Gulf Oil Co. (controlled by the Mellon family, and the sixth largest corporation in the U.S.) has firmly consolidated its position of importance in Bolivian economic life.
Of the original 16 foreign companies given concessions in 1956 under the US.-authored petroleum code which denationalized the oil industry, Gulf alone is pumping oil. Only two other foreign companies even maintain their symbolic presence in La Paz. Yacimientos Petroliferos Fiscales Bolivianos (YPFB), the national oil company, was effectively kept from achieving success in the late 1950s because of its inability to get significant credits for expansion in the U.S. or through international lending agencies. An offer for S85 million in credits from the Soviet Union in 1958 was not accepted by the Bolivian government because it would have jeopardized the aid received through the International Monetary Fund (controlled by Western finance) for their inflation crisis.
Today 20% of Bolivia's oil needs are supplied by Gulf Oil. Gulf has also begun exporting oil to the U.S. and has used YPFB as an intermediary for market expansion in Latin America. The pipeline from Sica-Sica (Bolivia) to the port of Arica (Chile) was contracted by YPFB in 1956 and financed by a $5 million loan from Gulf. Just the interest on the loan has cost the Bolivians a great deal. Today Gulf uses that very pipeline to ship 17 thousand barrels of oil a day to the port. The export of this oil may turn Bolivia into the third largest exporter of oil in Latin America, after Venezuela and Colombia. In July, 1967, the national oil companies of Bolivia (YPFB) and Argentina (YPFA) signed an agreement by which Argentina would receive excess petroleum from Bolivia to be, refined at Campo Duran in Argentina. Thirty days later, Gulf Oil signed an agreement with the Bolivian government to sell 32,000 barrels a month to YPFB, the exact amount needed by them to fulfill their obligations to YPFA. Gulf is to be paid with notes of credit which they will use to pay taxes and royalties to the Bolivian government (which would sharply reduce any real revenue from oil tax for the Bolivian government). YPFB recently contracted to sell oil to Paraguay, which will also increase its dependence on Gulf Oil. Another aspect of Gulfs entrenchment is a proposed petrochemical complex for Bolivia, most probably in conjunction with YPFB.
After the revolution in 1952, the development of the oil industry was viewed as a way of breaking the country's dependence on the tin economy. By 1961 Jose Estenssoro, head of YPFB and brother of Victor Paz Estenssoro, who was Bolivian President from 1952-56 and from 1960-64, had resigned in despair at the company's inability to compete with private oil companies. Fifteen years after the "revolution," this hope for diversification means the development of the oil industry by U.S. private capital.
Gulfs expansive vision from her Bolivian base in South America has gone beyond these prosaics. Project 50, introduced by the Falangist deputies of the Bolivian Congress in February, 1967, was the trial balloon of a plan to create direct access to the Pacific Ocean for Bolivia. (Falange Sociallsta Boliviana is the right-wing party to which the Vice President, Gen. Ovando, belongs and with whom Gulf management maintains dose contact.) The plan for a solution to Bolivia's long-standing problem as a landlocked country was rejected in its original form. It involved Chile ceding territory to Bolivia in exchange for lifting a ban on selling Chile petroleum and ceding irrigation rights from the Choi-Posa River. A similar arrangement would have been concluded with Peru. Considering Chilean and Peruvian nationalism, agreement on such a plan would have been impossible.
Gulf Oil has come up with a solution which proposes that Bolivia also give up part of her territory to create an international enclave on the sea. This enclave could be turned into an important industrial complex, taking advantage of the concentration of petroleum, gas and power which could be fed from the Altiplano and Lake Titicaca. The Andean Corporation created to promote economic integration of the Andean states (Bolivia, Peru, Ecuador, Chile) could become the instrument of endorsement of this plan. Two U.S. groups stand to benefit from this free state: Gulf Oil, with a hand in control of this enclave for its exports and as its base for "safe" industrial expansion, and the Pentagon, which would like to use the port of Arica as a center of operations for its elaborate "hemispheric defense" plans.
The central idea militarily is to use Arica as a crucial link in a network of roads and railway communications into Chile, Peru, Bolivia and northern Argentina. The port itself would be a point of entry for troops or equipment needed to fight Latin American insurgency. (The Brazilian military with Agency for International Development financing have already half completed an all-weather road in the interior of Brazil reaching to the Peruvian border which could be linked up with this road network.)
Opposition to the Gulf scheme cannot be viewed as outdated nationalism. The scheme is the work of one of the most powerful oil companies in the world and the politics of Gulfs maneuvers aim to create a "state" that it could control. It is important to note that the greatest support in Chile for the creation of this "free state" comes from program of Technical Cooperation Chile-California begun in 1963 which was to plan investments and expansion at tile port of Arica. This program has been under the charge of the undersecretary of transportation in Chile, Domingo Santa Maria, who had been a director of Koppers Co. (also a Mellon corporation). The works begun under this program went far beyond the capacity of the port at the time. The free stale is not a reality yet, but that it is even being seriously contemplated shows how much the needs and will of a big U.S. monopoly are heeded by such men as Gen Barrientos, present Bolivian dictator.