1942: Bolivia

The war brought boom conditions to Bolivia in 1942, since tin and other metals have been at a premium. This has meant a cash surplus in the budget and a chance to mend Bolivian finances, yet internal conditions have been bad. Living costs have been very high, and the end of the year saw a serious strike in some of the Patiño mines, resulting in a disturbance which led to the declaration of a nationwide state of siege on Dec. 14 and martial law in five principal tin-mining areas. Moreover, shipping difficulties have rendered deliveries to the United States increasingly difficult. The unbalanced economy of Bolivia, which is heavily dependent on a single commodity, tin, and the necessity for avoiding postwar chaos when the demand for Bolivian exports may be expected to slump, has led the Government to suggest the use of the 1941 Treasury surplus to reduce the outstanding debt and develop agricultural and manufacturing industries, thus diversifying economic activities and reducing the excessive dependence on imports.

A four-year contract, signed on Aug. 11, provides for a United States military mission to Bolivia. An agreement for expanded economic cooperation between the United States and Bolivia was concluded in the summer. This includes $25,000,000 in credits for the Bolivian Development Corporation, a joint United States-Bolivian company which will carry out a program recommended by a United States mission headed by Merwin Bohan. Three of the six directors will be named by the Export-Import Bank, which granted the loan on Jan. 28, the same day on which Bolivia severed relations with the Axis. The sum of $15,000,000 has already been made available for construction of the Cochabamba-Santa Cruz highway, linking Bolivia's agricultural and mining regions, and for establishing a national sugar industry. Of the balance $5,500,000 is to be used to stimulate petroleum production; $2,000,000 for stabilizing the boliviano; and another $2,000,000 to finance imports from the United States. A revised tin contract was signed at the same time with the Metals Reserve Company, by which Bolivia agrees to produce more tin for shipment to the United States to meet the more than trebled capacity of the Texas tin smelter. The price for United States-purchased tin was increased from 48½ to 60 cents per pound.

Bolivia is one of four signatories to an International Tin Agreement which, in September, practically raised the export quotas for tin areas still under United Nations' control. Since the revised agreement is to run till 1946 it will, presumably, impose basic restrictions on tin production and exports in the postwar period, which may be considered a violation of the fourth article of the Atlantic Charter. However, the loss of Far Eastern tin deposits means that the United Nations must keep production in the remaining fields at maximum to meet war requirements; hence the modification of export quotas. Bolivia's prewar quota was 46,490 tons annually, as compared with Malaya's 71,940 tons.

Like many other Latin American countries, Bolivia has agreed to sell its entire output of rubber to the United States, except for small amounts for local use and for neighboring republics. Earlier in the year Uruguay and Argentina were competing for Bolivia's exportable rubber. The nationalized Lloyd Aereo Boliviano is operating in one of the most productive rubber sections of the South American continent, the Beni and Northeast Colonial Territory of Bolivia. By unique methods of rubber collection and delivery it has found it possible to deliver shipments to the United States in under three weeks. In April, the United States signed an exclusive contract for the purchase of Bolivia's entire copper output, which is expected to total 6,500 tons annually.

Dispute over the agreement with the Export-Import Bank to establish a Bolivian Development Corporation caused a clash between President Peñaranda and the Bolivian Congress in October. The amount offered by the United States was considered insufficient for even partial solution of the country's problems and the terms were deemed unduly generous to the United States. Victor Paz Estenssoro, leader of the National Revolutionary party, was most outspoken in criticism. However, Congress finally accepted the economic agreements in November but with a shift in Cabinet as a result. The new Cabinet is more widely representative since it includes Liberals, Republican Socialists, Genuine Republicans, one independent and two Army generals. The railway agreement signed with Argentina in September, calling for the construction of railways, roads, and pipelines to link Bolivia's oil-producing region with its southern neighbor, has also been the subject of Congressional criticism and debate. Finally, the Government has been attacked for the agreement to settle the five-year old controversy with the Standard Oil Company of New Jersey by the payment of $1,750,000 to the company, in return for which Bolivia recovers unquestioned title to its oil fields. The payment was finally approved by the Bolivian Congress by a margin of one vote.

This year the United States diplomatic mission in Bolivia was elevated to the rank of embassy, action based on 'the steady strengthening of the bonds of friendship, culture and commerce.'