The Americanization of Bolivian Oil

September 25, 2007

The development of oil resources in Bolivia is the result of U.S. private investment schemes, despite Bolivian nationalist desire to control and benefit from their own national resources. U.S. private enterprise has sought American government support when necessary in its maneuvers with the Bolivians. And the long-range U.S. foreign policy goal in the underdeveloped countries is to promote favorable conditions for ust such corporate penetration.

Relatively little U.S. capital was invested in Bolivia before William aden secured a several million acre oil concession in 1921 which he transferred shortly thereafter to Standard Oil Co. of New Jersey. (1) Standard Oil remained the sole exploiter of Bolivian oil until 1937, after the end of the Chaco War between Bolivia and Paraguay. The war resulted from a dispute over the rights to the Gran Chaco-undeveloped land that was believed to contain large oil reserves. The spark which touched off the battle was produced by Argentina, formerly the outlet for oil from landlocked Bolivia, when she sided with Paraguay and closed her borders to Standard's oil. Both Standard Oil and the United States government found it to their interests to back the Bolivians. What seemed like an assured victory turned into a humiliating defeat for the Bolivians.

After the Chaco War, and partly in response to the feeling that Standard Oil had been responsible for provoking the conflict, the oil company's Bolivian operations were nationalized. Bolivia's expropriation, however, came at a time when the United States feared Axis penetration in latin America and had formulated a Good Neighbor policy, so the move did not provoke an armed intervention or heavy-handed response. Bolivia was given badly needed financial backing during the World War II period in return for full compensation for the oil company.

After World War II, and after an unsuccessful challenge for power by the MNR (Movimiento National Revolucionario), Provisional President Guillen opened negotiations with the U.S. government for the return of the nationalized petroleum operations to Standard Oil. Following the 1947 elections, President Urriolagoitia conducted similar negotiations with the Truman administration. Same of these mediations are rather candidly described in the correspondence of Ambassador Irving Florman to Donald Dawson.

But Florman was a bit overconfident. For before the denationalization was completed, the revolutionary MNR government seized power. Here again the United States withheld armed intervention and etended aid in return for a Bolivian promise to pay U.S. investors for their share of the nationalized tin mines. The new government planned to develop the oil resources through the state-owned Yaoimientos Petroliferos Fiscales Bolivianos (YPFB) as part of a plan to reduce the economy's dependence on tin.

In the end, however, the Americans got what they had waited for. The heavy dependence of the Bolivian government on U.S. credits and the MNR leadership's unwillingness to break its economic ties with the United States and accept credits from other countries left them in a weakened position vis-a-vis their creditors. An important public indication of official U.S. support for the MNR government was the visit in 1954 of Henry Holland, Assistant Secretary of State. In 1955, Bolivia announced a New Petroleum Code and later that year Holland arranged a $40 million export-import loan for Bolivia and made a second visit. He made a third trip as an attorney representing several U.S. oil companies in late 1956.

The New Petroleum Code, originally drafted by the U.S. engineering firm Travieso, Davensport, Brans and Fernindez under a Point Four (predecessor of today's AID) grant, laid out conditions geared to attracting foreign capital. Today the oil industry in Bolivia is dominated by Gulf Oil Corp. The success of their initial operations has led them to project heavier investments in the region and the present Bolivian government intends to make the nascent petrochemical industry growing up around Gulf operations a main part of its development plans. Today, Bolivia's nationalized oil properties no longer supply the country's domestic petroleum needs-they are met instead by Gulf 0il Corporation.(For further details on Gulf exploits in Bolivia, see NACLA Newsletters for August 1967 and March 1968.)

1. William Braden was the founder of the Braden Copper Co., whose copper mining and smelting operations in Chile are now operated by Kennecott Copper Corp. Braden's son, Spruille, has been U.S. ambassador to Argentina, Colombia and Cuba and he was Assistant Secretary for American Republic Affairs from 146-47.

Tags: Bolivia, Gulf Oil Co

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