The Truman Administration and Bolivia
Making the World Safe for Liberal Constitutional Oligarchy
Glenn J. Dorn
The Truman Administration and Bolivia
Making the World Safe for Liberal Constitutional Oligarchy
Glenn J. Dorn
“Deeply researched, deftly written, and replete with insight, The Truman Administration and Bolivia is an exemplary study in several respects. Glenn Dorn is as comfortable explaining the intricacies of Bolivian politics and society as he is analyzing the contradictory goals of U.S. foreign policy in the early Cold War. In so doing, he makes a significant contribution to our understanding of Truman as leader of the Free World. Moreover, he establishes himself as one of the leading scholars of inter-American relations of his generation.”
- Table of Contents
- Sample Chapters
“Deeply researched, deftly written, and replete with insight, The Truman Administration and Bolivia is an exemplary study in several respects. Glenn Dorn is as comfortable explaining the intricacies of Bolivian politics and society as he is analyzing the contradictory goals of U.S. foreign policy in the early Cold War. In so doing, he makes a significant contribution to our understanding of Truman as leader of the Free World. Moreover, he establishes himself as one of the leading scholars of inter-American relations of his generation.”
“Glenn Dorn’s new book is an important breakthrough for scholars of inter-American relations. In the late 1940s, worker and middle-class demands for better economic well-being, as well as democracy, in Bolivia clashed with the U.S. conclusion that only a ‘liberal constitutional oligarchy’ would provide for crucially important, pro-U.S. stability in the centrally located Andean nation. Employing underutilized, multilingual, multi-archival sources, Dorn’s book will be instrumental in helping scholars understand why the 1940s proved especially important for Bolivia (which would erupt in revolution in 1952) and how and why the United States attempted to secure its hegemony over Latin America in the early Cold War.”
“With due attention to the intrigues of Bolivian politics and the tricky diplomacy of tin, Glenn Dorn, packing a justified moral outrage, tackles the limits of ‘good neighborliness’ in inter-American affairs when greed is in the mix. This crisply written study should stand as a warning to those who bleed natural resources from poor countries without a care for the consequences.”
“The sexenio—the six years between the violent overthrow of populist military president Gualberto Villarroel in 1946 and the rise of the Movimiento Nacionalista Revolucionario (MNR) in 1952—has been examined by many studies as a backdrop to Bolivia’s national revolution, but no published treatment of the period in English or Spanish is as thorough as this one. Glenn Dorn makes a valuable contribution to the historiographies of Bolivia, of Truman foreign policy, and of Latin American–U.S. relations in the early Cold War. His book adds several important new archival sources to the study of the period, balancing them nicely, and tells the story with exceptional organizational clarity. Each chapter clearly develops Bolivia’s domestic dynamics during the period and looks at how a conflict-ridden bureaucracy in Washington generally worsened the situation. The lack of a coherent overriding policy meant that Truman turned over a complete mess to Eisenhower. Dorn says it well: ‘In the end, the Truman administration’s dealings with Bolivia must be considered a failure on almost every level. They were, however, an instructive failure, exposing many of the flaws of the early Cold War policies of the United States in South America.’”
“Having conducted comprehensive multi-archival, multinational research, Glenn Dorn provides a fascinating account of the maddening complexities of inter-American relations during the early Cold War. The Truman administration opposed economic nationalism and communism and wanted democracy and development for Latin Americans. But as Dorn deftly demonstrates, the administration proved to be confused and vacillating, unable to choose between these often conflicting goals. The administration further permitted congressional committees and independent government agencies to undermine its policies for Bolivia. The ‘tin war’ undermined U.S. allies and helped precipitate the Bolivian revolution that the Truman administration dreaded. This is a model case study written with empathy for U.S. and Bolivian political actors and long-suffering Bolivian miners.”
“Glenn Dorn’s new book . . . represents a major contribution to the study of . . . two interlocking aspects of pre-revolutionary Bolivian history. His authoritative analysis, moreover, is undergirded by the exhaustive research that he has conducted in the US, Bolivian and Argentine diplomatic archives; indeed, almost all the source citations refer to primary documents.
In sum, Glenn Dorn’s work makes a singular contribution to the study of US–Bolivian relations during the sexenio, a crucial means to gaining a fuller understanding of the paradoxical post-1952 US–MNR rapprochement that has been the subject of much scholarly debate; it also broadens our perspective on the Truman administration’s overall policy towards the region at a time when the vaunted principles of the Good Neighbor Policy were fast giving way to the exigencies of the Cold War.
“Glenn Dorn has provided us with an important and insightful study based on extensive archival research. . . . The book is warmly recommended for any scholar working on Bolivia, the Truman Administration, or the international tin industry, and is a must-read for those of us fortunate enough to be interested in all three.”
Glenn J. Dorn is Professor of History at Embry-Riddle Aeronautical University.
List of Abbreviations
1 Villarroel: April 1945–July 1946
2 Junta: July 1946–March 1947
3 Hertzog: March 1947–May 1949
4 Urriolagoitia: May 1949–June 1950
5 To the Mamertazo: July 1950–May 1951
6 Ballivián: May 1951–April 1952
7 Paz Estenssoro: April 1952–January 1953
The use of the word “democratic” throughout this dispatch, as applied to the present government of Bolivia, should be construed in its limited sense as distinguishing the type of government, i.e., as against a dictatorship, communist regime, et cetera, rather than that it embraces all other generally accepted concepts in the meaning of the adjective “democratic.” It might otherwise be described as a liberal constitutional oligarchy.
—James Espy, 10 February 1950
The Bolivian case, in schematic definition, is one of three and a half million inhabitants, dominated and exploited by a minority who utilizes the visible forms of a democratic regime to give the patent of legality and perpetuate essentially undemocratic privileges.
—Víctor Paz Estenssoro, March 1951
On 16 October 2003, truckloads of workers descended on La Paz, Bolivia, to help unseat an unpopular, corrupt, decadent regime, break the back of the free market economy it espoused, broaden Bolivian democracy, and seize control of the nation’s subsoil riches. It was not the first time they had done so. In April 1952, tin miners rallied to the defense of Víctor Paz Estenssoro, his Movimiento Nacionalista Revolucionario (MNR), and their National Revolution against “liberal constitutional oligarchy.” Whereas what has been called the “Third Bolivian Revolution” of 2000 to 2006 paved the way for Evo Morales’s landslide presidential victory, however, the National Revolution put an end to the sexenio—the Bolivian elites’ unsuccessful six-year battle to preserve the established order against a rising tide of popular unrest. That the United States, the International Monetary Fund, and the World Bank helped set the stage for the latest revolution—by encouraging the Bolivian adoption of neoliberalism and the “Washington consensus” and by militarizing the eradication of coca as part of the War on Drugs—is well documented. Much less studied was Washington’s role in events leading to the National Revolution of 1952.
The story of U.S.-Bolivian relations in the years after World War II represents a unique convergence of three major factors. The first was the efforts of President Harry S. Truman to forge a global liberal capitalist order by overcoming South American nationalists who threatened to derail those plans. The second was the efforts of the Bolivian rosca to preserve its hold on power in the face of a fierce revolutionary challenge from 1946 to 1952 (the sexenio). A third factor was decisive, however, in shaping this all-too-familiar clash between South American nationalism and U.S. hegemony: the determination of U.S. national security planners to secure a more or less permanent source of cheap tin vital for defense industries at the onset of the Cold War. As Bolivian leaders fought to stave off revolution, they anticipated resistance from the forces of populist nationalism but had every right to expect U.S. support. What they did not anticipate was that they would be undercut at almost every turn by the Reconstruction Finance Corporation (RFC), a U.S. agency given exceptional authority to secure a tin stockpile and dismantle an international tin cartel that had vexed Washington for decades.
For six years, four Bolivian governments desperately sought U.S. support as they battled on every front to forestall the ascension of Paz Estenssoro’s MNR. Truman’s State Department, hoping that the governments of Tomás Monje Gutiérrez, Enrique Hertzog Garaizábal, Mamerto Urrioagoitia Harriague, and General Hugo Ballivián Rojas could succeed in that venture, sought to provide what aid it could. U.S. diplomats, however, found themselves time and time again at loggerheads with the RFC, an independent government agency created by Herbert Hoover to assist in domestic recovery at the height of the Great Depression. With the outbreak of war, Franklin Roosevelt had turned the procurement of critical imports like tin and rubber over to the technocrats, whose primary mandate was to purchase as much Bolivian tin as possible at the least cost to U.S. taxpayers. Each year of the sexenio, an increasingly acrimonious ritual played out in Washington as RFC functionaries entered negotiations with the tin barons and representatives of the Bolivian government. For the Bolivians, the goal was always to secure as high a price as possible to finance modest reforms that might at least stave off an apparently inevitable revolutionary transformation of the country. Despite the efforts of a sympathetic but largely powerless State Department, they enjoyed little success, and in April 1952, the National Revolution finally occurred. Not entirely coincidentally, it occurred in a bankrupted nation as nearly a year and a half of tin shipments sat on Chilean docks awaiting a tin contract that never came.
Although it is impossible to know with certainty—despite Assistant Secretary of State Spruille Braden’s firm assertion to the contrary—whether RFC “bungling” was responsible for the National Revolution and the triumph of the MNR, even Secretary of State Dean Acheson conceded that the agency’s policies contributed to the weakening of four Bolivian governments at a time when they could ill afford it. The tin crisis may not have caused the National Revolution, but, as historian James Dunkerley has eloquently put it, “it was a decided mess within which the status quo was unraveling as fast as its opponents were consolidating.” Caught between the revolutionary plotters of the MNR and the thoroughly reactionary tin barons and landlords who dominated almost all facets of Bolivian society, the Monje, Hertzog, Urriolagoitia, and Ballivián regimes faced almost impossible challenges. Not the least of these was their own disunity, incompetence, and inability to understand just how precarious their control over the nation truly was. Still, the role of the Truman administration must not be underestimated. For six years, President Truman permitted the Reconstruction Finance Corporation to exploit a monopolistic position to punish not only the tin barons, but also the Bolivian governments that parasitically survived off the taxes they paid. If a middle course between stagnation and revolution had even been possible, then the RFC eliminated that small chance.
Postwar U.S. Policy in South America
The Truman administration, dominated by the final stages of World War II, reconversion to a peacetime economy, the onset of the Cold War in Europe and Asia, and the battle to create a new global economic order based on liberal capitalism, had few resources to dedicate to Latin America. Although the Western Hemisphere had once been the central preoccupation of U.S. diplomats, the emergence of the United States as a superpower stretched U.S. economic, military, and diplomatic assets to their limit at a moment when revolutionary nationalism was being galvanized across South America. Occurring in tandem, these developments created a confusing panorama that has impeded formation of any real historiographical consensus regarding the diplomacy of postwar inter-American relations.
The onset of the Cold War has probably been the foremost contributor to this confusion. As Stephen Rabe has noted, “historians of Inter-American relations frequently lump the years between 1945 and 1960 together as an unhappy, dull, and insignificant interregnum between the Good Neighbor and the Alliance for Progress.” Most historians attribute to the Truman presidency an anti-Communist zeal in Latin America that was far more prevalent in later presidencies. The Truman Doctrine may have called for increased anti-Communist interventionism in Europe and Asia, but, if anything, it reduced U.S. interest in Latin America, an area where there was no major Communist threat, without otherwise altering fundamental U.S. goals and tactics there.
Although there can be little doubt that U.S. policy makers at the highest levels had been preoccupied with the Soviet Union and the spread of Communism since at least 1945, there is very little evidence that this extended in any meaningful way into South America during the Truman years. Truman’s diplomats wisely paid little heed to the incessant efforts of J. Edgar Hoover and his Federal Bureau of Investigation to track Communism’s rather feeble spread in South America through the 1940s. Nor did they pay much heed when South American leaders accused their rivals of “Communism,” understanding that such accusations were a routine, almost meaningless feature of many nations’ political discourse or, at most, a transparent ploy to attract U.S. attention and support.
Instead, the State Department understood quite well that the Soviets had no significant interest in the Western Hemisphere and that a foreign ideology like Soviet-style Communism had little appeal in nations where fierce nationalism, Roman Catholicism, and jealously guarded independence predominated. Truman’s critics may have assailed him for failing to fight global Communism with sufficient zeal, but in South America, his diplomats consistently refused to be duped into a pointless red-baiting campaign against a virtually nonexistent enemy. A meeting of Latin American specialists within the intelligence community in the Panama Canal Zone in January 1947 simply noted: “Communism has not become numerically important (i.e., controlling more than 10 percent or more of the voters) as yet except in a few countries” where “special factors have contributed to its growth.” As late as 1950, the U.S. government could identify just 150 “Stalinists” and 2,000 “fellow travelers” in all of Bolivia and did so only by stretching the definitions of both terms to the limit. Communism was so weak in Bolivia in 1953 that leftists did not even attempt to “set up a united front with the Stalinists because they were not worth the trouble.” Robert Alexander, perhaps the most well-informed student of labor unions in the Western Hemisphere, considered the Bolivian Partido Comunista to be “the most naïve Communist party” in the Americas.
Still, scholars have perceived a Cold War shift in U.S. policy in 1947 or 1948 as U.S. anti-Communist rhetoric escalated and tensions with the Soviet Union grew. In perhaps the finest example of such scholarship, Leslie Bethell and Ian Roxborough illustrate how most nations in the hemisphere experienced greater democratization at the end of World War II, only to see those gains erased by 1950. They explain the trend by identifying a variety of domestic and international, economic, political, and social factors, but their analysis breaks down when it assumes that the U.S. commitment to democratization, development, and reform was motivated, to any significant degree, by anti-Communism. Indeed, Bethell and Roxborough show how domestic elites throughout Latin America opposed any mass movement that threatened their control, just as the United States did any movement that threatened foreign investment or the cheap raw materials it coveted. U.S. policy makers came to understand that increased democratization would increase the power of nationalist groups whose goals were, in most cases, antithetical to those of the United States. Whereas “communism proper has so far had little popular appeal,” what U.S. diplomats called “native socialist or semi-socialist parties” were flourishing. As Alexander has explained: “The Communists do not make headway” in countries where there is another “popular social and political movement which has captured the imagination of the rank-and-file citizen.” Truman’s diplomats in South America, despite their ever-vigilant efforts to ferret out Communists, simply could not find all that many. What they did find, however, was a disturbing number of homegrown nationalist movements.
Those movements were characterized by later generations of historians as “revolutionary nationalist” or “populist” and constituted, for Truman’s lieutenants, the true menace. Thus State Department officers found themselves constantly at odds with revolutionary nationalists who were, in most cases, even more committed to anti-Communism than they were. Indeed, nationalist organizations such as the Alianza Popular Revolucionaria Americana in Peru, the Acción Democrática in Venezuela, the MNR in Bolivia, and the Peronists in Argentina were the most effective bulwarks against Communism. These often multiclass organizations and movements competed with (and regularly triumphed over) the anemic Stalinist, and more prevalent Trotskyite, Communist parties in the all-important battle for the loyalty of working- and lower-class constituencies. Had President Truman attached any real significance to anti-Communism in South America, any of these nationalist groups would have been natural partners for Cold War Washington, as the MNR later became for President Eisenhower. Instead, the State Department spent five years destabilizing Juan Perón’s regime in Argentina, committed itself to blocking the MNR’s ascension in Bolivia, and formed quite satisfactory partnerships with the military regimes that ousted, outlawed, and violently persecuted both the Alianza Popular Revolucionaria Americana and the Acción Democrática.
Scholars following in the footsteps of pioneering historian David Green have illustrated well that, for Truman’s State Department, the revolutionary nationalists were far more menacing to U.S. economic interests than the Communists they had so thoroughly supplanted. Michael Grow’s The Good Neighbor Policy and Authoritarianism in Paraguay uses a case study to refine and expand Green’s central thesis that U.S. interests were primarily economic and dedicated to aggressively expanding what later generations would call the “Washington consensus.” James Siekmeier, however, offers the most persuasive and comprehensive illustration of U.S. efforts to derail economic nationalism across the hemisphere through case studies of Bolivia and Guatemala. Although Siekmeier’s The Containment of Latin America focuses primarily on the Eisenhower presidency, his chapter on Truman is perhaps the most cogent and effective analysis of those efforts to date. Thus, even though U.S. policy makers rebuilding Europe and Asia may have found their greatest obstacles in local Communist parties, the geostrategic reality of the Soviet Union, or some combination of the two, U.S. plans for South America were impeded primarily by all-too-independent nationalism epitomized by Peronism in Argentina.
The focal point for the U.S. campaign to establish an order of liberal capitalism and multilateral commerce in South America under the aegis of U.S. hegemony was, of course, Peronist Argentina. Perón had swept to power, in U.S. minds, like a fascist phoenix rising from the ashes of World War II, advocating a particularly statist brand of developmental nationalism, autarchy, and economic independence entirely antithetical to the U.S. vision. That he had done so through an unprecedented broadening of democratic institutions and had shattered the Argentine oligarchy in the process only made the perils of democratization more apparent. For the Truman administration, it was clear that Perón was the harbinger of the newest round of revolutionary nationalism in South America, economically committed to statist development and fully capable of triumphing through the same democratic processes that U.S. policy makers, at least in theory, had advocated for decades.
But Perón was hardly alone. Across South America, U.S. diplomats faced movements—some directly inspired or funded by Perón, but most entirely independent—committed to many of these nationalist goals, invigorated by the triumph of the Allies, and dedicated to the increased democratization and economic renovation of their nations against entrenched oligarchies. Time after time, Truman’s diplomats found themselves embroiled in battles between the agents of revolutionary change and elite representatives of old “liberal constitutionalist oligarchy.” Although U.S. envoys were often disgusted by the façade of democracy, the repression of the masses, and the stagnation that regularly characterized the old order in many South American nations, they saw little choice but to embrace and support that order. The oligarchies, at least, maintained stability, welcomed U.S. capital by and large, and had a vested interest in preserving the economic order U.S. policy makers hoped to extend.
In Colombia, Jorge Gaitán’s efforts to transform the Liberal Party into a mass organization for reform struck fear into the State Department, and dissident febreristas and Natalicio González’s Guión Rojo wing of the Colorado Party called U.S. attention briefly to Paraguay. In Uruguay, Jorge Herrera’s colorados threatened the pro-U.S. blancos, at times with Perón’s assistance. In Chile, the Communist Party, periodically in league with nationalists whom Ambassador Claude Bowers branded “Peronists,” worked to subvert the coalition of Radical President Gabriel González Videla. Although U.S. policy makers could tolerate both the Acción Democrática in Venezuela and the Alianza Popular Revolucionaria Americana in Peru, they could never entirely reconcile themselves with the nationalist agenda of either party. More important, the State Department found it far more comfortable to work with the despotic military regimes that drove both parties from power in late 1948. Whereas, in Europe and Asia, the Truman administration fought tirelessly to build a new and lasting democratic order through the reconstruction of Germany and Japan and the restoration of prosperity in Western Europe, in South America, it found itself battling merely to preserve an old order against the onslaught of nationalist alternatives and challenges.
Siekmeier’s study of Bolivia reveals that this was the case on the Altiplano as well, and the stakes for the U.S. vision were high. Not only was Víctor Paz Estenssoro’s MNR, like Peronism, mistakenly considered an offshoot of European Fascism, but also Bolivian tin was critical for both the U.S. economy and the new demands of the national security state. Scholars such as John Child, Chester Pach, and Roger Trask have explored how the Truman administration militarized its diplomatic relations with Latin America through the Rio Conference, arms standardization, and military cooperation. The desperate need for Bolivian tin added yet another dimension and an element of urgency to U.S.-Bolivian relations. As Dwight Eisenhower put it later, “it would be much better to have tin in Fort Knox than gold.” Because the United States produced almost no tin for its own military or civilian needs and World War II had disrupted the global tin industry, Bolivia suddenly acquired an importance for Washington that it never had, nor would ever have again. The global tin shortage of the postwar years also guaranteed that U.S. diplomacy would be conducted not only by the State Department, but also by the wartime and postwar procurement agencies whose agendas were far different. The results were little short of disastrous for the governments of Bolivia as their nation’s security and stability were subordinated to the demands of U.S. reconversion and European reconstruction.
Instead of acting to undo or at least mitigate the damage, the Truman administration, not perceiving a major Communist menace, simply braced for the consequences of what it saw as an inevitable “coming depression” in South America. Most Latin American nations had enjoyed the benefits of exporting large quantities of raw materials to the Allies at good prices during the war, but the war was now drawing to a close. Assuming that Asian and European production would soon be restored, U.S. policy makers understood that the “cessation” of U.S. purchases would “result in our being blamed in large part for the ensuing depression.” Naturally, “friendliness toward the United States [might] be expected to wane.” In other words, at the exact moment that radical nationalism was reaching its peak, the postwar economic order espoused by Washington was poised to create a climate in which it would flourish to the detriment of U.S. diplomacy. The State Department would be facing a wave of nationalist challenges aimed explicitly at the economic order the Truman administration was hoping to build; it would be shackled by its inability to completely control U.S. foreign policy. Bolivia offered perhaps the most striking example.
The Bolivian Political Economy
Whereas the United States stood alone as the most stable and prosperous nation in the Western Hemisphere, if not the world, prewar Bolivia had long been among the most unstable and impoverished. Landlocked since the War of the Pacific in 1879, Bolivia had endured more than sixty separate governments in its first 125 years as a nation. Its land, however, was a treasure trove of mineral wealth. The silver mines of Potosí had inexorably drawn the Spanish to the heart of South America and become graves for millions of Native Americans. The Spanish had been content to plunder what would become Bolivia, heedless of the consequences of their actions, and after independence, their successors had not deviated too far from that unfortunate example. In short, Bolivia’s social and economic patterns remained disturbingly close to their colonial antecedents, with the rosca replacing Spaniards as feudal overlords, ruthlessly exploiting the indigenous masses to tear profit from the land.
The two distinct groups making up the rosca, the landed hacendado aristocracy and the enormously wealthy tin barons, had dominated all facets of the Bolivian political economy for decades. The white rural elite enjoyed almost completely unchallenged rule throughout much of the nation, dominating local politics in most departamentos and rarely needing to join the national political fray. They paid “ludicrously light” taxes (less than one-fifth of a percent) based on their own undervalued assessments of their lands and built fortunes on the backs of their indigenous workforce with tools and practices that had changed little, if at all, in more than three centuries. Sharecropping colonos, almost indistinguishable from serfs, had scant incentive or opportunity to produce more. Landowners, with almost no expenses and a virtually guaranteed income, had even less incentive to risk upsetting their lucrative but stagnant system. They simply rented parcels to the colonos in exchange for three to four days a week of free labor on their land, the “rent-in-labor” system, and demanded additional personal service through pongueaje and mitanaje. The indigenous masses, most of whom spoke Aymara or Quechua rather than Spanish, were so isolated from the national political economy that, when defining the terms “Bolivia” and “Bolivian,” U.S. diplomat James Espy clarified that he was referring only to “the literate, dominant classes of people” and not to “the toiling Indian or other manual workers” whose primitive, subsistence agriculture combined the most onerous aspects of feudalism and slavery.
Still, according to political scientist James M. Malloy, the “dominant culture saw the city as the repository of civilization and the hacienda, its rural outpost” against the indigenous masses. What remained outside the control of the hacendados was what Malloy has called the “national system,” centered in the capital, La Paz, and extending to Cochabamba, Oruro, Potosí, Sucre, and the tin mining camps. As absolutely as the landed elite ruled the countryside, mining executives, most notably the tin barons Carlos Aramayo, Mauricio Hochschild, and Simón Patiño—the “Big Three”—ruled the cities and mining camps. Because the tin ore and other minerals they pried from the Altiplano constituted more than 80 percent of Bolivian exports, they were the economic backbone of the nation.
The influence of these men extended far beyond economics, however. For example, Aramayo owned La Razón, the largest and most influential newspaper in the country, Hochschild had partial control over Ultima Hora, while Patiño owned one-third of El Diario. Through their wealth, power, and control over most of the news outlets, the tin barons constituted nothing less than what their critics claimed was a “superstate” that far overshadowed the national government. Nonetheless, because their wealth made them the most visible target of reformers, the barons were forced to pay the lion’s share of taxes to support the state; their partners in the rosca, the landed aristocracy, paid next to nothing.
Although Mauricio Hochschild was generally considered to be the most politically active of the tin barons, and Carlos Aramayo the most ruthless, Simón Patiño, one of the ten richest men in the world and the “King of Tin (Rey del Estaño),” was without a doubt the most formidable. Starting with one tin mine, “La Salvadora,” which for a time produced 10 percent of all the world’s tin, Patiño had built a globe-spanning empire by 1930. He controlled the richest tin veins in Bolivia and used his profits to purchase controlling interest in the 95,000-ton capacity Williams, Harvey tin smelter in England, establishing the Consolidated Tin Smelters, Ltd., in 1929. Within five years, his General Tin Industries, incorporated in Delaware and allied with the National Lead Company, had gained control of more than fifteen British and German tin smelters and mines across Southeast Asia. His name became as synonymous with tin as Henry Ford’s was with the automobile. Although Patiño died in 1947, his son, Antenor, followed closely in his father’s footsteps, ensuring that Simón Patiño’s legacy would persist through the sexenio.
Still, the tin barons by and large remained above most Bolivian politics. An urban petit bourgeoisie, directly or indirectly dependent on the barons for its financial well-being, constituted what passed for the Bolivian political class. Composed largely of mine company employees, bureaucrats, lawyers, doctors, and other professionals, this mostly urban middle class created political parties, managed government, regularly contested elections, intrigued for power, and periodically rebelled within carefully prescribed limits on behalf of the 80 percent of the nation disenfranchised by literacy, property, and wealth requirements imposed on those seeking to vote. For decades, various factions and alliances of Liberals, Republicans, Socialists, and soldiers had jockeyed for control of the national government and periodically attempted cosmetic reform, but underlying their petty disputes was the enduring, virtually omnipotent old order of the rosca.
In essence, the broad power of the tin barons economically and politically stifled the nation. Because Patiño and his fellow tin barons remitted their profits to shareholders overseas or channeled them into lucrative foreign investments, Bolivian tin had an exceptionally low retained value for the nation. And because Bolivian tin concentrates were processed, smelted, and rolled at facilities in Great Britain, Holland, and eventually the United States, the role of Bolivian tin workers was reduced to simple extraction. Although this model suited Patiño, who owned most of the world’s smelting facilities, it did little to stimulate growth or investment in other industries on the Altiplano. Moreover, the subsistence wages paid to miners were insufficient to, as John Thoburn puts it, “generate a market for local consumer goods, and thereby spread development.” Even worse, finding no worthwhile investments within Bolivia, the tin barons continued to export as much of their surplus capital as they could. Bolivian politics was strictly confined to intra-elite battles within carefully prescribed rules. The taxation of tin provided enough revenue for the oligarchy to forswear meaningful changes in the political economy, particularly if such changes risked unleashing a social revolution. Although some within the white and mestizo political class understood that the old order was deeply flawed, virtually all shared the assumption that they owed it every privilege they enjoyed.
For those not among the privileged classes, however, the tin barons’ empire had come at “the inhuman cost of tuberculosis, misery, and backwardness” in a nation whose per capita income was the second lowest in the hemisphere. Put simply, U.S. officials found it “difficult to comprehend how the Altiplano Indian manage[d] to stay alive” under the brutal conditions he was forced to endure. The Bolivian tin mines, one U.S. ambassador asserted, “make Russia’s Siberian labor camps look like Labor Day picnics.” This was not much of an exaggeration: overcrowded, unhygienic mining camps produced malnourished children and an “exceedingly high” though unmeasured infant mortality rate. Earning at most $8.00 a week, miners routinely spent entire twelve-hour shifts underground, and at the Hochschild mine in Pulacayo, they were expected to work a forty-eight-hour shift once every month.
For most observers, the conditions in the mines defied description. Temperatures could reach 135 degrees as “rock dust fill[ed] the air and lungs,” and “carbon dioxide bubble[d] from the freezing water that drip[ped] from the ceiling.” Thousands of miners, “clad only in a G-string and rubber boots,” toiled until mine accident or disease claimed their lives. A 1951 study revealed that 20 percent of miners suffered from silicosis, 7 percent from tuberculosis, and fully one-third from other respiratory maladies. Indeed, a member of a United Nations survey team asserted that “after five or six years, virtually every worker” fell victim to silicosis. Not surprisingly, a miner’s life expectancy was less than forty years, and by the end of World War II, almost half the workers in Patiño’s mines had been forced to work there by the enganche (conscription) system.
The two component groups of the rosca had created two distinct economies that intertwined in a bizarre pattern of underdevelopment. The shortcomings of life on the Altiplano only exacerbated the problems of the tin miners, who supported their families at an altitude of more than fourteen thousand feet, sustained by incessant coca chewing, Cuban sugar, Argentine meat and fats, U.S. wheat, Chilean rice, and Peruvian clothing. Even with the vast majority of the population dedicated to agriculture, the nation was critically dependent on foreign products (and thus on the foreign exchange generated by tin sales abroad). Large areas of northern and eastern Bolivia represented, according to one U.S. diplomat, “immense virgin resources” that remained untapped due to the inability or unwillingness of the “Altiplano Indian to adjust physically to conditions at or near sea level.” Yet, even in 1952, there was no reliable highway or rail line connecting the cities and mines of the Altiplano with the eastern lowlands. Whereas the demands of the tin economy had made it essential to have easy and reliable access to Chilean ports for the export of minerals and the import of European and North American finished goods and machinery, there was no apparent incentive to connect the areas of Bolivia that lay outside the “national system.”
More than three-fifths of the nation was covered in rich tropical lowlands that would have been ideal for a lumber industry, agriculture, or ranching, if only the labor and transportation issues could be resolved. Without transportation, however, there was little market for lowlands agriculture or incentive for the indigenous peoples of the highlands to abandon their homes to work in hot, disease-infested jungles to which they were not acclimated. Indeed, a UN mission in 1951 concluded that only 2 percent of Bolivian soil was actually being cultivated; the 1950 census noted that more than 70 percent of the population derived their income from agriculture. With most of the population politically inert and engaged in subsistence agriculture on plots scattered throughout the Altiplano, the nation was forced to import most of its food, machinery, and consumer goods. The resulting drain on foreign exchange placed an entirely unnecessary burden on a population that could ill sustain it and exerted a constant pressure on government to extort more foreign exchange from the tin barons. In short, according to Carter Goodrich, “the economy of Bolivia is that of a mining camp”: it “sells what a mine sells, and like a mining camp, buys everything else.” Thus the average resident of La Paz consumed just eighteen hundred calories per day at an altitude that demanded three thousand in a nation where three-quarters of the population engaged in agriculture, and where tin had made Patiño one of the wealthiest men on earth.
The rosca had for decades used repression, propaganda, and armed force to keep the indigenous masses and the miners under their control, but the disparities in wealth and racial inequities had not gone unnoticed. In the 1930s, a new generation of critics emerged within the political class; they were soon joined by tin miners, railroad employees, and other workers in Bolivia’s nascent industries. The fervor of these critics was spurred by two disasters during the 1930s: the Great Depression and Bolivia’s humbling, catastrophic defeat by Paraguay in the Chaco War (1932–35). Although the Depression collapsed the economy and provoked political crises in Bolivia as in most nations, the 1932 border dispute that escalated into war between South America’s two poorest nations was possibly even more significant. Despite advantages in manpower and weaponry, the Bolivians were defeated time and time again by the Paraguayans. Indecisive civilian leadership, “inept, corrupt, and cowardly” officers, and internal political disputes all hamstrung the Bolivian war effort and eventually led La Paz to cede one hundred and seventy thousand square miles of territory to Paraguay. In the end, the war exposed what historian Waltraud Quieser Morales has called the “extremes of ineptitude and inequality of the traditional and social system” and gave new impetus for radical reform, if not revolution. Feeding on this discontent, at least four major new political parties emerged over the next few years, ranging from the Falange Socialista Boliviana to the Trotskyite Partido Obrero Revolucionario.
Foremost among the new radicals were José Antonio Arze, Ricardo Anaya, and their Partido de la Izquierda Revolucionaria (PIR). Drawing its leaders from the schools and universities, the PIR was a bourgeois organization that aimed to radicalize miners and industrial workers and to mobilize them behind a socialist vision of a modernized Bolivia. Professing independence from the Comintern, but support for the Soviet Union and Marxist-Leninist ideals, PIR leaders sought to guide the growth of the Bolivian proletariat through their enlightened leadership. The PIR extended its tendrils into many of Bolivia’s fledgling labor organizations and grew rapidly by calling for industrialization and land reform, yet it managed to maintain ties with the rosca by promising to channel and moderate working-class nationalism. By the 1940s, the PIR was Bolivia’s largest political party, one of very few with anything resembling a mass base, although hardly the only emerging challenge to the old order.
Formed in 1941, Víctor Paz Estenssoro’s Movimiento Nacionalista Revolucionario (MNR) brought together young ex-Socialists from the upper and middle classes, disenchanted Chaco War veterans, and labor militants in a “patriotic movement of socialist orientation directed toward the defense and affirmation of Bolivian nationalism.” The party’s message was a vague but emphatic attack on the rosca’s “antinational superstate” and an appeal to “incorporate into national life the millions of peasants.” Whereas the PIR sought to gradually consolidate its strength within the working classes, the impatient leaders of the MNR hoped for an immediate entry into power to purge the nation of “false, betraying,” and “bankrupt” “pseudo-democracy.” The opportunistic urban intellectuals of the MNR tied themselves to the growing discontent in the mining camps through a loose alliance with Juan Lechín Oquendo, a one-time soccer star who would eventually become the secretary general of the powerful Federación Sindical de Trabajadores Mineros de Bolivia (FSTMB). The MNR critique initially said little about conditions in the countryside or the hacendados’ domination of indigenous Bolivians that was the cornerstone of Bolivian society but focused instead on the rapacious tin barons and their crimes. Although the MNR hoped for a multiclass alliance and gradual reforms, it also cultivated unlikely allies among the army officer corps.
Arze and Paz Estenssoro both headed promising civilian movements, but a third force emerged within the ranks of the junior officers in the army in the 1940s. Whereas the PIR and MNR both sought some form of expanded democratization of Bolivian society and hoped to ally themselves with the nation’s rapidly growing labor unions, the third emerging faction, semisecret military lodges such as Iron Star and Razón de Patria (RADEPA; formerly Santa Cruz), sought for the most part authoritarian solutions to Bolivia’s many problems. Founded in a Paraguayan POW camp at the end of the Chaco War, RADEPA brought together disenchanted junior officers who were disgusted by the incompetence of their civilian leaders and military superiors. It was dedicated to nothing less than the renovation of their country and the elimination of the rosca’s stranglehold on the national polity. Fighting in the trenches, these junior officers had risked their lives with their troops while white, elite generals sat safely behind the lines and spent their time cultivating “politicians fishing for opportunities” and engaging in other political intrigues. Strongly influenced by European corporatist thought of the 1930s and bolstered by a strong sense of patriotism, RADEPA sought to revitalize the nation through a familiar mix of hierarchical statism and a vague brand of syndicalism. Although the military had long been the most formidable tool of the rosca, the officers of RADEPA saw their struggle as equal to Bolivia’s wars of independence; they proclaimed their willingness to die “for the noble ideal of forging our nationality.”
Despite the increased call for radical reform from the working classes, the PIR, the MNR, RADEPA, and the other new parties and factions, the old order remained firmly in control during the early stages of World War II. General Enrique Peñaranda del Castillo, the chief of the army in the last year of the Chaco War, easily won election to the presidency in 1940, opposed only by José Antonio Arze and his PIR. Elected explicitly to maintain the status quo, Peñaranda did little to stave off the coming radical challenges and filled his cabinet with members of the traditional Liberal, Socialist, and Republican Parties. World War II, however, forced difficult choices on the regime when Japanese expansion in Southeast Asia cut off the United States and Great Britain from their traditional sources of tin.
Peñaranda bowed to necessity by opting for virtually total cooperation with Washington. In 1937, “military socialists” had, as part of the post-Chaco wave of nationalism, expropriated Standard Oil’s properties in Bolivia, driving a wedge between the United States and Bolivia. With war looming, U.S. policy makers hoped to unite the hemisphere against the Axis and to secure a reliable source of tin for war industries by working toward rapprochement with Peñaranda’s government. Eager to partake of U.S. economic and military aid, Peñaranda was quick to respond. He welcomed a team led by State Department officer Merwin Bohan to develop a program for economic diversification of the Bolivian economy, agreed to a number of “denazification” measures, and signed a military assistance pact. Most important, he settled with Standard Oil soon after Pearl Harbor and agreed to pay the company $1.5 million for its expropriated properties. He was rewarded with Lend-Lease aid and financial assistance to start implementing the Bohan Mission’s findings. In short, the war brought the two nations into an unprecedented partnership and seemed to offer the promise of future cooperation. The only dark cloud on the horizon was the undecided price for Bolivia’s tin.
Peñaranda eventually agreed to sell the nation’s entire tin production to the Allies for a price well below what most Bolivians expected. Even worse, the tin barons, with at least tacit U.S. support, squeezed their labor force to maximize production and profits. The deteriorating working conditions in the mines and the restrictive contracts with the United States, which, nationalists claimed, cost Bolivia as much as $650 million in lost revenues throughout the war, provided easy fodder for dissidents. The “unfavorable contracts over raw materials, the commitments to contribute to the democratic cause, the inhuman persecution of Japanese and Germans[, who had] settled for many years in the country”—persecution undertaken at the behest of the United States—brought nothing but “pain, grieving, and impoverishment” to the Bolivian people. As the foremost standard-bearers of this critique, which melded xenophobia, outrage toward Peñaranda’s subjugation of the national interest, and traditional antirosquismo, Paz Estenssoro and the MNR rapidly emerged as the foremost opposition group.
Although Malloy describes the wartime MNR as a “small group of intellectuals stirring up what fuss they could,” the Roosevelt administration considered it the most dangerous element in Bolivian politics. In late 1941, British agents, presumably hoping to cement Peñaranda’s support for the Allied cause, had forged letters incriminating elements of the MNR and the officer corps in a conspiracy with the Germans to overthrow him. The MNR accused Peñaranda’s cabinet of forging the letters, but the State Department, alarmed over the apparent Nazi threat to the Western Hemisphere, unquestioningly accepted the forgeries as real. As a result, no U.S. diplomat could view the MNR as anything less than Nazi tainted for years. This was not an entirely unjustified view. In 1941, on the anniversary of Hitler’s ascension to power, one MNR newspaper editorialized that “the lesson of Hitler and the New Germany is a lesson of optimism” and that Bolivia, with its history of territorial loss to all of its neighbors, had “much to learn from Lebensraum.” U.S. diplomats, already predisposed to view every event in Latin America through the prism of the war, became fixated on the “anti–United States and anti-Jewish” MNR.
On 21 December 1942, a violent incident at Patiño’s Siglo XX tin mine in Catavi created the opportunity the MNR had long sought. When miners assembled to protest for improved conditions and higher wages—they were earning less than $1.50 a day—Peñaranda’s troops fired upon them, killing dozens, if not hundreds. The MNR and the PIR immediately escalated their efforts against the government; the leaders of the MNR branded Peñaranda a tool of the rosca in general and of Patiño in particular. For its part, Aramayo’s La Razón condemned the workers for seeking wages of $1.50 a day and lauded the president for his decisive action.
The Catavi Massacre exposed the hypocrisy and brutality of the old order for all to see and thoroughly discredited the government, even in the eyes of its U.S. patrons. Peñaranda clung to power for another year, but his fate was sealed. The PIR worked toward a popular revolt, several generals plotted their own coups, and the MNR forged alliances with the RADEPA and Iron Star lodges. The MNR and RADEPA won the race to unseat Peñaranda, and their “Revolution of the Majors” seized power almost a year to the day after the massacre.
According to Paz Estenssoro, the MNR had been involved in several plots that had been brewing for months and had even attempted to seize Peñaranda weeks earlier in Cochabamba. At one point, Peñaranda’s chief of the General Staff offered his loyalty to the MNR in exchange for its support, and another general, Angel Rodríguez, apparently approached Paz Estenssoro to enlist the MNR’s participation in a plot financed by Mauricio Hochschild. Paz Estenssoro “terminated this conversation” by telling the general that “he would be delighted to [participate] if Rodríguez would promise to execute Hochschild the day after they took power.” Allying himself instead with junior officers such as Major Gualberto Villarroel López and the members of RADEPA, Paz Estenssoro understood that he had to move quickly: Peñaranda planned a crackdown on the MNR immediately after Christmas 1943.
The president apparently remained ignorant of the plots against him, despite a number of mistakes by the MNR and RADEPA. The Ecuadoran Embassy in La Paz somehow acquired details of the coup the day before it occurred, Villarroel had hinted to friends on 18 December that a revolution was coming, and Paz Estenssoro himself had all but announced it in a session of Congress. At the last moment, Majors Villarroel, Edmundo Nogales, and Antonio Ponce even sought what Nogales called a “patriotic understanding” in “defense of national interests” with Peñaranda. They hoped to convince him to abandon the “the Great Tin Barons and North American Imperialism,” to whom he had “surrendered” a price of tin “as a gift” in the name “of continental unity, the good neighborhood of peoples, and the defense of democracy.” When Peñaranda rejected their demands, RADEPA and the traffic police effected an almost bloodless coup, installing Villarroel as president on December 23, 1943.
The British believed that the revolution was a “good thing for Bolivia and the United Nations,” brought about by “left-center” nationalists disgusted by the “corruption and inefficiency of the previous government.” The chief of the U.S. Military Mission in La Paz considered the revolutionaries “sincere patriots, to the point of idealism,” and many in the State Department were reluctant to label them “totalitarian” or “pro-Nazi.” As Philip Bonsal tried to explain to Secretary of State Cordell Hull, the “unfriendly” statements and acts by MNR members or military officers detailed in his memorandum were “only a very small proportion” of their activities and were more or less an “automatic” response to anything Peñaranda did. The MNR and RADEPA, Bonsal said, actually represented the “legitimate and respectable, if perhaps unattainable, aspirations of certain sectors of the Bolivian people.” Laurence Duggan went further, comparing the MNR to Louisiana populist Huey Long. He argued that the MNR was genuine in its call for the uplift of the masses and indeed might lead Bolivia to “evolve peacefully and gradually from semi-feudalism to something approaching twentieth century civilization.”
For President Roosevelt, however, this was no time to be “wishy-washy.” And Secretary Hull, though no great supporter of Peñaranda, was outraged by the emergence of a cabinet featuring five majors, Paz Estenssoro, and two other supposedly pro-Nazi MNR members. Convinced that the MNR and the military were “connected with Nazi groups in Germany and Argentina” and “received financial support from pro-Nazi sources,” Hull inaugurated a policy of nonrecognition against Villarroel’s government in the hopes of provoking a counterrevolution or at least the removal of the MNR. The United States was joined by the other nations of the hemisphere (except Argentina), but Hull refused to tell Villarroel what he had to do to secure U.S. recognition. Through veiled hints and suggestive conversations, it eventually became clear that Hull sought the expulsion of German and Japanese nationals from Bolivia and the elimination of the MNR from the cabinet.
In April, Villarroel removed the MNR ministers from his cabinet and replaced MNR prefects with nonpartisan army officers. In May, he complied with a U.S. demand to turn over eighty-one German and Japanese nationals. Although U.S. diplomats were barraged with “for-God’s-sake-don’t-recognize” pleas from Aramayo and other oligarchs, by June, every other nation in the hemisphere except Uruguay supported recognition of the regime. With congressional elections pending, the U.S. recognized Villarroel in the hope that this would strengthen his hand against the MNR and encourage other parties to join the government. Within months, however, Villarroel formalized his alliance with the MNR by appointing Paz Estenssoro to the post of finance minister and other party members to other cabinet posts. The MNR had won a share of power but had also earned the enmity of the rosca, the PIR, and the United States.
Villarroel is best seen as a harbinger of the National Revolution of 1952. When Harry S. Truman became president in April 1945, Villarroel had been entrenched in the Palacio Quemado for more than a year and a half. The tentative steps Villarroel had undertaken toward changing the status quo were a clear warning to the rosca and the political classes. Patiño, Aramayo, Hochschild, and the hacendados may have been content to preside over the hopelessly warped economy of Bolivia, but more astute observers understood that, without reform, revolution was inevitable. For the next seven years, Villarroel and his more traditional successors sought to achieve national development without dismantling the centuries-old foundation of the Bolivian political economy. They faced the almost impossible task of finding a middle road between Paz Estenssoro’s promised National Revolution and the intransigent stonewalling of the rosca.
World War II Tin Diplomacy
Although Washington’s drive for a global capitalist order and Bolivia’s struggle for national development were obviously critical elements in the diplomacy of the sexenio, perhaps the most decisive aspect was the postwar destruction of the international tin cartel and the establishment of an Anglo-American tin purchasing monopoly. If the governments of the sexenio hoped to bankroll modest reforms with tin export revenue, they required high tin prices to, if nothing else, prevent a disastrous economic downturn. Because World War II had left Bolivia as the sole major producer of tin concentrates for the Allies and the State Department did indeed fully support efforts to block the MNR, there was cause for optimism. However, developments in the international tin trade quickly overshadowed all other aspects of the U.S.-Bolivian relationship.
Before the war, Bolivia produced roughly one-sixth of the world’s tin concentrates. Two-thirds came from the Malay Straits, especially the Dutch East Indies and Malaya, and one-ninth from Nigeria, the Belgian Congo, Siam, and China. The United States, which had only produced two thousand tons of tin in the previous sixty years, consumed more than 40 percent of the world’s total, and European nations, led by Great Britain, another 45. In 1927, Patiño’s Consolidated Tin Smelters and John Howeson’s London Tin Corporation formed a producers’ cartel, the International Tin Committee (ITC), to stabilize the world tin market, protect themselves from the devastating fluctuations that periodically racked the industry, and guarantee their profits. By 1931, they were joined by representatives from all the major tin producers—Bolivia, Nigeria, Malaya, and the Dutch East Indies. Government officials and private tin producers united to set quotas, restrict output, and at one point even launch a two-month “tin holiday” by suspending all shipments to raise prices. Consuming nations were eventually given access to the proceedings but, much to the consternation of Washington, were denied any vote.
For Bolivian miners, this “prescient cartelisation,” to use Dunkerley’s phrase, had been nothing short of a godsend. Alluvial tin concentrates from the Malay Straits, far purer than Bolivian ones, were dredged from easily accessible rivers by cheap labor and would have otherwise doomed Bolivian producers. Simply put, the Bolivians could not compete. Their tin, generally of low quality, had to be extracted from the dizzying heights of the Andes hundreds of miles from the nearest port. Moreover, Bolivian workers, though poorly paid, were still better compensated than their Far Eastern counterparts. Finally, the tin barons bore the bulk of the nation’s tax burden. In all, U.S. experts estimated that that the cost of production in Bolivia was almost double that of Malay Straits producers. The cartel remained the only means by which Bolivian tin could remain competitive with English and Dutch producers in the Far East.
In June 1940, U.S. planners, weary of the decades they had spent at the mercy of the ITC, set in motion a series of events that culminated in the United States seizing control of the international tin trade in the postwar period and placing Bolivia at Washington’s mercy. The U.S. military consumed massive quantities of tin, primarily for canned food and solder. Anticipating war and economic dislocations, Undersecretary of State Sumner Welles proposed creation of a fifty-thousand-ton tin stockpile and construction of a U.S. tin smelter designed to accommodate low-grade Bolivian tin concentrates. A smelter and stockpile, in conjunction with a massive recycling campaign, would insulate U.S. industry from the conflicts in Europe and East Asia and possibly shatter the ITC once and for all. Roosevelt agreed and authorized the Reconstruction Finance Corporation’s Metals Reserve Company to construct a U.S. tin smelter.
Ostensibly in response to the German seizure of the Dutch Arnhem smelter and to fears that the Luftwaffe might at some point put British smelters out of commission, the Longhorn Tin Smelter was built in Texas City, near the port of Galveston. It cost the U.S. government $8 million but more than paid for itself during the war. It was the potentially the world’s largest and most versatile smelter, capable of processing any type of tin concentrate from any part of the world. The RFC contracted with the Dutch smelting giant Billiton Mastschappij, known for its experience with both Bolivian hard-rock and Far Eastern alluvial concentrates, to construct and operate the Longhorn smelter. Because the urgency of its construction had mandated against using innovative but still relatively unproven techniques, the smelter itself was not the world’s most modern, but it was capable of processing the entire Bolivian tin output and perhaps meeting U.S. demand. Although high labor costs and outdated techniques hurt the Longhorn smelter’s efficiency, it was hoped that plentiful fuel and acid, combined with cheaper transportation costs from Bolivia, might make it competitive with European commercial smelters.
Still, the Longhorn smelter’s construction was not entirely a response to the war. Indeed, the smelter was established explicitly to “eliminate this country’s dependence on the foreign tin cartel.” The British, who along with Patiño dominated the International Tin Committee, hoped to first dissuade the Roosevelt administration from building the smelter. Failing that, they sought to secure a commitment that the Longhorn smelter would be closed at the end of the war. Needless to say, the State and War Departments refused both requests, adamant that the United States never again be held hostage by the ITC. Indeed, when State Department analyst Herbert Feis negotiated the first contract with the Bolivians in 1940, he sought a twenty-five-year commitment of all Bolivian tin—a clear indication of U.S. long-term goals. Although the British were horrified by the prospect of the U.S. government entering the field of tin processing, Feis coolly reminded them that the discrimination and restrictions of the previous half century made this move inevitable. When the British complained that a U.S. smelter could not be operated profitably, Feis retorted that, although this was “probably true,” underhanded British tactics and the cartel had never permitted that thesis to be tested. Indeed, U.S. corporations had, on several occasions, attempted to open smelters on U.S. soil in the past, only to have the British drive them into bankruptcy.
The State Department sought more than one thousand tons of tin concentrates per month to supply the Longhorn smelter, but this requirement ran afoul of existing contracts that sent almost all Bolivian tin to Great Britain. Because the British smelted nearly all of their Far Eastern tin in Malaya, smelters in England were almost entirely dependent on Patiño’s Bolivian production. Still, after the fall of Holland, where the Arnhem smelter had traditionally processed Hochschild’s and Aramayo’s tin, Peñaranda and Hochschild encouraged construction of the Longhorn smelter. Not only might U.S. competition break Bolivia’s dependence on the British smelting monopoly, but it would also permit the tin barons and the government to acquire dollars rather than blocked sterling. The first U.S. offer was for 42¢ per pound, slightly more than London was currently paying, and the Japanese made their own offer soon thereafter. Within weeks, Peñaranda and the tin barons were presiding over a bidding war among the three rival nations.
Although Patiño saw the Longhorn smelter as a means to “extricate” himself from restrictive British sterling contracts, and other tin barons viewed it as a way to weaken Patiño’s dominant position in smelting, they soon found that the sword cut both ways. The Bolivians sought 45¢ per pound for all grades of tin concentrates, but the United States hoped to pay just 42¢ for only the highest grade. For the tin barons, the U.S. contract was a unique opportunity: neither the British nor the Dutch smelters had been willing to process their lowest-grade concentrates, and if they could secure a fixed price, they would now be able to export their lower grades. Washington attempted to break the deadlock by increasing the amount of tin it would purchase to eighteen thousand tons per year, but the Bolivians demanded even more concessions regarding smelting charges. After months of negotiation, the State Department, eager to begin operations at Texas City, finally agreed to pay a fixed price of 48½¢ per pound, to match low British smelting charges for five years, and to take responsibility for the ores in the Chilean ports of Arica or Antofagasta. Through hard bargaining that even the RFC’s own historian conceded meant “not standing as a neighborly supporter of Bolivia in its hour of economic distress,” U.S. planners were purchasing a good percentage of the tin available to the Allies at less than half of the World War I price.
For Great Britain, this arrangement was little short of a catastrophe on a number of levels. Patiño now argued that unless the British matched the U.S. price, he would break his long-term contract with them and sell to the RFC. At one point, he even threatened to enter the bidding to construct the U.S. smelter himself. Although the British were unable to forestall the U.S. contract with Bolivia, they attempted to end U.S. involvement by agreeing to purchase all Bolivian tin production for the five years after the U.S. deal expired. Naturally, Peñaranda and the tin barons refused, hoping to keep Anglo-American competition alive for the foreseeable future.
Pearl Harbor and the Japanese offensive in Southeast Asia changed everything. As Japanese forces overran British Malaya and the Dutch East Indies, world tin markets were thrown into chaos. Both the Allies’ main sources of tin concentrates and much of the world’s smelting capacity were captured. The British and Dutch, anticipating Hitler’s onslaught in Europe, had shifted much of their smelting capacity to Malaya and the East Indies, placing it directly in the path of the advancing Japanese. More than 70 percent of the world’s tin production (and an even higher percentage of its smelting capacity) rapidly fell into Axis hands, and U.S. leaders faced the unhappy prospect of entering the war with no viable source of either raw tin concentrates or processed tin plate. As precarious as the situation was for the Allies, Peñaranda and the tin barons seemed to have an unprecedented opportunity to become virtually the only source of tin for the Allied war machine.
It did not take long for Patiño to recognize the implications. With the ITC’s production control schedule set to expire at the end of 1941, the British requested a renewal on favorable terms. For the Bolivians, letting Great Britain, which would remain almost exclusively a consumer for the duration of the war, use the ITC to establish a low tin price seemed foolish. Instead, the Bolivian government and tin producers sought the freedom to negotiate major price increases with the United States and Great Britain in 1942. Therefore, Patiño, chafing under British sterling exchange restrictions, refused to sign the ITC renewal. What he apparently did not consider was that by spurning the ITC, he was removing the only impediment to the creation of an Anglo-American alliance based on their mutual interest in suppressing the price of the tin they consumed. Whitehall, now demonstrating “exceptional bitterness,” proposed a “common policy” to Washington to “prevent any attempt at blackmailing tactics.” Although Patiño eventually did sign the renewal (only to see it voided soon thereafter by the Japanese invasion of Malaya and the Dutch East Indies), the damage had been done, and the cartel would never again exert the authority it once had. In the view of political scientist Laurence Whitehead, by facilitating an alliance between Great Britain and the United States, Patiño and the tin barons had, however inadvertently, “shifted” market control “decisively” from the “rosca to the U.S. government.”
This was not immediately apparent, however. Peñaranda, Aramayo, and Hochschild wasted no time in requesting that the 1942 base price for tin concentrates be set at 65¢ per pound. Hochschild, whom U.S. diplomats described as “no shrinking violet in negotiations,” claimed that all of his mines except Colquiri were operating at a loss at the 1941 price and noted that the RFC had more than doubled its purchase price for lead imports. Nonetheless, the British, who were committed to pay Patiño whatever rate Washington agreed to pay Aramayo and Hochschild, could not “see why Americans or we should submit to Bolivian blackmail” since “the Bolivians are entirely dependent on U.S. and UK markets for their one vital export.” Whitehall urged the Roosevelt administration not to increase the price at all. Ultimately, the tin barons agreed to accept 60¢ per pound until the middle of 1943, and Peñaranda agreed not to place new taxes or restrictions on the tin barons.
When the tin contract came up for renewal in June 1943, the Bolivians demanded no less than 70¢ per pound but found their U.S. counterparts intransigent. Not only had the “shortsighted and avaricious” Peñaranda, in clear violation of the old contract, imposed new taxes on the tin producers and demanded a higher percentage of their foreign exchange, but the producers themselves had also violated the contract, by shipping the United States excessive amounts of low-grade ores and concentrates. U.S. planners therefore insisted on maintaining the current price for another year. The stalemate dragged on until December 1943, when Villarroel ousted Peñaranda from power. Because the United States now possessed a tin stockpile “adequate” for the next two years of war and the army was “not greatly concerned [about the supply of tin] at this time,” the Department of State recommended that negotiations be suspended.
Villarroel and the tin barons had to live with the 60¢ price until December 1944, when Washington agreed to a 2½¢ increase. Any benefit to the tin barons was then quickly negated, however, when Villarroel mandated a series of wage increases for workers and Paz Estenssoro, reinstalled in the cabinet, this time as minister of finance, decreed that 60 percent of all foreign exchange would be retained by the government. When Washington resumed negotiations for a new tin contract in July 1945, it again insisted that the Bolivian government enact no new restrictions on the tin barons and that the barons pay severe penalties for shipping exceptionally low-grade tin. Although the tin price did increase several cents per pound, the new contract called for it to decrease over the next year. With Japan nearing defeat and U.S. planners envisioning the return of the Malay Straits to the colonial powers, whatever leverage Patiño and Peñaranda may have had in 1940 was rapidly disappearing.
Still, there would be inevitable tin shortages until Malay Straits production became available again. Thanks to the Longhorn smelter, aggressive recycling campaigns, and the Bolivian contract, the War Production Board had been able to meet the needs of the U.S. war effort, but with the end of the war in Europe, “the situation materially changed for the worse.” The navy still demanded massive amounts of tin, liberated nations also demanded it for reconstruction, and domestic industries embarking on reconversion clamored for their share. These factors were only accentuated when, even after the Japanese surrender in August 1945, Malay Straits tin was still unavailable to meet the new demand; Director Erwin Vogelsang of the War Production Board’s Tin, Lead, and Zinc Division speculated that it might forever remain so.
After a British scorched-earth retreat at the onset of the war, four years of fighting, and intense anti-Japanese guerrilla campaigns, no dredges and only forty-five mines remained in operation in Malaya. Hundreds of small European and Chinese mining companies there and in China might not ever be able to finance a full restoration of the facilities destroyed during the war. Moreover, imperial policy and the lack of foreign exchange made it unlikely that the British would request U.S. assistance to help restore tin productivity in Malaya. And, even though the Dutch government and Billiton Mastschappij (in which the government held five-eighths control) had at war’s end immediately ordered replacement equipment for their tin operations in the Dutch East Indies, it did not matter, Director Vogelsang argued, because production would ultimately be determined by a restored ITC, which would “not be enthusiastic about undertaking prompt and effective, yet costly, action” to restore tin mining in Southeast Asia that might lead to overproduction.
For U.S. planners, it was therefore imperative that the ITC never be allowed to reconstitute. World War II had struck a decisive blow against the tin cartel; the International Trade Organization (ITO) and the United States would now finish it off. Chapter VI of the ITO Charter mandated that producers and consumers have an equal voice in any international commodity agreement, in effect banning price-fixing, government-ordered production restrictions, quota systems, or other stabilization schemes. That being the case, State Department functionary Donald Kennedy proclaimed that the ITC no longer served any “valid function.” Not surprisingly, Bolivian diplomats argued that the ITC should be restored and “revitalized with the goodwill and concurrence of the consumers to secure the harmonious development of the industry beneficial to all nations.” They soon learned, however, that Malayan producers, under pressure from the British government (itself coerced by Washington), were opting out. Although delegates from Bolivia and the Dutch East Indies desperately sought a formula that would salvage the ITC, they had to tread lightly “at all times,” so as “to not antagonize” the Anglo-American alliance. When the Bolivian ambassador asked for leeway to continue the ITC until the postwar transition was completed, the U.S. response was an “unequivocal” no. In November 1946, at the “suggestion of the United States” (although Bolivian ambassador Ricardo Martínez Vargas believed “the term ‘pressure’ would be more appropriate”), the only institution that had permitted long-term Bolivian competitiveness was formally dissolved.
In the place of the ITC, Anglo-American planners formed the Tin Study Group and the Combined Tin Board as an “experimental” “first stage” in achieving an ITO-compliant commodity agreement in what they hoped would be an “atmosphere of mutual goodwill.” It quickly became clear that the study group was “not concerned with the arrangements governing the immediate supplies of tin” but was instead a toothless “opportunity” for “a broad exchange of views and information” and “purely routine” statistical compilations. The RFC considered it little more than a pointless and “continuous round of secret meetings, veiled threats, and open accusations of bad faith.”
The true authority over tin production and pricing was vested in the Combined Tin Committee (CTC) in Washington. One of many emergency planning measures designed to efficiently allocate scarce resources during and after the war, the CTC exercised almost complete control over the commodity it monitored through firm national quotas. The Anglo-American technocrats of the CTC determined that all Bolivian tin, other than Patiño’s, which was committed to Great Britain was to be sold to the United States. For the RFC, the CTC represented nothing less than a unique opportunity to acquire for the United States and Great Britain the leverage the ITC had once wielded. Once either nation negotiated a price with its suppliers, usually after months of brutal negotiations, that price became the “world price,” which other producers would be obligated to accept. The ITC producers’ cartel was thus replaced by an “Anglo-American purchasing cartel” so domineering that some Bolivian tin producers found it preferable to negotiate with the potentially “gigantic market” of the Soviet Union.
The implications went even further: U.S. planners considered the destruction of the ITC to be only the first step in dismantling trade restrictions on the tin industry imposed by the tin-producing states. The ITC was far from alone in imposing such restrictions. Through export duties on Malayan tin in 1903 and 1924, the British government had derailed U.S. plans to establish smelters before World War II. Even so, in the opinion of U.S. experts, Bolivia’s restrictions were the most onerous in the world. Because only an “infinitesimal number” of Bolivians paid any tax at all on real estate or income, the national government was funded almost entirely by a Byzantine system of taxes on the production and sale of tin. Through literally hundreds of national export taxes, local taxes, indirect excise taxes, income taxes, mining transfer taxes, dividend taxes, and a burdensome foreign exchange surrender scheme to finance imports, the Bolivian government extracted, by U.S. estimates, 15¢ of tax revenue from each pound of tin. Moreover, this list did not include regularly decreed (“often retroactive”) wage increases or other social benefits for workers or new taxes like one commemorating the four hundredth anniversary of the founding of Potosí. The obvious next step for the United States as it entered the postwar period was the elimination of this maddeningly unpredictable taxation scheme, in which La Paz alone had 468 different taxes and the national government another 366 taxes and duties.
Ironically, the U.S. drive for “free markets” through the ITO could well have worked to the advantage of the Bolivians, at least for a few years, had these been regulated equitably. Although Bolivian tin was ordinarily unable to compete with alluvial tin from the East Indies and Malaya, the war and the Japanese occupation had crippled tin production in both these regions. Restoration of normal production in the Malay Straits was at least years away, and the soaring demand for tin created by postwar reconstruction gave rise to a tin shortage that augured well for the tin barons and any Bolivian government that subsisted off them. The U.S. decision to maintain smelting operations at Texas City, which the RFC considered the “most effective means of securing for the United States its share of limited world production,” should have guaranteed competition that would benefit Bolivian producers.
Instead, as tin became, under the RFC regime, “the most controlled of all commodities” in the world, Bolivian diplomats entered annual negotiations with the ruthless technocrats of the RFC having little or no leverage. The Reconstruction Finance Corporation, the British Ministry of Supply, and private Dutch smelters all benefited from Combined Tin Committee collusion that forced Malayans, Bolivians, Nigerians, and Indonesians to sell their primary exports to a sole bidder. Although the RFC justified its monopoly by asserting that the world’s three largest producers were chronically unstable and that a crisis in any one would “mean a serious world shortage,” it clearly worked to U.S. advantage.
For the Bolivians, the primary diplomatic task of the postwar period was to somehow circumvent this cunning system calculated to bring the combined might of the great industrial powers “almost exclusively against the tin industry of Bolivia.” Failure, they correctly predicted, would inexorably lead to the “decline and ruin” of the private tin industry in Bolivia, if not the political order it undergirded. Bolivia found itself at a critical juncture. The old political and economic order was deteriorating rapidly, and the next several years would either see collapse, a smooth transformation of the nation into a somewhat more modernized, more egalitarian society, or revolution. Patiño and the tin barons had welcomed and encouraged the U.S. intrusion into the tin markets, but these masters of manipulation soon found their would-be saviors to be as self-interested as they themselves were.
What emerges from this complex interplay of powerful forces is the realization that U.S. diplomacy was unable to coherently address the coming of the National Revolution, contributed to the demise of three successive governments that it sought to bolster, and inadvertently provided assistance to a movement it considered, at various points, to be “Nazi,” “Peronist,” and “Communist.” The needs of the national security apparatus, embodied in the Reconstruction Finance Corporation and the creation of the tin stockpile, completely overrode U.S. diplomatic priorities and, through a convoluted process, actually hastened an anticapitalist revolution that threatened to destabilize a major supplier of the U.S. defense industries, if not the entire Andean Cordillera.
The chapters that follow examine the Truman administration’s dealings with six distinct and quite different governments of Bolivia in some detail (see table 1). Chapter 1 focuses on the supposedly “fascist” regime of Gualberto Villarroel and his MNR allies, whose first effort at societal reform ended in the lynching of the president. Chapter 2 details attempts by the junta of Tomás Monje and the Bolivian elites to regain control of the nation and to rebuild liberal constitutional oligarchy at the beginning of the sexenio. Chapter 3 deals with the presidency of Enrique Hertzog and his failed diplomatic initiatives in Buenos Aires and Washington; chapters 4 and 5, with Mamerto Urriolagoitia’s efforts to suppress the MNR, rein in the tin barons, and secure a tin contract that might stave off the coming revolution. Chapter 6 tells of General Hugo Ballivián’s desperate attempts to reach agreement with the RFC. Chapter 7 begins with the National Revolution of 1952 and the regime of Víctor Paz Estenssoro and ends with Truman’s departure from the presidency in 1953. The conclusion briefly discusses the early days of the Eisenhower administration, when a more sophisticated, if not effective, U.S. approach to Bolivia finally emerged.
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