Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

611.24/11–2753

Memorandum of Conversation, by the Ambassador in Bolivia (Sparks)¹

secret

[La Paz,] November 23, 1953.

I called on President Paz Saturday morning, November 21, at 11:00 by appointment.

The President told me that it had been decided to postpone indefinitely his visit to Chile. He explained confidentially that it would have been imperative in any joint statement released to the press during the course of the visit to have included a reference to Bolivia’s aspiration for a port on the Pacific. The President made it clear that it was not Bolivia’s intention at this time to raise this question with Chile since Bolivia had more than sufficient internal problems without reopening the port question. Nevertheless, Bolivia considered that a reference to the port problem could not have been omitted in a press statement during the visit since the opposition would have seized upon this and would have charged the Paz Government with having abandoned this legitimate Bolivian aspiration. The President added that, on the other hand, President Ibañez is being pressed with many local Chilean problems in view of which neither he nor the Chilean Government were inclined to have a statement on the port question included in any press release during the course of the visit. Therefore, it was mutually agreed that the contemplated visit be postponed until a more appropriate time.

The President reminded me of a previous statement by him that he intended to take a more forthright action against Bolivian Communists after his return from his visit to Chile. He confided that the timing on this action was influenced by the fact that there is an articulate Communist group in Chile which, if the action had been taken prior to his arrival in Chile, would have plagued him throughout his visit. However, now that the visit had been postponed, he would begin to take measures immediately. He stated that there would be a meeting of the Political Committee of the MNR Party on Friday, November 27, which would outline the position of the Party with respect to Communism, following which these principles would be applied within the Party and throughout Bolivia. In this connection the President inquired if the Acting Under Secretary for Foreign Affairs had shown me the handbill issued prior to the syndical elections at Catavi, Llallagua and Siglo XX. It will be recalled that this handbill in its appeal to the miners contained the significant phrase “¡Afuera los Comunistas!” The President was obviously gratified that the miners had overwhelmingly elected anti-Communist syndical officers.

. . . . . . .

I mentioned to the President that I had just discussed with the Acting Under Secretary for Foreign Affairs the position of the United States with respect to the United States nationals who had been dismissed from the United Nations, and the decision of the United Nations Administrative Tribunal that the action of the Secretary General² had been illegal.³ I outlined briefly the problem and added that the Acting Under Secretary planned, after consultation with the President, to instruct the Bolivian delegation to the UN to support the United States position. The President told me that Bolivia would consistently support United States positions in matters of this nature and that he would direct the Acting Under Secretary to instruct the Bolivian delegation at the United Nations.

I then brought up the tax problem of Panagra which has been carrying on conversations with the Director of Revenue over a period of months with respect to its tax obligations in Bolivia. I explained that previous Governments had implicitly decided that Panagra was exempt from taxation in Bolivia, but that the Director of Revenue had reviewed this question and had reached the conclusion that Panagra was liable to income tax and had issued a Bill of Assessment. In establishing the tax due the Director had taken as a basis Panagra’s revenues in Bolivia and had deducted only expenditures in Bolivia. I observed that this appeared to be an inequitable basis for calculating the tax since no provision was made for depreciation of equipment, maintenance of equipment which was carried on in Lima and Miami, and innumerable other important operating expenditures made outside of Bolivia. I also pointed out that receipts included passenger fares and air express and freight charges to ultimate destinations of which Panagra received only a part since the balance had to be paid to other carriers. I stressed that Panagra was not trying to avoid tax obligations in Bolivia and that, with a view to reaching a formula equitable to the interests of Bolivia and Panagra, it had suggested a system which had already been accepted by Chile, Peru, Ecuador and Panama. I explained that this involved an annual statement of the profits or losses of Panagra and their apportionment in accordance with the actual miles flown in Bolivia. I added that officials of the Department had examined the Panagra documents and were in agreement as to the apparent reasonableness of Panagra’s position in the light of normal practices in other countries, and that it was the desire of the Department that a fair and equitable basis be established for determining the tax.

The President was not informed of the discussions that had been proceeding between Panagra and the Bolivian tax authorities. I informed him that Panagra planned to discuss the problem with the Minister of Finance on Monday, November 23 and to appeal the decision of the Director of Revenue, having already made the deposit of the portion of the assessed tax required by Bolivian law. The President appeared to be favorably impressed with the reasonableness of the position of Panagra and said that he would speak with the Minister of Finance and the Director of Revenue.⁴

The President told me that the Council of Ministers on Friday, November 20 had approved and signed a decree ratifying the retention agreements signed by the Corporación Minera de Bolivia and the Patiño, Hochschild and Aramayo groups. He furnished me a copy of the decree which will be transmitted to the Department under cover of a despatch.⁵

I then raised the question of critical comment appearing in the American press, referring in particular to the open letter of former President Hertzog⁶ which had appeared in the New York Times on November 11. I also mentioned the previous comments in the Herald Tribune, the Journal of Commerce, the Wall Street Journal and the American Metals Market. I said that I had discussed this problem with Foreign Minister Guevara at the airport on November 13 when he was returning to the United States, and that he had stated that he planned to call upon the editors of the principal American newspapers and explain the Bolivian situation. I expressed the hope that he would carry out this intention since the open letter of former President Hertzog is also critical of the United States in that the United States is virtually accused of supporting a Communist-dominated Government in Bolivia. The President is most sensitive to this criticism. He said that this matter is very much in his mind and that steps are being taken to counteract its adverse effects.

I took advantage of the opportunity to inquire as to developments following the abortive attempt of November 9th.⁷ The President said that the situation is entirely under control and that the Government will take legal action against those responsible, in conformity with Bolivian law. He volunteered that the leaders and adherents of the FSB were a desperate, determined group and that they might make further efforts to achieve their objective. However, the Bolivian police were continuing their vigilance and search for arms and that the latter to date had been very productive. At this point I mentioned that I was being approached by individuals and groups who alleged that conditions in the Panóptico, in particular, and the detention camps, in general, were inhuman and that brutal methods were being used to extract information from the political prisoners. I added that this, of course, is an internal matter of Bolivia, but I could not but exhibit a humanitarian interest in the welfare of these persons. I added that I was unaware of any physical changes that had taken place in the Panóptico over the years; nevertheless I did not believe that, if the conditions there or in the detention camps were as described, this could be in the long-term interest of Bolivia or conducive to the pacification of the Bolivian scene which I understood was the ultimate objective of the President and his Government. (The Embassy has received many allegations of brutality by the police in extracting information, but has received virtually no proof that this is a common practice except that physical conditions in the Panóptico are, and probably have always been, repulsive and degrading.) The President replied that these conditions were undoubtedly exaggerated although “the methods of police all over the world are rough”. I gained the impression that the President does not condone such “rough measures” by the police, but that the information obtained by the police permitted the timely discovery of plots and of the location of clandestine arms and ammunition which effectively prevented greater bloodshed among the Bolivian people.

I mentioned that the Embassy had received from the Minister of Economy, Augusto Cuadros Sanchez, the Bolivian request for the distribution of the 9 million dollars of food grants and that no final determination had yet been made with respect to the balance of 1.3 million dollars. The President seemingly had not understood that this amount was designed to be utilized for acquisitions in United States currency which would permit greater implementation of the local currency counterpart in the plans for the diversification of the Bolivian economy. I explained that FOA and the Department had intended that this amount be set aside from the grants for that purpose, or that should this amount be used for further food commodities then the Bolivian Government would commit itself to set aside from its own foreign currency availabilities an equivalent amount for that purpose. I said that I had discussed briefly this matter with the Foreign Minister on November 13 and that he planned to discuss it during his visit to Washington. The President appreciated this suggestion of FOA and the Department. No decision has yet been reached except the possible employment of a part of this amount for the purchase of pumps for the irrigation project at Villa Montes. The President stated that the possibilities would be given intensive study and he would inform me later as to the decisions that might be reached.

1. Enclosed with a letter by Ambassador Sparks to Mr. Hudson, dated Nov. 27, 1953, not printed.
2. Trygve Lie.
3. For documentation on this subject, see vol. iii, pp. 312 ff.
4. Panagra’s tax difficulties with the Bolivian Government were not fully resolved in 1953 or 1954; documentation pertaining to the subject is contained in files 824.11 and 911.5224.
5. Reference is to despatch 321, dated Nov. 23, 1953 (824.2544/11–2353).
6. Enrique Hertzog Garaizabal.
7. Reference is to the attempted coup led by the Falange Socialista Boliviano (FSB) party in La Paz and Santa Cruz; pertinent documentation is in file 724.00 for 1953.