824.51/184: Telegram
The Minister in Bolivia ( Cottrell ) to the Secretary of State
[Received 3:10 p.m.]
23. Referring to my cable of April 16, 4 p.m.2 President replied yesterday afternoon to the memorandum of Department’s views left with him. Translation follows:
“Reply of the Bolivian Government to the memorandum presented by the Minister of the United States.
The report given by the Equitable Trust Company of New York to the Department of State is incorrect when it states that the loan agreed upon with the Government of Bolivia was signed by the latter with a full knowledge of the conditions of the contract. The Bolivian consul in New York sent cablegram on May 27th in which the fundamental features of the loan contract were expressed very briefly. The Government in a cable of the 29th of the same month made observations on many of the points ordering the consul to demand their modification. The Government authorized the signature of the contract under pressure of its not being effected if there should be delay but always on the understanding that it agreed not only with the laws dictated by the Bolivian Congress to authorize this operation but also with the observations which the Government made to the features briefly communicated by the consul in the cable referred to of May 27th.
The result however has been that the Government has only actually known the contract in all its details 80 days after it was signed in New York and thereupon immediately raised definite objections in a note sent to the consul on September 20th, 1922.
This contract in all of its details, which were not known to the Government as the bankers state, was nothing else than a repetition ad pedem litere [ad lites pendentes] of a draft of a loan contract which the same bankers had submitted to the Government on March 17th, 1922. That draft after having been considered by a commission of bankers of this country was rejected in limine by cablegram of March 29th addressed to the Equitable Trust Company which contained the following: ‘It is my duty to inform you that after having studied carefully the proposal presented by the bankers on the 17th instant to Messrs. Rivero and Ballívían for the loan of [$]33,000,000 and which has been communicated to us, the Government has decided [Page 446] not to accept this proposal for the reason that it was too onerous to the interests of the nation’.
[Notwithstanding this the bankers made the Bolivian consul sign the same contract.
In addition the tenor of the contract signed in New York is in direct contradiction with the laws of February 10th and May 24th, 1922,3 which contained the conditions authorized for the contracting of the loan in New York. The law of May 24th was passed by the Bolivian Congress for this express purpose accepting the text forwarded by the lawyer of the bankers. Notwithstanding this the loan contract has failed to respect any of the clauses of the law in question of May 24th for it has included securities not contemplated in that law as well as conditions not authorized in it; so that the bankers have acted contrary to the text of the same law they themselves asked for. The power of attorney sent by the Bolivian Government to the Consul states textually that the contract must be in agreement with the provisions of the law enacted by the Bolivian Congress.]4
The Bolivian Government wishes to fulfill strictly its international obligations for the good of the credit of the nation and it has been doing so with all of its international agreements but in the case of the loan contracted in New York it is necessary to secure the modifications which the Government seeks and to make them comply with the laws referred to for the contract has not only overstepped and infringed on those laws but has raised a very great clamor in this country against its iniquitous conditions.
The Government is not only morally responsible to the country besides its legal responsibility [being legally responsible?] before Congress, but also a contract drawn with the provisions which the bankers of New York demand involves a great loss of prestige for the North American bankers, who treat the South American countries which have recourse to the markets of the United States, because of their requirements, with the most unyielding inflexibility.
The Bolivian Government is ready to fulfill its obligations and for this reason would be ready to sign the bonds immediately but it wishes a formal promise to be made by the bankers before the Department of State to the effect that they will accede to the requests of the Bolivian Government for the rectification of the contract to make it conform to the tenor of the laws which authorized it and it petitions the Department of State that it interpose its good offices with the Equitable Trust Company so that it may accept the modifications asked for. Contingent upon this promise the Government would authorize immediately the signature of the bonds. La Paz, April 17, 1923. B. Saavedra.”