the Senate's approval of the govern
ment's policy, the Foreign Minister took his case before
the Chamber of Deputies on March 29 in response to its
query. Ostria Gutierrez argued frankly and courageously,
although unsuccessfully, the following:
1. The United States had not been imperialistic

in the matter, but had played the role of
friendly mediator between the Bolivian
government and the company.
2. The present discussion about a settlement

with Standard Oil was actually the result
of a Bolivian initiative to obtain the
financial cooperation of the United States.
3. The Pefiaranda government did not defend

Standard Oil Company and would never
consider restoring its concession, although
it was unlikely that Bolivia could obtain
much-needed credits and assistance from the
United States without a settlement which
even President Busch had been willing to
support.50
The Bolivian Congress closed its session on April 30, 1941,
without any decision on the Standard Oil case by the Chamber
^Circular GM 22, Guillermo Francovich, April 1, 1941,

"Circulares" (Febrero de 1940 a Mayo de 1942), ABFM.
5°Ibid.
321
of Deputies.
The Bolivian government's position that a Standard
Oil settlement would have to precede a general program of
economic cooperation with the United States, although well-
founded in experience, did not fully take into account the
effects of the changing international situation. In July
19^1 Jenkins told President Pefiaranda and Finance Minister
Joaquin Espada that the United States was seriously
considering making important loans to that country .^1 Just
as the obstacle of foreign debt default had been laid aside
by January 1940, now the contingencies of war led the
United States government, over the objections of the
Federal Loan Administrators and the Export-Import Bank
director, to the position that the national interest would
best be served by relegating the Standard Oil case,
temporarily, to a secondary position of importance.
On August 1, 1941, the Department of State outlined
its position with respect to a program of economic
cooperation with Bolivia in a memorandum delivered to
Minister Fernando Ouachalla, The memo stated that the
United States was considering measures that might be
^Despatch 975 » to Washington, Jenkins, July 30,

1941 (DS)824.51/1095.
322
included in a long-term plan of collaboration.-^2
Objectives of the plan would be to Improve Bolivian
communications, to expand and diversify her agricultural
production, to stimulate her mining production, and to
stabilize her currency. The first step of the operation
would be to despatch a technical mission to Bolivia to
conduct the necessary studies. The memo went on to state:
The Government of the United States is prepared

to cooperate in giving effect to the recommendations
arising out of thorough technical and economic
surveys of Bolivian communications needs and
agricultural and mineral potentialities by the
extension of financial and technical assistance in
appropriate manner and amounts for the execution of
individual projects which are considered desirable,
useful, and practicable by both the Bolivian and
United States governments.53
In spite of Fernando Ouachalla's advice to La Paz
that this proposal offered Bolivia a unique opportunity
which would have to be considered by a highly competent
technical commission, the Bolivian cabinet hastily appointed
a special ministerial commission that promptly suggested
loans amounting to $80 million and advanced the hope that
credit would not have to await the conclusions of technical
studies.5^ Unrealistic predictions about the size of the
5^Text of the August 1, 1941 memorandum contained in

Telegram 127, to La Paz, Welles, August 1, 1941, FR, VI
(1941), 435.
53Ibld.J p. 436.
5^Note 301, to La Paz, Fernando Ouachalla, August 1,
323
United States credits soon appeared In the newspapers of La
Paz, some estimates ranging as high as $200 million.
Bolivia's minister In Washington warned Ostria that such
excessive optimism could easily lead to a dangerous public
disillusionment that would further weaken the PefSaranda
government, a prediction that was borne out soon when
delays in the program prompted sharp criticism from the
regime's opponents.
Bolivia's official reply to the August 1 memorandum
was delivered in two installments. A memorandum dated
September 9, 1941, expressed Bolivian approval of the United
States proposal, agreed on the necessity of improving
communications including the Vila Vila-Santa Cruz railroad,
urged that the mission of experts be despatched promptly
to Bolivia, and requested the inclusion of a petroleum
expert in that mission.-^ An outline of the Bolivian plan,
including reference to specific projects, was delivered to
the State Department on November 19, 1941. The cost of the
projects was estimated at $80 million, but the memorandum
declared that Bolivia could give every assurance of her
1941. "Legaci6n de Bolivia en los E.E.U.U." (Abril-Junlo

1941), 2, ABFM; Note 355, to La Paz, Fernando Ouachalla,
September 3* 1941 (same volume as Note 301).
55Memorandum of the Bolivian Legation to the

Department of State, September 9, 1941, FR, VI (1941), 439.
324
capacity to service loans of that amount.56 Thus, by the
time that Alberto Ostria Gutierrez retired from the
Chancellory in September 1941, he had guided Bolivia's
United States policy toward the achievement of most of the
objectives revealed at the Panama meeting in September 1939*
III. ASUNCION AND BUENOS AIRES
Apart from his work with the United States, Ostria
Gutierrez's most active and significant diplomacy was
with Paraguay and Argentina. The Treaty of Peace,
Friendship and Boundaries of July 1938 with Paraguay
enabled the Andean Chancellor to pursue foreign policy
objectives with respect to that country that until then had
not been possible. At the same time, the important matters
of railroad construction and petroleum exploitation and
exportation still had not been definitely determined with
Argentina.
It has been noted that at the Panama Conference of
American Chancellors, Foreign Minister Ostria Gutierrez
sought and obtained the collaboration of Paraguay's
chancellor in the presentation of two draft resolutions.
The Bolivian Chancellor later explained that two
56Note 530* to La Paz, Fernando Ouachalla, November

24, 1941, "Legacion de Bolivia en los E.E.U.U. de America"
(Octubre-Diciembre 1941), ABFM; Gutierrez, op. cit., p. 327.
325
considerations had prompted him to initiate a policy of
rapprochement with Paraguay at that time.57 one of these
considerations was the desire to definitely settle certain
pending matters related to the Chaco question so that a new
phase in relations with that country might be initiated.
Such matters Included agreements on private property rights
in the once-disputed territory, free port facilities on the
Paraguay River, and, of course, the final details of
frontier demarcation. A second factor prompting a new
Paraguayan policy.was the geographical situation shared by
the two countries which suggested the advantage of joint
action and cooperation in their foreign relations. At the
Panama Conference, therefore, the Bolivian Chancellor
invited Paraguay's Foreign Minister Justo Pastor Prieto
to visit La Paz on his return trip to Asuncion,
Pastor Prieto’s visit to the Bolivian capital was
the occasion for signing several Bolivian-Paraguayan
agreements designed to stimulate closer relations. These
agreements may be regarded as significant manifestations of
the desire and willingness of both parties to put their
relations on a new and potentially beneficial plane. Two of
the conventions signed on October 20, 1939* provided for
57flote 731, to La Paz, Ostria Gutierrez, November 19*

19^3* Erabajada de Bolivia en Chile" (Octubre-Noviembre
194?), ABFM.
the exchange of university students and professors and for
the exchange of official publications.-^® By the terms of a
protocol agreement, the two governments agreed to establish
permanent aerial service between Asuncion and La Paz. The
most important agreement of the Pastor Prieto visit, however
was the Protocol on Economic Cooperation and Facilities of
Transit by which the parties promised (1) to construct a
road across the Chaco directly linking the two states,
(2) to constitute a mixed commission to study the bases for
a commercial treaty and for other conventions designed to
stimulate commercial exchange and to promote economic
connections, and (3) to agree on a convention authorizing
facilities for the export of Bolivian products by way of
the river Paraguay in conformity with the peace treaty
of July 21, 1938.
While Foreign Minister Pastor Prieto was in La Paz,
discussions along these same lines were going on in Asuncion
between a Bolivian Commercial Commission, headed by
Federico Avila, and Paraguayan government and business
officials. These talks resulted in the Acta de
Recomendaclones of November 10, 1939> that proposed for
5®Luis de Iturralde Chine1, Colecolon de tratados

vigenteB de la republlca de Bolivia, MlnistêrTo de
Re lac lone sTTSxFerlores ( b v o I b . j La !Paz: Editorial "Universo,"
19^0), V, 350-365. (Hereinafter cited as Coleccldn de
tratados vlgentes.)
327
official consideration a variety of ways by which Bolivian-
Paraguayan relations could be developed in the commercial,
economic, industrial, and agricultural fields.-^
The transition in the nature of Bolivian-Paraguayan
relations was a swift and, apparently, complete one. Prom
the rancor and suspicion characteristic of their association
for almost a century, a cordiality and cooperativeness that
held much promise for the future was emerging. Fabi&n Vaca
Ch&vez (b. 1883), Bolivia's first post-Chaco War diplomatic
representative, reported that he had made substantial
progress in fulfilling his mission, which was to change the
hostile Paraguayan attitude toward Bolivia created by the
war and the long territorial dispute. He added that never
had those bilateral relations been as cordial as they now
were.^® Later in 1940 when Alberto Ostria Gutierrez
traveled to Asuncion, he also spoke of the changed character
of relations between those countries.
Until recently the history of Bolivian-Paraguayan

relations lacked understanding. Reciprocal ignorance,
misunderstanding, remoteness were characteristic.
Besides, between both peoples an Insurmountable
barrier was raised; the question of the Chaco. But
war— which is pain and sacrifice and misery— has made
59pederico Avila, Bolivia en el concierto del Plata

(Mexico: Editorial Cultura, 1^41), pp. 205-214.
^°Note 2, to La Paz, Fabidn Vfcca Chivez, January 3 ,

1940, "Legaci6n de Bolivia en el Paraguay” (1940), ABFM.
328
a miracle flourish: giving light to the conscience of

the two nations.
Bolivia and Paraguay have seen, then, in suffering
an open road for fellowship. And they are initiating
a new phase in their relationship. Because, instead
of spreading hatred or revenge, in both countries the
error of the past Is being shown and the hope of
amending it arises.61
The Asunci6n visit by Ostria Gutierrez in March 1940
culminated in the signing of another series of agreements,
this time with the new Paraguayan Chancellor Tom&s A.
Salomoni. By the terms of the Protocol to Regulate Private
Property Rights in the Chaco, the negotiators rectified an
omission in the Chaco peace treaty. In this protocol, the
parties agreed to establish a mixed commission that would
study Bolivian property rights in the territory now
definitely part of Paraguay.^*2 The Convention on
Recognition of the Effective Territorial Statute and Moral
Disarmament was another significant result of the Asuncl6n
talks. This agreement had four major provisions:
1. Each country recognized the other’s territorial

status as constituted in effective inter
national agreements.
2. Each country promised to respect the other's

territorial status and not to recognize any
territorial separation not freely agreed to
^Bolivia, Ministerio de Relaciones Exteriores,

Boletln Oficial, No. 3> Enero-Abril 1940, p. 45.
^2Ibid., pp. 48-54.

329
by the interested party, reaffirming "the
continental doctrine of August 3, 1932."
3. Each party promised not to accord belligerent

status to any movement directed at the other
country's legitimate government.
4. Each party agreed to promote moral disarmament

within their respective populations,
stimulating the sentiment of friendship and
fraternity between them.63
This convention must be regarded as another step in
the post-Chaco War Bolivian effort to guarantee her national
security and territorial integrity, an effort that was
guided almost exclusively by Ostria Gutierrez, The
Paraguayan agreement represented the third in a series of
four binatlonal conventions or declarations in this regard
that the Andean nation managed to obtain from her neighbors
during these years.
Bolivia's diplomatic representative in Asuncion in
March 1940, Carlos Salinas Aramayo, stated that the gains
achieved through this convention provided noteworthy

fji
guarantees for Bolivia against possible Chilean aggression.
In the diplomatic realm, the Bolivian-Paraguayan agreement
would discourage Chile in any plans to attack the little
63Ibid., pp. 49-50.
^Note 43/50, to La Paz, Carlos Salinas Aramayo,

April 4, 1940, "Legaci<5n de Bolivia en el Paraguay" (Julio-
Diciembre 1939), ABFM.
330
Andean nation, and It also eliminated the possibility that
Chile could count on Paraguay's help in the event of such
an aggression. Salinas Aramayo reported that the Chilean
diplomatic representative had also been disquieted by an
exchange of notes between Salomoni and Ostria Gutierrez
in which Bolivia and Paraguay agreed to jointly promote a
regional economic conference to which the countries of the
Rfo de la Plata would be invited. ^ This observation
reflected the view widely accepted in Bolivian circles,
that Chile had always attempted to maintain a special
relationship with Paraguay in order to keep Bolivia
politically enclosed.
Although the agreements of October 1939 and March
19^0 indicated clearly that Bolivia and Paraguay were
entering a new phase in their relations, signs soon
appeared which indicated that vestiges of the past still
remained. The ad referendum petroleum agreement of April
1939 had been tacitly repudiated by both governments.

Bolivian misgivings later contributed to the breakdown of
discussions on the sale of that nation's petroleum to the
Paraguayan Army in 19^0. Distinct differences also
developed between the two nations in the preparation for
65ibid.
331
and during the regional conference. Nevertheless, It must
be agreed that Bolivia's relations with Paraguay underwent
fundamental and historically significant changes In the
early war years.
Prom Asunci6n, Ostria Gutierrez traveled to Buenos
Aires to continue discussions with representatives of the
Argentine government on railroad construction and
petroleum matters. The basic objectives of Bolivia's
Argentine policy at that time were to place Bolivian
petroleum in the Argentine market, to obtain Argentine help
in transporting that petroleum to the Argentine market and
in developing the Bolivian oil industry, and to procure
Argentine cooperation in the constructing of railroads that
would link potentially Important Bolivian oil and
agricultural regions to the Argentine rail system.
Argentine officials were concerned about Bolivia's capacity
to guarantee the substantial loans required by these
projects, especially in light of the fact that the Andean
nation had not been willing to pay its share of the costs
for railroad studies agreed to in September 1937. The
negotiations of 1939 and early 19^0 , therefore, were attempts
at reconciling Argentina's conservative offers of

cooperation with Bolivia's more grandiose requests.66
66
Alberto Ostria Outilrrez, Una obra y un destino
(Buenos Airess Editorial Ayacucho, 1$46J, p p . 2J3-243.
(Hereinafter cited as Una obra.)
I
332
By April 2, 1940, discussions had advanced far
enough to allow the Bolivian Foreign Minister to sign with
Argentine Chancellor Jos£ Mar£a Cantllo a Protocollzed Act
which established the bases for a definitive treaty that
was to be drawn up at a later date. The Acta contained the
following major provisions:
1. The Argentine government will advance to the

Bolivian government sufficient funds to
construct the first section of the Yacuiba-
Santa Cruz-Sucre branch railroad, that Is,
from Yacuiba to Villa Montes. (Article 1)
2. The Argentine government will provide up to

500,000 Argentine pesos to the Bolivian
government to be invested in the construction
of new wells at the Sanandlta deposits.
(Article 5)
3. Upon completion of the railroad's first section,

Bolivia will begin to repay Argentina's loan
with fuel oil or crude petroleum. (Article 6)
4. On the basis of prior studies, Argentina will

construct a pipeline uniting Bolivia's
Bermejo zone oil deposits with the Argentine
city of Or&n. (Article 7)
5. If Bolivia's petroleum resources prove adequate,

other sections of the railroad will be
financed with the same method. (Article 8)b '
One of the first responses to this preliminary
agreement came from the United States. Under Secretary of
State Welles instructed Ambassador Norman Armour in Buenos
Aires to explain to the Argentine Foreign Minister that at
least part of the petroleum with which Bolivia would repay
6 7 i b i d . , p . 244; Boletfn Oficial, No. 3. o d . cit..

PP. 54-55.
333
Argentine loans would come from deposits to which North
American citizens had been given the exclusive right to
extract and sell petroleum.^® Welles doubted that the
Argentine government would wish to make financial
commitments involving properties with respect to which
American interests had definite claims, thereby Jeopardizing
efforts for reaching a settlement between the company and
the Bolivian government. Although the Bolivian Foreign
Minister showed annoyance over the United States involvement
in the issue, he was most concerned about Argentina's
reaction. A memorandum to Buenos Aires expressed Bolivia's
surprise at Ambassador Armour's comments regarding the
Standard Oil properties, declaring that the issue had been
settled already by virtue of the decision of Bolivia's
Supreme Court and rejecting any North American Interference

in the negotiations.
In his study entitled Una obra £ un destlno, Ostria
Gutierrez, himself, describes the process by which the
preliminary Acta of April 1940 became the Treaty of Railroad
Connection of February 10, 1941.?° First, the Chancellory
circulated the Acta among various ministries and agencies
^Telegram 232, to Buenos Aires, Sumner Welles,

April 22, 1940 (DS)724.35/73.
^Quti^rrez, 0£. clt., pp. 246-247.
7°Ibld., pp. 249-258.

Including Y.P.F.B. for comment and criticism. Second, on
the basis of the Acta, the Chancellory drafted a treaty
proposal that was then also considered by the ministries
and agencies which had been consulted earlier and by the
congressional representatives of the departments of
Tarija, Santa Cruz, and Chuquisaca, all of whom gave it
hearty approval. In February 1941, following the regional
economic conference in Montevideo, Foreign Minister Ostria
Gutierrez signed the treaty with interim Argentine
Chancellor Guillermo Rothe. However, the text of the
February 10, 1941 Treaty on Railroad Connection reveals
that the Bolivian Chancellor was not as successful in
selling his draft treaty to Argentina as he had been within
the Bolivian government. Although Ostria Gutilrrez
emphatically argued that the fundamental points of the
Bolivian draft treaty suffered no substantial modification
in the final treaty, a comparison of the two documents
indicates that two changes, which later became the
subjects of strong criticism of the agreement, had indeed
been made.
The first of these modifications manifested the
persistent Argentine anxiety about guarantees for the funds
to be advanced to Bolivia. The draft treaty, circulated
within and approved by the Bolivian government, proposed
that Argentina be reimbursed in crude petroleum, fuel oil,

335
Argentine pesos, American dollars or any other recognized

international monetary unit, but made no mention of
guarantees at all (Article VIII).^ However, the treaty of
February 10 made explicit reference to guarantees in
Article VIII, stating that "the product of the sale of
crude petroleum and fuel oil from the petroleum zones that
the Yacuiba-Santa Cruz and Sucre railroad and the Bermejo-
Orln pipeline traverse or to which they arrive" will serve
as the guarantee for the Argentine sums. This addition
later caused Brazil to raise serious objections because it
could be interpreted as an opening to Argentine influence
of a petroleum region that had previously been reserved for
Brazilian cooperation.
The second important change aroused Bolivia's
regional rivalries. Article X of Bolivia's draft treaty
provided that if the nation's petroleum resources were
sufficient, Argentina would agree to additional credits on
the same terms as before, and Bolivia would utilize those
new funds in a prescribed manner; "fifty per cent for
continuing the construction of the other sections of the
Yacuiba-Santa Cruz and Sucre railroad, and fifty per cent
for the simultaneous construction of the Balcarce-Tarija-
f^Guti^rrez, o£. clt., pp. 250-251.

Or£n railroad."^2 The final treaty, however, by deleting
the obligation of dividing additional funds evenly,

relegated the construction of the Balcarce-Tarija-Ordn line
to an uncertain status. According to the final treaty's
provisions (Article X), Bolivia would use any additional
credits to construct the Yacuiba-Santa Cruz and Sucre
railroad, "as well as for the construction of the Balcarce-
Tarija-Ordn railroad." This latter construction would be
realized after the completion of prior studies authorized
in an agreement, complementary to the treaty, which was

73
signed the same day.
The treaty aroused strong opposition within Bolivia,
especially from the city of Tarija, that suffered from a
serious lack of communications. The fundamental complaint
was that, according to the treaty, the oil resources of
that region (Bermejo deposits) would be used for financing
a railroad project from which Tarija would derive only
belated benefits or none at all. Although the Foreign
Minister argued to the contrary, he was handicapped by the
fact that he had earlier gained the support of Tarija*s
congressional delegation for the Bolivian draft treaty
that contained definite provisions for a railroad through

337
that city. The wisdom of Ostria Gutierrez's strategy can
well be questioned in retrospect. Regional opposition to
the treaty also stimulated regional support in its behalf
from cities like Santa Cruz and Villa Montes, which stood
to benefit from the construction of the railroad.
Nevertheless, Tarija's opposition, combined with that of
the more persistent critics of the Pefiaranda government,
was able to delay legislative approval of the treaty until
October 1942.
The Bolivian-Argentine agreements of April 1940 and
February 1941 also provoked the suspicions and, later,
even the official reservations of the Brazilian government.
David Alv^stegul, Bolivia's minister in Rio de Janeiro,
reported to La Paz,in May 1940 with respect to the
preliminary protocol of April 2, 1 9 4 0 . ^ He stated that
although he had received indications that the agreements
had made a bad impression on Chancellor Oswaldo Aranha, the
Brazilian Chancellor, himself, had denied this. The
Brazilian Foreign Minister had said that it was under
standable that Ostria Gutierrez showed a desire to counter
balance the policy of rapprochement that he had promoted
while Bolivia's minister in Rio. Alv^stegui indicated,
^^Note 138/88, to La Paz, Alv^stegui, May 7, 1940

"Legacl6n de Bolivia en el Brasil" (Mayo-Septlembre 1940
2, ABFM.
333
however, that Aranha was obviously concerned and probably
displeased with the preliminary protocol and its possible
effects on Bolivian-Brazilian agreements.
Later, after the signing with Argentina of the
Treaty of Railroad Connection of February 10, 1941, the
Brazilian diplomatic mission presented its country's
reservations to the agreement. The basic issue was
whether or not Bolivia had committed the petroleum resources
of the same region to the payment of loans granted both by
Brazil and by Argentina.
Both of the treaties signed with Brazil by Ostria
Gutierrez on February 25, 1938> referred to specified
petroleum areas. Article IV of the treaty on railroad
connection stated that "the product of the exploitation
of the petroleum zones that said railroad |corumb£-Santa
CruzJ crosses or to which it arrives" will serve as the
guarantee on the Brazilian funds advanced to conclude the
project.^-* The treaty concerning petroleum exportation and
exploitation stated in Article I that both parties agreed
to effect topographical and geological studies and to make
probes designed to determine the true industrial worth of
the petroleum deposits of the Bolivian subandean zone north
of the Parapet! River. In Article VI, Bolivia promised that
75colecci6n de tratados vigentes, op. cit., Vol. 4,

293.
339
the exploitation of petroleum within the indicated zone
would be carried out by mixed Bolivian-Brazilian stock
companies .7^
It has been noted, however, that Article VIII of the
• February 10, 1941 treaty with Argentina provided that the
product of the sale of the petroleum production from the
zones traversed or reached by the Yacuiba-Santa Cruz and
Sucre railroad would serve as the guarantee for funds
advanced by Argentina. Alv^stegui wrote to La Paz, in
November 1941, that an examination of the three treaties
did give the Impression that they referred to the same
territory.^ He also reported at the same time, however,
that the Brazilian government had indicated its satisfaction
with the Bolivian reply to its inquiry, a reply which stated
that La Paz would not commit any petroleum resources to the
construction of the railroad from Yacuiba other than those
existent within the zone of the first section, that is,
Yacuiba-Villa Montes. Although the issue was resolved
momentarily, the ambiguity of Bolivia's treaty commitments
with Argentina and Brazil with respect to petroleum would
return later to plague the Andean nation's foreign
relations.
76ibid., pp. 310-311.

77Note 711/457* to La Paz, Alvlstegui, November 3,
1941. "Embajada de Bolivia en el Brasil" (Octubre-Diciembre
1941), ABFM.
The apparently unrealistic yet persistent Bolivian
fear of a possible Chilean aggression intruded into
Bolivian-Argentine relations in July 1940. At that time,
the Bolivian Chancellory instructed the nation's minister
in Buenos Aires, Tomas Manuel El£o, to sound out the
Argentine Foreign Office on this matter and to obtain "an
official declaration, if possible in writing, of the
attitude that country would assume if Bolivia were the
victim of an aggression."7® The Bolivian minister's
efforts to comply with his instructions were not very
successful. Elio described the Argentine position as one
structured almost entirely by existing international
agreements. Argentine Chancellor Cantilo had told Elio
that his country would not remain indifferent before an
attack on Bolivia, but would coordinate its action with
that of the United States and Brazil in attempting to
reestablish the use of inter-American instruments of
conciliation, adding that he could not offer military aid
to Bolivia.79 while this Argentine reply had not been
unfriendly to Bolivia, neither had it been particularly
reassuring.
7®Note 280, to Buenos Aires, Tora&s Manuel El£o,

July 4, 1940, cited in Note 526/360, to La Paz, August 6,
1940, "Legacldn de Bolivia en la Argentina" (Agosto-
Octubre 1940), 5, ABFM.
79note 526/360, ibid., pp. 2-3.

341
Two additional matters demanded the attention of
Argentine and Bolivian officials In these early war years.
One of these was the problem of Bolivian migrant workers
who had left their own country to work in the mines and on
the farms of northern Argentina. The Bolivian government
was interested in improving the living and working condi
tions of those migrant workers and in establishing more
effective means of binational regulation and control over
the recruitment and traffic of labor in that area. To
these ends, Andean representatives in Buenos Aires offered
several proposals to the officials of San Martin Palace.
The Argentine Chancellory rejected these initiatives,
however, on the grounds that no difficulties actually

80
existed along these lines. A second problem was the
congestion of Bolivian-bound cargo at the frontier rail
centers of La Quiaca, Argentina, and Villazon, Bolivia,
which had resulted from a sharp increase in Argentine
exports following the onset of the European war. The
Bolivian rail system, especially that portion from
Villazon to Atocha, did not have the capacity to transport
into the Bolivian interior the amount of cargo that the
Argentine trains managed to deliver to the frontier. The
Bolivian Legation in Buenos Aires sought cooperation in
fin
ow"Resumen de labores," to La Paz, March 1941,
"Legaci6n de Bolivia en la Argentina” (Enero-Marzo 194l),
ABFM.
j
342
alleviating this situation by using Argentine locomotives
to move cargo into the interior to Uyuni, but a satis
factory arrangement eluded the parties for several years.
IV. BILATERAL RELATIONS WITH THE OTHER BORDERING STATES
Although Bolivian diplomacy in the early years of
World War II was oriented toward relations with the United
States and Argentina, nonetheless, significant developments
also took place in the Andean nation's relations with her
other neighbors. Because many aspects of Bolivia's
relations with these states either lacked intrinsic
importance or underwent no conclusive development, they
will be treated here in general terms rather than in a
detailed presentation or analysis. The most important of
these developments, of course, will be given more complete
treatment.
Three items headed the agenda of Bolivian-Brazillan
relations; (1) railroad construction, (2) petroleum
matters, and (3) frontier demarcation. Bolivia's minister
in Rio de Janeiro, David Alvestegul, reported to La Paz
late in 1939 that the matter of the CorurabA-Santa Cruz
railroad during that year had been his principal concern,
since "as intermediary between the mixed commission and
the Chancellory, the Legation has had to intervene in
almost all the questions that have been presented in the

343
8i
execution of the transcendental work." Progress had been
made in the railroad project. By the end of 1939, studies
of the entire route had been completed, contracts for
construction had been let, and, in September, construc
tion had begun from CorumbA, Brazil. On July 29, 1941,
Brazilian President Getulio Vargas and Bolivian Chancellor
Ostria Gutierrez, representing President PefSaranda,
officially inaugurated the construction of the railroad at

82
Corumbd, The next day Vargas and Ostria Gutierrez
traveled the 86 kilometers to Palmito in Bolivian territory,
the station being located at the terminus of the completed
section of the railroad.
The work of the mixed Bolivian-Brazillan petroleum
commission proceeded much more slowly than had that of the
railroad group, in spite of the constant urging for faster
and more decisive action by officials from both countries.
Not until June 28, 1940, did the commission hold its first
session, a delay which according to Alv^stegui could be
explained in part by Brazil's preoccupation with the war.
Ostria Gutierrez indicates that the commission's work
really did not commence until it moved to the Bolivian town
Note 354, to La Paz, Alv^stegui, December 31, 1939,

"Legacl6n de Bolivia en el Brasil" (Septierabre-Octubre
1939)* ABFM.
8p
^Bolivia, Ministerio de Relaciones Exterlores,
Memoria, 1941, 0£. clt., p. 45.
344
of Charagua on December 19, 1940.®^ Then for the next two
years, the mixed commission was engaged in studying the
petroleum potential which existed in the subandean region
to the north of the river Parapet!.
Bolivia's relations with Brazil, after well over a
century of political independence, were still marred by a
problem of boundary demarcation in the Cuatro Hermanos
region of the nation's northeast. When the matter first
reappeared in late 1939 and 1940, it was regarded as a
simple problem of organizing a commission to mark on the
terrain the line that had been agreed upon in the boundary
treaty of 1928. However, on March 8 , 1941, Alv^stegui
told Brazilian Foreign Minister Aranha that an earlier
demarcation commission had committed an error in

Oh
determining the location of an important frontier marker.
Instead of positioning the marker in the headwaters of the
river Verde as had been intended, the commission had
placed it in the headwaters of the river Tarvo. The
Bolivian Minister stated that demarcation on the basis of
this mislocated marker would be detrimental to the
interests of Bolivian property owners in that region and
Ôuti^rrez, o£. clt., p. 206.
^ N o t e 144/96, to La Paz, Alv^stegui, March 8, 1941,

"Legaci6n de Bolivia en Rio de Janeiro" (Abril-Junio 1941),
ABFM.
345
requested that the property rights of these owners be
considered in the positioning of the definitive markers.
Brazilian Foreign Minister Aranha acceded to
Bolivia's request. The parties agreed in an exchange of
notes on April 29, 1941, that border demarcation would
proceed on the basis of the true location of the principal
headwaters of the river Verde and would take into
consideration the existent property rights of citizens

85
of both countries along that line. ^ Bolivia's success in
the matter was illusory, however. Shortly afterward it
was discovered that the conclusions of the Fawcett-
Guillobel commission of 1909 with respect to the
principal headwaters of the r £o Verde, the authority on
which Bolivia had based her whole position, were also
erroneous. A boundary determined by the location of the
true point of origin of the Verde River, as provided for in
the notes of April 29, would be more damaging to Bolivian
interests than one based on the previous error. Therefore,
Alv^stegui was Instructed to seek Brazil's acceptance of
the Fawcett-Guillobel determination as the most satisfactory
interpretation of the April agreement. The Bolivian
minister encountered resistance, however, and the process
^Bolivia, Ministerio de Relaciones Exteriores,

Boletin Oflclal, No. 6 , Enero-Abril 1941, p. 27.
346
Qzr
of boundary demarcation was further delayed.
Bolivia's persistent desire to possess her own river
port on the Paraguay River was also manifested in her
relations with Brazil In those early war years. In
December 1940 Bolivia expressed to Brazil her Interest in
dredging and cleaning the Tamengo Canal which provided the
Bolivian port of Puerto Sucre with access to the river.
In reply, Brazilian officials asked Bolivia to consider the
possibility of a free zone for Bolivian trade at Corumbd,
since the costs of dredging the Tamengo Canal would be
excessive
Brazil occupied an important place in Bolivia's
foreign relations in this period, not only because of the
matters of binational interest which have been noted, but
also because of Brazil's interest in and influence on
Bolivia's associations with third parties. This interest
has been mentioned with regard to the Argentine-Bolivian

agreements. However, it must also be mentioned with respect
86
Note L686, to Rio de Janeiro, Eduardo Anze
Matienzo, October 3, 1941, "Embajada de Bolivia en el
Brasil" (Julio-Septlembre 1941), ABFM; Note 848/554, to
La Paz, Alvistegul, December 17, 1941. "Embajada de Bolivia
en el Brasil" (Octubre-Diciembre 1941), ABFM.
®^Note 673/429, to La Paz, Alv^stegui, December 18,

1940. "Legaci6n de Bolivia en el Brasil" (Noviembre-Diclemtre
1940), 3, ABFM.
®®Note 91/59* to La Paz, Alv^stegui, January 31,

1941. "Legaci6n de Bolivia en el Brasil" (Enero-Marzo
1941), ABFM.
347
to Bolivia's contacts with the United States. Bolivian
officials, aware that Brazil maintained especially close
relations with Washington, frequently sought that country's
collaboration in dealing with the United States. On
September 9, 1941, for example, Alvestegui reported that
he had requested Brazilian support for the Bolivian efforts
to obtain United States financing of the Vila Vila-Santa

8q
Cruz railroad. y This feature of Bolivian-Brazilian
relations was unique, since very rarely did Andean states
men seek the help of other neighboring countries in respect
to Bolivian relations with Washington.
Bolivian relations with Chile in these years were
characterized by rumors of a Chilean invasion and high
lighted by the visit of Chilean Foreign Minister Manuel
Bianchi Gundian to La Paz in January 1941. United States
Minister Douglas Jenkins advised Washington in July 1940
of an undercurrent of fear in Bolivia that the surrounding
countries, especially Chile, had aggressive designs on her
national territory.9° Jenkins suggested that this fear was
being utilized by domestic political forces, especially
certain army leaders who were spreading rumors of a Chilean
Q^Note 543/344, to La Paz, Alvestegui, September 9,

1941. "Embajada de Bolivia en el Brasil" (Julio-Septiembre
1941), ABFM.
^Despatch 302, to Washington, Jenkins, July 3, 1940

(DS)724.25/70.
343
attack in order to divert attention from internal
91
difficulties and differences. The expression of this
fear by politicians and the rumors in the Bolivian press
inevitably affected Bolivian-Chilean relations adversely.
Former President Hernando Siles, Bolivia's
ambassador in Santiago, called the rumors absurd, but he
warned La Paz that such talk could Itself nourish any latent
Chilean desires or plans along these lines .92 Siles advised
the government to moderate the press in this issue, to seek
some constructive, Joint enterprise with Chile, and to
explore the thought of other governments on the

93
possibility of Chilean aggression. He also suggested
that consideration be given to the idea of inviting the
Chilean Foreign Minister to visit Bolivia to negotiate a
nonaggression treaty similar to the one signed with Peru.
Chancellor Ostria Gutierrez noted in the margin of the
letter that an agreement with Chile, identical to that with
Peru, was not possible. However, the twin ideas of a
visit to La Paz by the Chilean Chancellor and of a
Bolivian-Chilean nonaggression pact prospered.
91Ibid.
92Cable 169, to La Paz, August 25, 1939, cited in
Note 163, to La Paz, Hernando Siles, September 11, 1939
"Embajada de Bolivia en Chile" (Julio-Dieiembre 1939), ABFM.
93Note 1 5 , to La Paz, Siles, January 19, 1940,

"Embajada de Bolivia en Chile" (Enero-Mayo 1940), ABFM.
In January 1941 Chilean Foreign Minister Bianchl
traveled to Bolivia for a meeting which provided the
occasion for drawing up several binatlonal agreements of
some importance. The timing of the visit cannot be over
looked. It preceded, by a very few days, Ostria Gutierrez's
scheduled trip to Buenos Aires and then to Montevideo for
the regional meeting of the countries of the Rio de la
Plata. Considering the Chilean opposition to that regional
conference, it was quite likely that Bianchi not- only
wanted to silence the critics in his own country, who
accused the Chilean government of losing the nation's
place of leadership in South America, but also wanted a
chance to talk with Ostria Gutierrez before the Bolivian
Chancellor entered additional discussions with Argentina
and B r a z i l . ^4 Prior to Bianchi's arrival, Ostria
Gutierrez described the forthcoming meeting as an effort
to strengthen the political and economic ties between the
two countries, dispelling the fears and suspicions that
clouded their relations in recent months.^
The foreign ministers exchanged two sets of identic
notes on January 16, 1 9 4 1 . ^ One agreement provided for
^Despatch 592, to Washington, Jenkins, January 20,

19^1 (DS)724.25/74.
J95Circular G24,to Buenos Aires, Ostria Gutierrez,
January 7» 1941, "Legaci6n de Bolivia-Buenos Aires, oficios
de R.R.E.E. de Bolivia" (Septiembre 1940-Abrll 1941), ABFM.
9^Bolet£n Oflclal, No. 6, o£. clt., pp. 33-36,
350
the mutual exchange of students and professors. Through
the second set of notes, the parties expressed their
agreement on three basic declarations: (1) they declared
that all disagreements between them would be resolved
only through peaceful procedures, explicitly condemning
wars of aggression in their mutual relations and with other
statesj (2) they reaffirmed their complete agreement with
the principle of nonrecognition of territories annexed by
forcej and (3) they confirmed their adhesion to the
principle that no state has the right to intervene in the
internal or external affairs of another. Bianchi and
Ostria Qutilrrez also signed a protocolized act by which
their two nations agreed to constitute a mixed commission
that would present for the consideration of both
governments new proposals for Improving their economic
relations
The mixed commission which was established by the
protocolized act of January 16, 1941, held two sessions
later that year and signed a final act on May 29, 1941,
through which several proposals were submitted to the
consideration of the two governments. Both delegations
recommended the study of certain measures relating to
blnatlonal financial and banking arrangements and to
97Ibid., p. 37.
351
Improvement of transport through Arica. In addition, the
Chilean delegation proposed for study a draft commercial
treaty, the creation of a Chilean-Bolivian corporation of
economic development, and the constitution of a Chilean-
Bolivian corporation of transport; the Bolivian delegation
recommended that Chile consider leasing the Chilean section
of the Arica-La Paz railroad and of the wharf at Arica to
the Andean nation.
These agreements and proposals with respect to
promoting and improving Bolivian-Chilean economic relations
all contained promise, but neither country was sufficiently
interested to implement them rapidly or effectively.
Bolivia's major efforts in foreign affairs were being made
in her relations with the countries of the Atlantic and with
the United States. The Bolivian aspiration for a Pacific
port also troubled relations between the two countries.
The port question remained in the background for most of
the time while Ostria Guti4rrez was chancellor. However,
during the Bianchi visit, the Bolivian Foreign Minister
spoke with his guest about the issue of a port, "inviting
him to enter into negotiations for the cession of A r i c a . "99
Bianchi replied by stating the prior necessity of preparing
9^Bolet£n Oflclal, No. 7, o£. clt., p. 71.
^ N o t e 144, to La Paz, Ostria Gutierrez, March 19,

1943j "Embajada de Bolivia en Chile" (Enero-Marzo 1943),
ABFM.
352
Chilean public opinion through a rapprochement by the two
countries.
Bolivian diplomacy with Peru during the years of
1939 to 1941 was devoted largely to frontier matters.
These Included such problems as the exchange of
territories in the Copacabana region of Lake Titicaca and
the delineation of the extreme southern sector of their
common boundary. Bolivian-Peruvian discussions also
considered the control of frontier incidents, usually
involving the Indian populations living in the border
areas, and the regulation of frontier traffic of
Indigenous peoples who frequently crossed and recrossed
the international boundary.
Definite progress was achieved with respect to
several of these matters in the years 1939-1941.
Territorial exchanges on the Copacabana peninsula, agreed
to in the Julio A. Gutierrez-Carlos Concha protocol of
January 15, 1932, were effected December 2, 1939 .1®0 The
act of exchange gave rise to additional questions of
property rights and of citizenship that subsequently were
resolved through a protocol signed in Lima, October 18,
1 9 4 1 . Bolivia's minister in Peru, Eduardo Anze Matienzo,
lOOBolivia, Ministerio de Relaciones Exteriores,

Bolet£n Oflclal, No. 8 , Septiembre-Dieiembre 1941, p. 61.
101Ibid.
353
reported in July 1940 that he had exchanged notes with the
Peruvian chancellor, Alfredo Solf y Muro, establishing a
system of safe conduct passes that would facilitate the
regulation of passage across the frontier by the indigenous

102
populations of the border area. An agreement signed in
Lima on October 4, 1940, authorized the local authorities
of the frontier regions to handle the minor incidents which
arose between village and hacienda residents who lived on
different sides of the international b o u n d a r y . T h e
more serious incidents, it was agreed, would be referred to
the national governments. Also, in mid-1940, a mixed
Bolivian-Peruvian commission was established to replace the
boundary markers that had been moved or carried away through
the years.
The matter of determining a boundary for the
southernmost sector of the two nations' common frontier
proved less amenable to an easy solution, Peru accepted
Bolivia's proposal that the issue be handled by the mixed
commission for marker replacement, but would not accede to
Bolivia's point of view regarding the proper location of
the dividing line, thus prolonging a disagreement that
^®%ote 91-73* to La Paz, Eduardo Anze Matlenzo,

July 2$, 1940, "Legaci6n de Bolivia en el Peru" (Junio-
Septiembre 1940), 3, ABFM.
103Boletln Oflclal, No. 5, o£. cit., p. 79.

35^
would delay settlement of the issue for years.
The mixed Bolivian-Peruvian economic study commission
was practically defunct by 1940. The two countries managed
no major gains in their commercial and economic relations
during these early war years, although Anze Matienzo was
able to arrange an agreement in December 1940 for the
utilization of Bolivia's blocked sterling balance in London

io4
in commercial transactions with Peru, v
Bolivia's relations with Uruguay after the close of
the Chaco Peace Conference were maintained on a formal and
friendly level, devoid of any significant content right up
until the regional economic conference of the countries of
the river Plata in 1941. Jorge Valdes Musters, Bolivia's
minister in Montevideo, described relations late in 1939 as
extremely cordial. He reported that Uruguay had much
sympathy for Bolivia's port hopes, adding, "My impressions
in this regard reach the point that, not only would I affirm
that today Uruguay is the most decided supporter of the
Bolivian aspiration, but also that there are very few
citizens of Uruguay who are not fully informed of our

105
anguishing problem."
104
Note 512-412, to La Paz, Anze Matienzo, December
27 $ 1940 "Legacion de Bolivia en el Perd" (Octubre-Dieiembre
1940), 4, ABFM.
^^Note 3 6 5 , to La Paz, Valdls Musters, December 21,

1939* "Legacion de Bolivia en el Uruguay" (Octubre-Diciembre
1939), ABFM.
355
Following the regional conference, which was held
in the Uruguayan capital, Ostria Gutilrrez sought to move
the ties between the countries to a more practical plane.
Before the Bolivian Chancellor left Montevideo, he signed
a series of agreements with Uruguayan Foreign Minister
Alberto Ouani on a variety of s u b j e c t s . 1 ^ two conventions
treated cultural matters, providing for the mutual
establishment of fellowships and for the exchange of books.
Another convention contained an agreement to constitute
a mixed commission to study the possibility of installing
in La Paz a branch of the Banco de Seguros del Estado of
Uruguay. Still another agreement provided for special
credits for Bolivian cattlemen to purchase breeder live
stock in Uruguay. The fifth convention called for the
establishment of a mixed technical commission to function
in La Paz. Its duties were to examine the needs for public
works in Bolivia and to propose ways in which Uruguay
could collaborate in the Bolivian effort to meet those
needs, possibly through the purchase of Bolivian products.
Apart from this series of conventions, Uruguay's
Administraci6n Naclonal de Combustibles, Alcohol, y Portland
(A.N.C.A.P.) persisted in vain in its efforts to obtain
petroleum from Bolivia's deposits.
^•^Boletin Oflclal, No. 6, o£. clt., pp. 46-57.

356
On the international level, Bolivia responded
favorably to the Uruguayan memorandum of June 21, 1941,
which declared that any American nation engaged in war
with an extracontinental power in defense of its own rights
would be considered a nonbelligerent by the government in
Montevideo. On July 4, 1941, Valdes Musters declared to
Chancellor Ouani and to Uruguayan President Alfredo Baldomir
that his government was in full agreement with the position

107
defined in the June 21 memorandum.
V. THE SECOND MEETING OP CONSULTATION, HAVANA

(July 1940)
The Bolivian delegation to the Second Meeting of
Consultation of American Foreign Ministers in Havana,
Cuba, had two principal objectives. One was to obtain
inter-American support for the construction of the Vila
Vila-Santa Cruz railroad as a section of the potentially
strategic transcontinental railroad linking Arica, Chile,
with Santos, Brazil. The second was to suggest to the
gathering that consideration be given to a system of
collective security for intrahemispheric relations.
Bolivia's ambassador to Mexico, Enrique Pinot,
headed the Andean nation's delegation at the meeting. La
10?Note 311/238, to La Paz, Valdes Musters, July 7,

1941. "Legacion de Bolivia en el Uruguay" (Julio-Septiembre
1941), ABFM.
357
Raz6n reported that the cabinet decided to appoint Finot
to the special post on July 11 for reasons of economy;
since he was stationed in Mexico, his travel expenses would

108
be less than those of a delegate traveling from La Paz.
A more significant explanation, however, was given by the
Bolivian minister In Washington, Fernando Ouachalla, to
Under Secretary of State Welles. Fernando Ouachalla
stated that the Foreign Minister had felt that he could not
justify a trip to Havana, especially on the eve of the
opening of Congress In Bolivia, without assurances that he
would be able to sign there important agreements on
economic cooperation with the United S t a t e s , H e added
that the Standard Oil issue undoubtedly would have
prevented the signing of such agreements.
In preparation for the meeting, Bolivia attempted to
enlist the support of other American countries for her
special projects. David Alvestegui, in an interview with
Brazilian Chancellor Aranha on July 17* 1940, requested the
backing of that country's delegation at Havana for Bolivia's
attempts to promote the transcontinental railroad and a
pact or declaration of reciprocal security within the
lo8La Raz6n, July 12, 1940, p. 4.
^^Note 252, to La Paz, Fernando Ouachalla, July 17,

1940, "Legaci6n de Bolivia en Estados Unidos de America"
(Mayo-Agosto 1940), 2, ABFM.
358
Americas .110 Ostria Gutierrez later claimed that before
the Bolivian project was presented, the Chancellory had
received promises of cooperation from nine American
countries, including Argentina, Brazil, and the United
States .111
Bolivia's strong desire to assure her security
through international guarantees prompted the formulation
of a draft declaration on American security and solidarity
in the weeks preceding the Havana meeting. The basic
principle of the declaration was that "any act of military
or diplomatic aggression or coercion committed against the
independence or territorial integrity of any one of them
[American republics^ by an extracontinental or continental
state will be considered ipso facto as an act committed

112
against all the others."
At the conference, the Bolivian delegation emphasized
the economic and commercial importance of the transcontinen
tal railroad and especially its strategic value for
continental defense. The conference subsequently
110Note 303/194, to La Paz, Alvestegui, July 18,

1940. "Legaci6n de Bolivia en el Brasil" (May©-Septiembre
1940), 2, ABFM.
i:ilLa Raz6n, July 26, 1940, p. 4.
112Jorge Diez de Medina, "La politica exterior de

Bolivia" contained in Circular P.D, 13, April 10, 1945,
"Circulares" (Febrero de 1940 a Mayo de 1942), ABFM.
359
recognized the Importance of the railroad in its Resolution
X , recommending to the American states, especially those
directly interested in the project, the advantage of
securing its financing as soon as possible.
Bolivian efforts to promote a regional system of
collective security at Havana were limited to a series of
general remarks on the subject presented by Pinot in his
address to the second plenary session.
It is surprising ... that in the midst of the inter

national anarchy that humanity endures, the necessity
of taking advantage of the lesson is not adequately
comprehended, neither is there contemplated the
possibility of a new organization of peace on the basis
of the reciprocal guarantee, of Juridical securities,
and, If necessary, of the application of sanctions.
For it is no mystery that the true concept of
cooperation for peace still has not sufficiently
matured in America and that the method of consultation
is insufficient for determining the course of duty in
determined conditions and circumstances. We are
gathered to study the problems of continental defense
against possible foreign attacks, but unfortunately
we still abstain from forestalling and avoiding the
danger that peace might be disturbed among ourselves.
... Bolivia feels it has the duty of insisting,

although it may be in theoretical and Isolated terms,
upon this subject.of such capital importance,113
The conference was preoccupied with the immediate
external threat, however; Resolution XV, therefore, was
limited to the proposition that the attack of an extra
continental power against one American state would be
H 3 Bolet£n Oflclal, No. 4, 0£. clt., pp. 27-28.

360
regarded as an attack against all the American republics.
The subject of a regional security system, including
conflicts within the hemisphere, was set aside until the
19^5 Inter-American Conference on Problems of War and Peace.
VI. THE REGIONAL CONFERENCE OF THE COUNTRIES

OF THE RIO DE LA PLATA
The concept of a special economic conference to
treat the problems arising from the unique geographical
positions of Bolivia and Paraguay had its origin at least
as early as the February 1933 Conference of Mendoza
between the foreign ministers of Argentina and Chile.
After that, references to special transit facilities for
the two countries or to regional economic conferences were
included in the peace protocol of June 12, 1935, in the
peace treaty of July 21, 1 9 3 in the closing acts of the
Chaco Peace Conference, and in the Resolution on Economic
Cooperation approved by the Meeting of Consultation in
Panama (1939). While serving as minister in Rio de Janeiro,
Ostria Gutierrez, a strong advocate of the idea of regional
groupings, had proposed a regional conference of the
countries of the Amazon River basin. Later, as foreign
minister, he was the chief proponent of a regional
conference for the countries located in the Rfo Plata basin.
Bolivia and Paraguay officially agreed to promote a
regional economic conference through an exchange of notes

36 i
In Asuncion on March 27, 1940. The note passed to
Paraguayan Foreign Minister Tomds A. Salomoni by Ostria
Gutilrrez contained this commitments
The Government of Bolivia ... agrees to promote,

Jointly with your Excellency's Government, the
realization of a regional conference of the countries
of the Plata, with the object of making effective the
economic cooperation between said countries and of
expanding the corresponding facilities of transit for
Bolivia and Paraguay .114
In May 1940 the Bolivian and Paraguayan ministers
in Montevideo, Rio de Janeiro, and Buenos Aires issued
invitations to the governments of Uruguay, Brazil, and
Argentina to participate in the proposed regional
conference. Affirmative replies were received the same
month from all three of the invited countries. Bolivia
and Paraguay accepted Alberto Guanl's offer to make
Montevideo the site of the conference and tentatively
selected August 25, 1940, as the inaugural date of the
meeting.
The resolve on the part of Paraguay and Bolivia to
promote the conference energetically encountered numerous
difficulties, however, before the meeting finally opened
on January 27, 1941. Neither Argentina nor Brazil was
enthusiastic about the proposed conference in which they
would certainly be asked to grant new concessions to
11^Boletin Oflclal, No. 3, 0£. clt., p. 53.

362
Bolivia and Paraguay. Chancellor Aranha told one United
States official that he wished to minimize the Importance
of the conference, adding that neither Brazil nor Argentina
was sending Important individuals as representatives to the
meeting. -^5
Chile opposed the Plata River conference. Chilean
Foreign Minister s£enz admitted to United States Ambassador
Claude 0. Bowers that he had instructed his diplomatic
representatives to work either for the broadening of the
scope of the meeting or for its abandonment.11^ Manuel
Bianchi, a successor to S&enz, indicated to Bowers on
several occasions his concern over Chile's exclusion from
the conference, requesting on one occasion that Under
Secretary of State Welles find a way to prevent such
regional conferences from being held.11^ Shortly before
the inauguration of the conference, Chile, Peru, and the
United States were invited to send official observers,
largely as the result of the critical stance taken with
respect to the meeting by Chile.
^^Telegram 18, to Washington, January 9, 1941

(DS)724.34119/1838.
116
Despatch 617* to Washington, Claude Q. Bowers
(Santiago), June 26, 1940, (DS)724.34119/1799.
^^Telegram 267, to Washington, Bowers, November 8,
1940 (DS)724,34119/1822; Telegram 10, to Rio de Janeiro,
Welles, January 7, 1941 (DS)724.34ll9/l837A.
Uruguayan Chancellor Alberto Guani, following a
meeting with Argentine Foreign Minister Julio A. Roca late
in December 1940, announced that he planned to open and
close the conference but would not preside over Uruguay's
conference delegation. The announcement caused keen
disappointment in Ostria Gutierrez, who was hoping that all
the participating countries would be represented by their
foreign ministers in order to give greater Importance to
the meeting. Valdes Musters told a high Uruguayan Foreign
Office representative on December 28, 1940, that he had been
authorized to state that Guani's refusal to head his
nation's delegation "had been taken as an act of discourtesy
by Chancellor Ostria Gutierrez," who had made his coming
contingent upon Guani's presiding over the Uruguayan
delegation.11® Guani replied to Valdds Musters by saying
that his decision had in no sense been intended as an act
of discourtesy and that, after conferring with the
chancellors of Argentina and Brazil, he had decided to lead
the Uruguayan conference delegation.119
In January 1941, shortly before the regional
conference was scheduled to get underway, Bolivia's minister
11®"Memorandum Confidencial" to La Paz, December 31,

1940. "Legacion de Bolivia en el Uruguay" (Octubre-Diciembre
1940), 4, ABFM.
119Ibid.
364
in Asuncion reported that Paraguay's Foreign Minister Luis
A. Argafia was completely disillusioned about the forthcoming
meeting .120 Argafla had stated that because the attitude
■toward the conference in Buenos Aires and Rio de Janeiro
was one of indifference, he was not going to Montevideo.
Bolivian Minister Carlos Salinas Aramayo persuaded ArgafSa
to change his decision, but the episode indicated that full
accord did not exist, even among the sponsors of the
conference.
The general objective of Bolivian policy in
promoting a regional conference was stated in the report
of that nation's delegation to Montevideo:
Bolivia and Paraguay thought that a conference of

a regional type, in which the nations that compose
that system [Plata River} are gathered, would permit
them to face and resolve some of the problems that
both countries confront as a direct or Indirect
consequence of their landlocked situation. 121
An examination of the eleven draft conventions that
the Bolivian delegation submitted to the Secretary General
of the conference makes it possible to determine the more
specific objectives pursued by the Andean nation at
120
Note 15/10, to La Paz, Carlos Salinas Aramayo,
January 15* 1941, "Legacidn de Bolivia en el Paraguay"
(Enero-Dlciembre 1941), ABFM.
121Ministerio de Relaciones Exteriores, Conferencia

regional de los pafses del Plata (Montevideo, January 27-
February 57 1^4'l), Informe de la secretarfa de la delagacidn
de Bolivia (La Paz: Editorial Universo, 1941), p. 5.
365
12P
Montevideo. The most important of those aims may be
listed in the following way:
1. Unlimited freedom of transit guarantees through

the ports and territory of the nations of the
region.
2. Free zones under Bolivian (and Paraguayan)

supervision in the fluvial ports of access to
the Atlantic for customs agencies and storage
facilities.
3. Special privileges for the construction of

pipelines and petroleum processing and
storage facilities.
4. Special tariff and transport rates for intra-

regional trade in foodstuffs and raw materials.
5. A permanent international commission to super

vise the general commercial use of the rivers
of the system.
6 . An Integrated regional road system.

7. Reduced transportation rates for intra-regional
shipments of cargo and packages.
8 . Special credit authorization for promoting

intra-regional trade.
9. More liberal visa procedures for immigrants in

transit.
The Regional Conference of the Countries of the Plata
River System opened on January 27, 1941. The Bolivian
Chancellor noted in his address to the Inaugural session
that, although the conference was designed to promote
closer ties between all of the countries that gravitated
toward the Plata River system, its fundamental objective
122Ibid., pp. 8 -12.

was to expand transit facilities for Bolivia and Paraguay,
thus giving relief to their medlterraneldad in real and
effective forms.12^ Almost immediately, however, the
important Bolivian draft convention on freedom of transit
encountered opposition from Argentina and Paraguay.
Paraguay's opposition came as a surprising disappointment.
According to official Bolivian sources, Paraguay's
Chancellor Luis Argafia had been briefed on the Bolivian
proposals in a preconference meeting in Buenos Aires and
had guaranteed the decided support of his delegation In
their behalf.12^ When Paraguay's opposition became clear,
the Bolivian delegation at first adopted the position, el

t 125
mas ampllo llbre translto <d nada. Nevertheless,
in place of the wide guarantees of freedom of transit the
Andean representatives had sought, they had to settle for a
convention in which the contracting parties granted freedom
of transit in conformity with effective international
obligations and the laws of each country.12^ Bolivia's
hopes were also disappointed on the questions of more
liberal immigration policies, preferential tariffs on
123Boietin Oflclal, No. 6, 0£. clt., p. 60.

12^Conferencia regional de los palses del Plata,
o p . clt., p. £2 .
125ibid.
1 2 6 Ibid., p. 24.
intra-regional trade, and on free zones.
Several definite although modest achievements could
be claimed by the conference, however, when it d o s e d on
February 6 ; Signatures had been placed on nine conventions
and seventeen resolutions. Probably the most significant
gain for Bolivia and Paraguay was the convention In which
Argentina, Brazil, and Uruguay agreed to renounce their
rights of "most favored nation" under certain conditions.
These three parties promised not to claim for themselves
the special facilities and privileges granted by the other
countries to the two landlocked nations.1^ a resolution
was approved recommending that free zones be established In
the region by bilateral agreement. Another convention
provided for the preferential lowering of transport rates
for cargo destined to or proceeding from Bolivia or
Paraguay. Another agreement partially incorporated
Bolivian objectives on pipeline construction and on special
banking and credit provisions.
In evaluating the conference's achievements, one
United States observer began by noting the several
unfavorable circumstances that had hindered the work of

128
the assembly. These Included the political crises in
127ibld., p. 29 for text.

12®Telegram 77 , to Washington, Edwin C. Wilson
(Montevideo), February 7# 1941 (DS)724.34119/1872.
Argentina and Paraguay, the lack of mutual exchange and
dialogue between the participants prior to the opening of
the conference, and the lack of technical experts within
the Bolivian and Paraguayan delegations. He concluded
that, given these adverse factors, the conference had
accomplished all that might be expected of it.
Bolivian officials were naturally disappointed with
the results of the conference and understandably resentful
toward Argentina. However, Ostria Gutierrez pointed to the
several accomplishments as proof of the utility of regional
conferences, which he described as a new form of collective
cooperation in the Americas.129 Bolivian public opinion
with respect to the results of the conference seemed to
be divided along political lines; supporters of the
government hailed it as a great victory, while opponents
claimed it was an abysmal failure .1^0 Many Bolivians,
however, regarded the failure to obtain unlimited freedom
of transit guarantees as a serious shortcoming.1^1
The diplomacy of the regional conference revealed
that the scars of the Chaco War persisted. Bolivia's
insistence on freedom of transit at all times and for all
129Boletin Oflclal, No. 6, op. clt., p. 64.
130Despatch 642, to Washington, Dawson, February 10,

1941 (DS)724.34119/1878.
131ibid.
369
classes of cargo apparently aroused Paraguayan fears of a
war of revenge and brought about the collapse of the
diplomatic coalition that had promoted the conference.

The Argentine-Paraguayan front reappeared, and Bolivia's
wartime resentment toward Argentina was at least
momentarily rekindled in response to the obstacles raised
by the representatives of el^ palaclo San Martin.
To some degree, the conference also revealed the
weaknesses and the strengths of Bolivia's diplomacy in a
unique way. Because the larger republics were fully aware
that they had nothing or very little to gain from the
proposed meeting, they sought to minimize its importance
and refused, once there, to grant anything of real
importance. Nevertheless, Bolivia's (and Paraguay's)
reliance on inter-American resolutions and commitments
proved useful in getting the other countries to attend such
a meeting and in securing arrangements that were to
Bolivia's advantage.
The diplomacy of the regional conference represented
one of Bolivia's most aggressive and successful diplomatic
efforts to break out of her traditionally weak and passive
role in international relations. Eduardo Anze Matienzo
wrote from his post in Lima that "we had habituated public
opinion to our role of followers; now that the country has

370
served as a leader, It has been Judged with more
respect."1^2
VII. BOLIVIA AND THE AXIS POWERS
The death of President Busch and the outbreak of
war in Europe combined to prevent the commercial
arrangements with Germany, signed in August 1939> from
taking effect. Although Dionisio Foianini, an Intimate
adviser to Busch, recommended to provisional President
Quintanilla that Bolivia proceed with certain of those
agreements at least to the point of obtaining the oilfield
equipment promised by Germany, the new cabinet and
especially Foreign Minister Ostria Gutierrez expressed
little further interest in the m a t t e r . O n October 18,
1939* provisional President Quintanilla declared Bolivia's
neutrality in the European war. Nevertheless, as the
Quintanilla and Pefiaranda governments pursued more actively
the policy of economic cooperation with the United States,
relations with the Axis powers deteriorated rapidly.
According to Ostria Gutierrez, the first serious
disturbance in Bolivian-German relations occurred in
^ N o t e 100 -93> to La Paz, Anze Matienzo, February 11,

1941 t "Legacion de Bolivia en el Peru" (Enero-Mayo 1941),
ABFM.
^Înterview with Dionisio Foianini, September 8,

1966, Santa Cruz.
October and November 1940 when the Bolivian Chancellor
declared that Bolivia would return to Argentina three
members of the German armed cruiser Graf Spee who had
escaped internment in that country.1^ The German
Legation vigorously protested that such an act would
constitute a violation of the duties of a neutral state,
adding that Germany did not recognize as obligatory the
provisions of the neutrality declarations of Panama that

Bolivia had cited in earlier correspondence.1^ Bolivia
admitted that the case in question was not explicitly
treated in international conventions on rights and duties
of the neutral state but, basing her position on inter-
American neutrality declarations and recommendations,
proceeded to return the German sailors to Argentina.1^
After the Graf Spee incident, relations between the
Bolivian Chancellory and the German Legation were stormy.
Ostria Gutierrez reported that the German Minister Ernst
Wendler, voicing criticisms of Bolivia's mineral contracts
with the United States and of the arrangements with
Argentina involving the nation's petroleum, told him that
1Âlberto Ostria Gutierrez, Una revolucl6n tras los

AndeB (Santiago: Editorial Nascimiento, 1^44), p. 7rf.
(Hereinafter cited as Una revoluci6n.)
135Note J.Nr763/40, to Alberto Ostria Gutierrez,

November 25> 1940, Boletfn Oflclal, No. o £. clt., p. 40.
•^^Guti^rrez, Una revolucl6n, op. clt., p. 112.

372
it was In Bolivia's Interest to sell those items to the
107
Third Reich. J The nationalization of Lloyd A^reo
Boliviano and the vigorous anti-German campaign waged in
the pro-Allied sector of Bolivia's press, especially La
Razon, also brought loud and frequent protests from the
German Legation.
German criticism of the pro-Allied policy developing
in Bolivia also complemented the most vigorous domestic
opposition against the Peflaranda government. The
nationalistic sector in opposition charged that the
government was selling its natural resources to the Allies
much too cheaply and in total disregard of the welfare of
the Bolivian mine worker and laboring classes. This crime
was called demoentregulsmo in La Calle, a term referring to
the alleged sellout of Bolivia's resources in the name of
democracy.1'*® Inti and La Calle were two papers that were
especially critical of the Peflaranda government, and,
according to United States Minister Jenkins, both were
generally recognized as being German subsidized.1®^ On
June 5, 1941, Ostria Gutierrez visited the United States
minister to express his fear of a German-supported
Gutierrez, Una revolucl6n, op. clt., p. 112.
13Qc^spedes, El presldente colgado, op. clt., p. 36.

139Despatch 865* to Washington, Jenkins, May 31,
1941 (DS)824.00/1048.
37J
revolution that would involve certain radical political
sectors and members of the Army and to report that a
revolutionary Nazi movement was being fostered over all
Bolivia.140
On July 18, 19^1* Douglas Jenkins delivered to
Ostria Gutiirrez a photostatic copy of a letter that
apparently had been sent to German Minister Wendler by the
Bolivian military attach^ in Berlin, Major El£as Belmonte

141
Pab6n. The letter made reference to a plan for ousting
the "weak government" of Pefiaranda through a revolution
scheduled for mid-July that would save Bolivia from "la

142
influencia Yanqui." The Bolivian Foreign Minister
immediately presented the letter to President PefSaranda and
the other ministers of state. On the following day, after
arduous and spirited discussion, the cabinet decided upon
a dual course of actions (1) to declare Wendler persona
non grata and (2) to declare a state of siege throughout
the country. Roberto Querejazu Calvo, a Chancellory
secretary, was instructed to go to the German minister's
residence and request that Wendler be at home to receive
l40Despatch 877* to Washington, Jenkins, June 5,

1941 (DS)824.00/Revolutions/6l.
li+10uti4rrez, Una revoluclon, op. clt., pp. 133-168.
1^2Ibld., pp. 134-138.

374
an important message from the Bolivian Foreign Minister.1^
Shortly afterward, the Under Secretary of the Chancellory,
Guillermo Francovich, delivered the German minister's
credentials, told Wendler that he had been declared persona
non grata, and asked him to leave the country by July 22,
Later, when Wendler asked about the accusations against him
and declared that he was awaiting the instructions of his
government with regard to leaving the country on July 22,
Ostria Gutierrez refused to reveal the charges and added
caustically that the only authority that mattered with
respect to leaving the country was that of the Bolivian
government whose decision had already been communicated, 1 ^
Although in reporting later to the Congress both President
Pefiaranda and Chancellor Ostria Gutierrez emphasized that
the action did not constitute a rupture of relations with
Germany, the ouster of Wendler and the subsequent German
reprisals of the same nature did signal the termination of
important relations with the German government for the
duration of World War II.
The "Wendler Affair" raised a number of questions.
One difficulty was the Belmonte letter, its origin and
authenticity. The letter definitely came by way of the

*
^Înterview with Roberto Querejazu Calvo, March 31,

1966, La Paz.
^■Ôuti^rrez, Una revolucl6n, o p . clt., pp. I5O-15I.

375
Department of State. It was first disclosed to Fernando
Guachalla In Washington in early July 1941* and he, lacking
secure and rapid means of communication, asked the
Department of State to convey it to La Paz through United
States channels of communication.1^ The authenticity of
the letter has neither been proved nor disproved. In Berlin
on July 26 Major Belmonte publicly denied sending this or
any other letter to Wendler. Critics called it a fabrication
by Washington. Some Bolivians doubt the letter's
genuineness because of its style and content.1^ However,
a Department of State memorandum, circulated in January 1944
in connection with the Bolivian revolution of December 1943,
refers to Belmonte's pro-German correspondence with Andean
army officers through the German Legation in La Paz. This
^ ^Note N343* to La Paz, Fernando Guachalla, August

26, 1941, "Legaci6n de Bolivia en E.E.U.U. de America"
(Julio-Septiembre 1941), ABFM.
■^C^spedes, gl presldente colgado, op . clt., p. 71;

personal interview wTFh iRoberto Querejazu Caivo on March 31*
1966. Querejazu Calvo and Augusto C^spedes, representatives
of opposing political factions, both have pointed out that
the letter's style tends to indicate that it was written by
someone who was not wholly familiar with the Spanish lang
uage. One example given was that the division of words at
the ends of lines in the letter was not characteristic of
Spanish writing. The fact that the Belmonte letter
referred to plans to use bicycles in the impending
revolution also has raised doubts among Bolivians familiar
with the steep streets of La Paz which occasionally prove
too much even for automobiles. It is possible, however,
that the bicycle reference related to plans for revolutionary
activity in Cochabamba where cycling is very common.
376
same memorandum also mentioned Belmonte's continuing
association with German officials and his travel privileges
within occupied Europe even after Bolivia severed relations
with Germany in January 19^2 . ^ 7 The existence of a Nazi-
supported revolutionary plot like that referred to in the
letter also was doubted at the time, mainly because the
Fefiaranda government utilized the occasion to close the
opposition press and to Jail or exile several of its
strongest critics. The nationalists explained the whole
affair as an invention used by the government to silence
the opposition.1^
These interesting questions require further
investigation. The most important aspects of the episode
are obvious, however. The Pefiaranda government, by
expelling the German minister, was identifying itself more
closely with the Anglo-American powers even though the
action did not constitute a break in relations with Berlin.
At the same time, some of the opposition to the government,
by taking a strongly anti-imperial1st and ultranationalist
position against the policy of cooperation with the United
States, became identified closely with pro-Axis sentiment
and elements in Bolivia, and inadvertently or otherwise
1^'7outilrrez, Una revoluclon, op. clt., pp. 229-230.
l^cgspedes, El presldente colgado, op. cit..

pp. 66, 72. *-- ----
377
was serving Germany’s cause.
The possibility of promoting important commercial
arrangements with Japan continued into the early war years.
Eduardo Anze Matienzo, Bolivia's minister in Peru, reported
in September 1940 that the Japanese minister in that country
had said that his country was disposed to open a large
credit in favor of Bolivia for the purchase of arms and
munitions in return for the sale of low grade tin ores to
J a p a n . A Japanese commercial mission visited Bolivia in
January 1941 to review the possibilities of expanding trade
between the countries. The mission concluded that a
mutually beneficial commercial arrangement could be
formulated on the basis of the sale of Japanese manufactured
products to Bolivia and the Japanese purchase of Bolivia's
minerals. It has been noted that during the first half of
1941, Japan made a bid to obtain Bolivia's tungsten
production. By mid-May 1941 the Bolivian government had
decided, however, that the national interest would best be
served by selling Bolivia's minerals to the United States
and to Great Britain. Government officials and mine owners
were aware that in the event of a Japanese-United States
war, any contracts with Japan would be Jeopardized. Also,
^^Note 217-166, to La Paz, Anze Matlenzo, September

9, 1940, "Legaci6n de Bolivia en el Pervt” (Junio-Septiembre
1940), 3, ABFM.
37<3
within the international context of 1941, Bolivian efforts
to trade on a greater scale with Japan could easily have
adversely affected the nation's relations with the United
States at a crucial time.
VIII. ANALYSIS AND EVALUATION
The period during which Alberto Ostria Gutierrez
presided over the Chancellory was one of transition and
decision for Bolivian foreign policy. The major development
of the period was the decision to pursue significantly
closer relations with the United States. Three other
developments of importance were: (l) the railroad and
petroleum agreements with Argentina, (2) the policy of
rapprochement with Paraguay, and (3) the Plata River
regional economic conference.
Energetic efforts to promote a program of economic
cooperation with the United States were initiated almost
immediately after Ostria Gutierrez entered the Quintanilla
cabinet. Those efforts during the early war years, together
with the deterioration of relations with Germany and with
the refusal to do business with Japanese mineral buyers,
clearly Indicated that the Bolivian government had decided
to take sides with the United States and Great Britain in
the growing world struggle. The decision had not been made
without opposition; the nationalist opposition joined the

379
influential German community In Bolivia in denouncing the
alleged submission to Anglo-American Imperialism.
Nevertheless, government officials and their political
supporters, especially from within the mining sector, were
convinced that the national interest would best be served
by collaborating with Washington. Of course, substantial
North American and English investments in Bolivia's mining
Industry played some part in this decision.
Bolivian policy toward the United States did not
preclude, of course, the continuation of the policy of
economic contacts with neighboring countries. One of the
chief developments in this realm was the pair of railroad
and petroleum agreements with Buenos Aires through which
Ostria Gutierrez sought to bring Argentina's commitments in
Bolivia's Oriente into line with those that earlier had been
obtained from Brazil. The policy of rapprochement with
Paraguay also was developed actively in Panama, La Paz,
and Asuncion and produced the Plata River regional
conference of 1941.
Thus, the active diplomacy of Ostria Gutierrez
produced a moderate measure of success and achievement.
Most of those accomplishments, however, took place only
within the "initial stage" level of international relations
and would require elaboration and implementation to become
significant. For example, the Plata River regional
conference produced a number of conventions and resolutions

that required additional attention by the participants.
Agreements with Chile, Paraguay, and Uruguay had authorized
the creation of mixed commissions whose recommendations
would have to be considered. The program of economic
cooperation with the United States was still at the proposal
stage. How much of the policy of Ostria Gutierrez was
identified only with the man? To what degree had this
policy become national policy? The answers lay in the
foreign policies developed by the men who succeeded Ostria
Gutierrez as foreign minister.

CHAPTER VI
THE PEftARANDA ERA: PART II
The Diplomacy of the Middle War Years 1941-1943
Pour men served as foreign minister during the
presidency of General Enrique Pefiaranda: Alberto Ostria
Gutierrez (1939-1941); Eduardo Anze Matienzo (1941-1942);
Tomis Manuel El£o (1942-1943); and Carlos Salinas Aramayo
(1943). The diplomacy of Alberto Ostria Gutierrez was the
subject of the preceding chapter. In this chapter,
consideration will be given to Bolivian foreign relations
during the latter part of the Pefiaranda era, the period
that extended from the resignation of Ostria Gutierrez in
September 1941 until the revolution of December 1943, which
deposed the constitutional government.
As noted above, three men served as Bolivia’s foreign
minister in the years 1941-1943. The following discussion,
therefore, will be divided into sections which treat the
most significant developments in Andean foreign relations
under the leadership of each of these men. Thus, we will be
looking at the diplomatic work of Anze Matienzo, Tom&s
Manuel Elio, and Carlos Salinas Aramayo. A section devoted
to an analysis of Bolivian diplomacy during the entire
Pefiaranda era will conclude the chapter.

382
I. THE DIPLOMACY OP EDUARDO ANZE MATIENZO

(1941-1942)
By September 1941 Ostria Gutierrez had wanted for
several months to resign his post as chancellor. After
having labored in La Paz for two years under constant and
harsh criticism, he was ready for relief. President
Pefiaranda, however, had difficulty in finding a replacement;
four men who were invited to serve as foreign minister
refused.1 One of these, Fernando Ouachalla, said that he
felt that his services in Washington at this particular
juncture were more valuable to Bolivia than would be his

O
leadership in the Chancellory. Congressional criticism
of the Pefiaranda government's foreign policy did not make
the post of foreign minister very appealing. Finally,
Bolivia's minister in Lima, Eduardo Anze Matienzo (1902- ),
agreed to accept the challenge. He was installed with a
newly constituted cabinet on October 1, 1941.
^■La Razon, October 2, 1941, p. 5; Circular CS110,

October T 7 19^1, "Circulares" (Febrero de 1940 a Mayo de
1942), ABFM. The four men named by La Raz6n were Luis
Fernando Ouachalla, Enrique Finot, Adolfo Costa du Reis,
and David Alv^stegui. Both houses of the Bolivian Congress
recommended to the executive power that there be incorpo
rated into the diplomatic discipline a stipulation that
members of the diplomatic service must comply with such
requests or forfeit their assignment overseas.
o
‘Memo of conversation, Department of State, Laurence
Duggan, June 12, 1941 (DS)824.00/1068.
War cornea to the hemisphere. The Japanese attack
on Pearl Harbor presented the new foreign minister with his
first major foreign policy problem. How should Bolivia
respond to this new situation In which an American republic
had been the victim of a direct military aggression by an
extracontinental state? In a supreme decree dated December
10, 1941, Bolivia declared her solidarity with the United
States and with the other American republics at war with
Japan and pledged her cooperation to them in accordance
with Resolution XV of the Pinal Act of the Havana foreign
ministers meeting. The decree added that Bolivia would not
regard American states at war in defense of their rights as
belligerents.3 The decree also placed under strict
surveillance all Axis subjects resident in Bolivia, blocked
Japanese funds, established control over all means of
communication and propaganda, and announced that all
strategic economic, transportation, and communication centers
would be placed under armed vigilance.
The most important immediate issue, however, was
whether or not Bolivia should break relations with the Axis
countries. One group of cabinet ministers and diplomats
advised an immediate breach on the grounds that Bolivia had
vital economic links with the United States and that such a
.^Bolivia, Ministerio de Relaciones Exteriores, Boletfn

Oflclal, No. 8, Septiembre-Dieiembre de 1941, p. 207.
384
decision, prior to that of any other South American country,
would place Washington in a position where it would be
difficult to refuse Bolivia's maximum request for financial
assistance. This group included Luis Fernando Ouachalla
and a number of former foreign ministers with whom Anze
Matienzo conferred on December 11.
Anze Matienzo, however, counseled a more cautious
policy. He was watching the course being followed by the
other South American countries, especially that of Bolivia's
neighbors.5 Several cabinet ministers, including the
Foreign Minister, also expressed concern about the possible
dangers of sabotage or attack that might result from
precipitate action. Some felt that Bolivia should wait
to see what the United States might guarantee in the form
of lend-rlease material or financial assistance in exchange
for breaking relations. While the debate continued,
Colombia broke relations with the Axis countries, thus
depriving the Andean nation of the opportunity to be the
pacesetter in this regard. Therefore, the Bolivian cabinet
^Despatch 1481, to Washington, Allan Dawson, December

22, 1941 (DS)824.24/384; Circular QS142, from La Paz,
December 13* 1941, "Circulares" (Febrero de 1940 a Mayo de
1942), ABFM. Among the former foreign ministers consulted
by Anze Matienzo on this matter were Tom&s Manuel Elio,
Eduardo Dlez de Medina, Carlos Calvo, Jos£ Marla Gutierrez,
Manuel Carrasco, Enrique Baldlvleso, Fabi&n Vaca Chdvez,
and Carlos Salinas Aramayo.
^Despatch 1481, ibid.

385
decided to adopt a wait-and-see position until the forth
coming chancellors' meeting in Rio de Janeiro.^
The Third Meeting of Consultation, Rio de Janeiro
(January 1942). The Bolivian delegation to Rio de Janeiro,
headed by Foreign Minister Anze Matienzo, carried a series
of draft declarations that had been considered and approved
by the cabinet, parliamentary groups, and an ad_ hoc
committee of former foreign ministers. Three of the most
Important of those draft proposals were as follows: (1) a
declaration on economic collaboration between the large
states and the small, (2) a declaration on economic unity
for continental defense, and (3) a resolution on the
protection of American commerce and industry.7 The
declaration on economic collaboration supported the
principle that stronger American nations should assist the
weaker states in the development of their soil and sub-soil
riches. The declaration on economic unity outlined the
requisites for continental economic mobilization, including
the movement of labor, the establishment of price and
tariff limits for basic merchandise and freight rates, and
6Ibld.
7Note (no number), to La Paz, Anze Matienzo, January

16, 1942, "Embajada de Bolivia en el Brasil" (Enero-Marzo
1942), ABFM; Bolivia, Ministerio de Relaclones Exterlores,
Boletin Oflclal, No. 9, Enero-Abril 1942, pp. 16-23.
386
a price-cost ratio which would take into consideration
satisfactory labor conditions. The resolution on protection

of American commerce recommended a practical system of
credits that would enable national firms to initiate or
expand their operations in order to minimize the wartime
shortages of goods.
Bolivia's basic objectives at the meeting, however,
were not contained In this series of draft declarations
and proposals. Anze Matienzo felt that the time had come
for seeking definite United States financial commitments
to a program of national development. United States Chargl
Allan Dawson reported on the position and purpose of the
Bolivian Foreign Minister at Rio in this way. Anze
Matienzo supported a general breach of relations with the
Axle countries. He also wanted to persuade United States
Under Secretary Sumner Welles to sign agreements of economic
cooperation with Bolivia and was going to attempt to settle

Q
the long-standing Standard Oil question.
Anze Matienzo was undertaking a bold project at Rio
de Janeiro. He was willing to offer Welles Bolivian
support for the recommendation of a general breach of
relations with the Axis, a declaration of Bolivia's rupture
of relations, and a Standard Oil settlement in return for
^Despatch 1661, to Washington, Dawson, February 2,

19^2, PR, V (19^2), 520.
387
agreements definitely committing Washington to loans for
Bolivia. Apparently, President Pefiaranda had reluctantly
agreed to allow the Foreign Minister to raise the Standard
Oil question at Rio, and Anze Matienzo was willing to
gamble that he could gain public acceptance of a
transaction with the Standard Oil Company if he possessed
definite loan agreements from the United States.^
On January 25, 1942, Anze Matienzo received
Instructions from La Paz authorizing him to announce his
government's Intention to break relations with the Axis
countries.10 The Instructions also directed him to gain
from Welles several additional commitments before the
rupture would be officially decreed. These Included a
United States guarantee to protect the Andean republic
against aggression, an Increase In the maximum
capitalization of the proposed Bolivian development
corporation from $25 million to $40 million, and Improved
prices for Bolivian minerals. However, Welles' report of
the Rio discussions, later confirmed by United States Charg4
d'Affaires Dawson In conversations with President Itfiaranda
and Interim Chancellor Rodas Egulno, Indicated that Anze
9Ibld., p. 521.
10Telegram 40, to Washington, Dawson, January 26,

1942, PR, V (1942), 515.
388
Matienzo never raised these points with him.13* On January
27 > the day on which the Foreign Minister also announced
the rupture of relations between Bolivia and the Axis
states, a series of agreements was signed between Welles
and Anze Matienzo. From La Paz, Chargl Allan Dawson
reported that the Rio announcement on Bolivia's break
with the Axis actually preceded by a day the Bolivian
government's decision to proceed to a rupture. He said
that his persuasiveness and Anze's statement were the
determining factors in bringing about the decree of rupture
on January 28, 1942 .12
The Rio agreements of January 27, 1942, between
Bolivia and the United States and between Bolivia and the
Standard Oil Company of New Jersey represented a significant
development in Bolivia's relations with Washington. In a
memorandum agreement, the United States promised to provide
Bolivia, through the Export-Import Bank of Washington, with
a credit for the development of agricultural, mining, and
other Industries, and for the construction of means of
transportation. The size of the loan, a maximum of $10
million, was specified in an additional memorandum. Bolivia
agreed to establish a development corporation that would
^Despatch 1661, loc. clt.
12Ibld.
389
prepare plans for the use of the credit and then would
assume responsibility for administering the programs
financed by the credits. The agreement also provided that
after the development corporation was created, immediate
attention would be given to the problems of the mining
industry and of communication between Santa Cruz and
Cochabamba.*3 On the same day Welles delivered a note to
the Bolivian Poreign Minister which stated that the
Export-Import Bank had agreed to extend a credit up to
$5*5 million for the development of petroleum resources in
Bolivia.14
On January 27 Anze Matienzo also signed an agreement
with H.A. Metzger, representative of the Standard Oil
Company of New Jersey, in which Bolivia promised to pay
the company within ninety days $1.5 million plus interest
dating from March 13, 1937, In exchange for all Standard
Oil properties in Bolivia, maps, surveys, and studies.^
Thus, the agreements on economic cooperation with the
United States and the settlement with the Standard Oil
Company that Ostria Outilrrez had sought for two years were
gained by his successor.
^-^Text of agreement, PR, V (19*12), 593.
liJText of note, PR, V (1942), 594.
^^Text of agreement, Boletin Oflclal, No. 9. oo. cit..

p. 129. ---
390
Several factors explain how such Important
agreements could be reached at Rio. The onset of the war
was an Important Influence In determining the United States'
willingness to enter into the arrangements. Then, too,
the earlier groundwork which had been prepared by Ostria
Gutierrez and Fernando Ouachalla was ready to yield
results. Credit must be given, also, to the new foreign
minister, Anze Matienzo, who was willing to take the
initiative and to push through decisions that the government
had been reluctant to make until this time.
Closer ties with Washington. Bolivia's relations
with the United States had continued to evolve even prior
to the Rio meeting. The two countries signed a lend-lease
agreement on December 6, 1941, that provided for a transfer
of $11 million in armaments and munitions from the United
States to Bolivia with $3 million coming in the first
twelve months . ^ Bolivian Minister Fernando Ouachalla had
earlier made^ clear to the State Department that Bolivia
would not sign a lend-lease agreement unless a sum equal
to or greater than that conceded to Paraguay was granted to
his country. Bolivia understood that supplies worth
between $10 million and $11 million were being allotted
^FR, VI (1941), 428.

391
to Asunciin.1? Following the Pearl Harbor attack, the
Bolivian government requested the Immediate delivery of
lend-lease supplies In the form of training planes, trucks,

18
and antiaircraft guns.
The United States economic mission, which had been
so eagerly awaited by the Bolivian government since August
1941 » arrived In La Paz on December 17, 1941.^ One of the
first recommendations made by Merwln L. Bohan, chief of the
mission, was that a technical and managerial corporation be
established In Bolivia to administer the credits granted by
the United States. This concept was later incorporated
Into the basic Rio agreement of January 27, 1942, as has
been noted.
Many Bolivians believed that the entrance of the
United States Into the war created the opportunity to seek
higher prloes for the nation's tin and tungsten exports.
Allan Dawson Informed the State Department In early 1942 that
most of the newspapers In La Paz were calling for Improved
mineral prices and that most of the cabinet ministers
shared the same view, although Justifying an Increase on
^ N o t e 506, to La Paz, Fernando Ouachalla, November

12, 1941, "Legaclon de Bolivia en E.E.U.U. de America"
(Octubre-Dieiembre, 1941), ABFM.
l8ra, V (1942), 433.

i^Boletin Oflclal, No. 8, o£. clt., pp. 67-68.
392
the grounds of rising production c o s t s . C e r t a i n l y the
chief pillar of the new close Bolivian relationship with
the United States was the sale of the nation's strategic
resources to the Industrial giant of the north. Now that
major Aslan sources of tin were closed, Bolivia felt that
the market would bear higher prices for her metals.
United States Interest in procuring a variety of
strategic materials from Bolivia Increased In 1942. North
American officials expressed their desire to buy rubber
and cinchona bark. Contracts were signed that provided
for the sale of Bolivia's total antimony production and a
portion of her copper output to the Metals Reserve Company.
Following the Rio meeting and after consultation In
La Paz, Bolivia's minister in Washington Luis Fernando
Quachalla, returned to his post with the o lective of
obtaining favorable price revisions In the standing tin

21
and tungsten contracts. Tin definitely had the priority
In these discussions, since the tungsten price was still
generally regarded as satisfactory. On June 29* 1942, a
revised tin contract was signed in Washington that provided
for a substantial price increase, from 48 1/2^ per pound
^Despatch 1331* to Washington, Dawson, January 6,

1942, PR, V (1942), 536-537.
21Note 145, to La Paz, Fernando Quachalla, April 14,

1942, "Bmbajada de Bolivia en B.B.U.U. de Norte America"
(Enero-Abril 1942), ABPM.
393
(c.i.f., Texas City) to 601 per pound (f.o.b., Pacific
ports). The contract's provisions were retroactive to
January 1, 1942, and were effective until June 30, 1943*
Fernando Quachalla reported to La Paz that the prices
obtained in the amended contract represented a significant
reimbursement for the producers and additional revenues
for the state, adding that once again it had been the
friendly intervention of State Department officials,
especially that of Sumner Welles, that had been decisive
in the bargaining.22
Bolivian representatives then initiated efforts on
July 14, 1942, to gain a favorable revision of the tungsten
contract. Andean spokesmen had three objectives in these
negotiations: (1) an Improved price, (2) a longer contract,
and, (3) a different point of d e l i v e r y . O n August 18,
1942, Fernando Quachalla Informed La Paz that a modified
tungsten agreement had Just been signed which satisfied
two of the three Bolivian objectives. The revised contract
provided Bolivian producers with a price of $22.60 per
twenty-pound unit in place of $21.00 and improved transport
22Note 230, to La Paz, Fernando Quachalla, July 3,

1942, "Bmbajada de Bolivia en Bstados Unldos de Norte
Aatfrlca" (Nayo-Julio 1942), AfiFM.
23Not* 311, to La Paz, Fernando Quachalla, August 18,

1942, "Bmbajada de Bolivia en Bstados Unldos de America"
(Agosto-Septlembve 1942), ABFM.
394
arrangementa, f.p.b. Pacific ports, in place of c.i.f. Texas
Bolivia's commercial relations with the United
States had definitely entered a new era of prosperity. A
report conveyed to La Paz by the Bolivian Embassy in
Washington indicated that this Improvement had already
begun during the first half of 1941, for Bolivian exports
to the United States had reached a value of $9,455,000
compared with United States exports to Bolivia valued at
$4,734,000 for the same period.2^ The following chart
reveals not only the degree to which the value of Bolivian
exports to the United States Increased between 1936 and
1941, but also, that in 1941 the Andean nation, for the
first time in the post-Chaco War period, gained a favorable
trade balance in her commercial dealings with that country,26
Value of Bolivian-united States Trade 1936-1941
Bolivian Exports to U.S.A. U.S.A. Exports to Bolivia
1936
1937
1938
1939
1940
1941 (6 mos.) (6 moo.)
g4ibld.
25]lote 192, to La Paz, Fernando Quachalla, Hay 22,
1942. "Embajada de Bolivia en Estados Unldos de Norte
America” (Mayo-Julio 1942), ABFM.
Îbid.
395
The United States, however, encountered some
difficulties In her program of securing strategic materials
from Bolivia. Bolivian suppliers of cinchona bark, which
was used In the production of quinine, were not Interested
in signing contracts with the Defense Supplies Corporation
of the United States as long as more profitable markets
existed in Argentina and Chile. North American officials
also found stiff price competition from Argentina In
negotiating for the purchase of Bolivia's rubber supply.
Bolivia's ohargl d'affaires In Washington, Carlos
Dorado Chopltea, reported to La Paz In January 1942 that
the United States was interested In Increasing rubber
production within the hemisphere and, to that end, was
seeking to promote cooperative programs with rubber-
producing Latin American countries.2? Although the Rubber
Reserve Company of the United States was prepared to purchase
the Andean republic's entire rubber production, excepting a
reasonable quota for domestic demand, Bolivian producers
were not eager to sign such a contract with the United
States agency. Charg4 Allan Dawson reported In April 1942
that Argentine buyers were actively bidding for Bolivia's
rubber trade by offering higher prices than those proposed
^Note 22, to La Paz, Dorado Chopltea, January 12,

1942, "Bmbajada de Bolivia en B.E.U.U. de Norte America"
(Enero-Abril 1942), ABFM.
396
by North American representatives.2®
The Argentine-United States competition for Bolivian
rubber had a number of angles. In the first place, the
United States offer involved, not only the purchase of
Bolivia's rubber supply, but also a promise to help in
expanding the rubber production of the Andean republic.
Specifically, the Rubber Reserve Company was Milling to
provide $2,125,000 for a program designed to Increase
rubber output in Bolivia, including the improvement of land

and water communications.29 The agency would provide
experts to direct the project and to manage the fund. The ,
United States government also promised to assist producers
in acquiring the equipment required for Increased rubber

production and offered its halp in obtaining for Bolivia
the manufactured products, foodstuffs, and raw materials

necessary for the maintenance of her national economy.
United States support for improving sanitary and health
conditions in the valleys of the Amazonian tributaries
of Bolivia was promised. Secretary of State Hull also
advised Dawson that if the Andean government would work
out a satisfactory arrangement with the Rubber Reserve
Company, Bolivia's requests for tin and tungsten contract
2®Telegram 257 > to Washington, Dawson, April 18,

19^2, PR, V (1942), 563.
2^Text of proposition to the Eolivian government,

Bolivia, Minlsterlo de Relaclones Exteriors8, Boletln
Oficial, Nos. 10, 11, Mayo-Dlclembre 1942, p. 7b.
397
revisions would receive favorable consideration.''
On the other side, Argentina was seeking ran rubber
supplies for her domestic rubber Industry. In June 1942
the Argentine government instructed its embassy In La Paz
to seek a five-year agreement with the Pefiaranda government
providing for Argentine acquisition of the total Bolivian
rubber production at higher prices than those offered by
the Rubber Reserve. Company.31 As part of the proposed
rubber agreement, the Argentine government promised to make
every effort to facilitate the shipments of wheat, sugar,
rice, meat, and other articles without delays, a provision
interpreted in Bolivia as a veiled threat according to
Dawson.
Bolivia's economic dependence upon Argentina placed
her in an extremely delicate situation with respect to
rubber exports. Costa du Reis, advising La Paz to harmonize
the divergent interests of Washington and Buenos Aires,
suggested that in any contract with the Rubber Reserve
Company, a small quota be exempted for export to Argentina
for two reasons: (1) Bolivia was morally obligated to offer
t e l e g r a m 238, to La Paz, Hull, April 27, 1942, PR,

v (1942), 565. —
^ N o t e 231, to La Paz, Adolfo Costa du Reis, June
23, 1942, "Bmbajada de Bolivia en la Argentina" (Junio-
Agosto 1942), ABFMj Telegram 449, to Washington, Pierre de
L. Boal, June 18, 1942, PR, V (1942), 570.
398
compensation for Argentina's economic cooperation through
the years since that country had no other source of rubber,
and (2) the sale of rubber would help Bolivia In obtaining
scarce foodstuffs from that larger neighbor.^2 The
Bolivian ambassador emphasised that. In fact, the nation's
only hope of acquiring the necessary goods from Argentina
lay In providing that country with at least a small
quantity of rubber.
One of the chief Bolivian objectives In the
discussions about rubber was to obtain guarantees of a
long-term market for her production which would continue
Into the postwar period. Costa du Reis wanted to sign
agreements with Argentina that would make Bolivia the
permanent supplier of that country's market. He suggested
that any contract with the United States allow for a
rubber producing area reserved for Argentine capital
investment.33 He argued that rubber exclusively In the
hands of the United States was a weapon that might be used
to force Argentina to break relations with the Axis, and
that, if Bolivia were too closely Identified with the North
American rubber policy, her relations with Argentina could
32Note 244, to La Paz, Costa du Reis, June 23, 1942,

"Bmbajada de Bolivia en la Argentina" (Junlo-Agosto 1942),
ABM.
^^Note 286, to La Paz, Costa du Reis, July 14, 1942,
"Bmbajada de Bolivia en la Argentina" (Junlo-Agosto 1942),
ABM«
399
be greatly p r e j u d i c e d . 3^ At the same tine, however, Costa
du Reis was frank to admit that Argentina's Interest In
Bolivian rubber appeared to be transitory, contrary to
Andean objectives.
The rubber Issue was resolved In favor of the United
States proposal. Anze Matienzo and John Worcester**
representing the Rubber Reserve Company of the United
States, signed the contract for the sale of rubber on July
15* 19^ 2.35 The agreement provided for the establishment
In Bolivia of an agency, representing the Rubber Reserve
Company, whose functions were to assist In the exploitation
of Bolivia's rubber and to acquire and sell all the nation's
production. Neighboring countries were allowed a quota of
150 tons annually, an amount that might be Increased to a

maximum of 250 tons given certain provisions of the
arrangement. Allowances were made also for meeting the
country's domestic needs.
However, in September 19*12, Foreign Minister Anze
Matienzo received such Intense congressional criticism for
signing this rubber contract that he submitted his
resignation to President Peftaranda, who refused to accept It.
The Chamber of Deputies even requested of President
34Ibld.
35por text of the agreement see Boletln Oflolal, Nos.

10, 11, o£. olt., p. 81 .
400
Peftaranda that he not Implement the rubber contract until
the Chamber had approved it, a request which was overruled
by the Chief E x e c u t i v e . 3^ Anze explained to his colleagues
In the diplomatic service that his decision to sign the
agreement stemmed from the fact that the United States
possessed a much greater capacity for assisting Bolivia In
Improving her system of communications, a vital requisite
for the nation's Industrial development.37
Early In July 1942 the Bolivian ministers of
economy and finance, Alberto Crespo Qutltfrrez and Joaquin
Espada, respectively, traveled to Washington for a visit
that lasted until August 18. The basic objective of the
ministerial mission was to obtain an expansion of the
credits that had been promised by the United States at Rio
de Janeiro to cover two additional projects, highway
construction from Camlrl to Sucre and Irrigation works in
the Villa Montes area.3® Although the results of the visit
with respect to these projects were inconclusive, the mlsslcn
had significant achievements in other ways. Ambassador
3&Porfirlo Diaz Machlcao. Historic de Bolivia.

Peftaranda. 1940-1943 (La Paz: Editorial "JuvenTudT" 1938),
vol. 5# P. 69.
37ciroular DPP69, August 28, 1942, "Oflcios de

R.R.E.E. de Bolivia" (Julio a Dlciembre de 1942), Tomo II,
ABFM.
3%rote 310, to La Paz, Fernando Quachalla, August 17,
1942, "Embajada de Bolivia en Estados Unldos de America"
(Agosto-Septiembre 1942), ABFM.
401
Fernando Quachalla reported to La Paz that the improved
tungsten contract of August 18, 1942, was due to the
presenoe in Washington of the ministers.^

In a note to Crespo Qutltfrrez and Joaquin Espada,
Secretary of State Cordell Hull described the state of the
blnatlonal program of economic cooperation as of August 14,
1942.^ The United States economic mission to Bolivia
had outlined a long-term program, estimated to cost $88
million. The first stage of that program would cost an
estimated $26,125,000 divided in the following manner:
$ 12,000,000 for roads, $6 ,625,000 for agricultural develop
ment, $5 >500,000 for petroleum, $1 ,000,000 for mining, and
$1,000,000 for health and sanitation. According to the
Hull note, the United States government was prepared to
extend promptly, through the Export-Import Bank, the
credits promised at Rio de Janeiro, as well as the funds
obligated in connection with the rubber contract of July 15,
1942, for a total of $18,625*000. The Bolivian government
over a three-year period would provide $9,000,000 to the
development corporation and $ 1 ,500,000 to a special fund
for highway development.
Secretary Hull confirmed that two additional measures
39Ibld.
40|fote to Espada and Crespo OutKrrez, Hull, August

14, 1942, PR, V (1942), 603 .
402
of cooperation had been arranged during the Crespo Outilrrez-
Espada visit; the United States Treasury Department had
offered to enter Into a monetary stabilization program with
Bolivia involving $2,000,000, and the Export-Import Bank
had agreed to establish a short term credit of up to
$2,000,000 for Bolivia's Central Bank.

4l The note also
Indicated that the United States government would be glad
to enter Into discussions with respect to the financing of
the two specific projects promoted by the Bolivian ministers
and would give sympathetic consideration to extending
additional credits of $15*000,000 for financing the second
stage of the long-range program.
The achievements of the ministerial mission Indicated
that the climate in Washington was highly favorable for the
development of closer and more beneficial Bolivian
relations with the United States. Anze Matienzo's policy
of frank collaboration with Washington, a policy that took
shape in the agreements of Rio de Janeiro, was bearing
fruit. The settlement of the Standard Oil matter, Bolivian
support of the United States at the Rio de Janeiro meeting
of foreign ministers, and the work of the respeoted
Bolivian ambassador In Washington enabled the Andean
Chancellor to move successfully along the course that had
been charted by Ostria Qutllrrez. Points of tension
persisted In that relationship, of course. Washington was

403
dissatisfied with the vacillating steps taken by the
Bolivian government in restricting the financial trans
actions of Axis subjects in the Andean country. A still
more menacing threat to cordial Bolivian-United States
relations, however, was the growing schism between
Washington and Buenos Aires.
Relations with Argentina. Aside from the accomplish
ments of Anze Matienzo1s active diplomacy of cooperation
with the United States, the most significant achievements
of Bolivian foreign policy under the young Chancellor took
place in the nation's relations with Argentina. When Anze
Matienzo assumed his post on October 1, 1942, opposition to
the February 10, 1941 treaty with Argentina threatened
serious harm to those relations and Jeopardized the
execution of important railroad and petroleum projects that
depended upon that country's financial cooperation. The
new Foreign Minister responded to the challenge by deciding
to promote several minor but significant changes in the
Argentine policy earlier defined by Oatrla Gutltfrrez.
In an Important note to the Bolivian ambassador in
Buenos Aires, Adolfo Costa du Reis (1891- ), the
Chancellor outlined his views with respect to relations with
Argentina. The most important change from the Ostrla
Outllrrez policy was that now the development of the
national petroleum Industry assumed primary importance for

404
the Bolivian government; railroad construction mas still
very important, of course, but Anze admitted that the
wartime conditions made that construction almost
impossible.2*2 Argentina's vital role in the Bolivian effort
to promote the oil industry was readily acknowledged by
Anze. Buenos Aires could lend the necessary financial and
technical cooperation and constituted the natural market
for Bolivia's petroleum production. In addition, all
Andean petroleum exports would have to pass through Argentine
territory, since that nation, in the words of Costa du Bels,
held a "geographical mortgage" on the Bolivian petroleum of
the southeast.^3 Therefore, Bolivia had to seek
Argentina's collaboration in developing the petroleum
Industry and in providing satisfactory means of getting
the product of that industry to market. Argentine and
Uruguayan markets for the national petroleum also had to
be assured.
The implications of this basic policy orientation
required negotiating revisions of the February 10, 1941
**2Note 717, to Buenos Aires, Anze Matienzo, November

10, 1941, "Bmbajada de Bolivia en la Argentina" (Octubre-
Diclembre 1941), ABFM.
^3Note 501, to La Paz, Costa du Reis, October 31,

1941, "Bmbajada de Bolivia en la Argentina" (Octubre-
Dlclembre 1942), ABFM.
405
hh
treaty. The funds promised by Argentina in Article VI of
that treaty (two million pesos) would have to be Increased
to ten or fifteen million pesos. The production of the
Bermejo oilfields was to be excluded from the guarantees
offered Argentina for financing the Yaculba-Santa Cruz
railroad in order to mollify Tarlja's opposition to the
agreement. This would leave the product of the sale of
hydrocarbons from the zones traversed or reached by the
railroad as the sole guarantee. Anze also wanted to obtain
a definite contract for the sale of Bolivian oil from the
Bermejo zone to Argentina's state petroleum agency.
Apparently in mild dissent, Costa du Reis pointed
out to the Chancellor that the new look in Bolivia's
Argentine policy was a distinct departure from the course
followed by Ostria Gutierrez, who had sought to promote the
construction of railroad connections guaranteed by the
gradual growth of the petroleum i n d u s t r y . The new policy,
he added, was directed primarily toward the growth of the
nascent petroleum Industry as the basis for future railroad
construction. The Bolivian ambassador also questioned the
advisability of devoting the revenue from the sale of
^ N o t e 717, loc.oit.
^Note 566, to La Paz, Costa du Reis, December 5,

1941, "Bmbajada de Bolivia en la Argentina" (Oetubre-
Dlciembre 1941), ABFM.
406
Bermejo oil exclusively to Improvements within the Tarija
region.
Following the close of the Third Meeting of
Consultation In Rio de Janeiro, Anze Matienzo traveled to
Buenos Aires to continue the negotiations of these matters.
On February 6, 1942, Anze Matienzo and Guillermo Rothe, the
Interim Argentine foreign minister, reached agreements that
were embodied In two sets of notes and a convention. In one
note, the Argentine government promised to deliver to
Bolivia 12,200,000 pesos for construction of the first

2i6
section of the Yaculba-Santa Cruz railroad. The two
governments agreed In the second set of notes that Y.P.F.B.
would sell to Y.P.F. of Argentina the total production of
the Bermejo petroleum deposits for ten years and that the
two public petroleum agencies would finance and construct
a pipeline for transporting the oil to the Argentine
m a r k e t . T h e convention signed by the foreign ministers
committed the two countries to undertake a Joint study of
road plans designed to link the Bolivian cities of Potosl
and Tarija with the Argentine road system and obligated
46
For the text of agreement see Boletln Oficlal,
No. 9 j o£. olt., p. 187.
47lbld., p. 181.
407
Argentina to finance the construction of the r o a d s T h i s
last agreement must be understood as the Bolivian Foreign
Minister's attempt to satisfy the desires of the tarlJefios.
But none of the arrangements excluded the Bermejo zone
production from the earlier guarantee commitments.
These petroleum and railroad agreements required the
attention of both countries throughout 1942. The official
Y.P.F.B.-Y.P.F. oontract, providing for the sale of oil
to Argentina for ten years, was signed in Buenos Aires on
April 24, 1942. On October 28, 1942, the Bolivian Congress
approved the 1941 and 1942 agreements with Argentina
pertaining to railroad construction, the sale of petroleum,
and highway construction, but not without asking the
executive power to obtain clarifications with respect to
certain Items of the agreements through an exchange of notes
with Argentina.^9 In the most Important of these, the
Bolivian Congress attempted to get a more definite
Argentine commitment to finance the entire Yaculba-Santa
Cruz and Sucre railroad, as well as the highway through
Tarija.
In September 1942 Argentine President Raa6n S.
Castillo and Bolivian President Enrique Peftaranda, each
4Qlbld., p. 194.
^^Bollvla, Mlnlsterlo de Relaciones Exteriorss,

Memoria (1942), pp. 20-25.
accompanied by hie foreign minister, met on the Argentine-
Bolivian frontier at Pocltos and drove the first spikes of
the proposed Yacuiba-Santa Cruz railroad. The party then
traveled to Sanandlta, Bolivia, and to Tobatlrenda,
Argentina, for speeches and discussion. Topics treated at
the Interview Included the possibility of establishing a
branch of the Banco de la Nacl6n Argentina in La Paz, the
use of the Argentine merchant fleet in transporting
Bolivian goods from Pacific ports, the coordination of
railroad service between countries, facilities for the
transport of Bolivian products by means of the Formosa
railroad, and the exploitation of the waters of the
Pllcomayo River.5°
Following the presidential Interview, Anze Matienzo
was again challenged by the Chamber of Deputies, this time
for Implementing the International agreements with
Argentina without first obtaining congressional approval.
The Foreign Minister explained that the presidential meeting
of September 19*12 had been planned for some time and that
the symbolic gesture of driving the first spike In the
proposed railroad did not In any way signify the execution
of the railroad treaties with Argentina which awaited

409
congressional ratification.^1
Bolivian diplomats treated several other matters with
Argentina during this period. One of these Involved
Bolivia's request to utilize Argentine transportation
facilities in transporting petroleum to Uruguay; the
inquiry received a cold reception in Buenos Aires.
Argentina expressed concern, however, over the unilateral
use of Plloomayo River water for irrigation purposes by
Bolivian authorities and called repeatedly for tri-partlte
talks on the matter with Paraguay. The three countries
had signed an agreement on the use of waters of the
Pilcomayo in February 1941. In 1941 and 1942 Bolivia
persisted In her attempts to obtain a bilateral arrangement
with Argentina with respect to migrant workers. Transporta
tion difficulties in the La Quiaca-Villazdn region also
persisted, although for a while the proposals of a joint
technical commission led to some improvement.
Bolivian foreign relations on other fronts. Although
Anze Matienzo's diplomacy was oriented toward relations with
the United States and Argentina, this did not mean that
relations with the nation's other neighbors were Ignored.
With Peru, the Foreign Minister managed to conclude several
^Circular 0M8O, September 29* 1942, "Clrculares"

(1942-1945), ABFM.
410
minor agreement8 that he had promoted while serving as
minister in Lima. Bolivia’s new ambassador in Chile,
former Chancellor Ostria Gutilrrez, was actively engaged
in promoting a greater cordiality with Santiago. Relations
with Brazil remained friendly, while few developments took
place in Bolivian-Paraguayan relations. Relations with
Uruguay centered around that country's hope of obtaining
some Bolivian pptroleum as her fuel shortage became more
serious.
When Ostria Outltfrrez became ambassador in Santiago
in November 1941, he reported that he found a good disposi
tion toward Bolivia in the Chilean Porelgn Office and that
perhaps the time had come to Initiate a new phase of
cordiality in relations with that c o u n t r y . Nevertheless,
no significant developments took place in Bolivia's
relations with Chile during the year of 1942. On July 15,
1942, ratifications of the 1937 convention on transit were
exchanged in Santiago. Several minor agreements were
signed later in La Paz between Anze Matienzo and Chilean
Ambassador Benjamin Cohen, the most important of which was
a protocol on the conservation of frontier markers. In May
1942 the Chilean Porelgn Office drafted notes proposing a
mixed commission to study problems relating to the Arloa-
52Note 3 1 3 , to La Paz, Ostria Qutllrrez, December 4,

1941. "Bmbajada de Bolivia en Chile" (Octubre-Diciembre
1941), ABFM.
411
La Paz railroad.53 The Bolivian Chancellory responded by
suggesting that the administrators of the Bolivian and
Chilean sections of the railroad meet to discuss the
matters of importance in this regard; Chile accepted the
suggestion. With respect to the port Issue, Ostria
Gutierrez acted discreetly, treating the issue privately
with at least one of the oftfcchanged Chilean foreign
ministers, but refraining from making a formal issue of the
problem.
Relations with Brazil still were concerned primarily
with the Implementation of the 1938 railroad and petroleum
treaties. Rail shortages due to the war constantly
threatened to paralyze the work on the Corumb6 -Santa Cruz
railroad. Reports from the Bolivian Embassy in Rio de
Janeiro indicated that Brazilian President Vargas had
obtained from United States Under Secretary Sumner Welles
formal promises of the delivery of rails contracted in that
country in spite of wartime restrictions; nevertheless,

Rii
delays continued. Officials of both countries were eager
to have the mixed petroleum commission move from an
investigative to an exploitive phase of activity, and
53tfote 269, to La Paz, Ostria Gutierrez. May 19, 1942,

"Bmbajada de Bolivia en Chile" (Abril-Junlo 1942), ABPM.
5^Note 65 /3 3 , to La Paz, David Alvistegul, February

5» 1942, "Bmbajada de Bolivia en el Brasil" (Enero-Marzo
1942), ABFM.
412
suggestions on how this could be done were numerous. Still,
no definite progress was made In this direction.
The only important concern In Bolivian-Uruguayan
relations was Montevideo's Interest In obtaining Bolivian
oil. While the combustible crisis grew, Y.P.P.B.
representatives and Uruguayan government officials met in
Montevideo to discuss the possibilities of a Bolivian oil
export to U r u g u a y . 55 Uruguay insisted that the time had
come to ask Argentina's cooperation In transporting Andean
oil to Montevideo. The lack of interest in the project
later shown by both Argentina and the United States, plus
the absence of any exportable petroleum surplus in Bolivia,
made the entire plan impractical.
The only development of any note in Bolivian-
Paraguayan relations while Anze Matienzo was chancellor
was on the negative side. A Paraguayan diplomat reported
to a cabinet group that, while in La Paz, he had come into
possession of a Bolivian plan for a second war against
Paraguay.5^ Much of Bolivia's diplomacy with respect to
Paraguay after this incident was oriented toward overcoming
Paraguay's latent fears of an Andean war of revenge,
55Note 383/269, to La Paz, Valdes Musters, July 31,

1942. "Legaci6n de Bolivia en el Uruguay'1 (Mayo-Agosto
1942), ABFM.
56j|ote 199/123* to La Paz, Augusto Ouzmdn,

November 25* 1941, ”Legaci6n de Bolivia en el Paraguay”
(Enero-Diciembre 1941), ABFM.
413
The work of Anze Matienzo— conclusion. The main
lines of Anze Matienzo1s diplomacy are clear. The most
Important Ingredient of Bolivian foreign policy, while the
young Chancellor was at the helm, was the nation's full
collaboration with Washington. Bolivia was in the United
States camp at Rio de Janeiro, agreed to a settlement of the
Standard Oil issue, and decided to sell the nation's rubber
production to the North American agency. When the Chancellor
was criticized for his entregulsmo, he^replied that his
policies were in no way prejudicial to national dignity or
sovereignty, but were designed to utilize the unique wartime
opportunities for the economic development of the country:
The course of world developments opens to the

country an opportunity filled with the hope of
initiating a new era of Incalculable scope with
the cooperation of the United States.57
Anze Matienzo's diplomacy also stressed the need to
develop the nation s petroleum industry, and for this
purpose close ties with Argentina had to be cultivated.
Although relations with Bolivia's other neighbors were not
ignored, they lacked Important new developments.
The chief question raised by this bi-polar concern
of Bolivian foreign policy was "How would Bolivia balance
her Interests between Argentina and the United States as
the schism between those two nations grew wider?" No other
57circular 0M92, November 3, 1942, "Circulares"

(1942-1945), ABFM.
414
nation was affected by the United States-Argentine
divergence as was Bolivia, a cotintry that was economically
dependent on both. Anze Matienzo managed to maintain the
harmony well. While fully cooperating with Washington, he
emphasized Argentina's Importance to Bolivia's oil Industry,
promoted the export of a portion of the nation's hydro
carbon production to Argentina, and arranged a presidential
visit to promote Argentine-Bolivian relations.
The Foreign Minister's achievements, however, kept
him In trouble with the Bolivian Congress, especially with
the same nationalistic opposition that had harassed Ostria
Gutierrez. Following the extensive debates with respect to
the treaties with Argentina In October 1942, the Congress
opened discussions on the policy of economic cooperation
with the United States. Critics charged that Bolivian
negotiators should have obtained better prices In the
mineral c o n t r a c t s . O t h e r s described the proposed credit
arrangements with the United States as shameful and Injurious
to Bolivia's national dignity because they allowed for
strong Export-Import Bank Intervention in the management
of the credits.59 some congressional members charged the
Foreign Minister and the government with violating the
5&La Raz 6n, October 30, 1942, p. 4.
59ia Raz 6n, November 11, 1942, p. 4.

415
constitution In signing and executing the Standard Oil
agreement. Finally, on November 19* 1942, the entire
cabinet resigned, and TomAs Manuel Sl£o replaced Anze
Matienzo as Bollvla*s foreign minister ,1
II. THE DIPLOMATIC WORK OF TOMAS MANUEL ELIO

(1942-1943)
Bolivia's foreign relations In late 1942 and 1943,
during the period of TomAs Manuel Elio's leadership, were
highlighted by an extended tour by President Pefiaranda and
Elio through a number of Latin American countries, the
United States, and Canada, by a serious flare-up In
Belivian-Chilean relations over the port question^,and by
a new attempt to strengthen relations with Brazil. The
pinnacle of wartime Bolivian-United States relations was
achieved during this time with the visit by United States
Vice-President Henry Wallace to La Paz and the White House
interview between President Pefiaranda and President
Roosevelt•
Major developments in Bolivian-United States
relations. Efforts to Implement the Bolivian-United States
agreements signed In Rio de Janeiro continued throughout
1942. Before the Export-Import Bank could enter into a
loan arrangement with the CorporaclAn Bollvlana de Fomento
(C.B.F.), the Bolivian Congress had to approve the credit

4x6
agreement between the Bolivian government and C.B.F.,
providing for an annual government payment of $3 million
for three years. In spite of reservations about these
proposed arrangements on the part of a substantial minority
within the Bolivian legislature, congressional approval
for the credit arrangements was given in late November
1942. Shortly afterward, on December 29, 1942, a tri
partite credit convention was signed in Washington by
representatives of the Corporacldn Boliviana de Fomento, of.
the Bolivian government, and of the Export-Import Bank
which provided for the establishment of the $ 13.3 million
Export-Import Bank credit in favor of the development
company .**0
In December 1942 a serious labor situation developed
in the Patifio-owned mining center of Catavi where miners
asked for higher wages and the promulgation of the Busch
labor code. An emotional confrontation between striking
workers and their families and army units led to violence in
which a number of the former were killed. The "massacre of
Catavi,” as this event was labeled by government critics,
was an important episode in the development of Bolivia^
wartime domestic and international political relations.
k°For documents pertaining to the establlshsient of

C.B.F., see Boletin Oflelal, Nos. 10, 11, o. clt.. on. 113-
d
142.
One effect of the Catavi incident was the United
States Involvement In efforts to Improve labor oondltlons
In Bolivia. From Washington, Ambassador Luis Fernando
Quachalla informed Foreign Minister Silo that his predeoessan
Anze Matienzo, had been concerned with a project along
these lines. He also reported that since October 1942, the
Bolivian Embassy In Washington had been trying to get the
United States government to despatch a team of labor
experts to Bolivia .^1 Those efforts were successful; the
State Department notified the Bolivian Embassy on December
31* 1942, that the plan to send a mission of labor
authorities to Bolivia to participate In a binational
investigation of labor conditions In the Andean country
had been approved. Fernando Quachalla hailed the project
as a significant departure from earlier relations with
Washington, which had dealt only with mineral contracts and
credits. The two countries were moving now to a new
dimension of international cooperation in which social

62
welfare was a principal concern.
As the Department of State admitted in a telegram to
United States Ambassador Pierre de L. Boal, "The primary
^1Hote 23, to La Paz, Fernando Quachalla, January 11,

1943* Bmbajada de Bolivia en Estados Unldos de America"
(Enero-Marzo 1943), ABFM.
62Ibid.
Interest of the United States In the problems to be
considered by the team of labor experts arises from Its
need for the strategic material produced In Bolivia and Its
vital concern In seeing that production Is maintained and
Increased."^3 The Bolivian government, of course, shared
this Interest with the United States and desired to combat
the growing criticism of Its alleged disregard of the
plight of the Bolivian miner and worker by giving visible
proof of Its intentions to make Improvements. Bolivian
authorities were confident that United States cooperation
could be obtained for Implementing the recommendations of
the study. They also were aware that the cost to Bolivia
of a program for improving labor conditions and wages would
be an additional reason for seeking better terms in the
mineral contracts with the United States.
The labor mission to Bolivia, commonly known as the
Magruder Mission after Its chief, Judge Calvert Magruder,
left for La Paz on January 28, 1943. After a brief survey
of labor conditions in several sectors of the Bolivian
economy, the mission presented its report to the Andean
government on March 3* The report referred to four areas
^Telegram 40, to La Paz, Hull, January 9, 1943,

9Rf V (1943), 607
6^Mote 23 » loo* clt.; Letter to Laurence Duggan from

Luis Fernando QuacEallaTTanuary 2, 1943, "Embajada de
Bolivia en los Estados Unidos de America" (Abril-Julio 1943),
ABFM.
419
In which the need for bilateral collaboration was indicated:
agricultural production, health and sanitation, worker
housing, and e d u c a t i o n . united States representatives
made it clear, however, that the initiative for implementing
the recommendations of the study would have to come from
Bolivia.
During 1943 the Pefiaranda government took several
steps designed to associate Bolivia fully with the Allied
nations. United States Vice-President Henry Wallace's
visit to La Paz was the occasion for the Supreme Decree of
April 7 which placed the Andean nation in a state of war
with the Axis and ordered full mobilization. The action
was in response to a recommendation by the National Council
of Defense that the nation move toward a state of war in
order to comply more fully with the obligations of American
solidarity, to Increase strategic mineral production, and
to stimulate the development of communications facilities
and agricultural industries.^ On April 26 Chancellor Elio
notified Secretary of State Hull that Bolivia adhered to
the ends and principles expressed in the Atlantic Charter
and to the Declaration of the United Nations of January 1,
63Note 247, to La Paz, Fernando Quachalla, July 7 ,

1943, "Embajada de Bolivia en los Estados Unldos de America"
(Abril-Julio 1943), A B M .
^Bolivia, Mlnlsterlo de Relaclones Exteriores,

Memorla (1943)* p. 6.
420
1942.67
Wartime relatione between Bolivia and the United
States reached their acme with the vlalt to Washington by
President Enrique Pefiaranda and Chancellor Tomis Manuel
Elio in May 1943* Oovernment leaders in La Paz had hoped
that the trip would result In additional agreements with
the United States government. Bolivia's ambassador was
Instructed In March 1943 to make arrangements for the
signing of revised mineral contracts, containing higher
prices and of longer duration, during the presidential
visit; La Paz warned that the trip depended on guarantees

68
to this effect. Fernando Quachalla replied by stating
the impossibility of concluding the negotiations on the
mineral contracts In the short time prior to the President's
arrival, and he warned against Justifying the trip with
promises of Its practical results.**9
On April 15, 1943* Fernando Quachalla delivered a
memorandum to Under Secretary of State Sumner Welles
Indicating the themes that President Pefiaranda wanted to

discuss during his visit.7® The memorandum outlined many
67Ibid., p. 8.
6®Mote 237* to La Paz, Fernando Quachalla, June 17,

1943* "Embajada de Bolivia en los Estados Unldos de America"
(Abril-Julio 1943)* ABFM.
69Ibld.
7°Ibld., p. 4.
421
of Bolivia1a major foreign policy concerns in raid-1943.
Heading the list was the subject of continental solidarity
and collective security; Bolivia wanted to know the North
American attitude toward guaranteeing the independence and
territorial Integrity of the Andean nation. The seoond
item referred to Bolivia's desire for a Pacific port and
her hope of gaining a commitment from the United States to
provide moral and financial support for that cause. Third,
Bolivia wanted an Increase in credits for military
equipment under provisions of the Lend-Lease Act. Finally,
the Bolivian government was interested in promoting a long
term tin contract as the basis of future relations between
the two countries.
The high point of the Pefiaranda visit to Washington
was the White House conversation that took place on Nay 5,
1943. Sophisticated Bolivians wondered how their poorly
educated mestizo President would fare In the encounter with
North American leaders, but one noted afterward that:
Happily, a lack of knowledge of the Bngllsh

language veiled something of the frightful Ignorance
of General Bnrlque Pefiaranda whose simple and
cheerful manners made a good impression upon the
candid and hearty North Amerloans. Also, we had the
consolation that after him, a still duller military
man with less merits arrived: the Paraguayan
dlotator Morinigo.71
TlRenA BalllviAn Calderdn, Hombres de buena voluntad

(La Paz: Editorial "Artistica/ 19^5)# P. 7&.
422
At the White House meeting were President Pefiaranda
and President Roosevelt, Sumner Welles, Tomis Manuel Elio,
United States Ambassador to Bolivia Pierre de L. Boal, Luis
Fernando Quachalla, and State Department official Philip
Bonsai. Bolivia*a Foreign Minister discussed the port
question, declaring that it was his country's Intention to
raise the matter with Chile at an opportune moment but
always using peaceful means President Roosevelt

«
responded by advising that the Issue not be broached until
opinion in Peru and Chile had been stfflolently prepared.
Elio later reported that the United States President told
him that he had been thinking about Bolivia's port problem
for twenty years and hoped to establish an International
commission to consider the Issue after the war.
When the conversation turned to mineral contracts,
Welles told the Bolivian representatives that his government
was prepared to sign a oontract for the war's duration plus
two years, although he offered no definite proposal
regarding prices. Pefiaranda advised the group that a
special Bolivian delegation soon would be designated to study
the matter of resuming payments on the nation's foreign debt.
When Elio expressed concern over the Inadequate amount of
72Note 237# loo, clt.
73lntervlew with Elio, December 12, 1966, La Paz,

Bolivia.
423
tonnage alloted for cargo shipped to Bolivia, Welles told
him that the Bolivian allotment mas being Increased from
4,000 to 5,600 tons monthly; the next day the figure was
raised to 6,000 t o n s . ^ " On the night of May 5 President
Pefiaranda signed the Declaration of the United Nations.
Bven though the presidential visit of 1943 confirmed
the basic cordiality between the governments of Bolivia and
the United States, Bolivian representatives were finding
stiff resistance in Washington to their requests to revise
the mineral contracts again. Fernando Quachalla was
instructed in December 19^2 to explore the possibilities of
an upward adjustment in tin, tungsten, and antimony
prices.75 since the primary Bolivian Justification for
increasing prices was the rising costs of production, the
United States agencies took a careful look at those costs,
and, after the report of the Magruder Mission was available,
they tried to decide how the new tin contract should relate
to efforts at improving labor conditions. During the early
phases of the contract negotiations in 1943 the two
governments were far apart in the terms which they proposed.
Bolivia sought a contraot for the duration of the war plus
7%*emo of conversation at the White House, May 5,

1943, TO, V (19^3), 563.
75Note 514, to La Paz, Fernando Quachalla, December

22, 1942, "Embajada de Bolivia en Bstados Unidos de Norte
America" (Octubre-Dlclembre 1942), ABFM.
424
two years at a price of J O j per pound.7^ The United States
counterproposal suggested a two-year extension of the
contract, which expired on July 1, 1943, at a price of 60^
a pound.77
Implementation of the Bolivian-United States rubber
contract was encountering difficulties in 1943. Ambassador
Fernando Quachalla acknowledged In a note to La Paz in
March of that year that the Bolivian producers preferred
the higher prices available in Argentina to those accepted
by the government in 1942 in the contract with the Rubber
Reserve Company.7® He suggested that representatives of the
American rubber-producing countries which sold their
production to the United States meet to consider ways of
alleviating the probler.
During this same period, discussions were proceeding
on a proposed Bolivian-United States commercial agreement
involving several substantial tariff reductions. The draft
treaty provided for a 30 per cent reduction in the United
States tariff on tungsten and zinc imports In return for a
30 per cent decrease In tariffs on automobile Imports by
^Telegram 967, to La Paz, Hull, July 28, 1943, FR,

V (1943), 567. ~
77Ibld.
7% o t e 138, to La Paz, Fernando Ouaohalla, March 29,

1943, "Embajada de Bolivia en Bstadoa Unldos de America”
(Enero-Marzo 1943)* ABFM.
425
B o l i v i a . 79 R e n 4 Balliviin Calderdn, Bolivia's chief
negotiator, Indicated that government and mining officials
in La Paz lacked interest in the proposed agreement while
the mineral contracts with the United States were in
effect. He also blamed Elio's indifference to the proposed
treaty and his proposals for changing its provisions for
delaying agreement in the matter.®**
Bolivian government control of the financial
transactions of persons and businesses on the Allied
Proclaimed Lists (black lists) Increased in 1943, largely
due to United States willingness to have the Bolivian
Development Corporation participate in the process. In
Nay the Bolivian government Intervened nineteen firms with
persons recommended by the newly established Economic
Control Board and appointed by interim-Presldent Waldo
Belmonte Pool in Pefiaranda's absence.®1
The portuary issue with Chile. Bolivia's relations
with Chile suffered a marked deterioration in 1943 as the
result of a number of developments, the most Important
being the renewal of Bolivian demands for a port in the
79Balliviin Calderdn, op. pit., pp. 74-76.

®°Ibld., p. 76.
®1Telegram 994, to Washington, Robert P. Woodward,

May 29, 1943, PR, V (1943), 597.
426
nation's press and by prominent Andean government officials.
Other factors also entered Into the picture, Including the
different positions taken by the countries with respect to
the world war. Not until January 1943 did Chile break
diplomatic ties with the Axis. Later, in April 1943, when
Bolivian President Pefiaranda decreed a state of war with
the Axis and ordered a full mobilization, the nation's
ambassador In Santiago reported that alarm spread through
official Chilean circles.82 Chile's foreign minister,
Joaquin BernAndez y FernAndez, protested that Bolivia's
action was taken without prior consultation with Santiago
and had endangered the security of Chilean ports through
which Bolivian minerals were shipped. Andean action, he
continued, also required a partial Chilean mobilization In
response to that decree In Bolivia.83
The major issue of contention, however, was still
Bolivia's deep-seated aspiration for a sovereign port on
the Pacific. The 1943 episode was ignited In February by a
press campaign begun In I* Noohe of La Paz. Later, In Nay,
as President Pefiaranda and Chancellor Elio traveled northward
toward the United States, the Foreign Minister added fuel to
the fire with a statement made to the press In Guayaquil
^2Note 202, to La Paz, Ostrla OutiArrez, April 8 ,

1943, "Embajada de Bolivia en Chile" (Abril-Mayo 1943), ABPM.
83lbid.
427
declaring that Bolivia could never renounce her legitimate
rights to territorial and maritime reintegration.8^ Chilean
foreign Minister FernAndez quickly denied that any
territorial issue was pending between the two countries and
stated that any attempt to revive such a question would
be vigorously repudiated by his country.^ FernAndez
also told Ostrla OutiArrez that the attitude of Elio had
caused a bad impression within the Chilean government. In
the light of the strong Chilean reaction to Elio's
statements, the interim leadership of the Bolivian govern
ment suggested to the Chancellor on May 8 that he refrain
from emphasizing the port problem during the tour.88 Elio
rejected the suggestion, however, asking, "How can the
President of Bolivia or his Minister of Foreign Relations,
in traveling through the continent, refrain from saying
what they think about a problem that substantially affects
the vitality of their country?"8?
8 4
^Circular 1, to Rio de Janeiro, Humberto Palza S.,
May 21, 1943, "Embajada de Bolivia en el Brasil, MlslAn
David Alvestegul, Correspondence reolblda Mlnlsterlo de
Relaclones Exteriorsa de Bolivia, Bnero a Dlclembre 1943,"
ABPM.
®5Note 280, to La Paz, Ostrla OutiArrez, May 7, 1943,

"Embajada de Bolivia en Chile" (Abril-Mayo 1943), ABFM.
^Circular PD491, to Rio de Janeiro, June 17, 1943,
"Embajada de Bolivia en el Brasil, Mlsldn David AlvAstegul,
Correspondence reolblda Mlnlsterlo de Relaclones
Exterlores de Bolivia, Enero a Dlclembre 1943," ABFM.
87ibid.
428
In the mldet of the public press duel, conversations
In Santiago between FernAndez and Ostria OutiArrez led to
the Chilean suggestion that the two countries initiate
direct negotiations on the portuary i s s u e T h e invitation
was extended with the understanding that revision of the
Treaty of 1904 would not be considered and that Chile
opposed the Intervention of any third party in the natter.
Bolivia's response to the Chilean suggestion
revealed the content of that nation's port policy in
mid-1943. At first, the Bolivian Chancellory regarded
the invitation as "a true triumph for Bolivian international
policy." Ostria OutiArrez was instructed on May 28 to
continue preliminary discussions on the matter with
FernAndez, keeping them on an Informal and strictly secret
basis. Early In June the Under Secretary of the Bolivian
Chancellory, Humberto Palza S., traveling to Santiago
apparently for personal reasons, carried instructions to
the ambassador there and remained to collaborate with him
in the discussions.9°
The Bolivian representatives were instructed to
obtain first a protocol or, at least, an official Chilean
®®Note 335, to La Faz, Ostrla QutiArrez, May 28, 194§,

"Embajada de Bolivia en Chile” (Abril-Mayo 1943), ABFM.
89ciroular 1, Circular PD491, loc. clt.
9°Ciroular PD491, ibid., pp. 3-4.

statement reiterating the willingness of that government to
enter Into direct negotiations on the port policy. Then,
they were to listen to the bases on which Santiago desired
to Initiate such negotiations. With respect to the matter
of compensations, Bolivia was In no case willing to consider
trading a portion of her national territory for a port, but
would consider compensations of a customs, commercial,
economic, or financial order. The most surprising element
of the slate of instructions, however, was the admission by
the Chancellory that the Bolivian government did not believe
that the moment had arrived for solving the portuary problem.
Ostrla Gutierrez's mission was primarily one of preparing
the way for a later arrangement. When would that time
come? "El corrido de los sucesos lo dir£.M93-
Chance llor FernAndez told Palza and Ostrla OutiArrez
on June 17, 1943, that President Juan Antonio Rios had
given his approval to the suggestion on direct discussions,^
The Chilean Chancellor then expressed pleasure that Bolivia
had decided to treat the Issue directly with Chile Instead
of looking to Geneva, Washington, or any other third party;
he then proposed that discussions begin upon the termination
of President Pefiaranda1s tour. Within two weeks, however,
9*ibid., "The course of events will decide It."
92Note 386, to La Paz, Ostrla OutiArrez. June 18, 194&

"Embajada de Bolivia en Chile" (Junio-Julio 1943), ABFM.
430
FernAndez was telling the Bolivian ambassador that
President Rios now felt that the port discussions should be
postponed until the end of the war so as not to weaken the
harmonious continental cooperation in the war effort.93 The
Bolivian ambassador In Santiago was reporting by late July
that every sign Indicated that Chile desired to elude any
new commitments to direct negotiations.
The violent press campaigns over the port issue
that had been carried on by the papers of La Paz and
Santiago subsided somewhat in late June and July. The
Issue, however* was reopened in August as the result of
statements by Chilean Chancellor FernAndez who was* himself*
undertaking a toub through a number of American countries.
Not until after the resignation of Elio early in September
1943 and the subsequent conciliatory statements made by
President Pefiaranda and his new foreign minister* Carlos
Salinas Aramayo* did Bolivian-Chilean relations move back
toward an official* If superficial* cordiality.
The events of 1943 Indicated that Bolivia's port
policy was improvised and opportunistic* largely determined
by the views of the chancellor or his substitute and by the
apparently favorable opportunities for formulating and
implementing such a policy. Foreign Minister Elio's port
93Note 420* to La Paz* Ostria OutiArrez, July 2* 1940*

"finbajada de Bolivia en Chile" (Junlo-Jullo 1943), ABFM.
policy appeared to be based on the view that only pressure
from a third party could persuade Chile to grant a port to
Bolivia. He rejected the Chancellory's suggestion to make
his public remarks on the subject more discreet, apparently
in disregard of the immediate effects they might have on
Bolivian-Chllean relations. The presidential trip was too
good an opportunity for reminding the other American
republics of Bolivia'sjflight, and Bllo placed more hope in
"the support of the nations of America" than he did in
mutual understanding with C h i l e . ^4 Ostrla Outldrrez
confessed to the Chancellory in March 1943 that he knew
"of no plan of the government on the problem of the maritime
reintegration."^ The ambassador in Santiago advised a
general policy of loyal understanding with Chile as a means
of obtaining Arica, recommending that a specific port policy
contemplate the possibility of economic or territorial
concessions.^ He recognized that aggressive press
campaigns only made a constructive policy toward Chile more
difficult.
Just as the Pefiaranda visit to Washington had marked
the high point in wartime Bolivian-United States relations,
^Circular 1, loo, clt.
95)Iote 144, to La Paz, Ostrla Outldrrez, March 19,

1943, "Embajada de Bolivia en Chile" (Bnero-Marzo 1943),
ABFM.
Îbid., P. 9.
the Bolivian President's trip to Rio de Janeiro In June
19^3 * with it8 consequent results, represented the major

development In Bolivia's diplomacy with Brazil since the
treaties of 1938. Up until that time, Bolivian-Brazilian
relations were concerned primarily with the problems and
possibilities arising out of the agreements on railroad
connections and petroleum development. And in the early
months of 19^3 j things had not been going well in these
matters.
In January 19^3 & Bolivian congressional commission,
established In September 19^1 to investigate the Joint
railroad project with Brazil, released Its highly critical
report. This study manifested the deep-seated anxiety of
some prominent Bolivians about the predominant Brazilian
influence in the construction of the Corumbd-Santa Cruz
railroad which was regarded as an affront to the national
security.97 Brazil's response to the report was based on
Itamaraty's assumption that the study was really a broad
swipe at the whole concept of Brazilian-Bolivian
cooperation in building the railroad, representing wide
spread suspicions within the Andean Congress about
Brazilian intentions. Chancellor Aranha was bitter about
the report and indicated to Ambassador Alv£stegul that
97por the conclusions of this report see Boletin

Oflclal, No. 12, 0£. clt., p. 99.
Brazil would terminate her collaboration In the project If
Bolivia no longer desired it.98 The Brazilian Chancellor
Indicated that his government would be keenly Interested In
the position assumed by the Bolivian government with respect
to the congressional report. On April 14 a supreme
resolution gave approval to a cabinet commission's report
that vindicated the action of the Bolivian representative
on the mixed railroad commission and reaffirmed the
Bolivian government's support for the cooperative program.99
On November 4, 1942, the Brazilian government
proposed the creation of a new technical commission In the
hope of expediting the blnatlonal petroleum project
established In 1938* Ambassador Alvdstegul replied In a
note delivered to Itamaraty In March 1943, outlining his
government's proposal for moving the activity of the mixed
commission quickly Into the exploitive phase .100 Bolivia
favored the reorganization of the mixed commission to ehable
it to proceed more effectively to drilling operations. The
Standard Oil Company studies held by Bolivian authorities
would be made available to the commission. La Paz agreed
9®Note 159/111. to La Paz, Alvlstegui, March 23, 1943

"Bnbajada de Bolivia en el Brasil” (Enero-Abril 1943), ABFM.
99Boietin Oflolal. No. 12, 0£. olt., pp. 99-111.
100Note 142/12, to Brazilian Chancellory, March 13,

1943 contained In Note 159/111,top. eit.
434
that each country should Increase Its contribution to the
commission by one million dollars, with Brazil advancing
Bolivia's quota. The Andean government was also in conform
ity with the idea that a North American drilling company
be contracted for execution of the exploitation.
These concerns were central in Bolivian-Brazilian
relations when the projected tour of the Bolivian President
was announced early in 1943* Preliminary plans of the
trip did not include a visit to Brazil, however.
Ambassador Alvdstegul promptly insisted that they be
amended to Include Rio de Janeiro. The Bolivian repre
sentative was convinced that the omission of Brazil from
the President's Itinerary would have confirmed the growing
suspicion in Rio de Janeiro that La Paz lacked Interest in
strengthening relations with Brazil and that President
Pefiaranda was partisan to such an attitude. Alvdstegul's
argument was persuasive and his view prevailed.
Early in June 1943 Chancellor Elio traveled to Rio
de Janeiro for preliminary conferences with Brazilian
President Vargas and Foreign Minister Aranha, well ahead of
President Pefiaranda's scheduled arrival. The presidential
visit began on June 22 and was highlighted by a series of
101Note 251/168, to La Paz. Alvdategui, May 18, 1943,

"Bnbajada de Bolivia en el Brasil'' (Mayo-Julio 1943), ABFM.
435
agreementa signed on June 28 by Chancellors Elio and Aranha.
Among these agreements, several were potentially of great
importance.
The most widely acclaimed of the Aranha-Bllo
agreements was contained in an exchange of notes in which
the two governments acknowledged their deolslon to proceed
to the construction of the Vila Vila-Santa Cruz railroad .102
The governments Instructed the existent mixed railroad
commission to examine previous studies of that projeot and
to submit a report. The parties planned to sign an
agreement on financing the construction of the line on the
basis of this report. Alvlstegul had earlier reminded the
Chancellory in La Paz that the proposal of Brazilian
financing for this railroad had been shelved by the
Bolivian government after the Vargas-Ostrla Outldrrez
interview of July 1941 until Na more opportune moment."10^
In another set of notes, Brazil officially offered
a free zone for Bolivian commerce in the Atlantlo port of
Santos, effective upon completion of the Corumbl-Santa Cruz
railroad.10^ Bolivia also gained something of a
sentimental achievement when the Brazilian government
10aHemorla (1943), 0£. cit., pp. 51-52 .
103Note 257/173, to La Paz, Alviategul, Nay 19, 1943,

"fiabajada de Bolivia en el Brasil* (Mayo-Julio 1943), ABFM.
10i*Msmorla (1943), 0£. cit., pp. 47-48.

436
accepted a plan prepared by the Andean nation's Minister of
Public Works, General Julio Sanjlntfs. General Sanjlntfa
proposed that Brazil grant Bolivia a more favorable location
for her own port In an area on the Tamengo Canal accessible
to the upper Paraguay River. a set of notes entrusted
the study of this matter to the mixed border demarcation
commission. Chancellor Aranha also confirmed In a note to
Bllo that the Banco del Brasil Intended to establish a branch
In La Paz.
Another series of agreements was reached In an
attempt to facilitate commerce between the adjacent border
populations of the countries. Two conventions provided for
reciprocal tariff concessions, simplified regulations, and
preferential treatment for exports destined for the frontier

1Ag
regions of each country. w Through another exchange of
notes, a system of train-truck transport was established
along the entire route of the Corumbl-Santa Cruz railroad.107
Ambassador Alvlstegui attributed great Importance
to the Aranha-Blio agreements, stating that they "have
signified, in fact, the solemn announcement that Bolivia
and Brazil have paeted an Indestructible relationship In
lOSjbid.» pp. 49-50; La Razdn. June 28, 1943, p. 1,
10^Memorla (1943)* SSL ' cit., pp. 58-61.

107lbld., pp. 56-57.
437
the economic ae well as the political o r d e r . A l t h o u g h
the Ambassador's evaluation was overly optimistic, It must
be admitted that the presidential visit and the agreements
of June 28 quite likely overcame the Brazilian misgivings
of early 1943. Bolivian-Brazilian relations were on the
upswing. Apart from his work with the United States,
certainly Elio's most successful diplomacy was that with
Brazil. Given the d o s e relationship between Rio de
Janeiro and Washington, It might be assumed that a rational
Bolivian pro-Allled foreign policy would tend to promote
oordlal relations with both those countries. The same
logic, however, points to a different kind of relationship
with another Important neighbor, Argentina.
La Paz--Buenos Alrea. Bolivia's foreign policy of
close collaboration with the Allies and, especially with
the United States, was most vulnerable at the point of her
contact with Argentina. Nevertheless, during the period of
Tennis Manuel Elio's leadership in the Chancellory, no signs
of serious deterioration appeared In Argentine-Bolivian
relations. Reports from Buenos Aires, however, did point to
developments that had to be regarded In La Paz as danger
signals.
108|jote 411/239, to La Paz, Alvistegui, August 4,

1943, "Embajada de Bolivia en el Brasil” (Julio-Septiembre
1943), ABPM.
438
One of the early indications that relations with
Argentina were proceeding on a cordial plane was the report
from Bolivian Ambassador Costa du Reis in Deoember 1942
that the clarifications of the Treaty of Railroad
Connection of February 10, 1941, requested by the Bolivian
Congress, had been favorably received in Buenos Aires.109
On April 14, 1943* during the exchange of ratifications of
the February 1941 treaty, Foreign Minister Tom&s Manuel
Elio and Argentine Chargl d*Affaires Francisco R. Bello
signed a Protocolo De Flrma in which the Argentine govern
ment declared its position with respect to the points
raised by Bolivia's legislature.110 Ratifications of the
convention on highway connection of February 6 , 1942, were
exchanged the same day. Later, on June 23, 1943,
representatives of Bolivia's Banco Agrlcola signed with
the Argentine charg£ d'affaires a contract providing for
the annual sale of two hundred and fifty tons of rubber to
Argentina. In return the Banco Agrlcola was given the right
to import from Argentina a fixed quota of manufactured
products containing rubber, and Buenos Aires agreed to grant
annual permits for fixed quotas of exports of machinery,
10^Note 600, to La Paz, Costa du Reis, December 22,

1942, "fisbajada de Bolivia en la Argentina" (Novlembre-
110For text of the "Protocolo de Flrma," see

Boletln Ofloial, No. 12, 0£. cit., p. 50.
439
farming implements, and breeder cattle.***
As Bolivia moved further into the Allied camp with
its decree of a state of war in April 1943# Costa du Reis
reported to La Paz that Argentina, feeling Isolated within
the continent, was seeking to improve relations with Chile.
Certainly, among Argentina's neighbors, Chile shared most
closely that nation's position with respect to the war.
The possibilities of a closer Argentine-Chilean relationship
were, of course, not well received in Bolivia where the port
Issue had recently taken on new life. Therefore, following
the overthrow of the Castillo government in June 1943,
Bolivian officials waited with interest to see If the new
regime would continue Castillo's policy of rapprochement
with Chile.
Bolivia promptly recognized the Pedro Ramfrez
government on June 9, 1943. Bolivian Ambassador Costa du
Reis explained to United States Ambassador Norman Armour
that his country's position vis-a-vis Argentina was different
from that of the United States because of urgent siatters of

112
economic exchange. He then suggested to the Chancellory
in La Paz that Bolivia demonstrate her willingness to
111Memorla (1943)# 0£. cit.. pp. 26-27 .
^SNote 243, to La Paz, Costa du Reis, June 13, 1943,

"Embajada de Bolivia en la Argentina" (Mayo-Junlo 1943),
ABFM.
440
resolve every question pending with Argentina in an effort
to keep Buenos Aires from strengthening ties with
Santiago.11^
Bolivian hopes of a new Argentine policy with
respect to Chile were disappointed; by late July 1943
Argentine Chancellor Admiral Segundo R. S t o m i spoke to
Costa du Reis of his government's necessary friendship with

114
Santiago. Stornl acknowledged that this policy meant
that Argentina could support Bolivia's bid for a Pacific
port only with her silence. In August Stornl again talked
with the Bolivian ambassador about growing Argentine-
Chilean economic relations that oould lead to the formation
of a binational customs union. When Costa du Reis
registered his reservations, pointing out the inevitable
political implications of such an arrangement, Stornl
replied that Bolivia should consider becoming a participant
in the movement as a possible means of satisfying her
portuary aspirations.11^
11^Note 281, to La Paz, Costa du Reis, June 29, 1943,

"Bsbajada de Bolivia en el Braslln (Julio-Septlembre 1943),
ABFM.
“ Slot. 339* to La Paz, Costa du Reis, July 26, 1943,

"Bmbajada de Bolivia en la Argentina" (Jullo-Agosto 1943),
ABFM.
11^Mote 393* to La Paz, Costa du Reis, August 17,

1943. "Bsbajada de Bolivia en la Argentina” (Jullo-Agosto
441
Additional diplomatic developments, Elio's
diplomatic record contained no Important achievements in
relations with other nations. Peru's attention during
most of the period was naturally turned toward the Bolivian-
Chilean port discussion. Former Foreign Minister Anze
Matlenzo, now ambassador in Lima, informed La Paz in May
1943 that the Peruvian government, preferring that Lima
not become a center of contentious declarations on the
issue, had requested that President Pefiaranda refrain from
mentioning the port matter during his visit to that oity.11^
Relations with Uruguay remained cordial, but
relatively unimportant. Bolivia's minister in Montevideo
reported that the Andean nation ranked seventeenth among
the foreign customers of Uruguayan products in 1942 with
purchases amounting to $22,000 out of a total export value
of $56,247,656. During this period, officials of
Uruguay's l.N.C.A.P. were disappointed when their suggestion
of a Joint petroleum project with Y.P.F.B. was rejected.
Uruguay's response to the Bolivian-Brazilian agreements of
June 1943, especially the offer of Santos as a free port,
11^Mote 1/230/43, to La Paz, Anze Matienzo, May 31,

1943, "ftsbajada de Bolivia en el Peril" (Enero-Mayo 1943),
ABFM.
11^Note 89/ 67, to La Paz, Valdls Musters, February

27, 1943, Legacion de Bolivia en el Uruguay” (Enero-Abril
I943), ABFM.
442
was a proposal to Bolivian officials that the possibility of
making Montevideo a free port for both Andean and Paraguayan

118
goods be explored.
When Tomis Manuel Elio became chancellor in November
1942, Bolivia's minister in Asuncion, Guillermo Pranoovlch,
urged him to take a close look at the nation's policy
toward Paraguay. Pranoovlch stated that the instructions
that had guided his mission since December 1941 had
directed him to promote cordiality between the two countries
and to report in detail upon political developments in
Asunci6n, but had discouraged him from promoting practical
economic and commercial arrangements.11^ Such a policy,
he reported, had reduced Bolivia to the role of passive
spectator in Asuncion. He advised the initiation of a
policy designed to promote closer economic and political
ties with Paraguay. Pranoovlch emphasized that the
continuation of the present passive policy could have
definite disadvantages and even dangers for Bolivia.
Without an active plan of rapprochement. Bolivia relinquished
her opportunity to overcome Paraguay's latent fear and
11^Note 403/280, to La Paz, Valdls Musters, July 19,

1943/ "Legaci6n de Bolivia en el Uruguay" (Nayo-Agosto
1943)* ABFM.
11^Note 626/454, to La Paz, Guillermo Pranoovlch,

November 29, 1942, "Legqci6n de Bolivia en el Paraguay"
(Septlembre-Diclembre 1942), ABFM.
443
suspicion toward La Paz. An inactive policy also might
cause an indifferent Paraguay to be recruited by a third
country with designs against Bolivia. Rapprochement with
Asuncion, however, would enable Bolivia to develop Jointly
with that country their common frontier zones and to have a
close ally with which to act in concert internationally
The recommendation was favorably received in La Paz;
Elio cabled Francovich on April 1, 1943, asking him to
sound out opinion in Asunci6n with respect to a Bolivian-
Paraguayan presidential interview ,121 The Bolivian minister
found a favorable response to his overtures. In mid-July
Paraguayan President Morinlgo visited La Paz for preliminary
discussions of means for strengthening economic and
political ties between the two countries. This renewed
concern for closer ties with Paraguay, led by Guillermo
Francovich and Tom&s Manuel Elio, was shared by Elio's
successor in the Chancellory, Carlos Salinas Aramayo. A
second presidential interview took place in November 1943,
the results of which will be discussed in connection with
the diplomacy of Salinas Aramayo.
The diplomacy of Tomis Manuel Elio, in its essential
120Ibid.
I21cable cited in Note 190/141, to La Pas, Francovich,
April 6, 1943, ”Legaci6n de Bolivia en el Paraguay” (Enero-
Abrll 1943), ABFM.
feature, was a continuation of the policy formulated by
Oatria Outllrrez and developed by Anze Matlenzo. This
feature was the course of close collaboration with the
United States. The peak of Bolivian-United States
relations was reached during this period, symbolized by
the visits of Vice-President Wallace to La Paz and of
President Peflaranda to Washington. Elio also moved to
strengthen ties with Washington's chief ally In South
America, Brazil, shifting the emphasis away from relations
with Argentina, the Latin American focal point of the
policies of Ostrla Gutierrez and Anze Matlenzo. The
flare-up of the port Issue with Chile, the growing
rapprochement between Santiago and Buenos Aires, and Bolivian
moves toward closer association with Washington all placed
new strains on Bolivian relations with Argentina, even
though those relations remained on a friendly basis.
Suggestions from the Bolivian minister in Asunci6n,sparked
a renewed interest in Andean ties with Paraguay, relations
which had lagged since the Plata River regional economic
conference.
III. CARLOS SALINAS ARAMAYO (1943)
Persistent and bitter oritlolam of the Pefiaranda
government by P.I.R. and M.N.R. members of Congress,
especially with regard to the still smoldering Catavl

!
j
i
i
| 445
Incident of December 1942, led President Pefiaranda's entire
cabinet to resign on August 27* 1943. Elio mas replaced in
the Chancellory by Carlos Salinas Aramayo (1901-1944),
one-time head of the United Socialist party. During the
short time that he occupied this post, Salinas Aramayo
pursued a policy characterized by continuing close relations
with the United States, an active effort at rapprochement
with Paraguay, and improving relations with Chile.
In September 1943 representatives of the governments
of Bolivia and the United States sere engaged in
discussions of a new tin contract that would encourage an
Improvement in social dondltlons in Bolivia in accordance
with the recommendations of the Magruder Mission. Bolivia's
case for higher prices was based on the Increased costs of
production. Fernando Quachalla earlier had explained to
United States officials that Bolivian mine owners needed
the readjustment of prices in many cases to Justify the
continuation of operations and that the government had the
duty of supporting their request.122 At the same time, the
state required the additional tax revenue whloh a price
hike would bring in order to finance a program of social
benefits. The Department of State stated its position with
122)(ote 247, to La Pas, Fernando Ouaehalla, July 7,

1943, "Bmbajada de Bolivia en los Bstados Unldos de
America" (Abril-Julio 1943)* ABFM.
446
respect to a program for implementing the Magruder Mission
recommendations in a memorandum to Fernando Ouachalla in
early September; the statement, according to the Bolivian
ambassador, made clear that Bolivian financial support for
the plan would be expected.123
(hi September 22, 1943* the Department of State
delivered to the Bolivian ambassador another set of
proposals for a tin contract.12^ The draft agreement
provided for the extension of the contract until September
30, 1948, and a price of 63 1/ 2^ per pound for one year

beginning October 1, 19*13• It also Included a new schedule
of smelting charges that would Increase costs for treating
low grade ores. The terms of the proposed contract would
increase the net Income for the producers by 1 1/ 2^ per
pound and provide the Bolivian government with a fractional
increase to be devoted to social welfare purposes, an
obligation that was to be confirmed by an exchange of
notes.125 The Bolivian ambassador replied by suggesting
some baslo amendments to the formula including higher prices*
a definite price agreement for two years rather than one,
123Note 321, to La Paz, Fernando Ouaohalla, September

7 » I9**3> "Bmbajada de Bolivia en los Bstados Unldos de
America" (Agosto-Dlolembre 1943), ABFM.
12*(7elegram 1180, to La Paz, Hull, September 22,

1943, FR, V (1943), 571.
125lbid.
447
and the separation of all social features from the tin
contract.12^ When the Fefiaranda government was toppled by
revolution on December 20, 1943# the problem of renewing
the tin contract was still unresolved.
By late 1943 La Paz and Washington still had not
been able to reach a satisfactory agreement for the sale
of Bolivian cinchona bark and antl-malarlals. The matter
was analagous in most ways to the problematic situation
associated with the rubber oontraot; Argentine competition
was the major hindrance. After the Argentine government
agreed to assist Bolivia in improving her railroad service,
Salinas Aramayo was approached once again by representatives
of Buenos Aires who claimed that quinine products were
needed in Argentina to fight malaria. The Foreign Minister
later told United States Ambassador Boal that he felt a
"give and take” arrangement was necessary in such
matters.*^ Andean officials feared that a refusal to
provide Argentina with a quota of these materials would
Jeopardize chances of obtaining essential Imports from
that country. The State Department, however, refused to
authorize any designated quota of anti-malarlals to a
^^Memorandum of conversation, Washington, September

25# 1943# PR# V (1943)# 571.
1^Telegram 1634, to Washington, Boal, October 8,
1943, F£# V <1943), 573.
448
third party* contending that Argentine stocks were
adequate.
In December 1943 the Bolivian government drafted
a decree prohibiting the export of all cinchona bark and
quinine products. United States Ambassador Boal
Interpreted the action as a reprisal of sorts against
Argentine laws preventing the export of wheat and other
foodstuffs. He added* however* that If Buenos Aires
reversed her position* Bolivia probably would be obligated
to provide some antl-malarlals to that country. Boal
reported to Washington that "the measure as a whole is
Illustrative of Bolivia's struggle to maintain their footing
between two opposing Influences* that of the United States
to obtain quinine for armed forces of the United Nations of
which Bolivia is a member* and the demand of Argentina to
obtain quinine for speculation or for the Argentine govern
ment which has adopted a menacing position with regard to
their food and other supplies."1^®
The Bolivian government's adhesion to the
Declaration of the United Nations announced in April 1943
was ratified by the Bolivian Congress on November 26* 1943.

*
Carlos Salinas Aramayo Indicated that he regarded the
congressional action as ratification of the April 7 decree
128relegram 1974*,to Washington* Boal* December 17*

1943* 2L* V (1943), 577.
449
placing Bolivia In a state of war.12^ A Foreign Ministry
circular later announced that the national government had
decreed on December 4, 1943, that Bolivia war at war with
the Axis, thus defining in categorical from the nation's
position at the side of the Allied nations In the world

conflict.1^
Bolivia's relations with Chile were placed on an
Improved level by the conciliatory attitude toward that
country assumed by the new foreign m i n i s t e r . ^ Bolivia's
position on the port Issue was defined for the State
Department in September 1943 by Ambassador Fernando
Ouachalla in anticipation of the visit of Chilean
Chancellor Fernandes to Washington. The Bolivian memorandum
acknowledged the legality of Chile's dominion In the former
Bolivian Pacific littoral in accordance with the Treaty of
1904, but stated that Bolivia maintained her aspirations
for a sovereign outlet on the Pacific. The Andean nation,
therefore, proposed a direct and mutually beneficial
agreement between the two countries to resolve the
129xelegram 1837, to Washington, Boal, November 27,

1943, FR, V (1943), 551.
130circular 29# December 10, 1943# "II Oficios de R.R.

de Bolivia" (1943), ABFM.
îNote 604, to La Pas, Ostrla Outllrrez, October 1.

1943# "Bsbajada de Bolivia en Chile” (Octubre-Novlembre 1943)
ABFM.
450
problem. *32 Quaohalla later reported that Secretary of
State Hull delivered the Bolivian memorandum to Pemindez
who replied that no possibility of a Chilean territorial
cession to Bolivia existed since all such matters had been
concluded by the 1904 treaty.*33 In November 1943
Chancellor Perntndez, apparently in a conciliatory move,
told Ostrla Outljrrez that he would invite Bolivia to adhere
to any Chilean-Argentine customs union agreement that might
be reached. But the fragile ties between Bolivia and Chile
were again shaken by the series of Bolivian-Paraguayan
agreements of November 1943*
The major development in Bolivian foreign relations
in the latter months of 1943 was the Bol1vlan-Paraguayan
rapprochement signaled by the agreements signed during a
presidential interview at Villa Montes in November. As we
have seen, efforts in this direction were initiated while
Tomis Manuel Elio was chancellor. Nevertheless, implementa
tion of those plans was realized by Salinas Aramayo, who had
previously served as the Andean representative in Paraguay,
and by the Bolivian minister in Asuncion, Guillermo
Francovioh.
132()atrla Outlirrez, Una obra y un destlno (Buenos

Aires: Editorial Ayaouoho, 1948), p. 58.
133Note 363, to La Paz, Fernando Ouaohalla, October

6, 1943# "Bebajada de Bolivia en los Bstados Unldos de
America” (Agosto-Dlolembre 1943), ABFM.
In April 1943 Francovich had furnished the
Chancellory In La Paz with a memorandum on the matters
which required consideration In Andean relations with
Paraguay. The visit of President Morlnlgo to La Paz in
July 1943 was the occasion for preliminary discussions on
strengthening Bolivian-Paraguayan relations. Therefore,
by mid-October 1943 agreement had been reached on most of
the conventions, protocols, and notes to be signed at Villa
Montes. One of Bolivia's major objectives in the negotia
tions prior to the interview was to persuade Paraguay to
accept a clause on unrestricted freedom of transit in the
proposed protocol on international cooperation. A cable
from Salinas Aramayo to Francovich, dated October 26, stated
that the Bolivian Chancellory considered the proposed free
transit clause a fundamental element of the protocol,
adding that Bolivia would be willing to grant economic
advantages in return for Paraguayan approval.*34 Paraguay,
however, preferred to postpone the consideration of the
free transit matter until some later date.
The Villa Montes interview between President
Morlnlgo of Paraguay and President Pefiaranda was the
occasion for the signing of several significant agreements
134q able 61, to Asuncl6n, Salinas Aramayo, October

26, 1943, cited in Note 369/409« to La Paz, Guillermo
Francovich, November 10, 1943* "Legacidn de Bolivia en el
Paraguay" (Septiembre-Noviembre 1943)# ABFM.
by Carloa Salinas Aramayo and Paraguayan Chancellor Lula
A. Argafia on November 16. The Protocol on International
Cooperation had the greatest Importance politically*
According to Ita terms, the parties agreed to establish
a policy of rapprochement and collaboration, consulting one
another about problems of continental Importance,*35 Most
significantly, the two governments agreed In Article III
of the protocol to lend "reciprocal collaboration and
help" to the friendly efforts undertaken by either of them
to resolve their problem of r o e d l t e r r a n e l d a d .1 ^ Such
efforts were to be made "within a spirit of respect for
the effective International pacts and of harmony and
solidarity with the nations of the continent."
The foreign ministers also signed three conventions.^
One contained the agreement to establish a mixed commission
to study the bases for a general blnatlonal commercial
treaty and, In the meantime, to regulate trade by a modus
vlvendl. A second convention obligated the governments to
exercise Joint action to obtain financing for the
construction of a highway linking the republics across the
^^Qutllrrez, una obra y un destlno, op. olt.. p. 318

(text).
136Ibld.
137ciroular 27, November 26, 1943, "Circulares"
(1942-1945), ABFM.
453
Chaco.*38 The two parties agreed, in an exchange of
confidential notes, to seek jointly the flnanolng of this
project by the United States government.1^ The govern
ments agreed in the third convention to organize a mixed
commission to study and prepare the bases for a convention
on the construction of a pipeline across the Chaco to
carry Bolivian petroleum to a navigable port on the

lilO
Paraguay River.
Among the most important of the six sets of
confidential notes exchanged was one In which Bolivia and
Paraguay agreed to present a joint request to the
Argentine government that freight rates for their products
be lowered by 50 per cent on the Formosa-Embaroaclln
section of Argentina's railroad system. In another set of
notes, the parties agreed to proceed toward compliance
with Article 7 of the peace treaty of July 21, 1938, In
which Paraguay promised to grant Bolivia a free zone at
Puerto Casado.
The Villa Montes agreements had repercussions on
many fronts. A United States observer stated that the
1 3 8 ( ) u t i 4 r r e z , Una obra y un destlno, o d . olt.. ‘

PP. 317-318 ( t e x t ) . -------- ------------- ---------
^^circular 27, loc. olt. i Despatch 1550, to

Washington, Wesley Frosfn(Xsunol6n), November 20, 1943
(DS)724.34/76.
^ O u t i f r r e z , Una obra y un destlno, op. clt., p. 317
(text). — —
results of the Interview, by reducing the limitations
imposed upon the two small countries by geographic and

ijn
economic factors, might affect the continental equilibrium.
Argentina, eager to protect her predominance in Asunel6n,
had little Interest in seeing relations between Paraguay
and Bolivia become too Intimate and probably was not
pleased with the accomplishments in this direction.
Paraguayan President Morlnlgo1s visit to Buenos Aires in
December 1943 was in all probability used by the Casa
Rosada to woo Asunci6n back toward solid ties with that
country.1**2 From Santiago, Ostrla Gutierrez reported
that Bolivia's active Paraguayan policy, the Villa Montes
agreements, in general, and the Protocol on International
Cooperation,specifically, had provoked a strong reaction in
Chilean circles.1**^
Carlos Salinas Aramayo's service as foreign minister
was abruptly terminated on December 20, 1943, by the over
throw of the Pefiaranda government. During the four-month
period in which he was chancellor, Salinas Aramayo persisted
■^Despatch 1550, loc. clt.
■^^Note 649/465, to La Paz, Francovich, December 22,

1943, Legacion de Bolivia en el Paraguay" (Novlembre-
Dlclembre 1943)» ABFM.
lJ*3lfote 731 > to La Paz, Ostrla Outllrrez, November

19, 1943, "Babajada de Bolivia en Chile" (Noviembre-
455
In the policy of close collaboration with the United States
and Improved ties with Chile. His most notable achievement,
however, was in promoting closer ties with Asuncl6n along
the lines earlier traced by Ostrla Gutllrrez.

/
IV. BOLIVIAN FOREION RELATIONS 1939-1943

ANALYSIS AND CONCLUSIONS
The most important problem for Bolivian foreign
relations after the death of President OermAn Busch was
that of determining the nation's policy with respect to the
world war and its Implications. That policy, from the

*
very outset of the European conflict In September 1939,
was oriented in a pro-Allled direction, even though the
nation maintained an official neutrality until after the
Japanese attack on Pearl Harbor. During the early war
years, La Paz moved steadily toward closer relations with
the United States: German Minister Ernst Wendler was
expelled In July 1941, diplomatic relations were severed
with the Axis countries in January 1942, and In April 1943,
President Pefiaranda decreed that Bolivia was In a state of
war with the signatories of the Axis Pact. The Bolivian
President, backed by congressional ratification of Bolivia's
adherence to the Declaration of the United Nations,
officially declared war on December 4, 1943.
This basic foreign policy orientation can be
attributed to many factors. Bolivia was a traditional

advocate of the rule of law in International relatione, a
principle now threatened by the Nazi system. The Andean
nation's devotion to law as the arbiter of relations between
states had been enforced by her membership In the inter-
American system. The policy of the hemisphere's most
powerful nation was extremely Influential In moving La
Paz toward the Allied cause. Bolivia's geographical
location, lacking direct access to the oceanic shipping
lines and separated from major non-American mineral markets
by those oceans, precluded a wartime defiance of the United
States. In addition, the large mine owners, for business
and personal reasons, supported strong economic and
political ties with the United States and Oreat Britain.
Bolivia's chancellor at the onset of the war,
Alberto Ostrla Gutierrez, was a strong spokesman for the
nation's democratic elements and an ardent advocate of
close ties with the United States. This preference by
Ostrla for ties with the United States cannot be understood
in doctrinal terms alone, however. Bolivia's relations
with the United States were structured by the sale of
strategic materials to that country In exchange for North
American cooperation in a program of national development.
The process of formulating a binatlonal cooperative program,
Involving substantial Bolivian exports to the United States
and Important economic and technical assistance from

Washington, represented the major new development In
Bolivian foreign relations in the 1939-1943 period. Andean
proposals for a program of economic cooperation with the
United States appeared early during this period. Ostrla
Outllrrez presented a plan of this nature to Sumner Welles
in September 1939 in Panama. In December of the same year,
Luis Fernando Guachalla presented to the State Department
a plan for the economic reconstruction of Bolivia with
United States cooperation. Thus, by late 1939, Bolivian
leaders envisaged an era of close and, hopefully, fruitful
relations with Washington. By December 1943 the policy
Inaugurated by Ostrla Outllrrez had obtained the
collaboration of the United States in a wide variety of
financial, industrial, agricultural, social, communications,
and health projects.
, In spite of the accomplishments of this policy,
however, relations with Washington during these years were
never completely comfortable or satisfactory. A number of
disruptive forces constantly disturbed these relations.
The ultranationalist opposition to the Pefiaranda government,
embodied in the M.N.R., assumed a harshly critical stance
toward the government's pro-Allied policy. Ideologically,
members of this group opposed not only North American
imperlallsmo, but also the Bolivian economic and social
aristocracy, the rosea, epitomized by the mining interests.

The strategic mineral contracts were viewed as evidence of
a conspiracy between these hated forces whereby the producers
would gain comfortable profits for themselves but not
enough to benefit the laboring class, while the Yanqui
escaped the burden of paying higher prices which a more
vigorous national government might have demanded. The
M.K.R*, therefore, challenged the policy of cooperation
with Washington at every turn. A similar challenge, with
different motives, came from the community of aliens or
naturalised Bolivian citizens with German, Japanese, or
Italian backgrounds or sympathies whose interests and causes
were threatened by strong Bolivian-United States relations.
A third disruptive element was represented by the Bolivian
economic sectors that were attracted by offers emanating
not from the United States but from the neighboring
countries, especially Argentina. The discordant theme
sounded by these elements was naturally supported by the
poor working conditions of the miners and general labor
unrest, wartime shortages, the rising cost of living, and
often the repressive measures and ineptitudes of the
government Itself.
Another development of significance during this
period was the policy of creating friendly and practical
eoonomlc and political relations with Paraguay. Early steps
in this dlreotlon were taken by Ostrla Outltfrrez at the

459
Meeting of Consultation at Panama In 1939* Progress In
this polloy continued until the Plata regional conference In
early 1941; but after the differences between the Bolivian
and Paraguayan delegations at this meeting proved to be so
basic In oertaln matters, relations cooled. A hew effort
to strengthen ties between La Paz and Asuncl6n was made In
late 1942 and 1943* And, as we have seen, significant
political and economic agreements were reached by
representatives of the two countries at Villa Montes In
November 1943.
A review of the major objectives of Bolivian foreign
policy In this four-year period reveals that, while new
concerns and emphases assumed Importance, a definite
continuity was maintained with the diplomacy of the 1936-
1939 period. Plve of the more general objectives may be
listed in the following manner: (1) to guarantee markets
for the nation*s exports In the changing International
situation, (2) to assure the essential Imports, (3) to
provide for the territorial aeourlty and polltloal
Independence of the nation, (4) to promote arrangements
that counteract the geographically-imposed limitations on
the nation's development and sovereignty, and (5) to provide
for national development through International contacts.
Bolivia's primordial concern with guaranteeing
markets for her mineral exports grew out of the fact that
460
these exports were the only important source of foreign
exchange. This preoccupation was visible at the Plrst
Meeting of Ministers of Foreign Affairs at Panama in
Bolivian efforts to avoid neutrality declarations
detrimental to her mineral shipments to Great Britain and
to obtain a mineral agreement with the United States. The
element of uncertainty in the proposed mineral contracts
with Japan was one of the major factors that led Bolivian
producers and government officials to the decision to sell
their ores to the United States. Later, when mineral
markets in Great Britain and the United States were secure,
the Bolivian objectives were to obtain the highest prices
possible for their products and longer contracts.
Bolivia's dependence upon essential imports of
foodstuffs, machinery, and other supplies required the
special attention of the nation's Foreign Ministry.
Wartime demands and shortages among Bolivia's industrial
and food-producing trade partners constantly threatened the
flow of vital Imports. The Andean nation's vulnerability
in this respect was most apparent in her relations with
Argentina, the primary supplier of basic foodstuffs for
Bolivia. La Paz was also careful to request special
consideration for exports from the United States in the
agreements signed with that country.
The Andean objective of guaranteeing the nation's

territorial integrity and political independence through
international agreements was readily visible in much of the
diplomatic activity of this period. Bolivian officials
were desirous that the closer commercial relations with
the United States be oonverted into a political arrangement
by which Washington would guarantee Bolivia's territorial
integrity, a responsibility that the United States would
not accept. This aim corresponded to Ostrla Outltfrrez's
view that Bolivia's natural resources should assume a
political as well as an economic function. A different
type of binatlonal security guarantee was sought and
obtained in the nonaggression agreement with Chile in
January 19^1 and in the pacts celebrated with Paraguay in
March 19^0 and in November 19^3. On a multilateral level,
it has been noted that one of Bolivia's contributions at
the Second Meeting of Ministers of Foreign Affairs in
Havana, Cuba, was the concept of a system of collective
security for lntracontlnental relations.
One of the persistent hopes cherished in Bolivia
was that of an arrangement with Chile through which the
Andean nation would obtain her own port on the Pacific,
thus changing her landlocked geographical position. Since
efforts to this end during this period were frustrated,
active efforts were undertaken to counteract the disadvan
tages of that unfortunate situation. One of the major

462
diplomatic efforts of the Bolivian government along these
lines was embodied in the promotion of the regional
conference of the countries of the Plata. There, Ostrla
Gutierrez sought to promote a regional agreement on
unlimited freedom of transit for landlocked states, proposed
the establishment of semi-sovereign enclaves for Bolivia
and Paraguay in fluvial ports of access to the Atlantic
for facilitating trade, and recommended liberalization of
visa requirements for Immigrants In transit to Bolivia
and Paraguay. These measures mere intended to provide
through international agreements some of the attributes
of national sovereignty that Bolivia lacked as the result
of her geographical situation. Bilateral agreements were
also promoted with Paraguay, Brazil, and Chile in an
attempt to Improve the communications facilities connecting
Bolivia with the maritime trade routes.
The objective of promoting domestic economic and
social development with assistance and cooperation gained
through International agreements moved toward the position
of top priority within the hierarchy of objectives pursued
by Bolivian foreign policy in those years. Many Andean
leaders agreed that the international situation offered
unique opportunities for registering significant gains in
national development. David Alvlstegul manifested a popular
sentiment in a note directed to Alberto Ostrla Gutierrez in

October 1940 ...
The moment la exceptional and, necessarily, brief,
as I have aald already; for that very reason, me muat
haaten to take advantage of It slnoe, when the war
ends, the economlo conditions of the world will be
very different from thoae of today. The policy of the
United States, especially In Ita relatlona with our
country, will change fundamentally and never again
will there be preaented to ua the opportunity for
organizing the development of our baalc wealth with
the condltlona that are preaented to ua n o w . 144
Within the framework of Bolivian-United Statea
relatlona, the poaalblllty of pursuing this objective of
national development was moat promising. The Andean nation
was In the rare position of possessing resourcea for which
the nation of the north was willing to pay in the form of
satisfactory prices, economic cooperation, technical
expertise, and military equipment. Such opportunities
were not restricted to relatlona with the United Statea,
however. Petroleum shortages throughout the Plata River
baaln gave Bolivia a splendid chance to replace the
traditional North American suppliers of that market.
Reference has been made to a modification In Bolivia's
Argentine policy considered by Anze Matlenzo that would have
given priority to the development of the national petroleum
industry. Although the transition was not Implemented,
'
1^ o t e 524/335, to La Paz, Alvlstegul, October 17,
1940, "Legael6n de Bolivia en el Brasil" (Novlembre-
Dlclembre 1940), 3, ABFM.
46*
agreements were reached with Argentina and Brazil that
contained provisions for promoting petroleum production
In Bolivia's subandean region*
This study has revealed that Bolivian diplomacy
during this period managed some definite gains In achieving
the objectives of the nation's foreign policy. A variety
of agreements with the United States provided positive
advantages for the Andean nation, Bolivian diplomacy with
Argentina registered Important gains. The bilateral
railroad and petroleum agreements guaranteed the financial
support of Buenos Aires for a variety of projects. An
Important joint highway project was also agreed upon which
provided for definite Argentine assistance. At the same
time, Bolivian diplomats, In spite of their nation's
Identification with the cause of the United States In the
war effort, prevented the development of any serious
conflicts with Buenos Aires. Another substantial achievement
in Bolivian foreign relations was the regional conference of
1941. Although Bolivian representatives were disappointed
with Its results, positive, if preliminary, steps were
taken for promoting regional commercial exchange and for
providing Bolivia and Paraguay with useful special facilities.
The Villa Montes agreements with Paraguay must also be
regarded as a significant milestone in the Andean polioy of
rapprochement with Asuncion. The same category of

465
achievement was obtained In the Aranha-El£o agreements
of June 1943* This review of gains Indicates, however,
that Bolivia's accomplishments In foreign relations once
again primarily Involved the Andean nation's eastern
neighbors and the United States.
Thus, at the time of the December 20, 1943
revolution, Bolivia's foreign relations were In a relatively
satisfactory state. Recent series of agreements with
Brazil and Paraguay Indicated that ties with these states
were on the upswing. Relations with Argentina were apparent
ly acceptable, although alleged Argentine Involvement In
the revolution of 1943 raised some doubts In this respect.
Associations with Uruguay and Peru were satisfactory, and
an official cordiality had recently been restored to
Bolivian-Chilean ties. A number of matters were still
pending with the United States, Including the conclusion of
a new tin contract, final agreement on a program
Implementing the Magruder Mission recommendations, and the
conclusion of a quinine agreement. However, a climate of
fundamental cordiality Indicated that these matters would
be concluded shortly In all likelihood. While not utilizing
to full advantage the opportunities presented by the wartime
situation, Bolivian diplomacy In the 1939-1943 period had
managed to avoid any serious pitfalls and had achieved
moderate success In International relations.

CHAPTER VII
THE DIPLOMACY 07 THE VILLARROBL REGIME

(1943-1946)
A revolutionary movement led by a group of young
army offloera and members of the Movlmlento Naclonalleta
Revoluoionario (M.N.R.) seized the Bolivian government on
December 20, 19^3. President Pefiaranda, together Kith
other high government official# and generals, was im
prisoned temporarily and then allowed to leave the country
for Arlca. A Junta of Government was immediately constituted.
It was composed of representatives of the M.N.R. and of the
Army, three Independent civilian members, and Major Alberto
Taborga Terrazas, whose transit police had collaborated in
the almost bloodless coup d'etat.1 Major Gualberto
Vlllarroel L6pez presided over the Junta; Victor Paz
Estenssoro, chief of the M.N.R., was named Minister of
Finance; Jos6 Tamayo, a civilian not officially affiliated
with the M.N.R., was named Foreign Minister.
The new Bolivian government was essentially
revisionist in nature. Its two principal components, the
nationalists who formed the M.N.R. and the army officers
^Luls Pefialoza, Hi at or ia del Movlmlento Naclonalleta

Revoluoionario 1941-195& (La PazTTialtorlai Libreria
"Juveniud," 1903}* p. 59.
467
who were members of an organization known as RADEPA
(Raz6n de Patrla), had been thoroughly dissatisfied with
the leadership of the traditional political and military
classes during and following the Chaco War, vowing to work
for a radical transformation of Bolivia's national life.
While the members of the M.N.R. sharply criticized the
Pefiaranda government in the civilian sector, acting mostly
In Congress and through the press, officers associated
with RADEPA managed to gain wide Influence within the
nation's Army. Similar objectives and reciprocal needs led
to the coalition represented in the governing Junta
described by one Bolivian observer, Lula Pefialoza, In these
terms:
For the first time, Bolivia had a government that,

almost in its totality, was disassociated with the
large mining companies and whose general orientation
was of independence with relation to them, and— In
distinction from the government of Busch— with
unified program of objectives and of criteria.?
The purpose of this chapter la to .^describe and
analyze the foreign policy of this revisionist government.
Inasmuch as the direction of the nation's diplomacy since
the Chaco War had been In the hands of Bolivia's traditional
elite, It had come under a constant and harsh barrage of
criticism from the nationalists who now formed part of the
Junta of Government. Augusto clspedes, a member of the
2Ibid.
468
N.N.R. and one of the editors of I* Calle. had labeled the
foreign policies of the past governments la dlplomaela
r o s q u e r a .3 h o w that the critics were In power, what course
would they take In guiding the nation's foreign relations?
What changes would be made In the diplomatic chartlngs of
the past? And how much of the policies of Flnot, Ostrla

*
Qutllrrez, and others would the spokesmein of the new
government accept and continue to promote as programs
consistent with the national Interest? __
In shaping Its foreign policy, the Vlllarroel
government was forced to contend with a series of adverse
factors. The first of these was the regime's unfavorable
Image in the rest of the continent. The State Department
was convinced that persons and groups sympathetic to the
Axis cause, located both In Bolivia and in Argentina, had
supported the revolutionary movement and that certain
members of the new Junta shared this pro-Axis sentiment.
This allegation led the other American states, with the
exception of Argentina, to withhold diplomatic recognition
from the Vlllarroel government for a period of six months.
This Isolation was the first major problem confronting the
revisionist regime in La Paz. Second, the movement of World
Âugusto Clspedea, SI dlctador sulclda (Santiago de

Chile: Bdltorlal Unlveraltaria, S.A., l^SbJ, P. 150.
469
War II toward Its conclusion aroused anxiety in Bolivian
government ciroles with respect to the future of the
nation's tin market and of the cooperative program with the
United States. Finally, a third factor affecting Bolivian
foreign relations In this 1943-1946 period was the strong
and persistent opposition to the Vlllarroel government that
existed both within the country and in exile. The govern-
ment's inability to cope satisfactorily with this situation
led to its fall in July 1946.
I. THE CRJANI DOCTRINE AND BOLIVIA'S ISOLATION
The provisional Junta of Government immediately took
steps to dispel any doubts with respect to its international
orientation. In a note to the dean of the diplomatic corps
dated December 20, the new government promised to observe
all international agreements contracted by the nation,
ratified the republic's adherence to the Declaration of the
United Nations and to the Atlantic Charter, and stated its
intention to reestablish constitutional rule and individual
liberties within the country.^ It expressed the hope that
the nations with which Bolivia maintained friendly relations
prior to the ohange in government would continue their polioy
**Note 945* to Nuncio Apost6lioo de su Santldad,

Egidio Lari, Jose Tamayo, December 20, 1943, "II Oficlos
de R.R. de Bolivia" (1943)* ABFM.
470
with the new regime.
On December 22 the Junta approved a resolution'
defining "its intention to make effective cooperation with
the United Nations and especially with the United States
in their war effort against the Axis powers."*’ Measures
consonant with this determination* it said* would be taken
swiftly and "without the useless verbiage which has been
characteristic of the deposed government." The resolution
indicated that the new government would be willing to
consider a contract providing for the exclusive exportation
of quinine bark and anti-malarial products to the United
States* nationalisation of businesses of German and
Japanese cltlssns* and a new tin contract at higher prices*
a portion of the Increase to be set aside for a plan of
social assistance. The revolutionary government was
seeking to demonstrate that the Allied war effort would
in no way be harmed by its activities* but rather would be
strengthened.
Bolivia's hope for swift diplomatic recognition by
the republics of the continent met opposition* however* in
Montevideo and Washington. Alberto Guani* Uruguay's vice-
president and chairman of the Emergency Advisory Committee
^Telegram 2000* to Washington* Boal* December 23*

1943, FR, V (1943), 537.
6Ibid.
I
471
for Political Defense, proposed to that group that It
reoommend to the American republics that during the war
emergency they not recognize a government instituted by
force without first either consulting one another about
that government's willingness to comply with inter-
American defense measures or exchanging information about
the circumstances that led to the establishment of the
regime. Resolution XXII, approved by the Committee for
Political Defense on December 24, 1943, read as follows:
To recommend to the American governments which

have declared war on the Axis powers or have broken
relations with them, that for the duration of the
present world conflict they do not proceed to the
recognition of a new government Instituted by force,
before consulting among themselves for the purpose
of determining whether this government complies with
the inter-American undertakings for the defense of
the Continent, nor before oarrylng out an exchange
of information as to the circumstances which have
determined the establishment of the said government.7
The Latin American republics, with the exception of
Argentina and, of course, Bolivia, encouraged by the
importance given to the matter by the Department of State,
responded favorably to the committee's recommendation. On
January 5 , 1944, the committee decided to recommend that the
consultation and exchange of information referred to in
Resolution XXXI be applied In the Bolivian situation, and an
Êmergency Advisory Committee for Political Defense,

Second Annual Report. Submitted to the Governments of the
American Republics, July 15, 1943-October 15, 1944
(Montevideo, 1944), p. 79 .
472
exchange of information through diplomatic channels was
initiated.®
The first formal BSlivian response to the activity
in Montevideo came on December 27 in a memorandum delivered
to Quanl by Valdls Musters, Andean minister in Uruguay and
liaison officer with the Committee for Political Defense.
The note affirmed once again Bolivia's intentions to fulfill
the obligations assumed at the Third Meeting of Consultation
and to adopt severe measures against all Axis efforts to
penetrate the continent.^ On December 30, while the
committee waited for final replies to its recommendation,
Valdes Musters filed a note of protest with that Body,
charging it with exceeding its authority and violating the
international principles of Judicial equality of states
and self-determination by sovereign peoples to constitute
their own form of government.10
Early in January 1944 Bolivian Chancellor Josd Tamayo
Instructed his representatives in the exterior to protest
the action of the Committee for Political Defense as a
®Ibld.. p. 92 .
% o t e 729-520, to La Pas, Valdds Musters, Deoember 27,

1943* "Legaoidn de Bolivia en el Uruguay" (Noviembre-
Dlclembre 1943)# ABFM; Telegram 1036. to Washington, Carl
Spaeth (Montevideo), Deoember 27, 1943, PR, V (,943), 35.
10Circular 1, January 4. 1944, "Oflclos de Relaclones

Exterlores de Bolivia" I, 1944, ABFMj Telegram 1105, to
Washington, Spaeth, December 31, 1943, PR, V (1943), 38 .
473
departure from the moet elemental principles of Inter
national law .11 Tamayo told them, "You must make every
effort to obtain the recognition of the Bolivian government
In the briefest time possible be It In Independent form or
In conjunction with other American nations, avoiding, thus,
the acceptance of the Ouanl formula ."12 The Chancellor
suggested that the committee recommendation be countered by
stressing the dangers to the sovereignty of all American
nations Inherent In It and by representing Its Uruguayan
proponent as a personal enemy of Bolivia
In an effort to bolster the charge that Alberto
Ouanl was acting out of some personal animosity toward the
Andean state, Valdes Musters Informed La Paz on January 10,
1944, that diverse actions over the years proved that Ouanl
"Is an enemy of our country."1^ These actions Included
Ouanl1s position at the League of Nations in opposition to
applying sanctions against Paraguay during the Chaco War,
his reluctance to preside over the Uruguayan delegation to
the Plata regional conference In 1941, his delays in naming
heads of mission in La Paz, and his evasion of invitations
11Ibid.
12Ibid.. p. 6 .
13Note 10/7# to La Paz, Valdtfs Musters, January 10*
1944. "Legacldn de Bolivia en el Uruguay" (Bnero-Abril 1944-
1945)# ABFM.
474
to atop over In La Paz on hla recent visit to Chile.
In an effort to maintain unofficial contact with the
governments of those American countries where the
diplomatic representatives of the Pefiaranda governments had
resigned, the governing Junta appointed confidential agents.
In Washington, where Luis Fernando Quachalla had renounced
his post, Enrique Sdnchez Lozada was named confidential
agent by the new regime. Enrique Baldlvieso was despatched
to Rio de Janeiro to take David Alvlstegui's place, and
Fernando Campero Alvarez traveled to Santiago to fill the
vacancy left by Ostrla Gutierrez’s resignation. Sinchez
Lozada, however, soon alienated himself from the government
in La Paz with his vacillating attitude toward the Junta
and by suggesting that if members of the leftist and
democratically-oriented Partldo de la Izqulerda
Revoluclonarla (P.I.R.), especially its leader Jos£ Antonio
Arze, were Incorporated into the new government, recog
nition by the United States was likely to follow.1^ Junta
members were unwilling to accept Arze's conditions for
entering the government and replaced their first confidential
agent in Washington with the Under Secretary of the Foreign
Ministry, Fernando Iturralde Chlnel.
A Campero Alvarez report from Chile dated January 14,
^^Ren^ Ballivlin Calder6n, Hombres de buena voluntad

(La Paz: Editorial "ArtisticaJ' 1945)/ p . 1 W . --------------
475
1944, discloses something of the nature of the missions
undertaken by these confidential agents, lie Indicated that
upon his arrival in Santiago, he had found in all circles
an attitude "totally adverse and dlsfavorable" toward the

15
new Bolivian government. The view that the revolutionary
regime was of a Nazi-fascist character, under the influence
of like elements In Argentina, was widely accepted.
Campero Alvarez felt the hostile atmosphere was best explain -
ed as the result of Intense State Department propaganda.
Of course, the confidential agent's primary objective
was to negotiate the recognition of the regime In La Paz.
News agencies, however, by reporting his trip to the
Chilean capital, had foiled his plans to work In secret.
Therefore, the confidential agent sought to clarify the
Bolivian situation by remarks to the press in which he
emphasized three things: (1 ) the change in government was
totally consolidated as the expression of the unanimous
sentiment of the populace, (2 ) the new government was
authentically democratic as proved by its loyal support for
signed pacts and contracted obligations, and (3 ) the new
regime wanted to develop close and friendly relations with
^^Note (no number), to La Paz, Campero Alvarez,

January 14. 1944, "Embajada de Bolivia en Chile" (Enero-
Abril 1944), ABFK.
476
the neighboring countries, especially Chile.^ Several days
later, Campero Alvarez reported that, while public opinion
was shifting in a favorable direction with respect to the
Bolivian government, the Chilean Chancellory was still
indecisive about recognition.
In order to understand more adequately the challenge
confronting the new Bolivian government, it might be useful
to review the major elements of the United States govern
ment's indictment against that regime. Even though mis
givings were voiced in several countries about the nature
of the new leadership in La Paz and about Argentina's role
in the revolution, there can be no doubt that the United
States was the basic force behind the movement to quarantine
this regime wlttaPlts unascuring past and questionable
loyalties.
Early reports about the orientation of the Junta of
Government from United States Ambassador Pierre de L. Boal
increased Washington's misgivings about the new government.
His report of December 29, 1943* was distinctly unfavorable
to the new Junta, although the brunt of the aasusations fell
on the N.N.R. element.1? Boal wrote that it was probable,
although not provable, that N.N.R. members had received, in
l6 Ibid., pp. 2-3.
^Telegram 2094, to Washington, Boal, Deoember 29,

1943, PR, V (1943), 539.
477
some form, financial support from Bolivians or resident
aliens with pro-Axis sympathies and support from Argentina.
He advised the State Department to view the present Bolivian
declarations of adherence to the Allied cause In the light
of the past performance of Junta members and warned that the
International attitude of the regime could easily shift
away from a position of cooperation with the United States,
threatening the strategic mineral contracts.
A State Department memorandum, circulated among the
American republics In January 1944 as Washington's contri
bution to the consultative process, contained definite and
more extensive charges of relations between the Bolivian

18
regime and "elements hostile to the continental defense.
With reference to the chief components of the Junta of
Government (the M.N.R. and the young army officers), the
memo stated, "Both groups are under Nazi Influence proceeding
from Europe as well as from South America and are frankly
hostile to the purposes of inter-American d e f e n s e . T h e
most Important of the accusations contained In the document
may be summarized In the following way:
1. the program and action of the M.N.R. manifested

an orientation hostile to continental principles
^"Memorandum of the Department of State of the United

States to the American Chancellories," contained In Clroular
G.S. 10, "Ciroulares," ABFM; Qutldrrez, Una revoluel6n tras
loa Andes (Santiago: Editorial Nasclmlento, 1544), 220.
■^Guti^rrez, ibid.
478
and solidarity. The group's program, published

on June 7, 1942, utilized extensively "fascist
language," discredited the demooratio form of
government, glorified the all-powerful state
and the Fuehrer Prinzlp, and contained anti-
Semitic racist doctrine. The action of members
of the M.N.R. had been consistently incompatible
with the policy of continental cooperation.
2. Members of the M.N.R. had maintained close con

tacts with Nazi, pro-Nazi, and nationalistic
groups in Germany, Argentina, and Bolivia,
receiving from them money and promises of
political support if their group managed to
gain control of the government in Bolivia.
3. The army officers in the revolutionary Junta

were also under the Influence of Nazi principles.
Major Qualberto Vlllarroel was a close friend
of Major Elias Belmonte Pab6n who had been
implicated in the German-supported subversive
plot against the Pefiaranda government in 1941.
4. Action by the Junta since the December 20, 1943

revolution indicated that it was continuing its
associations with Nazi Germany.20
Boal1s report and the State Department memorandum
indicated that Washington was disturbed not only by the
nature of Bolivia's new government, but also by the
probability of Argentina's participation in the revolutionary
movement. A closer relationship between La Paz and Buenos
Aires might threaten the Bolivian-United States strategic
material contracts. More importantly, the revolution in
Bolivia could signify an intensive Argentine to form, by
Intrigue and clandestine assistance, a bloc of nations that
would share her neutralist and Independent sentiments.
20Ibid.
479
Washington's anxieties were relieved somewhat when the
Argentine government abruptly broke relations with the Axis
on January 26,
The period of Inter-American consultation ended in
late January; on January 22 Uruguay and Cuba became the first
American states to announce officially their decision not to
recognize the Bolivian government. A similar announcement
came from the State Department on January 24; the other
American republics and Great Britain followed the same
course. By the end of January 1944 Bolivia was politically
isolated from the other American republics with a single
exception. Argentina, herself Isolated within continental
relations and officially following a neutral course with
respect to the world war, had recognized the Bolivian Junta
of Government on January 3, 1944.
Bolivia's relations with Argentina during the early
weeks of the Ouanl episode merit a special note. The Andean
ambassador in Buenos Aires, Adolfo Costa du Reis, reported
to La Paz late in December that his impression from the
earliest hours following the coup d'etat was that Argentina
would not delay in recognizing the new Bolivian government .21
Only the allegations by certain American countries that
^Note 671* to La Paz, Costa du Reis, Deoember 28,

1943, "Bnbajada de Bolivia en la Argentina" (Noviembre-
480
Argentina had been Involved In the revolution, he reported,
had prevented the Casa Roeada from granting Immediate
recognition. He stated that the Argentine government had
looked for support In favor of Joint recognition from
Brazil, Chile, and Paraguay5 however, he acknowledged that
the recommendation of the Committee for Political Defense
would make Argentina's bid more difficult. Nevertheless,
the Bolivian representative assured the Chancellory In La
Paz that "Argentina Is soon to recognize the Bolivian
government, but is attempting In every way to avoid having
its attitude confirm or be Interpreted as proof of Its
intervention In the revolutionary m o v e m e n t . T h e
ambassador was correct. On January 3, 1944, Argentine
Chancellor Alberto Gilbert notified the Bolivian Embassy of
his government's Intention to continue cordial relations
with the Andean government.
Argentina's recognition, however, coming when it did,
was beneficial to neither of the regimes. This stamp of
approval from the government In Buenos Aires could not but
confirm the suspicions of State Department officials that
the nation of the Plata had been actively involved In the
change of government in Bolivia. Costa du Reis later
reported that he had been Informed that the Argentine
January 26 decree that severed relations with the Axis had
Îbld., p. 4.
481
been caused principally by the Bolivian r e v o l u t i o n . 2 ^
According to hie source, Argentina feared that data would
be released verifying the charge of involvement by
Argentine nationalists in the Bolivian coup d'etat and
that, consequently, Buenos Aires would be even further
isolated within the continent. This prospect, therefore,
prompted the Argentine government to take preventive
action. This explanation of Argentina's decision to sever
relations with the Axis countries overlooks another
important development, however. During January the United
States and Oreat Britain had confronted the Ramirez
government with convincing evidence of Nazi espionage
activities in Argentina being carried on under the cloak
of diplomatic immunity.22* This revelation was most
certainly more significant in explaining the January 26
decree than was the Bolivian revolution.
The praotlcal and political consequences of Bolivia's
diplomatic isolation, although serious, were not as
disastrous as they might have been. Most importantly, the
refusal on the part of the United States government to
23lfote 35, to La Paz, Costa du Reis, January 31, 1944,

"Embajada de Bolivia en la Argentina" (Enero-Febrero 1944),
ABPM.
2i*Charles Earle Funk, (ed.) The Mew International Year

Book. A Compendium of the World's Progress r'or the Year
1$44. Têw York* Funic iWagnaiie Company, l£ft^), pp. 42-43.
recognize the Vlllarroel regime paralyzed the negotiations
In Washington concerning new mineral contracts. Late in
December 1943 representatives of the new Bolivian govern
ment were Informed that the Metals Reserve Corporation
would continue the purchase of tin on a day-to-day basis
and in accordance with the stipulations of the revised
contract of June 1942, but that no aspects of a new contract
would be d i s c u s s e d A c c o r d i n g to Ren4 Balllvlin's
account of the conversation, when he questioned the
day-to-day aspect of the provisional arrangement by re
minding the United States officials that the November 1940
contract was still In effect, he was curtly advised that
the United States did not consider herself linked by any
contract while the Bolivian situation remained uncertain.^
By mid-February 1944 most of the Bolivian mineral contracts
with the United States had expired with the exception of
the amended tungsten agreement that was due to end In May
1944, Although discussions with respect to contract
renewals were halted, the Department of State refrained
from taking drastic economic action against the Bolivian
Junta. No embargo or extraordinary trade restrictions were
25"Informe,n Ren< Balllviin C. contained in Note 14,

to La Paz, February 18, 1944, "Bmbajada de Bolivia en
E.B.U.U. de America," (Primer Semestre 1944), ABFMj
Balliviin Calderon, 0£. cit., p. 143,
^Balliviin Calder6n, ibid.

483
imposed nor were exchange credits frozen. Balliviin
reported from Washington, "It cannot be said that there are
reprisals, but it can be said that there is an extremely
prejudicial status quo, especially in the case of the

minerals."^7
Bolivia maintained relations with Brazil on an
unofficial basis but at a greatly reduced level in the first
half of 1944. Humberto Palza, the Andean confidential agent
who replaced Baldlvleso in Rio de Janeiro, stated that he
found no great hostility toward Bolivia in that city, but
instead an attitude among Brazilian officials that they
were fulfilling the obligations of inter-American agree
ments and of cooperation with Washington.2® Attempts were
made to continue the work of the binational commission on
petroleum exploitation and railroad construction by grant
ing special authorization to each country's chief national
representative in those bodies. These efforts were only
partially successful, however; the work of the commissions
was slowed and Palza reported that Itamaraty was maintaining
a posture of "cold analysis" with respect to the regime in
La Paz and especially in regard to its associations with
27Balllvl£n Calder6n, "Informs," 0£. pit., p. 4.
2®Humberto Palza, in a personal interview, Deoember

15, 1966, in La Paz.
484
Argentina.2^
Paraguay, however, appeared more reluctant to allow
the continental censure of the Bolivian government to
disturb the progress being made in their relations.
Although the Chancellory in Asunci6n announced on January
25, 1944, that Paraguay would refrain from recognizing the
new Andean government, shortly thereafter Paraguayan
President Mor£nigo explained that this position was
dictated solely by the nation's obligations under inter-
American a g r e e m e n t s . The veracity of his statement was
supported by the decree law of February 14 by which
Paraguay ratified several of the agreements signed at Villa
Montes the previous November. However, when in March 1944
Paraguay's former minister in La Paz, Tomis SalomSnl,
refused to travel to the Andean capital to carry on the
extraofficial relations that had been agreed to by his
government, the Bolivian Foreign Office recalled its
minister, Guillermo Francovlch, from Asuncl 6n.
Unofficial representation was also maintained in
Chile and Peru during the first half of 1944 primarily to
2^Note 71/33* to La Paz, Humberto Palza, March 21,

1944, "Bmbajada de Bolivia en el Brasil” (Enero-Julio 1944),
ABFM.
3°cable 34, to La Paz, Francovlch, February 13, 1944,

contained in Note 114/99* to La Paz, Francovlch, March 31,
1944. "Legacl6n de Bolivia en el Paraguay” (Bnero-Marzo
1944), ABFM.
485
persist In efforts to gain recognition or to promote move-
ment in that direction. However, relations with Uruguay
were so drastically affected by Quanlts major role in the
action against Bolivia that it would be years before they
again assumed the cordial nature of prior years. Only
with Argentina did Bolivia manage to pursue matters almost
on a "business as usual" basis.
in Buenos Aires, the Bolivian Junta of Government
replaced Ambassador Costa du Reis with an ad Interim chargd
d'affaires less identified with the dlplomacia rosquera.
Carlos Salamanca Figueroa. The new chargd d'affaires was
confronted by a fluid political situation in Argentina
which saw the ouster of President Ramirez in February 1944,
his replacement by Edelmlro Farrell, and the rise to power
of Colonel Juan D. Perdn. Chile announced her continuance
of relations with the new Argentine government, but the
United States advised delay; Washington later decided to
withhold its recognition of the Farrell regime.
Bolivia's relations with this Argentine government
appeared to have a promising future. Colonel Perdn, then
acting Minister of War, assured a Bolivian Embassy offiolal
that Argentina fully supported the revolutionary movement
operating in the Andean nation and had a special Interest
in increasing trade with Bolivia, adding that he was
confident other nations of South America would follow the

486
example set by Bolivia and Argentina .^1 Later, Argentine
Foreign Minister General Orlando L. Peluffo told Salamanoa
that he ahould be considered a deolded friend of Bolivia
alnce he had been a friend of President Busch.3®
In accordance with instructions he had carried from
La Paz, Salamanca, during early 1944, presented a number of
proposals that were designed not only to strengthen
Argentine-Bolivian commercial relations, but also to correct
Bolivia's perennially unfavorable balance of trade with her
neighbor to the south. Certain Argentine groups expressed
interest in purchasing Bolivian copper and lead over a
five-year period while another considered the possibility
of establishing a tire factory in Bolivia. Salamanca
received a favorable response from Argentine authorities
when he first suggested that that country might want to
consider a definite commitment to finance the entire
Yaoulba-Santa Cruz railroad. Thus, while Bolivia was
quarantined by the other American states, her relations
with Argentina were friendly and potentially productive.
By mid-1944, *however, the impending recognition of
31Hote 82. to La Paz, Carlos Salamanca Figueroa,

February 29* 1944. "Embajada de Bolivia en la Argentina"
(Enero-Febrero 1944), ABFM.
32Note 313, to La Paz, Salamanca Figueroa, Nay 16,

1944, "Embajada de Bolivia en la Argentina" (May 1944),
ABFM.
the Vlllarroel regime by the United States placed new stress
on Bolivian relations with Argentina. Salamanoa urged the
Bolivian Chancellory not to forfeit close relations with
Argentina In order to obtain Washington's approval, but to
follow a course that would balance the interests of those
two g i a n t s . 33 He was convinced that the program of
economic cooperation with the United States would provide
few benefits In the postwar period since North American
Interest In Bolivia's minerals would diminish. With these
considerations In mind, Bolivia hastened to assure
Argentina that recognition by the United States would
involve no restrictions whatsoever on Bolivia's relations
with Buenos Aires. Nevertheless, Salamanca reported that
suspicions did exist among Argentine officials that
recognition of the Andean government by Washington would
necessarily bring a diminished Andean Interest in ties with
Buenos Aires.34
In June 1944 the Vlllarroel government received the
long sought-after recognition by the American republics,
partly as the result of an arduous and frustrating series of
maneuvers by the Junta In La Paz. Leaders in the Andean
33Note 406, to La Paz, Salamanoa Figueroa, June 20,

1944. "Babajada de Bolivia en la Argentina1* (Junio-Julio
1944), ABFM.
34Note 394, to La Paz, Salamanca Figueroa, June 13,
1944 (same volume as footnote 33).
486
capital were well aware that the principal requisite for
recognition was to persuade Washington that the new
government was loyal to the Allied cause, Bolivian efforts
to demonstrate this loyalty fell into four categories:
(1) changing the composition of the Junta, (0) action
against Axis firms and citizens, (3) moves to constitu-
tlonallze the government, and (4) full compliance with
terms of the mineral contracts.
When the Junta's post-revolution declarations ■*on
foreign policy failed to convince the State Department that
Bolivia would continue to cooperate fully in continental
efforts against the Axis, La Paz was unsure of its
strategy. Apparently, Washington did not give members of
the Junta a clear signal of what was required for recog
nition until early February. Press reports indicated that
United States Ambassador Boal, immediately prior to his
return to Washington, advised Vlllarroel to rid the Junta
of its most objectionable m e m b e r s . 35 This advice was
seconded by reports from the Bolivian Embassy in Peru . ^
The recommendations brought new pressures to bear on the
M.N.R,-Army coalition of the Junta; Vlllarroel asked for
35n b w York Times, February 12, 1944, p. 7.
3^Note 1/39/44, to La Paz, Vlrrelra Paocleri,

February 8 , 1944, "Embajada de Bolivia en el Perii" (Primer
Semestre 1944), ABFM.
489
the realgnatlon of Auguato Clspedes and Carlos Montenegro,
two of the more militant and blatantly anti-American
members of the M.N.R. 37 Clspedes and Montenegro* together
with Major Taborga, resigned on February 9, the same date on
which the Junta Issued a supreme decree authorizing the
expropriation of the commercial and industrial properties
of Axis citizens.3® The predominant view within the Junta
of Government, a view championed by the RADEPA members,
held that a policy of accommodation to the United States
was the only rational course to follow even if it meant the
exclusion of the M.N.R. at least temporarily. One member
of the Junta advocated a more defiant course, however.
Bolivia's foreign minister, Joel Tamayo, favored the
idea of promoting an "austral bloc" of countries in South
America that would include Argentina, Bolivia, and Chile,
His views were shared by Carlos Salamanca Figueroa, the
Bolivian chargl d'affaires in Buenos Aires. Salamanca had
37Augusto Clspedes, El presidents coleado (Buenos

Aires: Editorial Jorge Alvarez, S.A., i^bb), p. 148; the
original composition of the Junta included three members of
the M.N.R., Augusto Clspadea (General Secretary), Carlos
Montenegro (Agriculture), and Victor Paz Estenssoro
(Flnanoe), four members of RADEPA, Vlllarroel, Josl
Celestino Pinto (Defense), Jorge Calero Vlsquez (Education),
and Antonio Ponce Montln (Public Works and Communications),
and four Independents, Major Taborga (Government), Victor
Andrade (Labor), Josl Tamayo (Foreign Relations) and Gustavo
Chacon Sanchez (Economy).
3Qe 1 Dlarlo, February 12, 1944, p. 12.

490
told his colleague In Rio de Janeiro, Humberto Palza, that
he was convinced that the Junta's recognition would not be
obtained through calling elections or any other domestic
m e a s u r e s I n s t e a d , he felt that the threat of an austral
bloc would lead to Brazil's recognition. Certainly, he
believed, Rio would try to prevent Bolivia from Joining an
arrangement that could challenge United States-Brazillan
hemispheric hegemony with Its economic potential and
political Influence.**0 Frustrated by the lack of progress
toward overcoming Bolivia's Isolation and, apparently
without consultation with other members of the Junta,
Tamayo decided to approach the Chilean government on the
subject of an austral bloc.
On March 7 * 1944, Tamayo Instructed the Bolivian
representative in Santiago to sound out Chilean officials
on the matter of a regional arrangement.*** The Bolivian
Foreign Minister referred to the closeness of relations
between Argentina, Chile, and Bolivia as the basis for
recuperating the "American union" so torn by misunderstanding.
39Note 63-27, to La Paz, Humberto Palza, March 16,

1944, "Babajada de Bolivia en el Brasil" (Enero-Jullo
1944), ABFM.
**°Ibld.
***Cable 34, to Santiago, Tamayo, March 7, 1944,

cited In Note 36/44, to La Paz, Joal Marla Paz Visquez,
March 23# 1944, "Embajada de Bolivia en Chile" (Enero-
Abrll 1944), ABFM.
491
Tamayo then suggested that the three countries could easily
reach agreement to form a solid political-economic bloc
designed to resist the difficulties of the postwar era.
The Tamayo Initiative, however, only further
diminished Bolivia's chances of gaining recognition quickly.
Chilean President Juan Antonio Rios rejected the. suggestion,
reaffirming again his nation's adherence to the concept of
Panamerlcanlsm. When the Tamayo message was brought to
Vlllarroel's attention by the Minister of Labor, Victor
Andrade, the President admitted that he had known nothing

42
about It. The Bolivian Junta asked for Tamayo's resig
nation on March 13, 1944; the next day Vlllarroel, after
accepting Tamayo's note of resignation, appointed Enrique
Baldivleso, a highly regarded socialist, to that post.
Eager to regain the ground lost by Tamayo's action,
the Vlllarroel government moved swiftly to demonstrate Its
democratic orientation and pro-Allled allegiance. On March
20 Vlllarroel convoked elections for the first Sunday in
July which would name a constituent assembly. The decree
outlined the assembly's responsibilities, granted a general
amnesty to those who had been accused of subversive

political activities, and reestablished freedom of the
^ I n a personal interview with Victor Andrade,

December 13, 1966, in La Paz.
492
press.^3 In the first days of April, Bolivia's governing
Junta assumed a "constitutional orientation"; Villarroel
became the provisional president of the republic and the

Junta was replaced by a cabinet of ministers. At the same
time, Victor Paz Estenssoro and the two N.N.R. Junta
members who had replaced C^spedes and Montenegro, resigned
to make themselves eligible for the July elections.
Additional measures were also taken to implement the
expropriation of Axis firms authorized earlier.
Washington was still not convinced, but the other
American republics were becoming restless with the delay in
resuming relations with Bolivia. They wanted to know what
the Andean government had to do to qualify for
recognition.44 The Bolivian government also wanted to know.
In April 1944 Minister of Labor Victor Andrade traveled to
the United States with the apparent purpose of attending an
international labor conference in Philadelphia. He also
visited Washington, however, and held conversations with
United States State Department officials including,
according to Andrade, Secretary of State Hull. The result
of Andrade's conversations was the May mission of Avra
^Circular PD1, March 20, 1944, "Circulares" (1942-

1945)# ABPM; El Diario, March 21, 1944, p. 4.
^Laurence Duggan, The Americas (New York: Henry Holt

and Company, 1949), pp. 105^T07T
493
Warren to La Paz, a mission described by Andrade as a
"face-saving" device for the United States, since he
believed that Washington had already decided to recognize
the Bolivian government.^**
The Villarroel government's most dramatic demonstra
tion of it8 loyalty to the cause of the Allies was timed
to coincide with the presence in Bolivia of the United
States mission. Avra Warren, the United States ambassador
in Panama, and General Ralph Wooten, Commander of the Sixth
United States Army Air Force, arrived in La Paz on May 9,
1944, for a review of the situation in Bolivia. On May 13,
the Bolivian government detained and delivered to United
States authorities for deportation eighty-one Japanese
and German subjects who were regarded by United States
Intelligence agencies as the most dangerous Axis elements
in the country.^ Warren later described the move as the
act by which "the Villarroel government committed Itself
Irrevocably to the cause of the United Nations."^
45in an interview with Victor Andrade, op. cit.;

also Balllvl&n Calder6n. Hombres de buena voluntad. op. cit..
pp. 141-142. ---
^Duggan, o£. cit., p. 107.
**?The complete English text was remitted to La Paz in

Note 77, Carlos Dorado, July 5, 1944, "Embajada de Bolivia
en E.E.U.U. de Norte America" (Jullo-Agosto 1944), ABPM;
also available in Outl4rrez, Una revoluol6n tras los Andes.
o p . cit., p. 253* this passage, p. £5$.
Ambassador Warren's report to the State Department
contained a number of considerations favorable to the
recognition of the reconstructed Villarroel government. He
wrote that the major Initiative of the December 20, 19^3
revolution had come from the army element that had
arranged a coalition of convenience with the M.N.R. to gain
vital civilian political support.^® Pollowing the coup
d'etat, however, when the military officers discovered that
the M.N.R. members of the Junta represented a distinct
liability In the efforts to gain recognition, Villarroel
proceeded to purge the government of members of that
party until, as Warren reported, " ... there remains not a
single representative of the M.N.R. in a position of
primary importance."^ The report Indicated that by mid-
1 9 ^ the revolutionary Junta apparently had won the
support of several sectors of the population, Including
substantial labor backing, thus freeing it from dependence
upon the M.N.R. Warren felt that provisional President
Villarroel would probably be elected constitutional chief
of the nation with or without recognition, and he suggested
that recognition would tend to promote closer ties between
the government and the traditional parties. Warren also
**®Outi<rrez, Ibid., p. 257.
49lbld.
495
pointed out that the performance of the provisional
government had given positive proof of Its adherence to
the Allied cause. The Villarroel government had maintained
the nation's mineral production and shipments to the United
States. According to the report, compliance with the
rubber agreement also had been satisfactory, and Bolivia
had resisted more profitable bids for that material from
Argentine interests.5°
Bolivian leaders were disappointed and Irritated
when recognition did not swiftly follow termination of the
Warren mission. Directions from the Chancellory instructed
representatives abroad to urge that relations be resumed
prior to the elections scheduled for July 2.51 However,
the State Department appeared reluctant to assume a forceful
position In favor of recognition. Only after Venezuela
and Colombia announced their intentions of recognizing the
Bolivian Junta did Washington proceed swiftly to suggest a
joint resumption of relations by the American states.5s
Recognition of the provisional regime In La Paz by the
United States and most of the Latin American republics
finally came on June 23, 1944.
5°Ibld., pp. 258-259.

5 1 H o t e 158-98, to La Paz, Humberto Palza, June 21,
1944. "Bmbajada de Bolivia en el Brasil" (Bnero-Jullo
1944), A B M .
5&Duggan, 0£. cit.. p. >07 .

Whether or not Bolivia's official acceptance into
the continental community would lead to the restoration of
genuinely cordial and beneficial relations with the

American republics remained an open question. Deep-seated
suspicions about the government and political leaders in
La Paz remained within the State Department and in other
chancellories of the hemisphere. Reports were circulated
that contradicted the conclusions of the Warren study,
telling of the Bolivian government's violent means of
repression against opposition e l e m e n t s . 5 3 The Warren
prediction that the Influence of the M.N.R. within the new
government would continue to diminish proved Inaccurate.
The congressional elections in July gave that party a near
majority in Bolivia's National Convention. It remained to
be seen, therefore, what long lasting effects Bolivia's
period of isolation would now have in her foreign relations,
II. ANDEAN DIPLOMACY IN THE FINAL YEAR OF THE WAR
Apart from the vestiges of the period of diplomatic
quarantine, the Villarroel government faced the challenges
of a strong domestic opposition and the threat of a postwar
economic crisis when relations with the American republics
53one of these reports was written by Cuba's

ambassador in Chile, Enrique Plzzl de Porrasj see Qutllrrez,
Pna revolucl6n tree log Andes, op. olt., p. 262.
497
were resumed In mid-June 1944. In November 1944 a
potentially serious revolutionary movement, supported by
small military and civilian groups, took place In the city
of Oruro. The government In La Paz managed to suppress the
uprising, but the severe reprisals that were taken against
those Implicated In the subversive activities further
aggravated domestic political relations and aroused new
suspicions abroad. In her International economic relations,
Bolivia*s bargaining position with the United States grew
progressively weaker as the end of the war approached.
In this discussion of Bolivian foreign relatione
from the time of recognition In June 1944 until the war*s
conclusion In September 1945, consideration will be given
to the manner in which the Villarroel government handled
these challenges. A review of Andean relations with the
United States and with her neighbors follows. Since
Bolivia's foreign policy was also given public expression
at two International conferences during this time, the
main features of the Andean nation's positions at the
Mexico City Conference and at the San Francisco Conference
of the United Nations will be described and analyzed.
Disappointed diplomacy in Washington. Bolivia's major
concern In her relations with the United States during this
late war period was to obtain long-term mineral contracts At
satisfactory prices as Insurance against a possible postwar

498
slump In the international metals market. A serious fall
in tin prices would not only affect Bolivia's economy
drastically hut also would hamper the government's efforts
to Improve social conditions in that country. However,
Andean representatives found a discouraging reception in
Washington. The new international situation and a changed
personnel in the agencies and departments of the United
States government made the negotiations on these matters
long, difficult, and disappointing for the Bolivians whose
effectiveness was limited by domestle dissension and
governmental ineptitude.
Indications that Bolivian overtures were to counter
a different and difficult set of circumstances appeared
almost immediately following the resumption of relations.
In mid-July 1944 Carlos Dorado Chopltea, Bolivia's interim
representative in Washington, reported that his efforts to
obtain an extension of the tungsten contract at an improved
price had been completely unsuccessful.5** Dorado stated
that he had emphasized that a reduced price would have
s»rlous economic and social repercussions in his country
and that Bolivia needed real cooperation from the United
States in such a problematic situation. He had urged
^^Note 8 3 , to La Paz, Carlos Dorado, July 14, 1944,

"Bmbajada de Bolivia en E.E.U.U. de Norte America" (Julio-
Agosto 1944), ABFM.
499
United States officials to consider the great efforts
realized by Bolivian producers when the United States
needed tungsten earlier In the war. Not even State
Department intervention in Bolivia's behalf before the
officials of the Foreign Economic Administration was
productive, however.**5 Mexico and Peru were reported to
have aocepted the United States offer of $16 per twenty-
pound unit and, apparently, the nation of the north did not
need large imports of the metal any longer.56
Prospects for the future of tungsten exports to the
United States were even more dismal. Dorado enclosed in
his communique a memorandum from Charles Taft, director
of the United States Office of Wartime Economic Affairs,
which read in part:
I think it is only fair to say to you that the

producers in Bolivia must look forward to the time
when the Foreign Economic Administration will no
longer be Justified in purchasing any tungsten at
all.57
The most Important contract discussions, of course,
Involved the future of Bolivian tin sales to the United
States. Negotiations for a new amendatory contract had
been Interrupted by the December revolution and by the
55ibid., p. 3 .
56lbid.
57)(emorandum, to Carlos Dorado, Charles Taft, (no

date), enclosed in Note 83, loc. cit.
I
500
following period of nonrecognition. The term of the original
contract of November 1940 extended until June 1945, but the
adjusted price agreement of June 1942 had expired in June
1943. When discussions resumed In mid-1944, United States
officials made It clear from the beginning that the present
negotiations could not be considered a continuation of those
Interrupted In December 1943 and that a new review of the
situation was called for.
In August 1944 Bolivia's Foreign Minister, then
Victor Andrade, presented the Bolivian proposal for a tin
agreement to the United States Embassy In La Paz. Andrade
proposed that the price be Increased 6 4 per pound (from
601 to 66j ) , retroactive to July 1, 1943, and that the
duration of the contract be extended from June 30, 1945,
until December 31, 1946.^8 According to the Andrade
proposal, the additional revenues provided by the price
Increases would be utilized for meeting the government's
budget deficit, for Increasing the salaries of the miners,
and for financing a plan of social assistance.59 Mine
owners would receive nothing from the revision. Although
^Balllvlin Calder6n, o£. cit., p. 187.
59ibid., p. 188; Andrade also commented on this

proposal in a personal interview in La Paz, December 13,
i960. He stressed the idea that all benefits of the
suggested agreement would go to the miners and for a
program of social assistance.
501
the proposal was not explicit in this detail, Bolivia's
preference for a government-level agreement without producer
participation was apparent .^0 When Washington replied that
it was opposed to a direct tin agreement that by-passed the
mine owners, Bolivian officials began to revise their
position in the matter.
On October 5» the Bolivian producers presented
their recommendations for a tin agreement to representatives
of the Porelgn Economic Administration. It, too, Included
a 6 4 increase in price per pound, but provided that at
least 24 of that amount would go to the companies .^1 The
request was based on the rising production costs en
countered by the mining firms. A study submitted in
conjunction with the proposal reported that, because of
greater expenses, 40 per cent of Bolivian tin produced for
shipment to the United States was uneconomical. These
nonprofitable operations, stated the study, were being
maintained in the hope that a favorable price adjustment
6°Cable 278, cited in Note 161, to La Paz, Carlos

Dorado, September 25, 1944, "Embajada de Bolivia en E.E.U.U.
de Norte America" (Agosto-Septlembre 1944), ABFM. This
cable from Andrade instructed Bolivia's representatives in
Washington to continue dlsousslons with respect to the tin
contract without consultation with the producers who were
to make their views known to the Bolivian government.
^Note 2 5 2 , to La Paz, victor Andrade, December 28,

1944, "Embajada de Bolivia en E.E.U.U. de Norte America"
(Obre-Dbre 1944), ABFM.
502
go
would alter that situation. c
Andrade's success in promoting the Warren mission
and his good standing with the North American community In
La Paz were no doubt Instrumental In his appointment as
Bolivia's ambassador to Washington In October 1944.63 soon
after his arrival in the United States In November, he
reported to the Chancellory that North American representa
tives opposed the idea of extending the duration of the
principle contraot beyond Its expiration date In June
1945.6^ Andrade explained the American position as the
product of two forces. One was the adverse propaganda
against the Villarroel government that had succeeded In
creating a lack of confidence In Its stability and
capability. However, most of the difficulty, according
to Andrade, could be traced to a new outlook in American
foreign economic policy.
Andrade understood the new policy In Washington as
62Ballivi£n Calder6n, o£. cit., p. 189.

63jtndrade described himself as the "white sheep"
within the Villarroel govermment with respect to relations
with the United States. A graduate of the Methodist-
sponsored American Institute in La Paz, Andrade had worked
to strengthen that school during the early war years at the
same time that the German oolegios were receiving substan
tial support from the German Legation and community. He
said that he had many friends within the North American
oommunlty, and he had the additional asset of a splendid
command of the English language. Personal Interview.
6^ o t e 252, 0 £. cit.. p. 3 .
the result of the changed war situation and of the new
breed of leaders which had assumed responsible posts in the
Roosevelt government. The resignation of Sumner Welles in
August 1943 was regarded as a considerable loss for Bolivian
interests. Andrade indicated that by the end of 1944 the
champions of the Oood Neighbor policy and the Idealistic
"new dealers" had been replaced by men of Industry who,
although progressive, were far less sympathetic to Latin
American views than their predecessors had b e e n . *>5 The
main characteristics of the new United States policy as
Andrade saw them were: (l) the desire to move inter-
national commerce back into private channels, (2 ) the
predominance of a commercial or economic criterion Instead
of a political one, and (3 ) a diminished Interest in
including clauses favorable to labor in the commercial
contracts.^
When the proposals of both the Bolivian government
and the Andean producers were rejected, embassy officials
in Washington decided to establish a common front with the
Bolivian tin producers. Representatives of those groups
met in November 1944 and decided upon a division of labor;
the mine owners or their representatives would concentrate
65Ibld., pp. 2 -3 .
66lbld. Andrade tended to equate the political
criterion with a "policy of inter-American friendship."
504
on proving the high costs of operations, while Bolivia's
ambassador, Victor Andrade, would emphasize the political
and social aspects of the issue with State Department
officials f i t In late 1944 Andrade met with representatives
of the United States Department of State and explained to
them the purposes of the December 20 revolution, especially
with respect to Improving the conditions of the laboring
classes.
The Bolivian plan of action was moderately
successful. Washington's offers were Improved and an
amendatory contract was signed on March 3 , 1945. By the
terms of the agreement, the United States agreed to
increase the price of tin to 63 1/ 2^ per pound and deduct
1 1/24 from smelting charges, effective beginning December
19, 1944, and continuing until the expiration of the term

of the basic contract, June 30, 1 9 4 5 . In addition, a 2$
per pound price increase would be applied retroactively for
the period July 1, 1944-December 18, 1944. The contract
contained a labor clause encouraging the Implementation
of existing social legislation.^ However, the Bolivian
government was required to pledge that It would not alter
67lbid., pp. 4-5.
6&Bailiviin Calder6n, 0£. cit.. p. 191.

^^BolivlA, Minlsterlo de Relaciones Exterlores,
Memoria (1944-1945), p. 70.
505
It8 tax laws so as to hinder the continued production of
tin.7°
Although the provisions of the revised tin contract
of March 3« 19^5* were "very satisfactory" according to
Ren£ Balllviin, Its obvious shortcoming was its limited
duration, until June 30, 19^5. Almost Immediately Andrade
began discussions on a new tin agreement that would give
the Andean government some assurances of a postwar market
and a basis for planning a program of economic development
The Bolivian ambassador stressed the necessity of maintain
ing social stability within his country to assure a
continuing mineral production, adding that It was In the
Interest of the United States to have a guaranteed source
of supply within the Western Hemisphere.72
Andrade reported, however, that the obstacles to be
overcome In obtaining a satisfactory extension of the tin
agreement were even more formidable than before. The
Foreign Economic Administration had assumed more exclusive
control of the negotiations following the appointment of
James Byrnes to succeed Edward Stettlnlus as Secretary of
7^Ballivlin Calder6n, loo. cit.
T^Note (no number), to La Paz, Victor Andrade,

August 13, 19^5* "Embajada de Bolivia en Washington" (Abril-
Septiembre 1945) » ABFM.
72ibid.
506
State. This agency, said Andrade, had become the standard
bearer for President Truman's economy drive having embraced
the idea that for Latin America "the honeymoon was over."73
The criterion of the Porelgn Economic Administration was
reported to be "coldly commercial."7^
In the faoe of this crisis, the schism between the
Bolivian government and the producers was growing more
pronounced. Ambassador Andrade informed La Paz that the
tin producers were uncooperative and showed little Interest
in assisting the government's efforts to obtain a suitable
contract. Frustrated by futile attempts to Improve on
United States offers, Andrade signed a new, but unsatis
factory, contract on September 10, 1945, the terms of whloh
will be described in a later section.
A second Important issue in Bolivian-United States
relations was the Argentine question. What posture would
the Andean nation assume in the continuing difference
between Washington and Buenos Aires? The United States
government had withheld recognition of the Farrell govern
ment and had attempted to get the other American
governments to follow the same course. Bolivia, however,
along with Paraguay and Chile, had continued to maintain
73lbid., p. 3 .
7îbid., p. 6 .
507
relatione with that government.
The Andean natien's essential objective in this
matter was to maintain cordial and productive relatione with
both countrlee Insofar aa possible. The Bolivian policy
Mae defined for Washington In a series of memorandums In
July 19^4. In one, Carlos Dorado attempted to Justify
Bolivia's recognition of the Farrell government on the
grounds that Argentina was a major supplier of vital food
stuffs, oilfield equipment, and rolling stock (35 per cent
of total imports) and had cooperated with La Paz In solving
several crucial wartime p r o b l e m s . D e s p i t e this dependent
relationship with Argentina, however, Dorado pointed out
that Bolivia's ties with Argentina In no way Jeopardized her
fulfillment of obligations to the United States; La Paz,
in fact, had repeatedly rejected better Argentine offers
for rubber and quinine so that prior commitments to the
United States might be met. Washington recognized
Bolivia's delicate position and accepted the fact that
Argentine-Bolivian relations could not easily be severed;
the State Department was Interested, however, In preventing
La Paz from naming sun ambassador In Buenos Aires to replace
75ltemorandum, Carlos Dorado C., July 26, 1944,

remitted to La Paz In Note 163* to La Paz, Carlos Dorado,
September 27* 1944, "Bmbajada de Bolivia en B.B.U.U. de
Norte America” (Agosto-Septlembre 1944), ABFM.
508
Chargl d'Affaires Salamanca.76 This probably accounts for
the fact that the Villarroel governments first ambassador
to Buenos Aires, Josl Tamayo, did not arrive In the
Argentine capital until May 19*15 •

The matter reached a crucial phase for Bolivia when
Argentina, In October 19**4, requested Cordell Hull, as
chairman of the Governing Board of the Pan American Union,
to convoke a meeting of chancellors to deal with the
question of her relations with nations of the continent.
The United States opposed the Idea, fearing that It would
create dissension among the American :irepublics on the
eve of the pending United Nations Conference.77 Meanwhile,
the Chancellory In La Paz was reluctant to adopt a policy
on the question completely adverse to the Argentine
request.
Andrade warned La Paz from Washington that the
situation was delicate. Any hint of Bolivian support for
Argentina or of a yielding to the economic pressure of that
country would be unfavorably received by the Department of
State, he said, thus Jeopardizing the vitally Important tin
76|femorandum on the Argentine question, Victor

Andrade, February 9, 1945, remitted with Note 42, to La Paz,
Victor Andrade, February 9> 1945* "Bmbajada de Bolivia en
Washington” (Bnero-Marzo 1945)« ABFM.
77j, Lloyd Meeham, The United States and Inter-

American Security, l889-195P~(Austin, Texas:"THTlverslty of
4exas Press, 1901)4 p. 240.
509
negotiations then In p r o g r e s s . The Bolivian ambassador
stated his conviction that, despite the nation's economic
dependence on Argentina, " ... the plans for the economic
future of Bolivia have their axis in Washington."^ While
favoring a policy designed to harmonize the interests of
both countries, Andrade thought that if sacrifices had to
be made on either front, the cordial ties with Argentina
were more expendable at the time. This was an Interesting
reversal of the view expounded by Finot in 1937, when he
regarded relations with the United States more expendable
than those with Argentina in respect to the Standard Oil
issue and the Chaco dispute.
Bolivia decided to follow a policy in support of
the Mexican proposal of cun inter-American conference of
nations cooperating in the war effort, thus excluding
Argentina. The conference, while treating the urgent
problems pertaining to the prosecution of the war and to
the postwar period, would also offer an opportunity for
considering the Argentine question. Foreign Minister
Gustavo Chacon Slnchez declared in February 1945 that
Bolivia's Argentine policy would be that determined in the

consultations at the Mexico City Conference.8°
?®Memo on Argentine question, oj>. cit., pp. 7-8.
79lbid., p. 8 .
8°La Raz6n» February 14, 1945, p. 4.
510
Apart from the Important matters of mineral contracts
and Bolivia's position vis-i-vis the Argentine-United States
rift, representatives of the United States and Bolivia
continued to treat matters relating to the programs of
economic and social cooperation. In September 1944 Bolivia
requested export licenses for equipment, machinery, and
other supplies to be used In connection with projects that
had been undertaken by the Corporaoi6n Bolivians de Fomento
(C.B.F.); Construction began In 1944 on the Important
Cochabamba-Santa Cruz highway In the hope that It would be
completed by 1947 and before the railroad from Corumbd

81
reached Santa Cruz. The Export-Import Bank, on December
26, 1944, approved a $10 million credit for the C.B.F. for
construction of this important highway .82 On March 3, 1945,
the Export-Import Bank authorized a $5.5 million credit for
C.B.F. to carry out a program of petroleum development In
conjunction with Y.P.F.B .88 The original agreement for
these credits, of course, had been reached at the Rio
8 lLetter, to Foreign Economic Administration,

Rowland Egger (C.B.F.), August 23, 1944, contained In Note
139* to La Paz, Carlos Dorado, September 1, 1944, "Bnbajada
de Bolivia en E.E.U.U. de Norte Amtfrlca" (Agosto-
Septlembre 1944), ABFM. The railroad to Santa Cruz from
Corumbl was completed In 1962; the highway had been
completed In 1957.
t&Bollvla, Corporacl6n Bolivians de Pomento, Memorla.

Febrero 1943-Marzo 1945 (La Paz: Empress Ed. nUniverso,"
19^5), pp76i-76.
83ibld., pp. 243-257.

511
Foreign Ministers Meeting In January 19*12. Discussions
mere also underway on programs of cooperation In the fields
of sanitation, education, low-cost housing for workers, and
agriculture. In April 19*15 the United States Department of
State notified Bolivian representatives that, In response to
Andean proposals, Washington was prepared to make available
the services of technical experts to collaborate In a Joint
project of social Improvements, If Bolivia was prepared to
share the cost for the program.
Diplomatic relations between Bolivia and the United
States after the period of Isolation were cordial but
uneasy. Old suspicions persisted In some Washington
circles about the sympathies of the government In La Paz.
Continuing Andean relations with Argentina, although
understandable, only contributed to the malaise. Bolivia
feared that the United States would lose all Interest In
acquiring her minerals as the war drew to a close, an
anxiety Increased by reports from Washington that a new
hard economic policy had been adopted there. Nevertheless,
due In large measure to the energetic and capable efforts
of Ambassador Andrade, Bolivia managed some definite, If
minor, gains In her relations with Washington. Much of the
^êmorandum of the Department of -State, April 27,

19*15> opntalned In "Bmbajada de Bolivia en Washington11
(Abril-Septlembre 1945), ABFM.
512
hostility that had characterized those ties during the first
half of 1944 was mitigated.
Bolivian diplomacy with her neighbors. "Uncertain"
was the word used by one Bolivian official In describing
Bolivia*s relations with Argentina In late 1944. The
Argentine-United States difference, of course, affected
Bolivia's relations with both of those countries. In June
1944 Buenos Aires, voicing fears that United States
recognition of the Junta In La Paz would restrict or even
suspend Andean economic relations with Argentina, recalled
Ambassador Martin Gras from the Bolivian capital. As noted
earlier, not until May 1945 was a Bolivian ambassador
accredited in Buenos Aires. This element of uncertainty
was probably unavoidable in a situation In which Bolivia's
policy was to balance the interests of Buenos Aires and
Washington. Charg£ d*Affaires Salamanca urged the
Chancellory in La Paz to concentrate on cultivating closer
links with Argentina because relations with Washington were
largely circumstantial, while those with Argentina were
necessarily permanent.^ At the very same time, Andrade was
Ândrade Note 180, cited in Note 612, to La Paz,

Carlos Salamanca P., September 5 » 1944. "Snbajada de Bolivia
en la Argentina" (Agosto-Septiembre 1944), ABPM.
t c '7 Carl OB Salamanca Pi,,

November 2, 1944, "Embajada de Bolivia en la Argentina"
(Octubre-Noviembre 1944), ABFM
513
cautioning La Paz about the dangers of any type of pro-
Argentine policy.
In her relatione with Buenos Aires, Bolivia was
Interested In Improving earlier agreements Involving
Argentine cooperation In railroad construction and petroleum
Industry development. Members of the Villarroel government
considered the Ostrla Quti£rrez-Rothe treaty of February 10,
1941, defective because It failed to Include a definite
Argentine commitment to finance the entire Yaculba-Santa
Cruz line.^7 In September 1944 the Argentine Embassy In La
Paz Indicated that Its government was disposed to augment
the original loan for railroad construction to provide for
the completion of the Yaculba-Santa Cruz railroad.88 The
Bolivian reply stated that La Paz was willing to accept
the Increased loan and that It could be amortized with 10
per cent of the Income derived from petroleum sales to
Argentina.8^ xn addition, the Andean nation asked Argentina
to Increase from two million pesos to fifteen million pesos
the amount of the loan for Intensifying Bolivian petroleum
production. The Reverse Notes Complementary to the Treaty
8^Note 536, to La Paz, Carlos Salamanca F., August 8,

1944, "Embajada de Bolivia en la Argentina" (Jullo-Agosto
1944), ABFM.
88Memoria (1943-1945), o£. cit., p. 31 .
Q9lbid.
of February 10, 1941, exchanged In Buenoe Aires on June 2,
1943# toy Bolivian Ambassador Josl Tamayo and Argentine
Chancellor C<sar Ameghlno, represented the results of those
discussions.
By the provisions of the notes, Bolivia succeeded In
gaining her two principal objectives. Argentina agreed to
advence up to forty million Argentine pesos ($9,928,000)
for completion of the railroad to Santa Cruz and Increased
her financial commitment for assisting In petroleum exploi
tation to fifteen million Argentine pesos ($3,723,000)
Also, the two countries agreed to finance the review of
prior technical studies of the branch rail line, Tarabuco-
Boyuibe, by the mixed Argentine-Bolivian commission and to
extend the projected Or&n-Tarlja highway to Potosl.
Argentina also assumed the obligation of constructing an
oil pipeline from Macueta on the International frontier to
a point on the Embarcacl6n-Yaculba railroad "when
circumstances make it n e c e s s a r y . ’’ ^ 1
Argentina, however, succeeded In tightening the
provisions for payment of the loans. Amortization of the
9°0uti$rrez, Una obra y un destino (Buenos Airea:

Editorial Ayaoucho, p. 293. (hereinafter cited as Una
obra.) This conversion to dollars is based on the average
free market exohange rate as of November 4, 1944, and Is
used only to give an estimate of the size of the loans In
American currency.
91ibid., p. 295.
515
loan for building the Villa Montes-Santa Cruz section of the
railroad was to begin upon delivery of the completed line
to Bolivia and no later than June 2, 1950.92 Payment for
the credits Invested In the oilfields was to begin one
year after the first advance by Argentina. Most Important!
Bolivia granted Buenos Aires a subsidiary guarantee In
addition to that contained In earlier agreements; this
consisted of the net Income from operations of the Yaculba-

Santa Cruz railroad.93
An interesting feature of the agreement was included
in the section providing for Bolivia's principal guarantee
for the loans. The principal guarantee was* of course,
"the product of the sale of the crude petroleum and fuel
oil of the petroleum zone that the Yaculba-Santa Cruz de la
Sierra and Siicre Railroad traverses or to which it arrives,
in accordance with the norms established in this agreement
and in the notes of this date that complement it."9^ The
significance of this phrase later became clear when Brazil
again protested the extension of the zone offered by
Bolivia as security for Argentine credits.
These agreements with Argentina were among the major
achievements of the foreign policy of the Villarroel
92lbld.. p. 296. The rail line between Santa Cruz

and Yaculba was opened, except for a few bridges, In 1961.
93lbld.
9^lbld.. underlined by the author.

516
government. The Andean nation obtained the assurance that
the Important Yaculba-Santa Cruz railroad would be financed
In Its entirety, as well as badly needed oapltal for her
petroleum Industry. The agreements also Indicated that the
coolness In Argentine-Bolivian relations had been substan
tially reduced.
Other issues served as Irritants to those relations,
however. In late 1944, Argentina, the usual source of wheat
for Bolivia, appeared to be annoyed when the United States
provided an emergency shipment of that grain to Bolivia to
alleviate a serious shortage there. Problems also persisted
In the Implementation of the Argentine-Bolivian rubber
agreement. Finally, new Argentine security measures
established as the result of Argentina's declaration of
war on the Axis on March 27, 1945, meant additional
restrictions on Bolivian braceros working In northern
Argentina.
Zf Andean relations with Argentina In the final
year of World War II were uncertain, then the nation's
relations with Brazil could only be described as troubled.
Numerous factors contributed to this worsening of
relations. One was the violent reprisals taken against the
"conspirators of Oruro" by the Villarroel government In
November 1944. Another was the dilatory fashion In which
the Bolivian government handled Important problems

517
encountered by the two countries In their joint construction
of the CorumbA-Santa Cruz railroad. These delays occurred
simultaneously with the signing of the June 2, 1945 notes
with Argentina, arousing suspicions in Itamaraty once again
that La Paz was downgrading relations with Brazil. There
fore, ties with Brazil in. this period lacked the cordiality
and productiveness which had characterized those relations
before the revolution of December 1943.
After Rio extended formal recognition to the
Vlllarroel regime, the most immediate problem in Bolivian-
Brazlllan relations was the short supply of essential
foodstuffs available from Brazil for provisioning the
Bolivian frontier populations in the provinces of Beni and
Pando and in the vecinity of Puerto SuArez. Bolivian
Charg£ d»Affaires Luis Johnson tried to obtain agreements
providing for fixed quotas of these supplies and for the
simplification of transport and customs procedures.95
Provisional arrangements, only partially satisfying
Bolivia's needs, were all that could be obtained. Brazil's
domestic consumption and the demands made on that nation's
food supply by the direct participation of Brazilian
armed forces in the war prevented Rio from agreeing to
95Note 324-209, to La Paz, Luis Johnson, October 16,

1944, "Embajada de Bolivia en el Brasil” (Agosto-
Diciembre 1944), ABFM.
518
predetermined quantities of food exports to her neighbor.

When Bolivian Ambassador Federico Gutierrez Oranier
assumed his post in Rio in November 1944, almost immediately
he faced the serious repercussions of the Oruro revolu
tionary movement. He sent word to La Paz on November 30,
that several Latin American diplomats in the Brazilian
capital reportedly had met to discuss the possibility of
asking their governments to reconsider the recognition that
had been granted the Bolivian regime on the grounds that the
Villarroel government was "practicing fascist m e t h o d s . "96
Gutierrez Oranier also reported that a Bolivian Embassy

official, Luis Johnson, had been called to the Brazilian
Foreign Office with respect to the matter. There he had
been told that the violent form utilized by the Bolivian
government to eliminate its adversaries, including such
illustrious persons as former cabinet ministers Luis Calvo
and Ruben Terrazas and former Foreign Minister Carlos
Salinas Aramayo, had deeply offended the conscience of the
Brazilian government and p e o p l e . 97 Later, the embassy in
“~Rio advised La Paz that apparently its press communiques
were being censored by Itamaraty and that the shootings in
^Note 378-257, to La Paz, Federico Gutierrez

Oranier, November 30, 1944 (same volume as footnote 95).
97jjote 380-259* to La Paz, Federico Gutierrez
Oranier, November 30, 1944 (same volume as footnote 95).
the Andean country had been universally condemned by the
Brazilian press.9® The Bolivian representatives could only
ride out the storm of criticism, while explaining that the
subversive movement had been directed at a government that
had as its platform nthe establishment of a true social
Justice In Bolivia."^ Undoubtedly, the Oruro episode had
Its lasting effects, however, further undermining foreign
confidence in the Villarroel government .1®0
The problem that most troubled Bolivian-Brazillan
relations in 1944 and 1945 was the question of adjusting
the construction contract for the Corumb£-Santa Cruz
railroad, a difficulty complicated by the June 1945 Andean
agreements with Argentina. In 1944 the J. 0. Machado and
Company construction firm, holder of the contract for
building two sections of the Brazillan-Bollvlan railroad,
requested an upward revision of prices in that agreement.
One contract adjustment already had been made in favor of
98Note 382-261, to La Paz, Federico Qutilrrez

Oranier, November 30, 1944.(same volume as footnote 95).
99ifote 378-257, o£. clt., p. 2 .
100Two M.N.R. historians, Augusto C^spedes and Luis

Peflaloza, refer to the executions following the Oruro
rebellion. Clapedes explains the government's actions as
the result of the "RADBPA mentality," completely exonerating
the M.N.R* Peflaloza states, "The executions of November
1944 were the gravest error of the Villarroel government."
Peflaloza, Historic del Movimlento Naclonalista Reeolu-
clonerlo, 194i-JL9^2, op. clt., p. 7 2 (see footnote lj.
520
that company; in 1942 unitary prices were Increased by over
50 per cent.101 Of course, the Machado request In Itself
should have had relatively little effect on Bolivia's
overall relations with Brazil. Nevertheless, Bolivia's
ambassador In Rio reported In June 194-5 that the Machado
case had become an Important International issue with
Brazil.102
The transformation of the Machado case Into a
serious obstacle for the construction of the Corumbi-
Santa Cruz railroad, as well as a stumbling block In
relations between La Paz and Rio, was a gradual process.
In April 1945 a special Bolivian commission Including
Foreign Minister Gustavo Chacon and Minister of Plnance
Victor Paz Estenssoro traveled to the Brazilian capital
for conferences with President Vargas and Chancellor
Pedro LeSo Vslloso. In discussing the Machado Issue,
Bolivian representatives sustained the position that the
firm's request would have to be considered and resolved
exclusively by the Andean government (Bolivia would, of
course, pay the total construction cost eventually); It
101Note 162/16, to Joto Neves da Fontoura, Federico

Outllrrez Oranier, March 2d, 1946, "Embajada de Bolivia en
el Brasil" (1940), I, ABFM.
102Note 369-176, to La Paz, Federico Outldrrez

Oranier, June 7, 1945, "Embajada de Bolivia en Rio de
Janeiro" (Junlo-Dlclembre 1945), ABFM.
521
was decided, therefore, that Machado Company representatives
and the chief of the mixed railroad commission would seek a
solution in La P a z . 1 Q 3 xn May 1945 the Bolivian criterion
in the problem was communicated to the Brazilian
Chancellory. La Paz did not feel that a second price
adjustment was Justified. Bolivia, however, was willing to
indemnify the company for a portion of its alleged losses,
the amount to be finally determined solely by the Andean
government.10^ Additional efforts would be made to arrange
for the "friendly rescindment" of the contract.
The Machado issue assumed serious proportions in
late May 1945, Just as the Argentine-Bolivian discussions
in Buenos Aires approached their conclusion. On one
occasion, Interim Brazilian Chancellor Macedo Soares
expressed his concern over the pending Andean agreements
with Argentina to Ambassador Gutierrez Oranier and his
annoyance with Bolivia's delay in settling the Machado
m a t t e r . The Brazilian official then charged that the
Machado case was only a guise for concealing Bolivia's
103)fOte 236/114, to La Paz, Federico Outidrrez

Oranier, April 19, 1945, "Embajada de Bolivia en Rio de
Janeiro" (Enero-Mayo 1945), ABFM.
104Note 162/ 16, op.clt., p. 2 .

105jiote 350-167, to La Paz, Federico Outldrrez
Oranier, May 30, 1945, "Embajada de Bolivia en Rio de
Janeiro" (Enero-Mayo 1945), ABFM.
522
intentions of paralyzing the entire project.10^ Misgivings
in Rio grew more pronounced with the publication of the
Bolivian-Argentine reverse notes of June 2. Brazil, again,
protested that the securities given Argentina in the
agreement Jeopardized her own treaty rights with Bolivia.
Paced with a deteriorating situation, Ambassador Outl6rrez
Oranier recommended to the government in La Paz that
Bolivia "open new points of contact with Brazil11 in an
effort to create a more conducive climate for resolving
the problems with Rio and for dispelling the suspicions
that characterized the relations between those nations.10?
Bolivian representatives continued the search for an
arrangement providing the nation with its own port on the
upper Paraguay. In this regard, the Villarroel government^
assumed a position noticeably different from that of its
predecessor. The PeRaranda government had sought and
obtained, through an exchange of notes on June 28, 1943,
the study of a new location for a Bolivian port on the
Tamengo Canal south of Sucre, possibly Port Aurora, and had
offered territorial compensations for such a site. The new
government, however, was opposed to making territorial
106Ibid.
10?Note 399-193* to La Paz, Federico Outilrrez
Oranier, June 20, 1945* "Hmbajada de Bolivia en Rio de
Janeiro” (Junio-Diciembre 1945), ABFM.
523
compensations and felt that the area around Port Aurora was
unsuitable for Bolivia's purposes. Foreign Minister Chacon,
at the April 1945 meetings in Rio, stated that Bolivia would
like to have a zone contiguous with the property of
Cervecerla Corumbi with a corridor linking that area with
Bolivian territory at Arroyo Conceptl6n; he asked the
Brazilian representatives what the price for such a
concession would be.10®
Bolivia also continued to press for a satisfactory
resolution of the question of border demarcation in the
Cuatro Hermanos sector and frequently raised the matter of
Brazilian financing for the Vila Vila-Santa Cruz railroad.
The work of the mixed petroleum commission proceeded
slowly, although agreement was reached to contract an
independent drilling firm to carry out the labors of
exploitation. In general, however, Bolivia's diplomacy
with Brazil in 1944 and until the war's end in 1943
registered few gains. The Argentine-Bolivian agreements
and the Machado issue threatened to further delay the
reestablishment of cordial and fruitful ties between La
Paz and Rio de Janeiro.
Bolivia's relations with her other neighbors during
this period were characterized by the lack of important
108Note 238/114, o£. clt., p. 8.

524
developments. The nation's energies In foreign relations
were absorbed by the larger Issues Involved In her ties
with Argentina, Brazil, and the United States, as well as
by the wider Inter-American and international questions
that emerged in the closing months of the war.
In September 1944 the villarroel government,
manifesting its approval of the Paraguayan policy
formulated by the Pefiaranda regime, submitted the
Important Villa Montes agreements to the consideration of
the National Convention. But not until May 1945 did La
Paz despatch a chief of mission to Asuncl6n, the diplo
matically inexperienced and highly political M.N.R.
member, Augusto C^spedes. Prior to that time, Chargl
d'Affaires Raul Botelho Oosilvez had reported that this
delay In naming an ambassador had contributed to the
weakening of friendly relations with that country.10^
In an effort to counter this trend in Bolivian-
Paraguayan relations, in May 1945 Bolivia sent not only an
ambassador to Asunci6n, but also a special commission that
Included interim Foreign Minister Lieutenant Colonel Jos£
Celestino Pinto and Minister of Agriculture Julio Zuazo
Cuenca. President Villarroel, himself, traveled to
Asuncion In September 194$ to return the visits that
l°9Note 5-4, to La Paz, Raul Botelho Oosilvez.

January 4, 1945* "Embajada de Bolivia en el Paraguay"
(1945), ABFM.
525
Paraguay's President Morinigo had made to Bolivia in 1943.
Foremost among the topics under discussion at these
meetings was the subject of promoting petroleum trade
between the countries. Consideration was given to the
construction of a pipeline from the Bolivian oilfields at
Camlrl and Sanandlta to the River Paraguay, to the building
of a refinery in Asuncion, and to the construction of
petroleum storage facilities at several locations in the
neighboring country .110 No definite agreements were
reached on the proposals, however. In general, the talks
of May and September 1945 served only to promote friendlier
relations between the two countries. In July 1946 Clspedes
expressed his desire to return to La Paz in order to be
reincorporated into the national congress, explaining that
the economic relations between Bolivia and Paraguay at that
time were of relatively slight importance.111
Bolivia's relations with Uruguay were strained
during the 1944-1945 period. The secretary of the Andean
Legation in Montevideo was Instructed in January 1945 to
define "the factors and elements that have determined suoh
a tough, harsh, and unjust attitude toward Bolivia."11^
110La Raz6n. September 3* 1945* P« 4.
111Note 97, to La Paz, Augusto Clspedes, July 18,

1946, "Bmbajada de Bolivia en el Paraguay" (1946-1947),
ABFM.
no
Instructions of Fernando Iturralde Chinel, to
52(5
Following the key role played by Uruguay's vloe-president,
Alberto Ouanl, In promoting the diplomatlo quarantine
against the Villarroel government, Uruguay had also reacted
strongly against the November 1944 shootings, proposing to
the other American republics that a Joint protest be
delivered to La Paz. Although reports from the legation In
Montevideo In late January 1945 Indicated that Uruguay's
Chancellor Jos£ Serrato was attempting to erase the bad
impressions caused In Bolivia by his government's actions,
the level of amiability between the two capitals never

11*3
climbed very high. J In fact, the functions of the
Bolivian mission In Montevideo, after the resumption of
relations in 1944, were restricted to reporting on
developments in Uruguay, to advising La Paz on policy
pertaining to that country, and to handling communiques
between the two governments.
Relations with Peru were more cordial than those
with Uruguay, but only slightly more productive. Bolivia's
Ambassador Rafael Balllvl&n arrived In Lima late in
October 1944. There he occupied himself with the routine
tasks of representation, regular reporting on the domestic
Secretary of Legation Carlos Rodriguez Rivas, January 12,

1945, "Lesacl6n de Bolivia en el Uruguay" (Enero-Abril,
1944-1945), ABPM.
^^Note 3 , to La Paz, Carlos Rodriguez Rivas,
January 24, 1945 (same volume as footnote 112).
527
Peruvian developments, and facilitating commercial trans
actions between the countries. He was especially concerned
with securing adequate Peruvian petroleum and gasoline for
Y.P.P.B. In La Paz, the Peruvian Embassy submitted two
draft agreements for the consideration of the Bolivian
Foreign Ministry, one on education for the indigenous
populations, a second on the protection of wild life

nit
common to the two countries.
Andean relations with Chile were threatened in
November 1944 as the result of the Chaquena incident. On
November 19 Bolivian soldiers, in pursuit of fleeing
rebels implicated in the Oruro uprising, crossed the
international frontier and arrested their quarry at
Chaquena in Chilean territory. The press in Santiago
described the event as a true invasion by Bolivian forces.1^
However, Bolivia's Ambassador Fernando Campero Alvarez
quickly delivered explanatory notices to the press and
conferred with Chilean Chancellor Fernandez on the matter;
the incident was terminated satisfactorily and swiftly,
thanks to the decisive action taken by Fernindez.
The matter of Bolivia's desire for a Pacific port
ll2*Memoria (1943-1945), 2£. clt., pp. 101-102.
11^NInforme— Mlsi 6n Diplomitlca del Seflor denn

Fernando Campero A.," December 15* 1944, "Embajada de
Bolivia en Chile" (Agoeto-Diclembre 1944), ABFM.
52$
again entered the picture In December 1944 when Chilean
Prealdent Rios, In an Interview with Ambassador Campero
Alvarez, stated that his country was prepared to consider
any Bolivian proposal for solving the problem that contem
plated the reciprocal Interests and mutual advantages of

116 y
both countries. The context within which Rios made his
offer, however, made It likely that the Chilean government
was primarily Interested In dissuading Bolivia from raising
the matter at the forthcoming Inter-American and inter-

117
national conferences. 1
This report on the interview with President Rios
from the Bolivian Embassy In Santiago also Indicated that
the Villarroel government, like the previous Bolivian
regimes, lacked a well-defined port policy. Campero
Alvarez acknowledged that no definite territorial objective
had been determined; no decision had been made with respect
to specific compensations that Bolivia would be prepared to

lid
grant In return for a port or littoral zone. This
1 16
Note 242/44, to La Paz, Fernando Campero Alvarez,
December 2 9 , 1944, "Bnbajada de Bolivia en Chile" (Agosto-
13>Îbld. Rios prefaced his comment about Chile's

disposition to consider a direct Bolivian suggestion by
saying that the policy of the Peflaranda government (most
notably Elio) In taking the matter to foreign chancellories
rather than treating the Issue solely with Santiago had
caused a very bad Impression in his country.
lltiIbld.
529
factor, as well as Campero*s conviction that the political
climate In Chile at that time was not favorable for such
negotiations, had kept the Bolivian ambassador from giving
r £o s a definite reply in the matter.
The port question was conspicuously absent from the
deliberations of the Inter-American Conference on Problems
of War and Peace held at Mexico City in March 1945.
Chancellor Chacon later explained that President Villarroel
had not wanted to use this important international issue as
an instrument of domestic politics by raising it at the

c o n f e r e n c e . 11^ a id appear, however, at the 1 9 4 5 United
Nations Conference on International Organization in San
Francisco in connection with the question of treaty revision.
The Bolivian representative to the United Nations confer
ence, Victor Andrade, supported the view that the charter
of the world organization should provide for revising
international treaties under certain circumstances; the
Chilean representative energetically opposed the idea.
The Chilean press promptly attacked the Bolivian polloy on
treaty revision and lamented the fact that, once again, the
Andean nation had forsaken direct discussion of the problem
by carrying it to the attention of the international
gathering in San Francisco. Still, reported Fernando
11^La Raz6n, August 17, 1945, P. 12.

539
Campero A., the Chilean prees reaction to Bolivia's action
at the United Nations conference was not as violent as It
had been on previous occasions .120
In handling specific matters, the Bolivian mission
found the Chilean Chancellory cooperative. Questions arose
with respect to the proper Interpretation of certain
provisions of the convention on transit of August 16, 1937,
but Campero Alvarez stated that these were resolved quickly
and amicably. The Andean Embassy In Santiago also was
concerned about the Bolivian political exiles who were
living In Santiago and other Chilean cities. Representa
tives of the Villarroel government were frequently required
to counter harsh propaganda directed by these groups against
the regime In La Paz. Chilean authorities assumed a
cooperative posture In difficulties of this type.
Relations with that country, therefore, despite Chilean
delays In naming an ambassador to replace Benjamin Cohen,

V
remained relatively satisfactory.
Bolivia and the International conference s--Mexico
City and San Pranclsco. The international conferences of
1943 provided the Villarroel government with excellent
120Note 184, to La Paz, Fernando Campero Alvarez,

June 30, 1943» "Embajada de Bolivia en Chile" (Abrll-Agosto
1945)* ABFM.
531
opportunities for giving public expression to the nation's
foreign policy. In some respects, Andean foreign policy
was better defined at the Mexico City Conference and at the
San Francisco Conference of the United Nations than at any
other time. For this reason, It is necessary that Bolivia's
participation In these meetings be examined.
Bolivia's delegation to the Inter-American Conference
on Problems of War and Peace (Mexico City, February 21,
19^5-March 8 , 1945) was headed by Foreign Minister Gustavo
Chacon and Included Minister of Finance Victor Paz
Estenssoro, National Deputy Luis Iturralde Chine1 , and the
nation's ambassador to Washington, Victor Andrade. The
delegation's work reflected the four major Bolivian
concerns at the conference: (1 ) to guarantee national
security through a regional security system, (2 ) to
promote International agreements In support of Bolivia's
port hopes, (3 ) to Influence the nature and functions of
the world organization, and (4) to support actions and
agreements favorable to the nation's economic and social
development.
On February 22 the Andean delegates presented two
documents to the conference pertaining to the establishment
of a hemispheric security arrangement. One was a draft
"Definition of the Dootrlne of Continental Solidarity"
formulated by the chief of the Political and Diplomatic

532
Department of the Bolivian Chancellory, Jorge Diez de
121 H
Medina. its most notable provision stated, "Every act
of aggression realized against an American nation, without
distinction of origin, will be considered an act of

1po
aggression committed against all of them. c The second
was a draft "Pact of Continental Security" that had been*
prepared by Luis Iturralde Chinel. The main features of
Chinel's proposal provide a good example of Bolivian
thinking on the subject of an inter-American security
system.
1. The American states would repudiate war as

an instrument of national policy, agreeing
to settle all disputes by peaceful procedures.
2. The territorial integrity and political

independence of the American states would
be reciprocally guaranteed.
3. The Board of Governors of the Pan American

Union would assume important new functions.
All threats to the peace, as well as actual
cases of aggression, would be referred to
that body. The Board would determine and
Implement procedures neoessary for maintaining
or restoring peace; decisions to use force
would be made in conjunction with the
Security Council of the United Nations. The
Governing Board would also determine the
aggressor in the cases where the state of
peace was actually altered.
121Memorla (1943-1945), 2R* P. 15.

IB^tlnisterlo de Relaclones Exterlores, Conferencla
lnteramerloana sobre problemae de la guerra y de la d s z .
Ciudad"'de M e x T o o r Sr Sc P & r ero~a B~d? Hkrzo de~ig? 5 .
ttelegacTSn de BolivTa“"[ta Paz: Qamarra y fila.T"!9 * 5 L P. 54.
533
4. An Inter-American Court of Justice would be
established for handling Juridical disputes.
5. Peaceful revision of treaties, either through

direct negotiations between the parties
involved or through the friendly Intervention
of the Inter-American Court or of the
Governing Board, would be sanctioned.123
The Bolivians took some pride in the fact that these
two proposals were taken into consideration in the formu
lation of the Act of Chapultepec. They also appreciated
the advances toward an effective security system that were
contained In that agreement. However, those gains did not
go far enough according to the Andean representatives.
Bolivian delegate Luis Iturralde Chine1 declared that the
Act of Chapultepec did not fully correspond to the political
and Juridical objectives pursued by his country, objectives
which had been defined in the draft security pact submitted

124
to the conference. He stated, "Bolivia thinks a system
of specific guarantees is necessary: one on territorial
integrity and another on political independence,"^^
Iturralde also felt that the procedures provided for in the
agreement were too vague.
In Bolivia*s draft pact on security, the nation of the
lg3xbld., p. 69 for text of draft pact.
124Ibld., pp. 13-14.

125La Raz6n. March 5, 1945, P. 4.
Altiplano was giving expression, once again, to one of the
most persistent and fundamental objectives of her foreign
policy, to make secure the national territory and the
nation *8 political Independence; and at Mexico City the
Andean nation, again, was seeking that security within a
multilateral arrangement. The same end, although in less
well-defined terms, had been pursued by Enrique Plnot at
the Second Meeting of American Foreign Ministers. One of
the men who had helped to formulate that policy In 1940,
Jorge Dlez de Medina, was a member of the delegation to
Mexico City.
The Andean delegation at Mexico City took special
care not to permit the approval by the conference of
principles or agreements that might weaken the nation's
position vis-k-vis Chile with respect to the port issue;
it hoped, naturally, to strengthen that position. One
attempt in this direction was the provision in the draft
Pact of Continental Security for treaty revision.
Another example of this concern came in Bolivia's
initiative to amend Article IV of the Declaration of Mexico,
a document that outlined the basic principles of inter*
American relations. The original article reaffirmed the
territorial inviolability and Immutability of the American
states. The Andean amendment upheld this basic norm

535
"salvo el caso de acuerdos paclficos ,lfl26
The observations presented by the Bolivian delegation
In respect to the Dumbarton Oaks Proposals Indicated that,
while La Paz was Interested In strengthening the regional
system on several fronts, she was not especially concerned
about the dangers to a Pan American security arrangement
presented by the general International organization. In
fact, the Andean observations failed to refer to the
problematic relationship between regional security systems
and the universal system. A more detailed discussion of
Bolivia's position with respect to the United Nations will
be deferred until the treatment of the San Francisco
Conference.
Another basic concern of the Bolivian delegation at
the Inter-American Conference was to support agreements
designed to promote national economic and social change.
Most of the draft proposals presented by the Bolivians fell
into this category, A resolution on the creation of an
Inter-American Committee of Social and Economic Matters,
drafted and submitted by Victor Andrade, was passed on to
the Pan American Union for study by virtue of Resolution
XXXV approved on March 7» 1 9 ^ 5 Favorable action was
12^Conferencla lnteramerlcana sobre problemas de la

Kuerra y de la paz, o p . clt., p. 19. " ... exceptinflfthe
case 0f peaceTuiagriernenFs.
127lbld.» p. 9; text of draft resolution, p. 47,

also taken by the conference on a Bolivian recommendation
that the more industrialized nations supply the other
American republics with machinery, implements, and
manufactured articles at reasonable prices. One of Bolivia's
chief Interests was manifested in a draft resolution
prepared by Paz Estenssoro and Eduardo Arze Qulroga. This
proposal recommended that the American states proceed to
the adoption of measures for preventing an abrupt drop in
prices for raw materials following the war.12® The
Bolivian objective here was achieved with the adoption of
the conference resolution on "Economic Readjustment of the
Hemisphere During the Transition Period" which provided in
the postwar period for a gradual shift of trade patterns to
a peacetime basis with minimal economic and social dis
location. Additional assurance was gained when Assistant
Secretary of State Will Clayton Informed the conference
on February 27 that the United States would not shirk her
jBsponsibilities in this regard.12^
On another occasion, Bolivia took issue with the
United States-backed drive to move international trade
toward more liberal channels Involving fewer government
128Ibid., pp. 51-52 .

129j. Lloyd Mecham, The United States and Inter-
American Security. 1889-1960 (Austin: University oTTJexas
Press, l9&i)» p. 26$.
537
restrictions and lower tariff barriers. Victor Paz
Estenssoro formulated his nation1s reservation to the
"Economic Charter of the Americas" by declaring that the
Bolivian government considered the official control of
foreign exchange Imperative for an extended period since
that country's only Important source of exchange was

mineral exportation.1^
With respect to the Argentine question, Bolivia
definitely favored the conciliatory policy that the United
States adopted vis-i-vis the nation of the river Plata and
supported the plan of action by which Buenos Aires could be
Incorporated into the United Nations as a charter member.
Victor Andrade reported that at the conference he formed
part of a group of Latin American diplomats, headed by
Brazil's Acting Foreign Minister Velloso, that told
Secretary of State Stettlnlua that it would be unfortunate
for the hemisphere if, at the San Francisco Conference,
the American republics could not count on the presence and
the support of the Argentine Republic .1^1
Despite the favorable reception given Bolivian
proposals at Mexico City, in the estimation of the
^■^Conferencia interamerloana sobre problemas de la

guerra £ de la paz,~op. clt., p. ll.
^3În a personal interview with Victor Andrade,

December 13, 1966, La Paz.
538
Chancellory In La Paz, the overwhelming Andean achievement
was the consolidation of the nation's position within the
inter-American s y s t e m . O n l y eight months before, the
Villarroel government had been politically isolated from
the rest of America, except for relations with Argentina.
But In Mexico City, members of that regime fully partici
pated in the proceedings of the conference; several
delegates distinguished themselves In their minor roles as
reporters of sub-commissions. Leaders In La Paz were
confident that these contacts between the Bolivian delegates
and the leaders of continental policy would restore faith
In the Villarroel government throughout the Americas,
opening new doors for the nation's future.
The general lines of policy that had been pursued
by the representatives of Bolivia at the Mexico City
Conference were very much In evidence again at the United
Nations Conference on International Organization (San
Pranclsco, April 25, 1945-June 26, 19^5). The three major
objectives pursued by the Andean delegation, headed by
Ambassador Victor Andrade, were the following: (1) the
creation of a world system of collective security that
would guarantee Bolivia's territorial Integrity and
political independence, (2 ) the adoption by the world
132conferencla lnteramerlcana sobre problamas de la

guerra £ de la paz, opT"clfc.. p. 5 .
539
organization of a procedure for handling International
disputes that might threaten world peace, and (3 ) the
expansion of the functions of the proposed economic and
social council.
Bolivia was willing to lend her full collaboration to
the establishment of an adequate system of security that
would safeguard the rights of small states that could not
"support said security with their own military and economic

resources. h133 in its "Observations" on the Dumbarton Oaks
Proposals, the Bolivian Chancellory stated that the
principal end of such a system would be to provide
protection in such a way that any individual nation could
confide In the collective action of the other states for Its

own security.1^
To develop a system that provided the guarantees
sought by Bolivia, the Andean delegation at San Francisco
accepted the view that the major powers had fundamental
responsibility for the maintenance of world peace.
Therefore, Bolivia fully supported a security council with
permanent seats for those powers. At the same time,
133"pr 0p 08iCione8 de la delegaci6n de la republlca

de Bolivia para la organlzacl6n de un slstema de paz y
segurldad," Conferenola Interamerlcana sobre problemas de
la guerra £ de ia patT“pp. cit., p. 5?.
13^nobservaclones de la delegaci6n bollvlana,"

Circular PD13, April 10, 1945, "Circulares" (1942-1945),
ABFM.
5^0
however, Andean delegatee favored an Increase In the number
of nonpermanent seats on the council so that Latin American
representation might be strengthened.133 Bolivia also
backed the concept of universality within the world
organization, convinced that the security system's effec
tiveness would be increased and the organization's
permanence would be assured by the inclusion of all states.
To facilitate an immediate collective response to an
aggressive act, Bolivia suggested that aggression in its
various forms be defined and that the sanctions to be
applied in these cases be determined by the members of
the organization.13**
The relationship between the world organization's
security arrangement and regional security systems was a
subject of vital concern to the American states. The Act
of Chapultepec had contemplated the use of force in
repelling aggressive acts within the hemisphere; the
Dumbarton Oaks Proposals, however, stated that "no
enforcement action should be taken under regional arrange
ments or by regional agencies without the authorization of
the Security Council."13^ Andrade reported that the Latin
133Ibld., p. 3 .
136Ibid.
137Mecham, 0£. clt., p. 262.
American group was unanimous In its desire to maintain the
prerogatives of the regional system as defined in the Act of
C h a p u l t e p e c . ^38 Andrade stated, however, that the
Chancellory's instructions to support the faculties of the
Security Council as defined in the Proposals and the
delegation's efforts to strengthen that body had represented
a policy that indirectly diminished the powers of the

regional s y s t e m . ^39 The Chief Andean delegate defended
this Bolivian policy on the grounds that it was realistic
and consonant with world thought which held that world
peace could only be maintained by a world security system.
This indicates that while Bolivia wanted to preserve for the
regional organization a cooperative role in security
operations, she was more Interested at the time in supporting
the creation of an effective peace-keeping system at the
world level.
In addition to its support for an effective
collective security system, the Bolivian delegation gave
much attention to the subject of treaty revision. Charter
provisions were sought that explicitly specified the
procedure for readjusting international agreements.
Bolivia proposed that the following paragraph be Included
1^Report, to La Paz, Victor Andrade, July 11, 1945.

"Embajada de Bolivia en Washington" (Abril-Septlembre 1945).
^ i b i d . , p. 28 .
542
in the section of the charter on "Pacific Settlement of
Disputes":
2. The Security Council shall recommend the revision

of all international treaties or agreements whose
continued existence would endanger a good understanding
between states or would destroy International harmony.
Where the agreement of the parties concerned cannot be
obtained, the Security Council shall decide on the
expediency of the said revision and shall promote the
use of the peaceful means provided for in
paragraph 3.140
Characteristically, the Andean proposals expressed a
preference for a direct and peaceful solution by the parties
involved, but suggested the intervention of the Security
Council otherwise. This body would be able to propose "the
application of procedures of Investigation and conciliation

l4l
for a satisfactory readjustment."
Most of the debate on the Issue of treaty revision
came in Committee II/2, which had the task of studying the
provisions of the draft United Nations Charter pertaining
to the political and security functions of the General
Assembly. The committee's chairman was Victor Andrade,
Bolivia '8 chief delegate at the conference. The basic
l40{j. s. Department of State, The United Nations

Conference on International Organization (Washington:
Government PFintlng Office, 1946;, p. ldl.
lln*
"Proposals of the Delegation of the Republic of
Bolivia for the Organization of a System of Peace and
Security," Comments and Proposed Amendments Concerning the
Dumbarton Oaks Proposals, the United hations conference on
International Organization, Doc. 2(Engllsh) 0/l4(r) Nay 5 ,
1945, P. 5.
543
question was whether or not a proposed amendment to the
Dumbarton Oaks Proposals, suggested by the four sponsoring
nations and France, allowed for the consideration of treaty
revision by the General Assembly. That amendment read in
part, "The General Assembly should be empowered to
recommend measures for the peaceful adjustment of any
situations, regardless of origin, which it deems likely
to impair the general welfare or friendly relations among
nations ."1**2
Andrade supported the Interpretation of the amendment
given by United States Senator Arthur B. Vandenberg. In his
remarks to a plenary session of Commission II, the Bolivian
delegate stated the following:
We subscribe to the words used by the American

Senator Arthur Vandenberg in his comprehensive
interpretation of the idea contained in this amend
ment. These words were substantially as follows:
"the phrase 'the peaceful adjustment of any situation
regardless of origin' should not be interpreted to
mean that the subject of the revision of treaties
would be foreclosed to the Assembly. If treaties
should give rise to situations which the Assembly
deemed likely to impair the general welfare and
friendly relations between nations, it could make
recommendations with respect to such situations."^ 3
Andrade went on to outline his country's position on
treaty revision by pointing out that if Bolivia favored such
revision it was because some countries had been forced to
l42The United Nations Conference on International

Organization, op. clt., p. 12 E~.
143ibld., p. 707.
544
accept agreements the enforcement of which would now endanger
the peace. He added, nWe believe that in drawing up the
Charter, we should make it possible to review any case of
injustice whether deriving from a treaty or not."1^
Strong opposition to this view of the amendment was
offered by Russia, France, and Chile, however, and despite
the paragraph's inclusion in the charter, it appeared
unlikely that any campaign for treaty revision within the
United Nations organization would prosper. Nevertheless,
several weeks later Bolivian Foreign Minister Oustavo
Chacon declared to the Bolivian National Convention, MThe
Republic of Bolivia, that faces a special situation,
fortunately has in the Charter of the United Nations the
necessary Instruments for resolving satisfactorily that
problem."1^
Bolivia was also interested in broadening the func
tions of the proposed Economic and Social Council. The
Andean nation had expressed its conviction at the Mexico
City Conference that permanent world peace and International
community depended upon the guarantee of well-being that
should be given to the large masses of the peoples who were
l ^ L a Raz6n, August 17, 1945, p. 12.

545
146
to be represented in the organization. Despite this
Interest* however* the Bolivian delegation at San Francisco*
handicapped by Its limited size* did not actively partici
pate In the debates of the committee responsible for the
council.
Bolivia also cooperated in the establishment of
several other International organizations. In 1943 the
Pefiaranda government had sent representatives to the
conferences that were discussing the creation of the Pood
and Agriculture Organization and the United Nations Relief
and Rehabilitation Administration (U.N.R.R.A.). Luis
Fernando Quachalla signed the convention that established
the U.N.R.R.A. on November 9* 1943* A special U.N.R.R.A.
commission visited La Paz in November 1944 and* in conjunc
tion with a Bolivian commission* determined on November 16
that the Andean nation's contribution to that organization
for three years would consist of cash payments of about
$35#000 plus such Items as cocaine* sulphate or quinine*
minerals* and lands for colonization all valued at about
$ 7 8 , 0 0 0 . Bolivia's National Convention approved these
agreements with respect to U.N.R.R.A. on December 28. 1944.
The Andean nation was also represented at the Monetary
1^ Conferencla interamerlcana sobre problemas de la

guerra £ de la paz* o p T ~clt.. p. 617
^ ^ Memorla (1943-1945), o£. cit.* p. 9 .

546
and Financial Conference of the United Nations held in July
1944 at Bretton Woods, New Hampshire. Ren6 Balliviln
Calder6n, Bolivia's representative to this conference,
signed the agreements which established the International
Monetary Fund and the International Bank for Reconstruction
and Development. He was convinced, however, that these
organizations would have no immediate importance for his
country and feared that the benefits derived from
participation in them might be outweighed by the obligations
involved.14® Nevertheless, the Vlllarroel government issued
a decree on December 24, 1945, approving the conventions
signed at Bretton Woods and accepting the quota assigned to
Bolivia.
III. THE POSTWAR FOREION RELATIONS OF THE

VILLARROEL GOVERNMENT
The Vlllarroel government managed few important
achievements in foreign relations during the final months
of its existence. The only accomplishment of Importance
was the complementary railroad protocol signed with
Argentina in December 1945. Among the major problems
encountered were the question of the tin contract with
Washington and the persistent Machado case that plagued
l4®Note 95, to La Paz, Ren£ Balliviin Calder6n,

August 7 , 1944, "Embajada de Bolivia en E.E.U.U. de
Norte America, (Jullo-Agoato 1944), ABFM.
54?
relations with Rio de Janeiro.
This section will be devoted to the discussion of
three broad areas of Bolivia's foreign relations. First,
attention will be given to the Andean nation's links with
Washington, especially with regard to the tin discussions.
Second, Bolivia's relations with Argentina and Brazil will
be examined. Third, the discussion will turn to a
consideration of Bolivia's other foreign concerns in this
period. These Included relations with the other bordering
states and questions pertaining to Inter-American
relations, the Larreta proposal, and the regional security
system.
Bolivia, tin, and the United States. The tin
contract signed between Bolivian representatives and the
United States Commercial Company on September 10, 1945, was
extremely unsatisfactory from the Andean point of view.
The agreement had a duration of one year (July 1, 1945-
June 30, 1946) and provided for a downward sliding scale of
prices on a trlmestral basis. Prices would decrease from
63 l/2fi per pound of fine tin during the first quarter to

58 1/ 2^ per pound in the final three-month period.1^
•'■^Bolivia, Minlsterlo de Relaciones Exterlores,

Boletln Oficlal del Minlsterlo de Relaciones Exteriorss,
ffo" 15, Julio -BloIemEre IgW>7 p7"lgTI-------------
548'
Andrade felt that his country had been the victim of economic
coercion from Washington, since cooperation between the
United States and Oreat Britain with respect to tin prices
had left Bolivia without alternate markets for her
exports .1^0 This dissatisfaction soon spawned desires
among Bolivian government officials and producers to seek
favorable revisions in the agreement. Andrade cautiously
favored the idea, but he insisted, however, that the
initiative for any adjustment must come from the producers

themselves.
It might be useful to describe Bolivia's position
with respect to the tin negotiations, as represented by
Andrade, in terms of selling points, objectives sought,
and obstacles. Perhaps the major argument utilized by
Andrade in his efforts to increase Washington's interest
in and prices for Bolivian tin was that of the metal's
strategic value for the United S t a t e s . A n d r a d e stressed
that tin was vital to the security of the United States
and for continental defense. Considered in this perspective,
Washington should not be guided in the negotiations by
150
Note 382, to La Paz, Victor Andrade, November 24,
1945, "Bmbajada de Bolivia en los E.B.U.U. de Amtfrlca"
(Octubre a Dlciembre 1945)* ABFM.
151Ibid., p. 2 .
x52Ibld., p. 3.
549
commercial criteria alone. Even if the metal should become
available to the United States from Malaya or other sources
in the Orient, it would still be in Washington's interest
to support the tin Industry within the Western Hemisphere.
In terms of objectives, Bolivia was seeking long
term contracts at prices which would enable the producers
to realize a reasonable profit without requiring the
government to cut taxes. Andrade felt that the shorttpterm
contracts were only prolonging the agony of the Industry,
leaving it in a state of uncertainty about the future and
without sufficient profits.
The Bolivian ambassador in Washington frequently
expressed his concern about a number of factors adverse to
the cause of improved tin contracts. One, of course, was
the previously described economic outlook within the United
State 8 government that determined the harder bargaining
position assumed by American representatives. A second was
the persistent propaganda directed against the Vlllarroel
government by its political enemies, a propaganda described
by Andrade as "criminal."1^ A third was the attitude
assumed by the Bolivian producers with respect to the
question. This group was basically opposed to the entire
character of the government in La Paz. Therefore, with
regard to the tin negotiations, the representatives of the
153ibld,
550
mine owners were In a dilemma. They could support the
efforts to obtain higher prices for their production,
which, If obtained, would Indirectly strengthen the
government; or, they could sabotage the contract revision
campaign, accept the lower contract prices and take a loss
In an attempt to weaken the government. In late 1943 and
In 1946, the producers reluctantly followed the former
alternative, supporting the efforts to gain favorable
revision in the tin contract.
In Pebruary 1946 negotiations on a contract
revision were opened when Andrade delivered to the
Reconstruction Finance Corporation a memorandum on the tin
question that had been prepared by the nation's producers.
The memo emphasized the relatively small rise In tin prices
from pre-war levels as compared with other metals and
pointed out that Malayan tin was selling in England at

67 1/ 2^ per p o u n d . ^54 ^he initiative was sympathetically
received in Washington. Improved offers were made by the
United States buyers in April and May, but all were
rejected by the producers. Andrade reported in mid-May
that the discussions had reached an impasse, and he
added that a drop in the British price for tin, plus the
154»some pacts Pointed Out by the Tin Producers

Related to the Tin Situation in Bolivia," memorandum
remitted in Note 173# to La Paz, Victor Andrade, May 15,
1946, "Embajada de Bolivia en E.E.U.U. de America" (Marzo-
Mayo 1946), ABFM.
discovery of large stocks of the mineral in Asia, had hurt
Bolivia's bargaining position c o n s i d e r a b l y . 1^ After the
overthrow of the Vlllarroel government in July, a new tin
contract was signed on August 20, 1946, which represented
a slight improvement over the United States offers of April
and May 1946.
Bolivia and the United States proceeded with their
Joint program of social Improvements. On September 28,
1945, two contracts were signed in La Paz between
representatives of the Bolivian government and of the
Institute of Inter-American Affairs. The agreements
extended previously established programs of public health
and Inaugurated other services designed to Implement
certain of the recommendations of the Magruder Mission.156
Bolivia's relations with the United States in the
Immediate postwar period continued to be strained. Part of
this could be accounted for by the renewed Argentine-United
States conflict provoked by Argentina's refusal to comply
with the obligations she had assumed through adherence to
the Chapultepec Conference agreements.1^ when the State
Department Blue Book on Argentina was released in February
155Note 173* ibid.

156La Raz6n , September 28, 1945, p. 4.
157Mechara, 0£. cit., p. 279.

552
1946, the old charges against the leaders of the Bolivian
government and their association with Argentine leaders
were unavoidably reiterated. Andrade reported that the
author of the Blue Book, Carl Spaeth, had also written the
memorandum on the Vlllarroel government that had been
circulated to the American republics in January 1944.*58
To Incriminate the Argentine government, Andrade stated,
Spaeth had referred to the Bolivian revolution as an
example of Argentina's imperialism.*59 Andrade later said
that a small group within the Department of State,
including Spaeth, had never been convinced that the
Vlllarroel government was not Nazi -oriented . ^ O
In June 1946, shortly before the ouster of the
Vlllarroel regime, the United States instructed its
ambassador in La Paz to confer with other members of the
diplomatic corps with respect to the violence associated
with recent attempts against the Bolivian government
■^®Note 124, to La Paz, Victor Andrade, April 9,

1946, "Embajada de Bolivia en E.E.U.U. de America" (Marzo-
Mayo 1946), ABFM.
Wibid.
lÔin a personal interview, December 13, 1966, in

La Paz, Andrade named not only Spaeth as a member of this
group but also Assistant Secretary Spruille Braden and
State Department official James Wright.
^^Note 225, to La Paz, Victor Andrade, June 22,

1946, "Embajada de Bolivia en Estados Unidos de America"
(1946), ABFM.
553
In response, La Paz instructed Andrade to make a "formal
protest for the intervention of the American government in
matters of Bolivian Internal policy ."1**2 Thus, at the
time of Vlllarroel's death on July 21, 1946, Bolivia’s
relations with Washington were once again tense.
Argentina and Brazil. The major achievement of
Bolivian diplomacy in the immediate postwar period was the
Complementary Protocol on railroad relations signed with
Argentina on December 22, 1945. Jos6 Tamayo, Bolivia’s
ambassador in Buenos Aires, had already obtained
Argentina's promise to finance the entire Yaculba-Santa
Cruz railroad in the reverse notes of June 2, 1945. In
this agreement, signed with Argentina’s Chancellor Juan I.
Cooke, Bolivia gained Argentina's commitment to finance the
Boyulbe-Tarabuco railroad which would link the Bolivian
Oriente with the Altiplano.
Negotiations on the protocol had been underway in
Buenos Aires since October 1945 but were delayed by the
unstable Argentine political situation. In November 1945
the General Director of Economic Affairs of the Bolivian
Foreign Ministry, Emilio Diaz Romero, traveled to the
Argentine capital to assist Tamayo in the discussions on
^■^Circular 237, to Bolivian Embassy, Washington,

Josi C. Pinto, June 20, 1946 (same volume as footnote 158),
ABPM.
the proposed a g r e e m e n t A n Argentine draft agreement,
delivered to Tamayo on December 7* 1945* was accepted in
most respects. Bolivia managed to delete one provision from
the draft protocol that would have required her to extend
the Boyuibe-Tarabuco line by constructing a section from
Sucre to Uncia (the Sucre-Tarabuco section had been
completed in 1944). Instead, Bolivia declared in an
exchange of notes on December 22 that she was disposed to
study the route and the cost of the Sucre-Uncia line.1^
By the terms of the protocol, the Argentine govern
ment agreed to finance the construction of the Boyuibe-
Tarabuco section of the Yacuiba-Santa Cruz-Sucre railroad
by advancing, funds up to sixty million pesos. The provi
sions for amortization and guarantees were identical to
those contained in the reverse notes of June 2, 1945, and
in the treaty of February 10, 1941; payment on the loan
was to begin upon completion of the section, but no later
than December 22, 1952. The agreement also provided that
work on the line would begin immediately (Article 6 ) . ^ 5
Unfortunately, this success in reaching a
1^3Note 703, to Buenos Aires, Jose C. Pinto,

November 16, 1945, "Embajada de Bolivia en la Argentina"
(1945-1946), ABFM.
^ ^ L a Raz6n, December 23, 1945* P. 5.
l65por the text of this protocol see Ostria

Gutierrez, Una obra, op. cit., p. 297.
satisfactory railroad agreement was not duplicated In other
aspects of Bolivia's relations with Argentina. A number of
difficulties contributed to what Bolivia's Chancellor Lt.
Colonel Josd Celestlno Pinto referred to as an unfavorable
climate In commercial relations with that c o u n t r y . A
troublesome factor was Bolivia's Inability to comply with
the stipulations of the rubber contract with Argentina. It
was the failure to fill the annual rubber export quota of
two hundred and fifty tons, according to Jos£ Tamayo, that
soured Bolivia's commercial ties with Argentina. Operating
on the principle of reciprocity, Argentine officials refused
to guarantee for Bolivia definite export quotas of necessary
foodstuffs such as flour and sugar, Indicating that no
exports would be permitted If the rubber shipments did not
arrive from Bolivia.^ 7 The rubber difficulties also
handicapped Bolivia in her efforts to purchase ninety-six
thousand tons of wheat from the Argentine government.
Discussions on this matter dragged on Inconclusively
throughout 19^5 and 1946 as wheat prices continued to climb.
I66oustavo Chacon resigned as foreign minister on

October 17, 1945; President Vlllarroel appointed Lt. Col.
J o b 6 C. Pinto Interim chancellor to replace Chacon. Pinto
characterized the climate of commercial relations with
Argentina as unfavorable in Cable 192 cited In Note 530,
to La Paz, Joe£ Tamayo, July 12, 1946, "Embajada de Bolivia
en la Argentina" (Julio 1946), ABFM.
^TNote 234, to La Paz, Jos6 Tamayo, March 26, 1946,

"Embajada de Bolivia en la Argentina" (Marzo 1946), 3 ,
ABPM.
556
Therefore, relations with Argentina in the Immediate
postwar period were not fully satisfactory. Nevertheless,
despite the difficulties experienced in obtaining the
necessary food Imports and the lack of success in reaching
definite commercial agreements, Argentina was willing to
enter into an important railroad agreement with La Paz and
proved reasonable for the most part in considering
Bolivia's request for supplies. Even if Andean ties with
Buenos Aires were not completely satisfactory, however, at
least one of Bolivia's neighbors apparently felt they were
too close.
Bolivia's ambassador in Elo de Janeiro, Federico
Gutierrez Granier, frequently informed La Paz that the
atmosphere that had been created by several troublesome
Issues was not conducive to close and beneficial relations
with Brazil.1^® Among the problems to which Gutierrez
Granier referred were the Machado case and the Argentine -
Bolivian rail agreements which had aroused suspicions at
Itamaraty. These matters effectively hampered relations
between these two countries, preventing any substantial
achievements from taking place.
Immediately prior to the overthrow of the Vlllarroel
^^ N o t e 242/19, to La Paz, Federico Qutilrrez

Granier, May 8 , 1946, "Bnbajada de Bolivia en el Brasil"
(1946), I, ABFM.
government In July 1946, Ambassador Gutierrez Granier
advised La Paz that Brazilian President Eurico Dutra had
decided to liquidate the entire Machado problem, a move
that encouraged the Bolivian diplomat to think that perhaps
a new era of amiability was about to be inaugurated.1*^ up
until that time, the Brazilian government had looked with
disfavor upon the Bolivian position In the case. This
position held that, while Bolivia had no legal obligation
to pay the firm an Indemnity for losses Incurred In
construction of the railroad, she would pay voluntarily an
Indemnity at the time and In the amount of her own
choosing.1?0 The case affected every facet of Bolivian-
Brazillan ties. In June 1946, the Bolivian ambassador wrote
that the matter "from the beginning of my mission has
hindered all progress In various aspects of our relations
and our cordial understanding."1?1 The Machado Issue also
prompted Brazilian Chancellor Jo&o Neves da Fontoura to
tell Gutierrez in June 1946 that "nuestras relaciones

172
marchaban muy mal." The Brazilian Foreign Minister added
^ ^ N o t e 429/41, to La Paz, Federico Gutierrez Granier,

July 18, 19^6, "Embajada de Bolivia en el Brasil" (1946), 2,
ABFM.
^^Note 162/16, loo, clt., see footnote 97.
1?1Note 322/29, to La Paz, Federico Gutilrrez

Granier, June 5 , 1946, "Embajada de Bolivia en el Brasil"
(1946), I, ABFM.
172Ibid.
558
that President Dutra had considered putting an end to the
entire Joint railroad project.
A second and even more serious matter that
threatened relations between La Paz and Rio in the postwar
months was the Brazilian response to the two Argentine -
Bolivian rail agreements of 19*15 • Itamaraty objected
strenuously to the guarantees that Bolivia had given In the
agreements for the Argentine loans. Brazil presented her
formal reservations to the arrangements on October 23, 19**5,
and on January 11, 19*^6, charging that certain of the
provisions of these agreements encroached upon her own
treaty rights in accordance with the Tratado sobre salIda
£ aprovechamlento del petrdleo boliviano of February 25,
1938.*73 The Bolivian ambassador interpreted the Brazilian
objection more as an expression of Rio's disapproval of the
Andean nation's close relations with Buenos Aires than as
an indication of concern with her treaty rights^1^
The Bolivian Foreign Ministry had anticipated the
Brazilian reaction. Reference already has been made to the
qualifying phrase appended to the section on guarantees In
the reverse notes of June 2, 19^5* with Argentina which
read "in accordance with ... the notes of this date that
173jjote 50-3* to La Paz, Federico Gutldrrez Granier,

February 6, 19^6* (same volume as footnote 171).
Wlbid.
559
complement lt [the agreement^ #»'^75 Qn ^jjat date, confiden
tial complementary notes were exchanged between Tamayo and
Argentine Foreign Minister Clsar Ameghino that explicitly
safeguarded Brazil's treaty rights in the petroleum zones
north of the river Parapet!.1^ However, those notes had
been kept secret by the Bolivian authorities unknown to
Brazilian officials; the Vlllarroel government's early
replies to the Brazilian reservations on the agreements
failed to refer to the confidential notes. The strategy
confused Ambassador Gutierrez Granier and led him to believe
that his government's objective was to perpetuate doubts in
Rio with respect to Bolivia's relations with Argentina.*77
Apparently, this was not the case, however. As part of a
plan to smooth relations with Brazil, the Andean represen
tative, on May 6, 1946, delivered a note to Brazilian
Foreign Minister Neves da Fontoura that contained the text
of the confidential notes of June 2, 1945.
The reasons for Bolivia's delay in disclosing the
notes are open for speculation. Perhaps the Bolivian
Chancellory was hoping that the Brazilian reservations could
be satisfied with the explanation that the guarantees to
175ostria Gutierrez, Una obra, op. clt., p. 296.

176Note 50-3* ££. clt., p. 3.
Wlbid.
Argentina Involved only the product of the sale of petroleum
from the zone traversed by the Yaculba-Santa Cruz railroad,
thus allowing Bolivia to exploit that zone Jointly with
Brazil in accordance with the stipulations of the 1938
treaty. Possibly, Bolivia was hesitant to reveal the note
since lt might be Interpreted in a manner offensive to Rio
de Janeiro as an Argentine-Bolivian agreement with respect
to Brazil18 treaty rights In which Brazil had not been
consulted. Then, too, Bolivia might have been holding the
notes for the moment in which she Judged that a special
display of loyalty to Brazil was needed. If Brazil had
responded to the Argentine agreements by offering Bolivia
more concessions, perhaps a definite commitment to finance
the Vila Vila-Santa Cruz railroad, Bolivia could have
sealed the overture by disclosing the notes as a sign of
the Andean nation's allegiance to Brazil all the time.
Whatever the reasoning in La Paz, relations with Brazil
had deteriorated to such an extent by early 1946 that the
confidential notes in question were made known in Rio de
Janeiro on May 6, 19*t6« in the hope that the Brazilian
suspicions and misgivings would thereby be overcome.
The Brazilian response to the disclosure of the
confidential notes of June 2, 1945, was disappointingly cool.
Brazil's chancellor, Neves da Fontoura, failed even to
mention them in an interview with Ambassador OutiJrrez

561
Qranier In early June.178 Early in July 1946 an Itamaraty
official told the Bolivian ambassador that in his government's
view no satisfactory reply had yet been given to the
Brazilian reservations. With respect to the notes safe
guarding Brazil's treaty rights, the Brazilian spokesman
expressed his government's displeasure at the delay in their
disclosure and described them as a bilateral Argentine-
Bolivian promise that had no effect for a third party.17^
The Machado case and the Brazilian reservations to
the Andean agreements with Argentina dominated Bolivlan-
BrazIlian relations in the immediate postwar period. These
difficulties, coupled with the prior Brazilian misgivings
about the Vlllarroel government, prevented any gains in the
matters of border demarcation, joint petroleum exploitation,
Improved commercial exchange, and in the establishment of a
branch of the Banco del Brasil in La Paz.
Other considerations in Bolivian foreign relations
after the war. No important developments took place in
Bolivia's relations with her other neighbors. In Chile,
Ambassador Fernando Campero Alvarez was increasingly
concerned about the activities of Bolivia's political exiles
178Note 322/29, 0£. clt., p. 2.
179lft>te 384/37# to La Paz, Federico Gutierrez

Granier, July 3 $ 1946, "Embajada de Bolivia en el Brasil"
(1946), 2, ABFM.
in Santiago who, early in 1946, organized the Comit£
Democratico Antl-fasclata Boliviano, The committee included
8uch members aa former Preaident David Toro, Alberto Oatria
Gutierrez, and Luia Fernando Guachalla and ahared the viewa
and purpoaea of the Anti-Faaciat Democratic Front that waa
formed within Bolivia in December 1 9 4 5 . Aa mentioned
earlier, by July 1946 Bolivia1a ambassador to Aaunci6n,
Auguato Clspedes, was requesting permission to leave that
post in order to be Incorporated into the next national
congress. He was convinced that Bolivian-Paraguayan economic
relations were relatively unimportant.1®1 Relatione with
Uruguay remained tense and yielded no practical results.
Ties were more cordial with Peru but hardly more productive.
No important new initiatives were taken by La Paz in
relations with Lima.
Bolivia's response to the Larreta proposal presents
another facet of Bolivian foreign policy during this period.
Uruguay's Foreign Minister Eduardo Rodriguez Larreta
suggested to United States Ambassador William Dawson on
November 22, 1945, and to the other American republics that
consideration be given to a revision in the principle of
1®°La Raz6n, December 20, 1945* p. 4; Note 43, to La

Paz, FernancTo tampero Alvarez, February 28, 1946, "Embajada
de Bolivia en Chile" (Enero-Marzo 1946), ABFM.
^^Note 97# loc. clt., see footnote 111.

non-intervention, permitting collective or multilateral
intervention in defense of human rights and democratic

iftp
principles. c The Andean reaction to Larreta*s overture
was mixed. La Razdn, the La Paz dally, described the
proposal as "a magnificent and irrefutable document of
sound International d o c t r i n e . H o w e v e r , the evasive
official Bolivian reply, dated January 22, 1946, indicated
that the Andean government was less convinced of the
soundness of the idea. It referred to the centrality of the
principle of non-intervention both in the United Nations
Charter and in the regional system and warned that a pre
mature act contrary to this accepted norm could easily
disrupt good relations within the hemisphere and complicate
the bonds between the regional system and the United

Nations. ^^4 while acknowledging the high objectives
contemplated by the Larreta proposal, the Bolivian govern
ment pointed out that to achieve such ends, precise
definitions of the human rights to be protected and clear
rules in regard to Intervention would have to be unanimously
accepted by the American states. Therefore, in Bolivia's
opinion, prior consideration should be given by the
^®2flecham, o£. cit., pp. 207-288.
^^La Razdn, November 27, 1945, P. 4.

564
American states to two relevant studies being undertaken by
the Inter-American Juridical Committee in accordance with
Resolutions XL and XXXVIII of the Inter-American Conference
on Problems of War and Peace. The first of these had to
do with the "Declaration of the International Rights and
Duties of Nan"; the second called for consideration of the
Ouatemalan proposal entitled "Defensa y Preservacidn de la
Democracia de America," which was designed to prevent the
establishment of "anti-democratic regimes" in the
Americas.
Although the Bolivian reply was not an absolute
rejection of the Larreta proposal, the Vlllarroel govern
ment clearly was not disposed to endorse the concept of
collective intervention. The alacrity with which United
States Secretary of State James Byrnes endorsed the
proposal, in light of concern in Washington and Montevideo
with the activities of the Farrell-Per6n government in
Argentina, raised the possibility that the proposal was
aimed at Buenos A i r e s . L a Paz, attempting to strengthen
her relations with Buenos Aires, was not willing to endanger
lQ5lbld.
^^Conferencia interamerlcana aobre problemas de la

guerra £ de la pazT~6pT~cTt.. pp. l2t, 129.
i^Duggan, op. clt., pp. 205-206; Meoham, op. cit.,

pp. 288-289. --- ---
that policy of cooperation by supporting the Uruguayan
Initiative. The memory of Bolivia's own experience with
one form of collective Intervention during the first half
of 1944 was another significant factor. The nation's
Isolation had clearly Indicated how the United States could
utilize such Instruments against a rebellious Latin American
republic. At the same time, while the Vlllarroel government
consistently had supported the non-Interventionist prin
ciples of Juridical equality for the states and national
self-determination and had sought International legal
safeguards for the nation's political Independence, Its
record on the domestic front indicated that considerably
less vigilance had been exercised in defense of human
rights.
In early 1946 the United States Department of State
released Its Blue Book on Argentina containing references to
the association between Bolivian leaders of the revolution
of December 20, 1943* and members of the military regime in
Argentina. A United States embassy official delivered a
copy of the document to the Bolivian Chancellory on February
21, 1946, apparently in an effort to assure the government
that Washington's intentions In the matter were not un
friendly to Bolivia and to encourage the refutation of the
charges contained in the Blue Book by the persons involved.1^®
l88circular D.Q.A.P.D. 14, March 1, 1946, "Circulares"

56$
Immediately, the Bolivian Foreign Ministry contacted the
people to whom reference was made In the State Department
Blue Book, requesting that they Issue a detailed refutation
of the North American account. On February 26, 1946,
President Vlllarroel called a cabinet meeting to discuss the
publication of the Blue Book. The Chancellory later announoa)
plans for formulating a communique that would prove the
Bolivian revolution operated Independently of the Argentine
government.l89 Although, as previously Indicated, the
Incident did not provoke serious consequences In Bolivia's
relations with Washington, lt must be regarded as one more
negative factor which contributed to the unfavorable milieu
within which Bolivia conducted her foreign relations.
The future of the International Tin Committee was
another extremely Important postwar concern of Bolivia's
foreign policy. On October 3, 1945, the Bolivian repre
sentative on the committee, Juan Pefiaranda Mlnchln,
reported that Great Britain opposed the continuation of the
regulatory g r o u p . P e f i a r a n d a thought Great Britain's
position had been determined by United States opposition to
(containing circular notes from the Bolivian Foreign Ministry

dated from August 1945), ABFM. Explanatory note added since
volume title gives no dates.
l89lbld., p. 2.
19C>Note 91/45, to La Paz, Juan Pefiaranda M., October

1945j "Legaclon de Bolivia en Gran Bretafia” (1945)$ ABFM.
567
the continuation of the tin cartel.*91 victor Andrade,
however, reported in January 1946 that the United States
policy with respect to the international tin group was
still u n d e f i n e d . xn any case, if the committee were
discontinued, Bolivian tin would have to compete In an
unregulated international market against low cost tin
producers, a situation placing Andean high-cost producers
at a distinct and probably disastrous disadvantage. Early
In 1946 the tin committee recommended a conference of tin
producers and consumers to decide the future of the
Industry on a worldwide scale.
The American republics had decided at the Mexico
City Conference that one of their first responsibilities
In the postwar period would be to draft a treaty Incor
porating the principles and procedures of the Act of
Chapultepec. On August 29, 1945 » the Board of Governors
of the Pan American Union decided that a conference to
draft an agreement on reciprocal assistance within the
hemisphere would take place in Rio de Janeiro on October 20,
1945. Although the difficulties between Washington and
Buenos Aires forced the postponement of the conference until
Îjiote 104/45, to La Paz, Juan Pefiaranda M.,

November 23, 1945 (same volume as footnote 190), ABPM.
^^Note 4, to La Paz, Victor Andrade, January 4,

1946, "Embajada de Bolivia en los E.E.U.U. de America”
(Enero-Febrero 1946), I, ABFM.
569
August 1947, much of Bolivia's early preparation for the
conference took place during the final months of Blllarroel's
reign.
Bolivia's proposal for a treaty of mutual assistance
was incorporated Into a draft Pact of Continental Security,
prepared by Luis Iturralde Chinel. Taking Into considera
tion the United Nations Charter's provisions for regional
arrangements, the draft pact carefully distinguished
between the pacific procedures designed to promote the
solution of inter-American disputes and the procedures
designed for taking collective action In response to acts
of aggression.1^ The Andean proposal provided that the
Board of Governors of the Pan American Union would have
the responsibility of promoting the peaceful resolution
of inter-American controversies.1^ Luis Iturralde Chinel
intentionally deleted any reference to treaty revision In
the draft pact, explaining that the nation's experience at
San Francisco amply demonstrated the futility of Insisting
upon this particular.1^ The author added, however, that
^ c i r c u l a r D.O.A.P.D. 440, October 2, 1945#

"Oficios del Mlnisterio de R.R.E.E. de Bolivia" (1945), II,
ABFM.
1^ I b l d ., text of the draft "Pact de segurldad

continentalK contained in Circular D.O.A.P.D. 440.
195conferencla lnteramerlcana sobre problemas de la

guerra y de la paz, "Pacto de segurldad continental,
exposlcl6n de motivos," o£. clt., p. 68,
Article III of the pact implicitly included treaty adjust
ments. It provided that any situation, without distinction
of origin, that damaged friendly relations between American
states or which could threaten continental peace and that
could not be resolved through direct negotiations would be
referred to the "Directive Council" of the Pan American
Union.*96 This body would then propose procedures of
investigation, conciliation, and mediation to effect a
solution of the issue. In cases of direct aggression, the
pact provided for a permanent military group that would
take automatic and immediate action against the

aggressor.1^
On still another front, Victor Andrade deposited in
Washington on November 14, 1945* the instrument of Bolivia's
ratification of the Charter of the United Nations. The
nation's National Convention had approved Bolivia's

198
adherence to that document on October 2, 1945.
The end of the Vlllarroel government. On July 21,
1946, a rebel movement toppled the Bolivian government and
killed President Vlllarroel. Dissatisfaction with the
oppressive measures of the regime had been building for
196circular D.O.A.P.D. 440, loc. clt.
iPTconferencla lnteramerlcana sobre problemas de la

guerra de la paz, loc. clt.
^ ^Note 376, to La Paz, Victor Andrade, November 15,

5?0
months. Despite the unquestionable good intentions of
many members of the Villarroel government in behalf of
social reform and national development, criminal elements
tolerated within the regime had alienated large sectors of
the populace. The strong economic nationalism and pro
labor orientation of the M.N.R. had, of course, aroused
the intense opposition of the large mine owners and their
associates within the nation's upper Income groups.
Within the government, itself, an uneasy coalition had
existed between the M.N.R. and RADEPA members.
The movement against the government which succeeded
in July had been building since June when a violent out
burst, supported by small contingents of the nation's army
and air force, was crushed by government forces.1^ The
government retaliated by seizing two of the capital city's
dally papers, La Raz6n and Ultima Hora. In July sporadic
demonstrations against the government continued; some of
these resulted in violence and death, developments which
further angered the cltizemv. The visible components of
1943, "Embajada de Bolivia en los E.E.U.U. de America”

(Octubre a Dlclembre 1945), ABFM.
^ ^ o n e of the more complete accounts of the final

days of the Villarroel government, written from the govern
ment's perspective, is that by A. Clspedes, El presidents
colgado; the opposition's account is given by Alberto
6siria Outidrrez, The Tragedy of Bolivia (New York: Devin-
Adair Company, 195&), pp. 5B-7G.
57&>
the rebel movement Included eecondary school teachers who
were striking for higher wages, university and college
students, labor groups, and representatives of the middle
sectors including many women. Yielding to the demands of
these groups and to the advice of his military collaborators,
Villarroel reorganized his cabinet on July 19 excluding
members of the M.N.R.^®® However, by the morning of July
21 the President had lost the support of the Army and found
himself defenseless against an angry mob that burst Into
the Palaclo ftuemado later that day and killed him.
IV. ANALYSIS AND CONCLUSIONS
The major challenge with which the Vlllarroel
government had to contend in Its foreign relations was the
United States allegation that this regime had Nazi
associations and an antidemocratic orientation. This
Indictment led to Bolivia's diplomatic Isolation within the
hemisphere during the first half of 1944. It also created
suspicions and doubts In the other American republics that
lingered as long as the Vlllarroel government existed. The
Nazi taint also provided the Issue that rallied persistent
opposition to the government both within the country and
abroad. Therefore, in assessing the Andean action In
2000stria Outldrrez, The Tragedy of Bolivia, op. clt.,

pp. 64-67.
572
foreign relations In this 1943-1946 period, It Is essential
to keep In mind that this accusation represented not only
Bolivia's first and major problem In foreign affairs, but
also the most persistent and prejudicial factor with which
that country had to deal. Although the government managed
to achieve diplomatic recognition and to regain the nation's
official status within the American community, Its tendency
toward authoritarian tactics prevented It from ever wholly
overcoming the stigma of the early charges against it.
It follows, therefore, that the primary objective of
Bolivian foreign policy during the first half of 1944 was
to gain diplomatic recognition by the nations of the Western
Hemisphere. The quarantine In which the Andean nation was
placed had effectively paralyzed all negotiations of metal
contracts, threatening not only Bolivia's economy and
general welfare, but also the life of the government,
llarsfore, the overriding objective of Bolivian foreign
policy until June 23, 19^4, was diplomatic recognition by
the other American states; almost all Andean diplomatic
activity during this period was oriented In this direction.
After relations were resumed with the American states
in June, a second foreign policy objective assumed the
central place in Andean diplomacy, to obtain Improved
mineral contracts with the United States. Although the
objective was not a new one for Bolivian policy. It had
special significance for the Vlllarroel government. One of

573
the central criticisms that the members of the M.N.R. had
leveled persistently, and often rudely, at the Pefiaranda
government was that of selling out the nation’s natural
riches to the United States at outrageously low prices.
Now the M.N.R. had the opportunity to demonstrate that it
could improve upon the record of the regime It had attacked.
In addition, the platform of the new government contained
promises to make social Improvements beneficial to
Bolivia18 working classes. But these programs cost money,
and without satisfactory mineral contracts, it was unlikely
that the government would have the financial resources to
fulfill those aspirations.
A third objective of Villarroel's foreign policy was
to support national development through international agree
ments. This concern was evident in the continuing efforts
to obtain financing for railroad building. Although
attempts to gain Brazil's firm commitment to finance the
Vila Vila-Santa Cruz railroad were unsuccessful, substantial
progress in this regard was made with Argentina. Foreign
Minister and later Ambassador Jos£ Tamayo recognized the
practical limitations of the earlier Argentine-Bolivian
railroad agreements'of 1941 and 1942; in those agreements,
a definite Argentine financial commitment had been obtained

only for the first section of the Yacuiba-Santa Cruz rail
road. Tamayo, therefore, managed to gain an Argentine
promise to finance not only the balance of the main

574
Yaculba-Santa Cruz line, but also the branch line from
Boyuibe to Tarabuco that would connect the eastern region of
the nation with the high mountain country. The Tamayo
agreements must be regarded as a major accomplishment of
Bolivian diplomacy.
Bolivia also obtained during this period the credits
from the Export-Import Bank promised earlier by Washington.
These loans went to the C.B.P. for two Important projects —
the construction of the Cochabamba-Santa Cruz highway and
the development of the petroleum Industry. No Important new
credit arrangements were made with the United States,
however.
Another objective of Bolivian foreign policy was to
strengthen Its economic and political position through an
active participation in International organizations. At
the major regloaal and international conferences in which
Bolivia participated, her chief concern was to bolster
national security by promoting an effective collective
security system either on the regional or at the world
level. A second important aim was to strengthen her
position vis-a-vis Chile with respect to the port question.
At San Francisco, Bolivia's position was clearly in favor
of explicit provisions in the Charter of the United Nations
for treaty revisions; the security policy formulated in
preparation for the Rio conference manifested more sophis
tication by referring to treaty adjustment indirectly. The

575
revisionist government’s Interest in Multilateral agreements
and international organizations favorable to its economic
and social concerns was also in evidence at the meetings.
A fifth general objective to which Chancellor Chacon
alluded in a report to the National Convention in August
194^ was that of maintaining harmonious relations with
"all the peoples of the world."201 The significance of
this broad foreign policy objective lies in the degree to
which the Andean nation fell short of its achievement.
Reference has already been made to the strained relations
that Bolivia had with Brazil, the United States, and
Uruguay. Mention must be made of the relatively untroubled,
but equally nonproductive relations with Chile, Paraguay,
and Peru. Ties with Argentina, although productive in
important ways, also were hampered by persistent
difficulties. Bolivia's desire to have harmonious and
productive relations within the International community was
in sharp contrast with her capacity to do so.
When one compares the objectives of Bolivian foreign
policy with the results of Bolivian diplomacy during the
period and then adds this balance sheet to the description
that has been presented already, one can only conclude that
an overall deterioration occurred in the Andean nation's
201La Razdn, August 17, 1945, p. 4.

576
202
foreign relations under the Vlllarroel government. To
some extent, this appraisal Is less condemnatory than It
may appear. Several of the factors and problems with which
the Vlllarroel government had to contend would have been
serious challenges to any government. The end of the war
would invariably have threatened Bolivia's favorable
wartime position with respect to mineral markets and made
more difficult the negotiation of acceptable metal
contracts. The Machado case would probably have troubled
any Bolivian government In relations with Brazil, although
it is likely that another regime could have handled the
issue more effectively. Then, too, much of Bolivia's
problem with Brazil stemmed from her activism and success
In promoting the new railroad agreements with Argentina.
A more ineffectual policy toward Buenos Aires would surely
have Increased the possibility of Improved relations with
Rio de Janeiro.
How does one explain this decline? Frequent
reference has been made to a number of circumstances that
help In understanding this development. The stigma resultlr^g
202A period of deterioration In a nation's foreign

relations may be described as one in which relatively
cordial and potentially beneficial relations with a number
of countries have been replaced by ties that are so
strained that objectives are not achieved or problems
solved, or by relations that are officially cordial but
practically passive and unproductive.
57f
from the early allegations against the Vlllarroel government
was probably the most Important factor In determining this
deterioration. The psychological and practical effects of
the close of World War II were extremely Important.
Uncertainty in Bolivia and In the United States about the
postwar market for Andean minerals made contracts hard to
negotiate.
Tq these basic factors must be added the inexperience
and ineptitude of the new government. Many of Bolivia's
most experienced and competent diplomats were either exiled
or resigned from the diplomatic service as a result of the r
December 20, 1943 revolution. In general, older members of
the traditional diplomatic elite were replaced by a younger
group with little diplomatic experience. The Foreign
Ministry was In eharge of politicians and army officers
who, with the exception of Enrique Baldlvleso in 1944,
lacked a background in foreign policy-making and diplomacy.
Key ambassadorial posts were assigned to men who had little
or, in some cases, no previous experience in the diplomatic
service. This inexperience may help to explain the blunder
of the Tamayo note of March 1944, the prejudicial delays in
the Machado case, the Inexplicable use of the confidential
notes with respect to Brazilian .treaty rights, and the
awkward handling abroad of the executions associated with
the Oruro rebellion.

A fourth factor was the government's own Inability
to win widespread domestic support or to gain the confidence
of the other American nations. The unstable Vlllarroel
government was constantly threatened by domestic critics
predominantly from the traditional parties. For the most
part It was constrained from taking violent repressive
measures against the opposition by the desire to prove that
previous charges against It were false. Nevertheless, a
widespread lack of confidence in the stability or political
nature of the Villarroel government existed abroad.
Frequent attempts against the regime, reports of harsh
treatment of the political opposition, the brutal execu
tions of prominent citizens In November 1944, and the
kidnapping of mine owner Mauricio Hochschild in July 1944,
were all prejudicial to establishing a proper climate for
effective foreign relations. The government's Inexperience
and Instability also undoubtedly accounted, at least In
part, for the scarcity of Important Bolivian Initiatives in
her foreign relations.
This decline cannot be attributed to any new overall
203Note 5-4, to La Paz, Raul Botelho Oosilvez,

January 4, 1945, "Embajada de Bolivia en el Paraguay"
(1945), AB7M. In January 1945 the Bolivian ohargtf d'affaires
In Paraguay informed La Paz that Paraguay's Chancellor
Chlrlanl had reportedly told an Uruguayan official that he
believed the government of Lt. Col. Vlllarroel to be
transitory and subject to change at any time.
579
foreign policy orientation, however. One objective of this
Investigation has been to determine whether or not the
Vlllarroel government would deviate markedly from the policy
of other post-Chaco War governments. Our discussion has
Indicated that In almost every respect, continuity existed

*
between the foreign policy of the Vlllarroel government
and that of the Pefiaranda regime. One of the government's
major achievements, the Tamayo railroad agreements with
Argentina, was consistent with the earlier railroad
treaties and arrangements of 1941 and 1942. Relations
with the United States continued to have fundamental
Importance for the Andean republic. Although these
relations were concerned primarily with mineral contracts,
the Bolivian government did emphasize more Its desire for
cooperation In promoting social Improvements than had the
prior government. The lively Interest In guaranteeing the
nation's security persisted. It would be legitimate to
note, however, that, despite the difficulties Involved,
Bolivia moved closer to Argentina In these years than to
any other neighbor.
Thus, the turbulence In Bolivia's domestic life was
clearly reflected In her foreign relations during the
presidency of Oualberto Vlllarroel. While gains were
registered In certain aspects of Bolivia's relations with
Argentina and while the nation participated actively In

several important international conferences, ties with the
United States were always slightly strained. At the same
time, relations with the bordering states were generally
troubled or unfruitful. Overall, it was a difficult period
for Bolivia domestically and in her International relations.

CHAPTER VIII
AN ANALYSIS AND SOME CONCLUSIONS
This final chapter has the following purposes:
(l) to summarize the major developments in Bolivian foreign
relations In the years 1935-1946, (2) to analyze Andean
foreign policy and foreign relations during this period, and
(3) to draw tentative conclusions about these subjects,
while raising several questions for further inquiry.
I. SUMMARY
Although the protocol of June 12, 1935* ended
hostilities In the Chaco War, It left the solution of the
fundamental territorial question to the Chaco Peace
Conference which convened in Buenos Aires on July 1, 1935.
Not until July 21, 1933, did the former belligerents sign
the Treaty of Peace, Friendship, and Boundaries which
provided a settlement in the Chaco dispute. In the inter
vening period, the Chaco issue was the most Important
problem in Bolivian foreign relations.
At the Chaco Peace Conference, the Andean nation*.>
while laying legal claim to the entire Chaco Boreal, sought
an agreement that would have given her a sovereign port on
the river Paraguay and security in the Villa Montes-

582
Boyulbe region. Bolivian diplomacy at the Conference was
based on the provisions of the protocols of June 12, 1935,
and January 21, 1936, which recognized the declaration of
August 3* 1932, stipulated a settlement of the territorial
question by legal arbitration If direct negotiations
failed, and obligated the neutral governments to continue
In the Conference until an arbitration compromise was
formulated. Bolivia, by consistently supporting the
Conference's authority and by complying with its resolutions,
attempted to utilize the mediatory body as an Instrument for
breaking down Paraguay's Intransigence and for gaining a
satisfactory settlement In the dispute.
Even though the Chaco Issue was the focal point of
Bolivian foreign relations during the 1935-1938 period,
Andean action at the Peace Conference must be understood In
terms of the nation's overall foreign policy. This policy
advocated establishing practical and friendly relations
with the neighboring states as a means for gaining support
at the Chaco Peace Conference, for providing national
security, and for promoting Internal economic development.
In 1936 and 1937* blnational economic study
commissions were created with each of the bordering states
except Paraguay. Although the tasks of the commissions
varied somewhat, their general purpose was to find ways of
strengthening economic and commercial ties and of improving

583
communications between Bolivia and the second party involved.
Bolivia also signed a nonaggression pact with Peru in 1936
and obtained a guarantee of her territorial integrity from
Brazil in 1938.
Petroleum was the key to the policy of practical
contacts. On March 13* 1937* the Andean government
cancelled Standard Oil Company's concession in Bolivia,
thereby gaining control of the nation's oil deposits.
Since Argentina and Brazil were interested in Bolivia's oil,
La Paz, with an eye to the proceedings at the Chaco Peace
Conference, wanted to demonstrate to these countries that
it was in their Interest to guarantee continued Bolivian
control over the oil zones. Bilateral discussions with
each of these countries contemplated linking the potentially
oil-rich but isolated Bolivian Orlente with the Argentine
and Brazilian railroad systems.
At the same time, Bolivia was interested in
countering the possibility of an Argentine-Paraguayan plan
of penetration into her Orlente by making some arrangement
with Brazil. In February 1938 Brazil, also concerned about
possible Argentine preponderance in Bolivia's eastern
lowlands, agreed to finance the construction of the
Corumbi-Santa Cruz railroad and to advance funds to initiate
petroleum exploration in the Bolivian subandean zone north
of the Parapet1 River. Bolivia guaranteed the loan with

584
potential petroleum production of the zone made acceeaible
by the railroad and set aside a large area for petroleum
exploitation by mixed Bolivian-Brazilian companies.
But Bolivia's policy of practical contacts was
easier to formulate than it was to Implement. The Andean
nation did not have the financial, technical, or political
capacity to exploit her newly nationalized petroleum
wealth. The Standard Oil difficulty made it virtually
impossible to obtain in the United States the capital
necessary for developing the oil Industry. At the same
time, the Andean nation had little or nothing to export to
her western neighbors, Chile and Peru. Therefore, prospects
for obtaining balanced trade with these countries were
poor. Bolivia's port aspiration also continued as a
negative factor in relations with both these countries.
La Paz responded to these difficulties by espousing
the concept of balanced bilateral commercial relations.
Special transport facilities were sought from Chile and
Peru in return for the favorable trade balance which they
enjoyed in their commercial relations with Bolivia. Strict
bilateral commercial agreements were considered with Japan
and Oermany, and Bolivia turned to Berlin for the credit
needed to purchase oilfield equipment.
The outbreak of the war in Europe in 1939 and
political changes within Bolivia that same year had a

significant Influence upon Andean foreign relations. Except
for mineral exports to Great Britain, avenues of commerce
with Europe were closed. Relations with the United States,
still troubled by the Standard Oil case, assumed a
different character by virtue of Washington's growing
Interest In Bolivian metals. In November 1940 a five-year
contract was made for the sale of Bolivian tin to the United
States. Contracts for other Bolivian metals also were
signed. On the basis of these mineral exports, Bolivia
asked for United States technical and economic assistance
In strengthening the Andean economy. Little progress was
made in this regard, however, until the United States was
involved directly In the Second World War and Bolivia was
willing to make a settlement with the Standard Oil Company.
At the Third Meeting of Consultation in Rio de Janeiro In
January 1942, the basic agreements were reached for the
wartime program of economic cooperation between Bolivia
and the United States. In December 1942 Important credit
agreements were signed between representatives of the
Bolivian government, the Bolivian Development Corporation,
and the Export-Import Bank of Washington. Meanwhile, during
the early years of the war, Bolivia moved toward a full
political commitment to the Allied nations.
Throughout the first years of the Second World War,
Bolivia continued her policy of building closer contacts with

586
the countries which surrounded her. A nonaggression pact
was signed with Chile in January 1941 and another mixed eco
nomic study commission was created with that country. But
the fundamental political issue at stake between La Paz and
Santiago, the Bolivian desire for a sovereign port on the
Pacific, made effective cooperation between the two countries
difficult, if not impossible. Aside from relations with the
United States, Bolivia continued to be preoccupied by grow
ing ties with the countries which bordered her Orlente. A
policy of rapprochement was established toward Paraguay. La
Paz and Asunci6n assumed the initiative in sponsoring the
special Plata River regional economic conference in 1941.
Chile, concerned about Bolivia’s close relations with the
large Atlantic countries, tried to derail the conference,
but was unable to do so. Important railroad, highway, and

petroleum agreements were made with Argentina in February
1941 and February 1942. As in the case with Brazil, Bolivia
mortgaged Important petroleum deposits to guarantee the
Argentine loans. Other potentially important agreements
were reached with Brazil and Paraguay in 1943.
Bolivia’s pro-Allied course in foreign affairs
placed new stress on her relationship with Argentina.
During the middle war years, 1942-1943» Buenos Aires was

competing actively with the United States for Bolivia’s
raw materials. Caught in the middle, the Andean nation
attempted to balance these Interests in much the same way

58%
as she was trying to juggle Argentine and Brazilian Interests
In the Orlente. Dependent Bolivia could 111-afford total
alignment with any of these countries If It meant curtailment
of Imports or credit from the others.
Bolivia's foreign relations were affected directly
by the revolution of December 20, 1943, when the conser
vative pro-Allled government of Enrique Pefiaranda was
replaced by an ultranationalistlc regime whose members
included critics of the pro-Allled policy, German
sympathizers, and politicians with strong admiration for
the neutral and nationalist Argentine regime of Pedro
Ramirez. Despite protestations of loyalty to Bolivia's
International commitments by the Villarroel government, all
the American republics, except Argentina, agreed to
withhold diplomatic recognition of the new regime. Bolivia
was Isolated politically within the hemisphere during the
first half of 1944.
After the Bolivian government received official
recognition from the American states In June 1944, she had
little alternative In foreign affairs but to follow the
policy of cooperation with the United States set by the
government of Pefiaranda. Due to lingering suspicions In
Washington about the Vlllarroel government and to doubts In
both countries about the future market for Bolivian
minerals In the United States, United States-Bolivian

588
relations were less cordial In the years 1943-1946 than
they had been prior to the ouster of Pefiaranda. Generally
speaking, except for the gains registered In complementary
railroad and petroleum agreements with Argentina, the 1943-
1946 period was an era of decline In Bolivian foreign
relations.
II. AN ANALYSIS
This section Is devoted to analyzing Bolivia's
forelga relations and foreign policy during the post-Chaco
War-World War II period. Consideration will be given to
the objectives of Andean policy and to the Instruments used
In pursuing those objectives. The matter of continuity of
policy within the 1935-1946 period will be examined, and
the policy-making process will be discussed. Bolivia's
more distinctive policy positions will be noted. Special
consideration will be given to the significance of Bolivia's
port aspiration for the nation's foreign affairs In this
era. Throughout the section, the Investigator will
endeavor to Indicate how Bolivia's domestic conditions
affected her foreign policy and the course of her foreign
relations.
Policy objectives. This investigation has devoted
much attention to the objectives of Bolivian foreign policy
during the 1935-1946 period. As a convenient summary to the

reader, seven of the most important ends that were pursued
by the Bolivian government in those years will be considered
briefly here. The achievements of Bolivian policy in
relation to each of these objectives will be noted.
Bolivia's fundamental foreign policy objective after
signing the protocol of June 12, 1935» was to obtain a final
and satisfactory settlement of the Chaco dispute. A
satisfactory arrangement for Bolivia, as defined by Andean
spokesmen early in the negotiations, would have provided
that nation a sovereign port on the river Paraguay and a
substantial portion of the disputed Chaco territory occupied
by Paraguay. As we have seen, Andean negotiators were only
partially successful in achieving these objectives. The
treaty signed on July 21, 1938, reestablished peace between
Bolivia and Paraguay, placed the boundary a considerable
distance from the Boyuibe-Villa Montes road and the Camiri
oilfield, and provided a free port for Bolivia on the
Paraguay River.
Second, a major objective for Bolivian diplomats
throughout the period was to secure firm guarantees for the
territorial integrity and political Independence of the
nation. Andean diplomacy was pervaded by the awareness of
Bolivia's weakness. Therefore, national security was
sought indirectly through friendly and practical economic
contacts with the neighboring states and directly in

599
bilateral agreements with Peru (1936), Brazil (1933)#
Paraguay (1938), and Chile (1941). in inter-American and
International conferences, Bolivia also strongly supported
the creation of regional and world systems of collective
security.
Third, the Andean republic worked to obtain
unrestricted free transit rights through the territory and
ports of the bordering states. This objective of free
transit was pursued ardently in bilateral negotiations and
multilateral discussions in the years after the Chaco War
and through the early years of World War II. Special
attention will be given to this problem later In the chapter.
Fourth, Bolivia strived to improve international
communications and transport facilities. The reason for
this effort was clear, Bolivia had to trade In order to
live. Virtually the only source of foreign exchange for
the nation was her mineral exports. Adequate facilities
were needed to get them to markets in Europe, the United
States, a*d Asia. The country could not feed Itself and had
to Import vital foodstuffs, as well as military supplies
and manufactured goods. Transport facilities were lacking
for the nation's oil production.
Therefore, Bolivia entered Into agreements with all
her neighbors to Improve these essential facilities.
Agreements were reached with Argentina and Brazil to build

591
new international railroads. Arrangements to Improve
existent railroad facilities wer*e made with Chile and Peru.
Bolivia secured the right to build pipelines to petroleum
markets in Argentina, Brazil, and Paraguay. Improved port
facilities in Chile and Peru, river transportation on the
Amazon, and free ports in Paraguay, Brazil, and Uruguay
were topics of discussion throughout the period.
Fifth, another aim of Bolivian diplomacy was to
obtain mutually beneficial commercial and economic
agreements with the surrounding states and with nonbordering
countries. Impetus for this policy came from Enrique Flnot
who promoted the creation of mixed economic study
commissions with Argentina, Brazil, Chile, and Peru.
Ostrla Gutierrez collaborated in and continued this plan,
organizing mixed commissions with Paraguay and Chile. For
the most part, however, Bolivia lacked the exports to
establish balanced commercial relations with her neighbors.
Although Andean representatives located potential
petroleum markets in the countries of the Plata River
basin, Bolivia's petroleum production was insufficient to
fill even the national market. Petroleum remained, however,
as the future hope for alleviating Bolivia's adverse
commercial relations with at least some of the bordering
states.
At the same time, the Andean republic was vitally

592
concerned about protecting and developing markets for her
mineral exports. To this end, Bolivia was a party to the
International Tin Agreement and was represented on the
International Tin Committee. When Europe*s continental
markets were closed to Bolivian minerals, the United States
absorbed most of these exports, with the exception of large
quantities of tin, which continued to flow to Oreat Britain.
Sixth, Bolivia sought to obtain through her foreign
relations the technical and financial resources for
promoting domestic development. Foreign collaboration was
desired in the post-Chaco War period to help Bolivia build
up her Internal railroad system and to develop the petroleum
industry. As we have seen, the development program for
which Bolivia asked United States assistance after the
outbreak of war in 1939 was expanded greatly. It included
projects relating to road systems, agriculture, the mining
Industry, labor conditions, railroad construction, public
health and sanitation, and public finance. Substantial
credits were obtained from the United States for the
construction of a highway linking Cochabamba and Santa Cruz
and for development of the national petroleum Industry.
Seventh, Bolivia tried to keep the nation*s hope for
and need of a sovereign Pacific port before the American
republics while, at the same time, she worked to strengthen
her legal and political position on the problem. In almost

593
every inter-American conference during the 1935-1946 period,
Bolivian representatives referred to their nation's
unfortunate and unjust geographical situation and warned
the nations of the hemisphere that the issue constituted a
latent threat to continental peace. In the international
conferences, Andean spokesmen also supported peace-keeping
procedures and international legal provisions that might
be beneficial for Bolivia in the dispute with Chile. This
problera-with Chile will be considered separately later in
the chapter.
These were the ends pursued in Bolivia's foreign
relations during the years that have been examined. They
were fundamental in nature, relating closely to the most
basic problems of the nation, security, trade, and
domestic development. Consideration must now be given to
the Instruments that Bolivia used in pursuing these
objectives.
Instruments of policy. When one discusses the
Instruments of foreign policy, the fundamental issue
Involved is the nation's general capacity for obtaining the
objectives which it has selected for Itself in International
affairs. Theoretically, the same forms of international
action were available to Bolivia as were available to any
sovereign state. Actually, however, the reduced national
capability, measured in terms similar to those discussed in

594
relation to the context of Bolivia's foreign relations,
severely limited the foreign policy Instruments available
to the Bolivian government In trying to achieve the
objectives defined above. These included such matters as
a reduced population, a non-lndustrlallzed economy,
political instability, and a landlocked geographical
situation. In the light of such considerations, on which
Instruments of foreign policy did the Andean republic rely
most heavily in her foreign relations?
Bolivia'8 capacity for utilizing military action or
the threat thereof in her foreign relations was seriously
limited. The disastrous performance of the Army during the
Chaco War had destroyed the nation's confidence in that
institution and had discredited it in the eyes of the
hemisphere. Therefore, for all practical purposes, this
instrument of international action received little
consideration from Andean policy-makers. Slight exception
in this regard, however, must be made in respect to Bolivia's
relations with Paraguay while the Chaco Peace Conference
continued. Bolivia's military capability, as limited as it
was, had to be taken into account as long as no settlement
of the Chaco dispute was reached. Andean military strength
was approximately on a par with that of Paraguay when
hostilities ceased in 1935; this relative strength was
definitely a deterrent to renewed hostilities. There is

595
some evidence to support the claim that Bolivia's rearmament
program In late 1937 and 1933 might have encouraged the
neutral nations to work harder for a settlement and Paraguay
to accept It. Aside from this issue, however, the Bolivian
Army's role was much greater In domestic affairs than In
foreign relations.
Bolivia's resources In the economic and political
realms, though still severely limited, were more Important.
The Andean nation's shortage of export products to the
neighboring states, together with her small market for
Imports gava Bolivia scant leverage In commercial and
economic discussions with those countries. The nation's
unimpressive military record, a problem-plagued economy,
and an Inadequate domestic transportation system detracted
from Bolivia's value as a political ally and restricted the
political role she could play In the southern half of the
South American continent. Nevertheless, Bolivia's
consistent adherence to a policy of friendly relations with
the surrounding states did tie the Andean republic more
closely to her neighbors and prevented any serious crises
from taking shape In these relations.
The Andean nation was not devoid of resources In
these fields, however. Bolivia's natural resources were
used to advantage In relations with Argentina, Brazil, and
the United States. Argentina and Brazil agreed to finance

596
railroad construction in the Oriente with loans guaranteed
by Bolivian oil, and both countries provided small amounts
of financial support for petroleum exploitation in Bolivia.
Generally speaking, petroleum played an important role in
bringing national and International attention to Bolivia's
Oriente and in providing the means for incorporating this
region into the Bolivian economic and communications
system.
The Second World War created a high demand for
Bolivia'8 strategic minerals and resources which placed
La Paz in a good bargaining position with the United States
at least temporarily. As a result, Bolivia managed to
obtain United States economic and technical cooperation in
a program of national development. However, Bolivia's
uneasy political situation prejudiced and delayed this
cooperative program, and the Andean nation was unable to
take full advantage of the opportunity which the war

afforded.
Bolivia did manage to turn her problematic geograph
ical situation to some political advantage. The Andean
presence in the Plata River basin converted her Oriente into
a battleground between Argentina and Brazil over access to
Bolivian oil and for general influence in that region.
Although this competition was not without serious problems
for La Paz, it did help to gain commitments from Argentina

59f
and Brazil to build the railroads that were to meet at Santa
Cruz. Although Andean foreign policy was oriented toward
maintaining friendly relations with all her neighbors in
order to minimize the dangers Inherent in her geographical
situation, La Paz was willing to use the Argentine -
Brazilian rivalry to good advantage.
Instruments of a legal and moral character also were
used and supported by Bolivia in foreign relations. Andean
spokesmen made frequent reference to the nation's adherence
to principles of internationallaw and justice. The
utixlzatlon of such Instruments was prominent, as we have
noted, at the Chaco Peace Conference where Bolivia relied
heavily on the inter-American declaration of August 3, 1932,
the moral commitment of the mediators not to retire from
the Conference without a settlement, and the provisions of
the peace protocols. Bolivia also tried to use an inter-
American Red Cross conference to bring moral pressure to
bear on Paraguay. In the port issue, Bolivian strategy
relied heavily on mobilizing the moral force of the
continent against Chile.
During these years, however, Bolivian leaders rejected
an excessive reliance on legal and moral tools in Inter
national relations. More emphasis was given to practical
economic and commercial factors, considerations which many
Bolivian leaders felt had been too long underemphasized in

598
Andean foreign relations. Naturally, we see the use of
these moral and legal Instruments In those situations In
which alternative strategies are not available or are not
sufficient without the complementary legal and moral
arguments.
La Paz also used propaganda In her foreign affairs,
an Instrument closely associated with the legal and moral
tools Just-considered. Bolivian diplomats frequently made
arrangements with magazines or newspapers in foreign
countries to publish articles favorable to a Bolivian posi
tion or of general information about the Andean nation.
Some diplomatic missions published their own magazines or
bulletins which contained articles, poetry, photographs or
stories about Bolivia or by Bolivian artists, writers, or
craftsmen. Radio programming also was used to diffuse
information about Bolivia.
The propaganda Instrument was mentioned often In
relation to Bolivia's port problem. Bolivian diplomats
often were Instructed to realize an effective propaganda in
favor of a sovereign outlet on the Pacific for the Andean
republic. This strategy, of course, was utilized in those
situations where Bolivia lacked more effective instruments
of policy or as a complementary measure.
From this brief analysis of the conduct of Bolivian
foreign relations, one must conclude that Bolivia's economic

599
resources made the economic Instrument the most important of
Andean foreign policy tools. The second tool of Importance
was undoubtedly the diplomatic, whereby Bolivia was able to
maintain friendly relations with the bordering countries
until December 194-3 and with most of them after that date.
By doing this, the Andean nation avoided any serious
incidents in her foreign relations except those which
resulted from the revolution of December 1943.
The matter of continuity. Political developments
within Bolivia during the years 1935-1946 might lead one to
believe that a consistent foreign policy would be a highly
unlikely possibility. Within the eleven-year period,
Bolivia had six different governments and thirteen titular
foreign ministers. However, gauged in terms of consistent
pursuit of and support for the major objectives that have
been listed, Bolivian foreign policy had a high degree of
continuity. After Andean post-Chaco War foreign policy
took shape, the general ends determined by that policy were
sought by most of the Bolivian foreign ministers through
the presidency of Vlllarroel. This is not to say, of
course, that no shifts of emphasis or modifications took
place in Andean foreign relations. Certainly, ties with the
United States assumed major new proportions beginning in
1939* On the other hand, relations with Chile and Peru
lacked Important developments in the later years of the

699
period. Nevertheless, a number of elements worked for
continuity in Bolivian foreign policy in this period and
they should be noted here.
Domestic and foreign circumstances shaped this
continuity in Andean foreign policy. First, domestic
political revolutions that brought about changes of
government in Bolivia in 1936, 1937, 1943, And 1946 were
never directed primarily at the foreign policies of the
Incumbent regime. Invariably, the spokesmen for the new
ruling groups explained that shortcomings in the previous
government's handling of domestic affairs were the causes
of the revolution. Second, most of the basic objectives
of Bolivian foreign policy were grounded in a general
awareness of obvious national needs. Most Bolivian leaders,
after the experience of the Chaco War, recognized the
needs for free transit, new security arrangements, and
improved communications. Third, the military regimes which
ruled in Bolivia for almost this entire period were able to
select their foreign ministers from an apolitical elite
group of diplomats. In the 1933-1943 period, a relatively
small group of diplomats continued to serve one government
after the other and was Influential in giving continuity
to Bolivian foreign policy. For example, Ostrla Qutllrrez
served the governments from that of Tejada Sorzano to that
of Enrique Pefiaranda in high foreign service posts. Only

601
after the revolution of December 20, 1943, did significant
numbers of these diplomats retire or resign from the
diplomatic service. Fourth, Bolivia's own economic condi
tion, together with the international context, allowed the
nation few fundamental choices in foreign relations during
much of the period. When the RADEPA-M.N.R. coalition came
to power In December 1943, few practical alternatives were
available to the Bolivian nation in foreign affairs. The
United States loomed large as Bolivia's largest customer,
as Bolivia'8 biggest supplier, and as the only real source
of financial and techhlcal assistance for national
development. By then, the outcome of the world-wide
conflict was no longer In real doubt; the advantages of a
neutral policy In the war had vanished.
These were some of the factors that managed to give
Bolivia's foreign policy continuity in the years 1935-1946.
Again, acknowledgement must be given to the fact that each
of the six governments also pursued a distinctive policy in
conformity with the basic concerns and Interests of Its
foreign minister. Emphasis must be placed, however, on the
degree of consistency with which all these governments
pursued similar objectives.
Policy sources and formulation. Bolivian foreign
policy In the post-Chaco War-World War II period was
formulated in large measure by a small group of professional

diplomats that served in the Foreign Ministry in La Paz and
in Andean missions abroad. Lacking experience in foreign
affairs, the military presidents who ruled from 1936 to
1946 relied heavily upon such men as Enrique Finot, Alberto
Ostria Outi£rrez, Luis Fernando Ouachalla, Eduardo Dlez de
Medina, and Eduardo Anze Matlenzo. And, as we have seen,
these Andean leaders, especially Flnot, Ostria Gutierrez,
Fernando Ouachalla, and Anze Matlenzo, charted the course
for practical contacts with Bolivia's neighbors and for
special and significant relations with the United States,
Argentina, and Brazil.
Bolivian foreign policy cannot be understood
completely as the product of any one foreign minister or
group of diplomats, however. These men gave voice to the
Bolivian government's plans for promoting the national
interest within the changing international context.
The president set the general orientation of the
nation's foreign policy. As the spokesman of the nation and
of the group holding political power within the nation, he
determined, or at least expressed, the basic guidelines for
the nation's participation in world affairs. But within
these guidelines, the specific content of the nation's
foreign policy had to be formulated. Therefore, considera
tion will be given here to the most salient features of the
policy-making process and to several of the groups that

603
participated in that process.
One useful description of a segment of the policy
making process in respect to a specific situation, relations
with Brazil in 1937-1938, is provided by Ostria Gutierrez
in a note to La Paz in March 1938. After Brazil and
Bolivia accepted the recommendations of their blnational
technical commission in November 1937* departments within
the Bolivian Chancellory prepared draft treaties on railroad
connections and petroleum exploitation. These draft
agreements were then considered by an ad hoc group, consist
ing of the Ministers of Finance and of Mines and Petroleum,
the Under Secretary of the Foreign Ministry, the President
of the Commission of Bolivian Engineers, the Director
General of Y.P.F.B., and advisory personnel, over which
Bolivia's Foreign Minister presided. After modifications
recommended by the ad hoc group were incorporated into the
draft agreements, the Foreign Minister then submitted them
to President Busch and the cabinet. When Ostria Gutierrez
returned to Rio de Janeiro to negotiate the railroad and
petroleum treaties with Brazil, he carried the draft
treaties approved by the cabinet and explicit instructions
from President Busch.1
1Note 6l. to La Paz, Alberto Ostria Gutllrrez,

March 2, 193d, "Legaci6n de Bolivia en el Brasil" (Enero
Abril 1938), ABFM.
This example points out two obvious features of
Bolivia's policy-making process. One, In matters of
Importance, the Foreign Ministry sought to coordinate the
positions of the different official ministries and agencies
that might have partial responsibility In the question.
This was frequently done through ad hoc groups similar to
the one used In the Illustration above. Two, the cabinet vas
the decIsion-making body that determined official govern
ment policy. Instructions authorized by the cabinet and
Issued by the president or foreign minister were of
fundamental significance.
The policy-making process as described so far has
been restricted to lntra-governmental discussions and
decisions. In many ways, however, this formulating of
policy involved significant participation by extraofficial
groups or persons. For example, when the Tejada Sorzano
government had under consideration the Chaco Peace
Conference's October 15, 1935 proposal for a settlement of
the Chaco dispute, representatives of the nation's military,
political, industrial, and commercial sectors were
consulted by the president and his cabinet. On another
occasion, the Japanese attack at Pearl Harbor, Foreign
Minister Anze Matlenzo conferred with parliamentary leaders
and a number of former foreign ministers with respect to
Bolivia's policy on the matter. Thus, Bolivia's foreign

605
policy-making process tended to broaden its scope as the
problems Increased in significance.
Bolivia*s policy-formulating operation also was
readily accessible to special Interest groups. For example,
the Influence of the Association of Ex-Prisoners upon
Bolivia*8 policy with respect to the prisoners question at
the Chaco Peace Conference was direct and determinative.
In another case, Bolivia's delegation to the First Meeting
of Consultation of Ministers of Foreign Affairs was requested
by the National Chamber of Commerce to seek safeguards
against the adverse effects of United States "black lists"
that would be Issued in time of war.
The significant Influence of the nation's mining
industry upon the nation's foreign policy was both direct
and indirect. Tax revenues, special loans, and foreign
exchange from the Bolivian mines had financed the Chaco War
in large measure. Therefore, when in June 1935 Bolivia's
Minister of Finance Carlos Victor Aramayo told the Bolivian
delegation to peace talks in Buenos Aires that the Andean
economy was in a precarious situation, his appraisal had
special significance; he also was one of the nation's large
mine owners.
Since the Bolivian government and economy were
dependent on mineral exports, the Interests of the govern
ment fluid the mining compauiles in foreign affairs were not

606
readily distinguishable. Sizeable English and North American
investments in Bolivia's mining industry must have made
easier the choice to support the Allied cause in the Second
World War. We have seen how Bolivian-United States relations
during that war, relations based on Andean mineral exports,
were characterized by the direct participation of
representatives of Bolivia's mining Industry. The
opposition of the mine owners to the Vlllarroel government
also had expression in the negotiations of tin contracts
during the 1944-1946 period. Thus, the mining Industry's
Importance in Bolivia gave it considerable Influence in the
process by which the Bolivian government selected foreign
policy objectives and instruments of implementation.
The congressional role in foreign policy-making also
was important during this period because it provided a
platform for the government's most serious critics.
Bolivia's foreign ministers, especially during the 1940-
1943 years, were called frequently to the Chamber of
Deputies to explain and defend the government's foreign
policy. Although the Congress ratified all the Important
treaties signed during these years, it did repudiate certain
decisions and actions of the governments. Congressional
(Titles of the Pefiaranda government's policy of cooperation
with the United States delayed settlement of the Standard
Oil case, challenged the contract of July 15, 1942, with the
607
Rubber Reserve Company, and questioned the credit arrange
ments with the Export-Import Bank of Washington. As noted
earlier, the report of the parliamentary commission
established to examine the CorumbA-Santa Cruz railroad
project caused difficulties In Bolivian-Brazilian relations.
It Is Impossible actually to measure the effect of
congressional criticism upon Bolivia*s foreign policy
during the period. It did not directly affect the basic
outlines of policy since no major agreements were rejected.
The government's opposition within Congress did make the
foreign minister's post an uncomfortable one, however. The
services of Pefiaranda's foreign ministers may well have
been extended if congressional criticism had been muted.
On at least one occasion, the task of foreign policy
making passed from the Poreign Ministry to another govern
ment agency, Y.P.P.B. This development illustrated the
fluidity of Bolivia's procedure for making foreign policy.
The nation's foreign policy tended to revolve around the
strong men In the government who assumed responsibility for
international matters, regardless of their position. Most
often this leadership came from the Chancellory or diplo
matic service. However, in respect to the International „
petroleum policy, leadership was exercised by Dlonlsio
Foianini in 1938 and 1939.
Basic policy positions. A number of foreign policy

603
positions especially associated with the Andean nation were
formulated in the years 1935-19^6 in response to the
problems of the period. These Included a posture of strong
support for the principle of nonrecognition of conquered
territory, a persistent search for security guarantees, the
quest for unrestricted free transit rights, and omnipresent
attention to the matter of acquiring a sovereign outlet on
the Pacific. In this section, these basic policy positions
will be considered.
Ironically, Bolivia received hostllely the
declaration of August 3* 1932, which contained the doctrine
of nonrecognition of territory acquired by force. Later
the Andean delegation to the Chaco Peace Conference not
only fully embraced the principle, but utilized it frequently
in the course of the negotiations at Buenos Aires. On the
basis of the declaration, Bolivia contended that the
military advances and occupation by Paraguay did not give
that nation any legal rights to the disputed territory.
In early discussions at the Conference, Andean delegates
argued that in accordance with the August 3 declaration, the
military results of the war should be disregarded in
determining the boundary between the two nations. Bolivia
soon modified her position in this respect, but continued
to protest what she called illegal acts of jurisdiction
exercised by Paraguay in the Chaco on the grounds that such

609
acts violated the nonrecognition principle.
Bolivia continued to support the nonrecognition

doctrine even after the Chaco dispute was settled. Alberto
Ostria Outl£rrez Insisted In late 1938 that the doctrine
had not been Invalidated by the settlement because "Bolivia
by her own will renounced a part of the occupied territory

O
and thus gave the legal title to Paraguay." Later in
1938, at the Eighth International Conference of American
States in Lima, the Bolivian delegation presented a draft
convention designed to Incorporate the nonrecognition
principle Into the laws governing Inter-American relations.
Although Bolivia utilized this doctrine extensively
in the dispute with Paraguay, the Andean nation's support
of the principle reflected Its deep-seated concern with
national security. We have seen how Bolivia hoped to
fashion a cordon of friendly nations around her by creating
practical commercial ties with her neighbors. Bilateral
security agreements also were sought with the surrounding
countries. However, an even more distinctive Bolivian
position Involved the Andean nation's early and persistent
support for a regional and later an International system of
collective security. At the Second Meeting of Consultation
Âlberto Ostria Qutllrrez, La doctrina del

ilsta en America “(Rio de Janeiro:
B o r so i ft cia., 1 9 3 3 P . 139.'
610
at Havana In 1940, Bolivia*8 delegate Enrique Flnot spoke
of the necessity of a collective security system within the
hemisphere. Again at the Inter-American Conference on
Problems of War and Peace In Mexico City in 1945, Bolivia
favored establishing a regional security system that would
guarantee her territorial Integrity and political
independence. Equally strong support for an effective
international security system was voiced by Andean delegates
at the United Nations Conference on International
Organization in 1945.
Bolivia*8 concern for guaranteeing her national
security motivated her to strive for this objective In at
least four discernible ways In her foreign relations.
First, Bolivia supported the adoption of the doctrine of
nonrecognition of territory acquired by force as a cardinal
principle of inter-American relations. Second, Bolivia
adopted a foreign policy of friendly and practical relations
with her neighbors. Third, the Andean nation sought national
security through bilateral nonaggression pacts and agree
ments guaranteeing her territorial integrity. Fourth, La
Paz supported the creation of systems of collective security
on the regional and International levels. Bolivla*s
preoccupation with security was the result of her historical
experience, her geographic enclosure, and her own sense of
national weakness. One may conclude that as long as these

611
latter two conditions persist, the Andean concern for
security will continue.
Another policy position developed extensively by
Bolivia in the years after the Chaco War was that pertaining
to freedom of transit. Of course, this was not a new
problem in Andean foreign relations. Bolivia had enjoyed
free transit rights through the territories of surrounding
states for decades. The experience of the Chaco War had
revealed some ambiguities in previous arrangements,
however. Two specific questions with respect to free
transit agreements were raised. One, did Bolivia enjoy
the right to transport all types of cargo, military
equipment included, through the neighboring countries? Two,
in times of war, would neutrality rights and obligations
force the surrounding countries to restrict free transit
rights? One of Bolivia's most important foreign policy
objectives, therefore, was to secure agreements which
guaranteed free transit rights for all.types of cargo and at
all times.
One example should illustrate clearly the dimensions
of Bolivia's policy in this matter. In the Treaty of Peace
and Prlendship signed with Chile on October 20, 1904,
Bolivia obtained transit rights defined in this way:
Article 6 — The Republic of Chile recognizes in

favor of the Republic of Bolivia and in perpetuity,
the widest and freest right of commercial transit
612
through its territory and Pacific ports ...3
Dissatisfied with the delays Incurred in the transit
of essential war material through Chilean ports during the
Chaco War, Bolivian diplomats sought clarifications In the
free transit provision. On August 16, 1937, Bolivia's
Alberto Palacios and Chile's Jorge Matte signed a convention
on transit which stipulated the following in Article I:
The Government of Chile in conformity with Article

VI of the Treaty of Peace and Friendship of 1904
recognizes and guarantees the widest and freest transit
by means of Its territory and major ports for the
persons and cargoes that 6ross its territory from and
to Bolivia. Within the effective stipulations, the
free transit comprehends all class of cargo and at all
times without any exception.4
In multilateral relations, this same concern caused
Bolivia to give special attention to continental policies
on commerce and neutrality. As we have seen, the Bolivian
delegation to the Maintenance of Peace Conference at Buenos
Aires in 1936 was prepared to propose an amendatory clause
to any general resolution on neutrality which would main
tain unrestricted free transit rights for landlocked countries
independently of continental neutrality measures. Bolivia
also attempted to assure free transit rights at the Plata
regional economic conference in Montevideo in 1941, even
^Luls de Iturralde Chine1, Colecci6n de tratados

vlgentes de la republlca de Bolivia, Mlnl8terTo"{!e
Re lac ione s“fcxFerlores [t> vols.; La Paz: Editorial "Universo,"
1940), IV, 399.
4Ibid., p. 500.
613
attempting to extend this right to immigrants in transit
to Bolivia. La Paz hoped to obtain agreements by which
Immigrants with authorized Bolivian visas would not be
subject to visa requirements in neighboring countries.
This policy in favor of unrestricted free transit
must be regarded as the Bolivian attempt to regain attributes
of sovereignty which she felt she lacked due to her enclosed
geographical situation. As long as the surrounding
countries enjoyed the right to deprive Bolivia of the means
of defense (military supplies) and of the human resources
for development (immigrants), the Andean nation did not feel
that she enjoyed full rights of sovereignty. The free
transit arrangements were one way of ameliorating Bolivia's
situation in this regard. The true solution to the
problem, however, according to Andean spokesmen, was
sovereign access to the Pacific.
The Andean nation's port policy during this era was
vague and Incomplete. None of the governments formulated
a detailed position on the question. A more adequate policy
might have determined the specific territorial objectives
sought, recommended a strategy for achieving these objectives,
and considered the compensations that Bolivia would make in
exchange for sovereign access on the coast.
This lack of a clear policy on the port question can
be explained in several ways. The rapid turnover of foreign
ministers and governments made policy of any type difficult

to formulate. During much of the period, Bolivia also was
preoccupied with more pressing problems which required the
time and the attention of government leaders. Basically,
however, this deficiency reflected Bolivia's awareness that
her overall weakness vis-a-vis Chile made a direct bilateral
approach to the subject impractical. In 1937 and 1943, the
Chancellory in La Paz admitted that Bolivia was unwilling to
place discussions of the question on a formal basis. In
such a situation, the Andean Chancellory must have felt
that a precise strategy was of secondary Importance.
Bolivian leaders must have thought that success in the
matter would depend more upon regional power configurations
and upon the international climate than it would upon a
formula worked out in the Bolivian Foreign Ministry.
One of the fundamental elements of the policy that
did take shape on the matter was that the time was not
propitious for settlement of the dispute. A number of
specific circumstances contributed to this conviction.
The Chaco War had left Bolivia in a weakened and disor
ganized condition, ill-suited to confronting Chile on such
a significant question. At the same time, Bolivia did
not want to antagonize any of the neutral countries

represented at the Chaco Peace Conference. Consequently,
the port issue remained in the background in the 1935--1938
period with few exceptions. After the Chaco Peace

Conference concluded its labors, Bolivian relations with
615
Chile remained tense for one reason or another, a situation
scarcely conducive to discussions of such a question. Then,
too, Bolivia was unable to find any significant support for
her cause among the other American states.
Although La Paz did not formulate a port policy which
considered all of the essential aspects of an arrangement
of this problem, Bolivian diplomacy did develop a relatively
consistent strategy In the matter. In fact, two general
approaches which tended to work at cross purposes are
discernible in the Bolivian diplomacy of the period relating
to this question. One held that the best way of getting
sovereign access to the Pacific was through a policy of
rapprochement with Chile. The other sought to find support
In bilateral and multilateral relations for overcoming
Chilean resistance to cession of a port to Bolivia. The
former approach held that Chile would never succumb to
external pressures In the matter, while the latter asserted
that Santiago was unlikely to cede Bolivia a port without
the urging of the other American states.
These two approaches were intertwined in the 1943
episode. Ostria Qutllrrez, Bolivia's ambassador In
Santiago, was convinced of the necessity of following a

policy of loyal understanding with Chile to obtain the port
desired by the Andean nation. At the same time, Foreign
Minister Elio and President Pefiaranda were seeking Latin
American and United States support for a Bolivian port

616
during their 19^3 tour. The Issue appeared to move In a
vicious circle. Apparently, the port question could only
be resolved on the basis of sound relations between Bolivia
and Chile, but these sound relations appeared to be
impossible without a solution to the port controversy.
Bolivian diplomacy treated the port problem on
multiple fronts. First, the Issue frequently surfaced In
conversations with Chile. Second, Bolivia looked for
support on this matter in bilateral relations with the
bordering states and the United States. Peru refrained
from siding with Bolivia. Brazil and Paraguay gave the
Andean republic encouragement in this regard, but
Argentina, especially during World War 11, refused to
jeopardize her Important relations with Chile by backing
Andean port aspirations. In 1943 the United States
suggested the necessity of preparing public opinion In
Chile and Peru before Bolivia raised her port demand again.
Third, the Andean nation worked to strengthen its Juridical
and moral position on the problem at the international
conferences in which it participated. Andean strategy at
the inter-American conferences was designed to keep the
portuary problem before the American republics as a
situation which was incompatible with the high Ideals of the
Western Hemisphere and as an issue which constituted a
threat to continental peace. We have seen that Bolivia's
delegates to these conferences worked to create procedures

61$
for the pacific settlement of disputes which might have
been useful for the Andean nation In Its efforts to gain an
outlet on the Pacific. Fourth, Bolivian diplomats tried to
shape American opinion on the problem through propaganda
realized primarily through newspaper and magazine articles.
Three concluding observations must be made In respect
to Bolivia's port problem. First, a sovereign port on the
Pacific Ocean was a deep-seated and widely accepted national
objective during these years, one that could not have been
subdued easily. Second, the port problem was a strong
negative factor In relations with Chile and Peru.
Bolivian diplomats accepted the view that relations would
never be fully satisfactory with Chile without resolution
of the port Issue. Third, the port demand had domestic
political value that politicians did not overlook. The
emphasis on Bolivia's need for an outlet to the sea made by
Chancellor Elio and President Peflaranda during their 1943
tour might be explained In part, at least, by the govern
ment's shaky situation at home.
L historical perspective. Bolivia's post-Chaco War-
World War II diplomacy also needs to be viewed in terms of
its relationship to the past and to the future in Andean
foreign relations. This study has indicated that in several
respects, Bolivian foreign relations and foreign policy
during these years contained distinctive new elements.

618
Consideration will be given In this section to the most
Important new developments In Andean diplomacy during this

period.
In the first place, the conclusion of hostilities In
the Chaco War and the settlement of the Chaco dispute in
1933 marked the end of the era In which Bolivia*s primordial
Interest In foreign affairs was Invariably a border dispute.
Ostrla Gutierrez took note of this fact in his report to
Congress In 1940 when he stated, "The cycle of boundary
diplomacy, In the sense of border disputes, terminates,
then, with the signing of the Treaty of Peace with
Paraguay."^ Bolivia's basic territorial status was
determined at last by effective treaties.
Second, following the Chaco War, Bolivia Initiated a
policy of practical contacts with the bordering countries.
Although Enrique Pinot was thinking primarily In terms of
economic contacts, numerous political and cultural agree
ments were signed also. As we have seen, this policy had
few Important results In respect to Bolivia's relations with
Chile and Peru after 1937* Nevertheless, It must be
acknowledged that in the 1935-1946 period, Bolivia was more
active In foreign affairs than at any previous time.
Confirmation of this proposition comes from an examination
^Bolivia, Mlnisterio de Relaclones Exterlores,

Memorla (1940), (La Paz: Editorial Unlverso, 1940), p. I.
619
of Santiago Jord&n Sandoval's Registro de tratados £
congresos lnternaclonales de la republics de Bolivia.
According to Jordin Sandoval's comprehensive list of
bilateral agreements signed by Bolivia through 1943* the
Andean nation entered Into 47 per cent of all blnatlonal
agreements signed in this twentieth century (through 19*13)
during the eight and one-half year period that began on
June 12, 1935 .6
Third, with the signing of the peace treaty with
Paraguay in 1933, relations with Asuncldn could develop
along normal commercial lines for the first time. In effect,
Bolivia and Paraguay began to consider issues in their
relations other than the boundary dispute only after July
1933* Of the thirty-two agreements signed between those two
nations in the twentieth century until 1943, twenty-five or
about 78 per cent were reached in the 1935-1943 period.^
Fourth, petroleum entered into Bolivia's foreign
relations in an important fashion in 1937 with the cancel
lation of Standard Oil Company's concession by the Andean
^Santiago JordAn Sandoval, Registro de tratados y

congresos lnternaclonales de la re£&olica de~bolivia,
convenioa multllaterales y bllaterales.-Ministerio de
RelacIones fixterlores (La Paz: Editorial "U»iverso," 1944),
"Indlce cronoldglco," pp. XV-XXV. The chronologloal list of
bilateral agreements Includes 291 agreements In the 1900-
1943 period. Of this number, 138 were entered Into In the
1935-1943 period.
Tjordin Sandoval, op. clt., "Indlce general por

palses," pp. X-XI.
620
government. By utilizing this nevily nationalized resource,
Bolivia gained the commitments by Argentina and Brazil to
finance railroad construction from their territories to
Santa Cruz. Though in pre-Chaco War discussions, each of
these countries had contemplated cooperating in railroad
projects with Bolivia, satisfactory arrangements In this
regard were made only after the Bolivian government
controlled the oil zones of the Orlente. By mortgaging a
portion of her oil production for an indefinite period,
Bolivia obtained the capital necessary to build these
railroads. The poor state of the industry, however, led
Bolivia to seek foreign capital for petroleum development.
Fifth, the period 1939-1946 saw the development of
Bolivian relations with the United States on an
unprecedented scale. This closer link with Washington took
place after the war in Europe began in 1939. Prior to that
time, the Standard Oil difficulty had strained relations
between La Paz and Washington. After the war began in
Europe, the importance of the Standard Oil case diminished.
Bolivia*s desire for foreign resources coincided with the
United States needs for strategic materials and political
loyalty from her Latin American friends.
The importance of these developments for Bolivian
diplomacy in the period after the fall of Villarroel are
beyond the scope of this study. Nonetheless, it might be
helpful to raise some questions for the period after 1946.

The development of the nationalistic anti•imperial1st line
by an important political sector in Bolivia, coincidental
with the growth of significant United States-Bolivian
relations, naturally leads to an Inquiry about ties between
La Paz and Washington in the post-Villarroel period. Of
course, some clues along this line were afforded by these
relations during the Villarroel presidency. The role of
petroleum in Bolivia's foreign relations after 1946 should
be an important subject for study. This would be the case,
especially in respect to Bolivian ties with Argentina and
Brazil, since these neighbors were investing large amounts
of capital in the expectation of receiving oil in return.
An inquiry Into Bolivian-Paraguayan relations might be
useful to determine if the vague beginnings of a close
cooperation between these two countries developed further
or not. Attention must be given to the development of the
portuary issue with Chile. Bolivia's relations with Peru
also need to be examined in respect to the port issue, since
this problem was a negative factor in relations between -
Lima and La Paz during these years.
III. CONCLUSION
Bolivian foreign policy in the 1935-1946 period was
rooted deeply in the Andean nation's internal conditions and
geographical situation. That policy was the plan by which
La Paz sought to provide through foreign relations the

essential elements needed for the nation's well-being which
Bolivia was Incapable of providing for herself. First,
Bolivia sought territorial security through bilateral~and
multilateral arrangements. Second, the Andean nation
turned to foreign relations to obtain financial and technical
resources for national development. Third, the Bolivian
government worked to assure the Importation of vital
foodstuffs, manufactured goods, and war supplies. In order
to guarantee these Imports, La Paz had to place the nation's
mineral exports in foreign markets In order to provide
sufficient foreign exchange for making purchases abroad.
Free transit rights and transportation facilities for the
Imports through the territory of the surrounding states
also had to be secured.
A three-dimensional pattern of diplomacy was
apparent in Bolivian foreign relations in these years as
the Andean republic strived to meet the nation's needs.
This diplomatic pattern consisted of the following
elements: (1 ) establishing cordial and practical contacts
with the surrounding states, (2 ) seeking financial and
technical assistance and political support among nonborder
ing powers, and (3 ) using international law and organization
in behalf of national Interests.
Bolivia, however, encountered In this period the
same obstacles to a successful diplomacy which had plagued

623
Andean diplomacy from the beginning, namely, a weak economy
and domestic political dissension. In addition, the burden
of the past, in the sense of the continuing Andean hope
for a Pacific port, proved to be a liability in creating
closer and fruitful relations with Chile.
That which actually emerged from the Andean relations
of the period was the following. The most significant
development in Bolivian foreign relations in this period was
not the establishing of practical contacts with all the
surrounding countries. This is too general and misleading.
Rather, it was the pronounced emphasis on Bolivian relations
with her neighbors on the Atlantic side, Argentina, Brazil,
and Paraguay. Most of the important accomplishments of
Bolivian diplomacy in these years were realized in the
relations with these countries. Other important
developments occurred in Bolivia's relations with the United
States. But the accomplishments of Bolivian diplomacy in
relations with Peru and Chile were relatively slight.
This eastern orientation in Bolivian post-Chaco War
foreign relations should be understood as the culmination
of a gradual shift that began following the War of the
Pacific. The reasons for increased Bolivian interest in
such relations after 1935 are many. The Chaco dispute, of
course, clearly revealed both the Bolivian Orlente's
potential wealth and its long neglect by La Paz. The

crucefioa who played leading roles In formulating and
Implementing Andean foreign policy In the late 1930's were
eager to promote the development of the region. Then, too,
during the Chaco Peace Conference, Bolivia had a special
reason for strengthening relations with Argentina and Brazil,
to wit, to gain the support of these governments in the
negotiations at Buenos Aires. The settlement of the Chaco
dispute also brought Bolivia her first opportunity to
develop practical economic and political relations with
Paraguay. At the same time, Bolivia's most important
petroleum zones were In the Orlente, and Andean oil had
its logical outlets in the markets of the countries
bordering the region.
On the other hand, Bolivian relations with Chile and
Peru were problematical. The problem of a sovereign outlet
on the Pacific for Bolivia continued to trouble every effort
to establish Important practical ties between these countries
and La Paz. The secret complementary protocol signed by
Chile and Peru In 1929 in conjunction with the settlement of
She Tacna-Arica dispute had kindled strong resentment in
Bolivia toward both countries. Bolivia also lacked goods
to export to these Pacific Coast countries and, consequently,
was In no condition to promote with them mutually satisfactory
commercial agreements. Nevertheless, Bolivia's relations
with Chile retained their significance because Andean

625
mineral exports were transported to markets through the
Chilean ports of Antofagasta and Arlca.
Several Important achievements were registered by
Andean diplomacy during this period 1935-1946.^ The Chaco
settlement ended the long conflict with Paraguay, enabling

those nations to establish normal relations for the first
time. Promising beginnings were made In Improving Bolivia's
Internal and International communications facilities
through the assistance of Argentina, Brazil, and the United
States. Important (although still Insufficient) capital
was obtained for developing the petroleum Industry, and
Bolivia managed several favorable agreements with Brazil,
Argentina, and Paraguay providing for petroleum transit and
storage facilities. The Andean nation succeeded in locating
large quantities of Its minerals In the North American
market beginning In 1940. Thus, a period of closer Bolivian-
United States relations was Initiated that had significant
implications for Bolivian plans for national development.
As the period came to a close in 1946, many serious
problems remained for the future, however. Strained
relations between Bolivia and several American countries,
notably the United States, Brazil, and Uruguay, needed to
be Improved. The tasks of completing and paying for the
railroads and highway begun during this period remained.
The future of the petroleum Industry would depend largely

626
on foreign cooperation and capital in all likelihood. Yet,
the Andean nation already had a large and growing foreign
debt with respect to which she had been unable to resume
service in these years. Of course, the Andean aspiration
for sovereign access on the Pacific would continue to
influence Bolivia's behavior in international relations.
The question of whether or not Bolivia's foreign policy
would continue to be oriented toward the eastern countries
would hinge in large measure on the evolution of this
dispute.
Bolivian accomplishments in foreign relations in
these years were modest. For the most part, Bolivia was
acting in foreign affairs with few resources, just as at
the Chaco Peace Conference. The major achievements of the
period involved the nation's two major natural resources,
minerals and petroleum. La Paz, therefore, found itself
dependent upon the fate of these raw materials. The Andean
voice was loudest when and where Bolivia's minerals and
hydrocarbons were needed. At the same time, the nation's
landlocked geographical position had a logic of its own.
Friendly relations with the neighboring countries was an
indicated ingredient of Andean foreign policy. The meaning
was clear. Bolivia had a reduced number of alternatives
available to her in foreign relations. Whether or not
she could strengthen her overall capacity for acting in

international relations in the years following the fall of
Villarroel would depend largely on whether a breakthrough
could be achieved in one of these restrictive conditions.

6.28
68 60
BRAZIL BOLIVIA
International boundary
p A N D O fJ's\Que|ar»-Mlrlm D epartam ento boundary
t.vMjP'I) National capital
D epartam ento capital
Cobija
Railroad
Road
Salt flat
50 tpo iy>Mile*
90 100 190 Kilometer*
E L
PERU
Trinidad
Logo
Titicaca
PAZ
SANTA
CRUZ
C O C H A B A M BA
Cochabamba
0 R U R O
lArica
de /
1 ty Ponpo
.Pototl
20-
•
I6ALAR DC A l
-• /?
f/j jJ u v u n i • /U J y u n l
CH
*N ! S >
» 0 (T 0 S i ’III* Ha*A*
TAR PARAGUAY
HI
E N
6Qtor nm nM M ir
FIGURE 5
BOLIVIA
♦United States Department of State, Office of the

Geographer, Geographic Report South America: Civil Divisions,
No. 10, September 1, 1966, p. 5"! i
BIBLIOGRAPHY
BIBIOGRAPHY
Much of the data used in this investigation was
obtained from the collection of diplomatic papers located
in the archives of the Bolivian Foreign Ministry* This
material has been cited throughout the study with the
abbreviation ABFM. All the diplomatic correspondence
dating from the 1935-19^*6 period which is located in the
archives has been placed in bound volumes. Unfortunately,
no comprehensive listing of the volumes has been compiled.
This situation offers no serious problem with regard to
the despatches to and from missions abroad; these papers
are contained in series of bound volumes arranged in
chronological order. The case is quite different, however,
with circular despatches from the Foreign Ministry and with
correspondence to and from the Chaco Peace Conference.
The volumes of papers in these categories are not arranged
in a separate section and carry a wide variety of titles.
In the bibliography, therefore numerous individual volumes
must be listed by the exact titles, including abbreviations,
which appear on their covers. This is done in order to make
it possible for these sources to be located in the archives.
Another valuable source of data was the collection of
unpublished Department of State diplomatic papers located
in the National Archives of the United States. Permission

631
was obtained fronrthe Historical Office of the Department of
State to consult documents dated through 1943. Material
from this collection to which reference was made in the
study has been cited with the abbreviation (DS) followed by
a file number with which specific documents may be found in
the National Archives.
A. PRIMARY SOURCES
i.* Bolivian Government Publications
The Acre Concession. Concession of the Acre territory in

favor of the Bolivian Syndicate of New York City,
approved by the Bolivian Congress, December .1901.
[p.p.], [n.n.], [n.d.].
Busch, Oerm&n. Mensa.le del Presidents de la Junta mllltar

de goblerno Toni. Qerm&n Susch a ia~Cbnvencl6n Kaclonal
cfiT 1936. Ea Paz; Eitograficas e" Tmprentas llnidas,
TTT.d.] .
Corporaci6n Boliviana de Pomento. Memorla. Febrero 1943-

Marzo 1945. La Paz: Empresa Ed7 Universo] (n.d.] .
Iturralde Chinel, Luis de. Coleccl6n de tratados vlgentes

de la republics de Bolivia] Ministerlo de Relaclones
Sxteriores. CompTlada, revisada y anotada. 6 vols.
(Volume 6 compiled and annotated by Santiago Jordin
Sandoval.) La Paz: Editorial Universo, 1940-
JordAn Sandoval, Santiago. Registro de tratados y congresos

internaclonalee de la repupllca deHBollvla, convenios
multi late rale s yUlIafce rales. Ministeriode Re lac lone s
Sxteriores. Ea Paz: Editorial "Universo," 1944.
La Corporacl6n Boliviana de Pomento. (Sue origenea,

organizacidn y actlvicJad] La paz: Editorial Universo,
1943.
Legacidn de Bolivia en el Brasil. 4 tratados entre Bolivia
£ Brasil. Rio de Janeiro: Borsoi A d a . , 1936.
632
Minlsterlo de Relaclones Exterlore8. Anexoa a la Memorla
preaentada al H. Congreso Naclonal. La Paz: Editorial
Universo, 19^07
_______ . Boletin oflclal del Mlniaterlo de Relaoionea

Ext er lore b . ('Title varies slightly) “TTos. 1-13. June
1938-December 1946. La Paz: (Various publishers
including Ed. Universo and Editorial del Estado.)
. Conferencla lnteramerlcana de conaolldaoldn de la

paz. (Buenos Aires, 1936) Informe de la delegacldn de
Bolivia. La Paz: Lib. e Imp. Arn6 Hnos., 1937.
. Conferencla lnteramerlcana sobre problemas de la

§ uerra y de la paz. Ciudad die Mexico, 21 de EeFrero a
de Marzo de~l945. ApreciacTdn general” deT"las labores
3e“T a conferencla, y de la actuacidn desarrollada por
la delegacldn de Bolivia. La Paz: Oamarra y Cia., 1945.
. Conferencla regional de los paises del Plata.

(Montevideo, 27 a Enero-0a“Febrero de 1941) informe
de la secretarla de la delegacldn de Bolivia. La Paz:
Editorial Universo, 1941.
______ . Estatuto orgdnlco del servlclo de relaclones

exterlores. Ea Paz: pi.n.] 7 19^0 .
. La conferencla de Mendoza y el confllcto del

Chaco. La paz: imprenFan!filbctrica7n.933.
« La reunldn de consulta entre los mlnistros tte

relaclones exterlores de las republlcas Amerlcanas.
(Panama, 23 Septlembre^J Octubre de 19397 Informe de
la delegacldn de Bolivia. La Paz: Editorial
Renaclmlento, 1939.
. Departamento de Limites. Las fronteras de Bolivia,

(flompilacidn de tratados vigentes sobre limites.) E T
Paz: Editorial Universo, 1941.
_______ • Memorla que presenta al Honorable Congreso Naclonal

el Mlnlttro aeHglkciones sxEenbrks yHgulto. *T voii.
1935-19557"“ Ea Paz: (Publishers vary.J, [h.d.;} .
Pefiaranda C., Enrique. Mensaje de S.E. el Presldente de la

republlca de Bolivia, tienerar~tenrlque~"Penaranda C ., en
la inauguracl5n""del Congreso orJinarlo" (title varies
sTlghtly.) 1940^ 1343. La Paz: [h.n^ , (ft.d^ .
633
Villarroel Ldpez, Gualberto. Mensaje a la H. Convenel6n
Naclonal, 1944-1945. La P a z i Q i . n ^ T "fh.dj .
2. Unpublished Documents and Papers
"Actas de 1935, Delegacldn de Bolivia a la Conferencla de

Paz." Archives, Bolivian Porelgn Ministry, La Paz.
(ABFM).
"Actas de la Conferencla del Chaco, 1935-1936*" ABFM.
"Argentina, Legacidn en Argentina." 4 vols. August 1934-

January 1940. ABFM.
"Circularss." 4 vols. 1935-1946. ABFM.
"Comisidn redactors alegato Bolivia ante La HAya, 1936."

ABFM.
"Corresp. env. a varios, Junio 35-Oct. 38, Corresp. a

Conferencla de Paz, Julio 1935-Enero 1939, Delegacldn
de Bolivia a la Conferencla de Paz." ABFM.
"Correspond, envlada a la canclllerla, Delegacldn de Bolivia

a la Conferencla de Paz." 3 vols. July 1935-
January 1939• ABFM.
"Correspond, reclblda de la canclllerla, Delegacldn de

Bolivia a la Conferencla de Paz." 2 vols. May 1935-
December 1936, 1938. ABFM.
"Correspond, reclblda de la Conferencla de la Paz 1935-1939,

Delegacldn de Bolivia a la Conf. de Paz." ABFM.
"Delegacldn de Bolivia a la Conferencla de Paz de Buenos

Aires." (Titles vary slightly.) 4 vols, 1935-May 1938.
ABFM.
"Embajada de Bolivia, Buenos Aires, Oflclos de R.R.E.E. de

Bolivia, Marzo-Agosto 1941." ABFM.
"Embajada de Bolivia en Argentina." (Titles vary slightly.)

8 vols. July 1942-1946. ABFM.
"Embajada de Bolivia en el Brasil, Mlsldn David Alvdstegul,

Correspondencia reclblda Ministerlo de Relaclones
Exterlores de Bolivia, Enero a Dlclembre de 1943." ABFM.
"Embajada de Bolivia, Oflclos de la Canclllerla^,Mlsldn

Hernando Siles, 1939." ABFM.
634
"Leg. Bolivia en Argentina, Oct. 41 a Julio 1942." ABFM.
"Legacl6n Buenos Aires, Enero 1940-Dlclembre 1940." ABFM.
"Legacidn de Bolivia, Buenos Aires, Clrculares de M. de

R.R.E.E. de Bolivia, Marzo 1935-Mayo 1936." ABFM.
"Legacidn de Bolivia, Buenos Aires, Oflclos de R.R.E.E. de

Bolivia, Septlembre 1940-Abril 1941." ABFM.
"Legacidn de Bolivia en Alemanla, 1936-1937." ABFM.
"Legacidn de Bolivia en Alemanla, Bdlgica, Francla, 1939."

ABFM.
"Legacidn de Bolivia en Buenos Aires, Mlslones A. Flores,

E. Flnot, Oflclos de la canclllerla de Bolivia, Sept.
1938-Marzo 1939." ABFM.
"Legacidn de Bolivia en Chile." 33 vols. 1935-1946.

("Embajada de Bolivia en Chile," beginning July 1939).
ABFM.
"Legacidn de Bolivia en Estados Unldos de N. Amdrica."

32 vols. 1935-1946. ("Embajada de Bolivia en E.E.U.U.
de N. Amdrlca," beginning January 1942. Title varies
slightly.), ABFM.
"Legacidn de Bolivia en el B r a s i l . 35 vols. 1935-1946.

("Embajada de Bolivia en el Brasil," beginning July
1941). ABFM.
"Legacidn de Bolivia en el Paraguay." 17 vols. 1938-1947.

("Embajada de Bolivia en el Paraguay," beginning January
1945). ABFM.
"Legacidn de Bolivia enel Peru." 29 vols. 1935-1941,

1943-1946. ("Embajada de Bolivia en el Peru," beginning
January 1943). ABFM.
"Legacidn de Bolivia enel Peru, 1936 a 1933." ABFM.
"Legacidn de Boliviaen el Uruguay." 28 vols. 1935-1946.

ABFM.
"Legacidn de Bolivia en la Argentina." 55 vols. 1935-1946.

("Embajada de Bolivia en la Argentina," beginning July
1941). ABFM.
"Legacidn de Bolivia en la Oran Bretafia. 15 vols. 1935-1946.

ABFM.
635
"Legacidn de Bolivia en la Rep. Argentina, Diclembre de 19^0
a Octubre de 1941." ABFM.
"Legaclones de Bolivia en Alemanla, Italia, Francia, Santa

Sede, 1940." ABFM.
"Oflclos del Mlnisterio de R.R.E.E. de Bolivia, 1945."

2 vols. ABFM.
"Oflclos de R.R. de Bolivia, 1943, II." ABFM.
"Oflclos de R.R.E.E., 1942, primer semestre," ABFM.
"Oflclos de R.R.E.E. Bolivia, 1946, I." ABFM*
"Oflclos de R.R.E.E. de Bolivia, Septlembre-Diclembre 1941."

ABFM.
"Oflclos de R.R.E.E. de Bolivia, Julio a Diclembre de 1942,

tomo II." ABFM.
"Oflclos de R.R.E.E. de Bolivia, 1944." 2 vols. ABFM.
2.. United States Government
"Activities of the Coordinator of Inter-American Affairs

In Bolivia. Introduction: Political, Geographic, Social,
and Economic Conditions." [n.pJ] , [n.nJJ , May 1943*
United States Department of Commerce, Bureau of the Census,

Bolivia. Summary of Blostatlstlcs. Maps and Charts.
Population. flatalTFy and Mortality. Statistics.
Prepared in cooperation with Office of the Coordinator
Inter-American Affairs. Washington: [n.nj , 1945.
The Chaco Peace Conference. Report of the Delegation of the

United States of America to the Peace Conference HeTd
at Buenos Aires, July 1, I?35^7anuary S3, 193^7"
Washington: GovernmentPrinting 6fflce7i940.
Coordinator of Inter-American Affairs. Bolivia Storehouse

of Metals. Commerce Department Building, wasnington,
jj.c . 7
^ . *} , [ n. d .
Report of the Delegation of the United States of America to

tHe"Eighth International Conferenceof American States.
Lima, Peru, beoember 9-27, Washington:
Government Printing Office, 1941.
636
Report of the Delegation of the United Statee of America to
ihe"Tnter-3Gnerican ConTerenoe for the Maintenance of
Peaoe. fluenos Aires. Argentina. December 1-23, 19J6.
Washington: Government Printing Office, 1937.
Report of the Delegation of the United States of America to

the xnter-Amerioan ConTerence on Problems o7 War and
PeaoeT Mexico city, Mexico. February 21-March 0, 1945.
Washington: Government Printing Office, 19*16.
U. S. Army Area Handbook for Bolivia. Special Operations

“ “Research Office, Foreign Areas Studies Division, The
American University. Washington, D.C. [n.nj] , 1963.
U. S. Department of State. Porelgn Relations of the United

States. Diplomatic Papered The American HepuETlcs.
1935-1943. Washington: Govemment Printing orflce,
1953-1965.
U. S. Department of State. The United Nations Conference
on International Organization. San Francisco.
California, April 25 60 lune 26, 1945. Selected
Documents. Washington: Government Printing Office,
19*16.
United States Tariff Commission. Economic Controls and
Commercial Policy in Bolivia. Washington: (h.n.] , 1946.
. The Porelgn Trade of Latin America. A report on

the Trade of tatin America with Special Reference to
Trade with the United States. (In three parts.)
Report No. 146. Second Series. Washington: (n.nJl ,
1942. J
_______ . Mining And Manufacturing Industries In Bolivia.

Washington: (h.n.j , 1946.
Zondag, Cornelius H. "Problems In The Economic Development

Of Bolivia." United States Operations Mission to
Bolivia. La Paz: November 1, 1956.
4>. Memoirs and Document Collections
Ballividn Calderdn, Ren£. Hombres de buena voluntad. La

Paz: Editorial ArtisticaT 1945.
Diez de Medina, Eduardo. De un siglo al otro. Memoriae de

un hombre publico. L a T a z : AifonsoTeJerina, 1955.
637
Diez de Medina, Eduardo. Dlplomacla y politics
lnternaclonales. La Paz: imp. y Editorial Artlstlca.
T5 W . --------------
OBtrla Gutierrez, Alberto. Una obra £ un destlno. La

olltlca Internaclonal de Bolivia despuds de la guerra
Sei cnaoo. Ibuenos Aires: Editorial AyacucEo,”T 9*t6^
. Una revolucldn tras los Andes. Santiago:

E3TtorIaT H a s c H I e n F o r T W -------
Saavedra, Bautista. El Chaco y la Conferencla de Paz de

Buenos Aires. SanFiago: EaiForial NaacimienFoTT^JjJ.
Toro Ruilova, David. Ml actuacldn en la Querra del Chaco.

(La retlrada de Plculba.) La Paz:"Editorial
Renacimlento, 1941.
5.. Newspapers
El Dlarlo La Paz , March 1935“December 1946.
La Calle La Paz , June 1941-May 1942.
La Razdn La Paz , January 1935-December 1946.
New York Times, January 1935-December 1946.
6 . Other
Emergency Advisory Committee Por Political Defense. Second
Annual Report. Submitted to the Governments of tKS
American Republics. July 15, 1943-October 15, 1944.
Montevideo: [n.n.j , 1944.
United Nations Conference on International Organization.

"Comments and Proposed Amendments Concerning the
Dumbarton Oaks Proposals*" Submitted by the Delegations
to the United Nations Conference on International
Organization. San Francisco, 1945.
B. SELECTED SECONDARY SOURCES
1_. Bolivian Writings
Alcdzar, Moisds. Crdnlcas paralamentarlas. La Paz: fn.n.1 .

1946. L J
630
Aibmaraz, Sergio. Fetr6leo en Bolivia. La Paz: Editorial
"Juventud/ 1 1956.
Avila, Federico. Bolivia en el conclerto del Plata.
Mexico City: Editorial-CuTFura, l9î•
Carrasco, josd. Bolivia's Case for the League of Nations.
London: Selwyn & Blount, 1920.
Cdspedes, Augusto. El dlctador sulcida (40 afios de

hlstoria de BolivTaTJ Santiago: Editorial Universltarla,
S.A., 1956.
. El oreBidente colgado (Hlstoria boliviana). Buenos

Aires:“Editorial Jorge Alvarez S.A., 1966.
Diaz Machicao, Porfirio Hlstoria de Bolivia. Salamanca,

la Guerra del Chaco, Tejada SorzanoT"I931-1955T La
Paz: O i s b e r t y dia. S.A., 1955^
,gJstorla de Bolivia. Toro, Busc&,

1^36-l94d. La Paz: Editorial Juventud, 1957.
Dlez de Medina, Eduardo. Problemas lnternaclonales. La
Paz: [n.n^ , 1936.
Flnot, Enrique. The Chaco War and the United States. New
York: L. & S. Printing C o .,~TJ34.
. nueva
Nueva nxscoria
hlstoria ae
de Bolivia. Ensayo ae
de
InterpreEacidn socTolSglca. Segunda edlcISh. La Paz:
disbert y Cia. S.A., I§54.
Francovich, Ouillerrao. El pensamlento boliviano en el slglo

X X . Mexico City: Fondo de flultura Econdmica,“T956-.
Marlaca, Oulllermo. Resefla sobre la Industrla petrolifera

de Bolivia. La Paz: flditorial—’Tfcollasuyo,"19447
Marlaca Bilbao, Enrique. Mlto y realidad del petrdleo

Boliviano. La Paz: Editorial Los Amigos del Llbro, 1966.
Mercado Morelra, Miguel. Hlstoria dlplomdtlca de la Guerra

del Chaco. La Paz: Talleres GrAficos Bolivianos, 196b.
_______ . Hlstoria internaolonal de Bolivia. (2d edlcldn

ampliada). La Paz: Imp. “Atenea," 1930.
63*
Monroy Cardenas, Arturo. Hlstoria aduanera de Bolivia y
tratados comerclales con los palses veoinos, lo2^-
m B . l a n K z r wg u e v a ^ l i m 7 n ^ 9:-------------
Ostrla Gutierrez, Alberto. La doctrlna del no-reconoclmlento

de la conQuista en America. R i o d e Janeiro: Rorsoi &
CTaTT I53H. --------------
Un pueblo en la cruz. El drama de Bolivia.
Segunda edlcldn.~~l3antiago: Editorial 3el Pacifico S.A.,
1956.
_______ . The Tragedy of Bolivia. A People Crucified. A

condensation and translation of -fa Pueblo en la~cruz
by Elthne Golden. New York: The Kevin-Adair Company,
1958.
Pando Qutldrrez, Jorge. Bolivia y el mundo. Qeografia

econ6mlca. 2 vols. La Paz: " W n i x , * I947.
Peffaloza, Luis. Hlstoria del Movlmlento Naclonal 1st a

Reyoluclonario 1$4!TT952T La Paz: Editorial Juventud,
Querejazu Calvo, Roberto. Masamaclay. Hlstoria politica

diplomatlea y mllltar de la buerra del Chaco. La Paz:
fi.Burillo, 1955^
Quldn es qulln en Bolivia. Buenos Aires: Editorial Quidn es

qulthen SoITvIa, 1942.
Rodas Eguino, Justo. La Guerra del Chaco. Interpretacldn

de politica lnternaclonal Americana. Buenos Aires:
Bernabry"Cia .7 1538.--------------
Salinas Baldivieso, Carlos Alberto. Hlstoria diplomatlea
de Bolivia. Sucre: Editorial Charcas^ 193S"7
Salinas Marlaca, Ramdn. Las constItuclones de Bolivia. La

Paz: Imp. y EditorialTrtistica, [h.d.j .
Sinehez Bustamante, Daniel. Bolivia su estructura y sue

derechos en el Paciflco. segunda edlcldn. Ea Pa5T“
Km frnwhmoTT w —
2. Foreign Writings
Alexander, Robert Jackson. The Bolivian National Revolution.

New Brunswick, t'New Jersey: Rutgers University tress,
1958.
Burr, Robert N. The Stillborn Panama Congress. Power
Politics and Chilean-Colombian Relations during the War
of the Pacific. Vol. 69/ University ofCalifornia
Publications in History: Berkeley and Los Angeles:
University of California Press, 1962.
eleven, Nels Andrew Nelson. The Political Organization of

Bolivia. Washington, D.C.; Carnegie Instltution of
Washington, 1940.
Duggan, Laurence. The Americas; The Search for Hemisphere

Security. New York: Henry Holt and company, 1949/
Punk, Charles Earle (ed.). The New International Year Book«-

A Compendium of the World1s Progress for the~Year 194PT
flew York: KmJc"~and Wagnalls Company, 19411 Volumes in
this series are published annually and were consulted
for the years 1935-1946.
Kaln, Ronald Stuart. "Behind The Chaco War," Current

History, XLII (August 1935)* PP. 468-474. -------
. "Bolivia^ Claustrophobia," Foreign Affairs, 16,

Ro7 4 (July 1938), pp. 704-713. ----- ----------
Kelchner, Warren H. Latin American Relations with the

League of Nations. XIl, No. 6 . Boston: World Peace
Foundation Pamphlets, 1929.
Klein, Herbert Sanford. "The Impact of the Chaco War on

Bolivian Society." Unpublished Doctoral dissertation,
University of Chicago, 1963.
Martin, Lawrence. "The Ghost of German Busch," Harper^

Magazine, 189, No. 1133 (October 1944), pp. 44,3-4'56'.
Mecham, J. Lloyd. The United States and Inter-American

Security, 1889-15601 Austin: University of Texas Press,
1961.
Osborne, Harold. Bolivia, A Land Divided. Third edition.

London: Oxford University Press, 1964.
Whitaker, Arthur Preston. The United States and South

America, The Northern Republics. Cambridge: Harvard
University Press, 1940.
Wood, Bryce. "The Principle of Discrimination: Bolivia,"

The Making of the Good Neighbor Policy. New York:
Columbia university Press, 1961.
641
Wood, Bryce. The United States and Latin American Wars
1932-1942. "Hew “
York; Columbia University fcress, 1£66.
Zook, David H., Jr. The Conduct of the Chaco War. New York:
Bookman Assoclate

HOLLAND, E. J. A Historical Study of Bolivian Foreign Relations, 1935-1946

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

HOLLAND, E. J. A Historical Study of Bolivian Foreign Relations, 1935-1946

Загружено:

Авторское право:

Доступные форматы

68-2915

HOLLAND, Emmett James, 1937-

University Microfilms, Inc., Ann Arbor, Michigan

Emmett James Holland

EMMETT JAMES HOLLAND

Faculty of the School of International Service

of the American University

The Requirements for the Degree

AMERICAN UNIVERSITY LWR*»V

II. THE CONTEXT OP BOLIVIAN FOREIGN RELATIONS .. 13

Geography and Demography .................... 13

The History of Bolivian International

Economic and Financial Factors .............. 35

' Politics and Government ............ 42

III. BOLIVIA AND THE CHACO PEACE CONFERENCE . . . . 57

A Brief Background Survey .................. 58

The Chaco Peace Conference .................. 82

The Prisoners-of-War Issue .................. 87

The Security and Transit Issues . . . . . . 106

Inter-American Conference for the Maintenance

of Peace (December 1-December 23 > 1936) . 113

Security and Transit Issues Continued . . . 121

The Territorial Issue ...................... 127

The Peace Treaty and Arbitral Award .... 157

Analysis and Conclusions .................... 169

IV. BOLIVIA*S POST-CHACO WAR DIPLOMACY

Postwar Foreign Relations During the

Tejada Sorzano Regime ..................... 185

Foreign Policy ........................... 199

Relations with Brazil ..................... 201

Bolivian relations with Argentina ........ 207

The Standard Oil Company c a s e ............... 213

Bolivian-United States relations ........ 219

Bolivian-Peruvian relations .............. 224

Relations with Chile ..................... 228

Additional foreign policy concerns .... 232

Post-Chaco War diplomacy— the formative

Andean Foreign Relations during the Busch

Years (1937-1939)......................... 239

Prompt recognition ................ ... 240

Bolivian-Argentine relations ............ 241

Relations with Rio ....................... 249

La Paz and Santiago de C h i l e ...............261

Relations with P e r u ......................... 264

Uruguay and P a r a g u a y ....................... 267

Relations with the United States ........ 270

Relations with Germany, Italy, and Japan . 275

Eighth International Conference of

American States .............. 279

Immigration policy 281

ALBERTO OSTRIA GUTIERREZ 1939-1941 295

The Panama Meeting of Foreign Ministers . . . 299

Relations with the United States .......... 306

Bilateral Relations with the other Bordering

The Second Meeting of Consultation, Havana

(July 194<)............................... 356

The Regional Conference of the Countries of

the Rio de la Plata .................. 360

Analysis and Evaluation ................ 378

VI. THE PERARANDA ERA: PART II. THE DIPLOMACY OF

THE MIDDLE WAR YEARS 1941-1943 ........ 381

1941-1942 ......................... 382

The Third Meeting of Consultation,

Rio de Janeiro (January 1942) .......... 3&5