1939: Bolivia

On April 24 President Germán Busch established a political and financial dictatorship when, by proclamation, he dissolved the Bolivian Congress, suspended the Constitution, abolished the courts and all existing laws, and declared that the critical economic condition of the country demanded a totalitarian régime. Absence of all connection with any European totalitarian state was specifically indicated, although rumors of German influence in the April coup were given some support by the announcement in May of a $15,000,000 barter deal, by which crude oil and petroleum products would be exchanged for pipelines and refinery equipment, and by reports the following month, later officially denied by the Bolivian Foreign Office, of a huge modern German air base to be constructed at Trinidad, in Eastern Bolivia, in return for assistance in completing the General Staff's two-year rearmament plan. The threatened bankruptcy of the Government, due to the prevailing low price of tin and to labor scarcity at the mines, gave some credibility to the alleged economic necessity for a dictatorial régime. Since Congressional elections were impending and the Government was threatened with a coalition of opposition parties, the coup might also have been politically motivated.

The Busch dictatorship was destined to be short-lived, however, and ended just four months later with the death, presumably suicide, of President Busch. General Carlos Quintanilla, chief of staff of the army, assumed the presidency. In keeping with his declared intent to 'seek the constitutional normality of the country,' on Oct. 6 he reestablished the 1938 Constitution and called general elections for March 1940. On Oct. 27 a state of siege was declared when younger elements of the army tried to foment a revolution. As a result, General Bernardino Bilbao Rioja, commander-in-chief of the army and a candidate for president, was expelled from the country. Four days later a second revolt, this time instigated by his brother, also failed. The candidacy of General Enriquez Penaranda, Minister of Defense and generalissimo in the Chaco War, was announced in December.

The nationalization program of the last two years, spectacularly initiated by the expropriation of the Standard Oil properties in 1937 was further realized in two important decrees in 1939: that of June 7, ordering all Bolivian mines to market their total output through the Central Bank; and the decree of Aug. 2, nationalizing the Banco Central. The first of these decrees has been attacked by the leading mining companies, on the ground that it is a step towards expropriation and that, by further raising production costs, already higher than those of the other major producers, British Malay and Nigeria, it endangers Bolivia's position in the world tin market. However, the move to keep tin profits within the country has been made a political issue, based on the slogan 'economic emancipation for Bolivia.' Whether or not the decree will be modified will depend on the extent to which the new régime will continue the Busch policies. The decree making the Government the sole shareholder in the Central Bank caused a Cabinet split in mid-summer, the Foreign Minister, Alberto Ostria Gutierrez, being replaced by the Minister of Mines, Dionisio Foianini, sponsor of the confiscation of the Standard Oil properties, and by some considered the master-mind of the Busch régime.

The Bolivian Supreme Court, on March 8, dismissed the petition of the Standard Oil Company of New Jersey for restoration of its properties. The oil company has renewed its request to the United States State Department for diplomatic intervention, and demands either restoration or international arbitration of its claim, but diplomatic action has been postponed until all remedies within Bolivia have been exhausted. A Bolivian government investigation has begun of the Yacimientos Petroliferos Fiscales, the State monopoly which operates the confiscated properties.

By an ad referendum contract between Paraguay and Bolivia, negotiated in April. Paraguay granted its former enemy neighbor a thirty-year monopoly to refine crude oil and to supply all Paraguay's petroleum needs. The concession includes two free zones of 5,000 acres each on the west bank of the Paraguay River, a Chaco pipe-line, with a 325-foot right of way across the Chaco for this purpose, a refinery, to be completed in eighteen months, and exemption from export taxes on petroleum products shipped from the Bolivian refinery. Pending the completion of the pipeline, petroleum will be shipped by rail across Argentina to the Paraguayan refineries.