CURRENT ASSESSMENT OF THE BOLIVIAN SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001100090063-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 22, 2016
• Document Release Date: October 28, 2008
• Sequence Number: 63
• Publication Date: January 5, 1970
• Content Type: IM

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Secret
DIRECTORATE OF
IN'1ELLIGENCE
Intelligence Memorandum
Current Assessment of the Bolivian Situation
State Dept. review
completed
Secret
5 January 1970
No. 2822/70
00
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
5 January 1970
Current Assessment of the Bolivian Situation
Introduction
The "revolutionary" government of President
Ovando is still in its shakedown phase. Its radical
and supernationalist rhetoric, characteristic from
the outset, is designed to give the regime a "popu-
lar" image by appealing to the sentiments of Bolivia's
highly vocal student, intellectual, and labor ele-
ments. So far this rhetoric has been transformed
into concrete action only in the expropriation of
the Bolivia Gulf Oil Company last October. A group
of radical civilians, whom Ovando originally brought
into his government, has so far set the tone of the
regime, but pragmatists within the government and the
military may begin to press for more moderate posi-
tions. Neither side appears ready for a showdown
with the other, however. Ovando himself, a rather
enigmatic figure, had seemed in recent weeks to be
beginning to take the reins of government more firmly
in his grasp and to be showing a more pragmatic at-
titude. His wildly "revolutionary" speeches during
the weekend of 20-21 December--in which he called for
the establishment of firing squads for "counterrevo-
lutionaries" and expressed some sympathy for the aims
of Che Guevara and his guerrillas--sounded, however,
like the fulminations of an insecure man. It is too
early to assess the meaning of his weekend outbursts.
Our tentative assessment of the outlook for Bolivia
begins on page 9,
Note: This memorandum was produced solely by CIA.
It was prepared by the Office of Current Intelligence
and coordinated with the Office of Economic Research,
the Office of National Estimates, and the Clandestine
Service.
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Background
1. The events that brought General Alfredo
Ovando Candia to power in a military coup were set
in motion last April with the untimely death of
President Rene Barrientos. General Ovando, the com-
mander of the Bolivian armed forces and heir appar-
ent to Barrientos, was out of the country at the
time of the President's death. Vice President Luis
Adolfo Siles, therefore, was allowed to accede to
the office constitutionally. Presented with this
fait accompli, Ovando continued his campaign for
the presidential elections scheduled for 1970 and
tried to coerce Siles into actions that would assure
an Ovando victory.
2. President Siles was a stronger personality
than Ov,-indo and the military had counted on, how-
ever. As Siles' popularity increased rather rapidly
from its rockbottom low when he took over the office,
the military became concerned that the President
might influence the elections in favor of Ovando's
opponent, Mayor of La Paz Armando Escobar. Further
complicating matters for. Ovando, char(,es arose in
congress and the press f;hat the US-owned Bolivian
Gulf Oil Company was fir)anci:,q the general's campaign
in return for assurances th&t it would be able to
continue operating in Bolivia as usual. in view of
General Ovando's deteriorating position, it was de-
cided--whether by Ovando himself or by those officers
close to him is not certain--that President Siles
must be removed by force. On 26 September, when
Siles was visiting outside the capital, the military
took over the government in a bloodless coup and in-
stalled General Ovando as President.
Current Political Situation
3. President Ovando unexpectedly named several
civilians tc his cabinet. He filled some of the
most important cabinet posts with civilians who
were young, intelligent, and dynamic. Among these
were Marcelo Quiroga, the Minister of Mines and Pe-
troleum, and Alberto Bailey, the Minister of Public
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Information. Both of these men had reputations as
radicals and ultranationalists and had been among
Ovando's harshest political critics. Ovando appar-
ently picked them in an attempt to bolster his sag-
ging popularity, to give credibility to the national-
ist and revolutionary image he sought in mimicking
the Peruvian military government, and to put them in
a situation where they could be inhibited from crit-
icizing his policies.
4. If this is true, the strategy appears to
have backfired to some extent. The leftist and na-
tionalistic civilians have seized the initiative in
the government, and so far have been relatively suc-
cessful in pushing through policies that Ovando had
appeared to be against. With Minister of Mines
Quiroga taking the lead, these civilians have ma-
neuvered the government in the direction they wanted
it to go and have gained considerable public credit
for their most popular actions, including the na-
tionalization of the Bolivian Gulf Oil Company. Dur-
ing his first month in office, Ovando appeared un-
able to control his own government, but in recent
weeks seems to have imposed some restraining influ-
ence.
5. There are divisions within both the mili-
tary and the government, but the differences have
not yet crystallized to the point where one group
is likely to take overt action against the other.
On the left are Quiroga and his government follow-
ers. This group may also include some members of
the military such as commander-in chief of the armed
forces General Juan Jose Torres and Minister of Gov-
ernment Colonel Ayoroa. If a working relationship
does exist among Torres, Ayoroa, and Quiroga, as has
been reported, it is undoubtedly only an alliance of
convenience that could break down at any time. Both
General Torres and Quiroga are reported to have
presidential ambitions, but apparently neither feels
that his time has come as yet. Opposition to Ovando
and his policies from moderates and the right wing
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is even more amorphous at the present time. Moder-
ate elements in the military are known to dislike
the Ovando government's policies and methods, but
as yet there is no solid evidence that this poten-
tial opposition is organized. Civilian political
opposition at this time is relatively insignific4nt,
although Bolivian businessmen and even a large num-
ber of the peasants appear to be less then enthusiastic
about the new government.
6. The policies the Ovando government has fol-
lowed thus far are largely results of two primary
influences. The first, a desire to consolidate its
hold on power, has led it to seek the approval and
support of the most vocal sector of the nation,
which in Bolivia is the student, labor, and intel-
lectual left. The second significant influence on
government policy has been the strenuous effort of
the radical leftist nationalists in the government,
led by Quiroga, to push Ovando along the revolu-
tionary path beyond the point of return. The ex-
propriation of Bolivian Gulf is the primary example
of the coinciding of these two influences. The
move apparently came as a result of strong pressure
from Quiroga and General Torres, but Ovando himself
obviously saw a need for some action designed to
appeal to the public and thwart criticism long enough
to allow him to consolidate his position.
7. In the past few weeks President Ovando and
members of his government have resorted more fre-
quently to verbal attacks on alleged US interfer-
ence in Bolivia. They have exploited news stories
(very possibly concocted within the government) that
accuse the CIA, Gulf, and counterrevolutionary Bo-
livians of collaborating in efforts to destroy the
Ovando government. This tactic appears to have at
least a three-fold purpose: (1) to arouse national-
istic fervor in the nation and thus to gain popular
support; (2) to associate legitimate opponents of
the Ovando government's policies with outside im-
perialist forces and thus to discredit them; (3)
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to provide a ready excuse for failures of govern-
ment economic policies by attributing the failures
to sabotage.
8. That Bolivia will face serious economic
problems is a foregone conclusion. It is the poorest
nation on the Latin American continent and requires
foreign capital for development. The expropriation
of the Bolivian Gulf Oil Company and the leftist
nationalist posturings of the Ovando government have
only assured that chronic economic and financial
problems will continue and in all probability be-
come more severe. Foreign exchange restrictions
since the expropriation have temporarily cushioned
devaluation pressures, but the inability to fulfill
import requirements is likely to have a severe impact
on price stability, employment, and economic growth.
Bolivia has found it difficult to attract foreign
capital under the best of circumstances, and the
currently unstable political climate will further
dampen investor confidence. In addition, the gov-
ernment's labor policies seem likely to reverse the
progress made in the mining industry during the
Barrientos administration when the mining of tin---
by far Bolivia's most important export product--
became a profit-making industry for the first time
in a decade.
Bolivia vs. Gulf Oil Company
9. The expropriation of the US-owned Bolivian
Gulf Oil Company was not a total surprise, although
President Ovando had given private assurances to
company officials and the US ambassador that all
the government really wanted was a renegotiation of
the contract. He did not, however, commit himself
publicly, and it was apparent that Quiroga was press-
ing for expropriation? It is still not clear who in
the government initiated the order, but on 17 Octo-
ber Bolivian troops occupied the offices and instal-
lations of Bolivian Gulf.
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10. While satisfying to national pride, the
expropriation has been a major headache for the gov-
ernment.
Since the company
was taken over, however, major portions of the oil
industry have been forced to shut down. Gulf im-
mediately stopped shipping oil from the storage point
in Arica, Chile, with the result that operations in
the oil fields had to be stopped for lack of storage
facilities, Bolivia has not yet found a market for
its petroleum, although it has made offers to Brazil,
Argentina, and various Communist countries.
11. Gulf has taken other measures that have been
interpreted by Bolivians as retaliation and as an ef-
fort to force a reversal of the expropriation. Con-
struction has stopped on a pipeline from southeastern
Bolivian natural gas fields to Argentina because the
company has embargoed the shipment of construction
materials. Argentina is cooperating with Bolivia in
an attempt to get the materials and financing for the
pipeline construction released and will probably be
successful. Gulf also requested Chile to stop the
movement of certain materials from the port of Arica
to Bolivia, but the Chilean Government refused. A
stop-payment was also issued on some $500,000 of Gulf
checks payable in Bolivia.,
12. The government has maintained from the very
first that it intends to pay compensation to the com-
pany for its expropriated property. Minister of Mines
and Petroleum Quiroga has declared, however, that pay-
ment will be made only for the actual value of the
property taken. This excludes any underground reserves
the company may claim as well as legitimate explora-
tion costs. Quiroga's method of computing the com-
pensation would result, even under the most favorable
evaluation, in a payment of no more than $85 million
on Gulf's claim of approximately $140 million total
investment. Finding the means to make the payment
could present a real problem. The Bolivians have
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suggested they could sell oil to Gulf and then set
aside a portion of the price paid, perhaps as much
as 30 percent, for compensation purposes. The com-
pany thus far has rejected a solution of this sort.
Mid-December talks between Gulf representatives and
Bolivian Government officials have been described by
the company as productive. These talks are to be re-
newed this month when the Gulf officials will return
to Bolivia with "concrete proposals," according to
the La Paz press.
Relations With US
13. The US, in one form or another, has fre-
quently been the butt of vociferous attacks from
members of the government and vocal elements of the
population since the September coup. Not only have
US companies come under attack, but official and
semiofficial representatives of the US have been
targets for the anti-US nationalism that characterizes
this government. USAID supported projects have been
particularly vulnerable to heavy criticism. Repre-
sentatives of the American Institute for Free Labor
Development (AIFLD), in Bolivia for the training of
democratic labor leaders, have been declared unwel-
come, and the ORIT representative has already left
the country. The US military assistance group has
also been subjected to criticism and may yet be
asked to withdraw from the country. No other US
companies have been nationalized since the Gulf
expropriation, but the Matilde Mines, South American
Placers, and the Bolivian Power Company are prime
potential targets for future expropriations.
14. Government-to-government relations have been
characterized by seemingly frank discussions, followed
almost immediately by vicious public attacks on the
US and by reversals of stated Bolivian intentions.
Labor Minister Rolon has gone so far as to advise the
US Embassy that it should not take seriously the anti-
US statements made by government officials because
they are made only out of political necessity and
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are not tru13 representative of the government's
feelings or indicative of policies it intends to
pursue. Unfortunately, it appears that private
statements to L'S officials carry no more validity
than public declarations. What can be said with
certainty is that the Ovando government wants con-
tinued US aid but will strive very hard to get it
with minimum commitments on its own part.
Relations With the Soviet Union and Eastern Europe
15. Since taking power, President Ovando has
pursued a policy of establishing diplomatic and trade
relations with the Communist countries. This, how-
ever, is not a new bold venture but primarily a con-
tinuation and amplification of a process begun under
President Barrientos but with a spei,~,:1ing up of the
timetable. Diplomatic relations have been established
so far with Romania and the Soviet Union. Technical
teams from bcth countries, in addition to one from
Hungary, V Lch is already represented in La Paz by
a charge d'affaires, have visited Bolivia. By pursuing
this policy of closer relations with the Communist
countries, President Ovando appears to be trying to
demonstrate his independence from the US in interna-
tional affairs and to gain access to financial or
technical assistance.
When Julio Garret Ayllon, Bolivia's first
ambassador to the USSR, departed for Moscow in late
December he said that his main task will be to sell
Bolivian petroleum and tin to the Soviet Union. To-
ward this end he stated that a former -resident of
the Bolivian state oil company would be a member of
diplomatic mission in Moscow. Moscow is still as-
sessing the recent events in Bolivia, however, and is
not likely to make any major commitments in the near
future.
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Outlook
17. The likelihood that the Bolivian Government
will achieve any appreciable degree of stability in
the near future is slim. There are some indication3
that President Ovando feels more confident and secure
now than he did in his first two mop; :hs of office,
but statements attributed to him on 20 and 21 Decem-
ber are those of a man who is not at all sure of his
position. In a speech in Cochabamba he referred to
a "plot" against his life and threatened to use a
"firing squad" to enforce government "morality." He
called upon peasants, students, and workers to support
his government and "demanded military support for his
government" according to press reports. Following the
president's cue, his supporters in La Paz issued a
harshly worded document that atacked Bolivians who
are directed by "imperialism, CIA, and Gulf" and con-
cluded by saying that there is no middle way--"either
you are with the government and the revolution or
with Gulf and the counterrevolution." All this sounds
as if the ground is being laid for a witch hunt of
presumed opponents of the Ovando government.
18. President Ovando has used all of the revo-
lutionary rhetoric that is currently in vogue in Latin
America but has failed, thus far, to detail any co-
herent plan of reforms that even resembles revolutionary
changes. In a recent interview, Ovando told newsmen
that his program "coincides in many points with that
proposed by the "Guevara guerrillas" including "de-
fense of natural resources, the struggle against
imperialism, and the necessity to change structures."
His revolution, he said, "is obviously closer to
socialism than to capitalism." It is doubtful that.
Ovando's "revolution" will ever come close to match-
ing his rhetoric, but Bolivia is truly in need of
many far-reaching reforms. His proposed "revolution-
ary" attack on illiteracy through extensive use of
students and the army, and his plan to reform the
government structure could fill genuine needs if im-
plemented.
19. The forces necessary to push Bolivia fur-
ther `co the left are present in Zarcelo Quiroga and
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his followers, but conservative forces are also pres-
ent, most notably in the military. Neither the left
nor the right appears to bE; in a position to take
over the government at this time, however, and it
is likely that Ovando will continue in power for the
time being, taking ideas from both sides but continu-
ing to lash out verbally against the US and "counter-
revolutionaries" in Bolivia. The first 3 to 6 months
'f. 1970, when the economic pinch will begin to be
felt by the general populace, will be critical for
the President. The more pragmatic forces in the gov-
ernment and military are likely to press Ovando to
take a moderate approach in dealing with the economic
situation, and the pressure from the radical left will
increase as well.
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