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New International, August 1934


Jean Mendez

Murder for Profit: El Gran Chaco

From New International, Vol. I No. 2, August 1934, pp. 57–58.
Transcribed & marked up by Einde O’Callaghan for ETOL.


SAID Bernard Shaw:

“The wise man looks for the cause of war not in Nietzsche’s gospel of the Will to Power, or Lord Robert’s far blunter gospel of the British Will to Conquer, but in the custom-house.”

And the Chaco War, with Chile backing Bolivia for American interests, and the Argentine acting for British, money in Paraguay, is a pat illustration of that observation. In Bolivia’s financial and economic set-up, as far back as 1920 is to be tound the explosive directly determining the Chaco War. For Bolivia as she was at the end of the World War, the Chaco slaughter was almost inevitable; hence also for Paraguay.

Bolivia, 506,467 square miles of mountain, plateau and jungle, is inhabited by three million people, of whom over half are Indians, over a third mixed-breeds, and the remaining 10 to 15% whites, mostly Creole Spanish. It is rated as the third richest mineral country in America, the United States and Mexico coming first and second. Before the World War, Bolivia was a typically agricultural semi-feudal country. The Indians were bound to the land, and estates were – and still are – valued, not by area but by the number of serfs upon them. Transportation was carried on almost entirely by human portage, a system taken over by the Spanish conquerors from the native pre-conquest rulers, and by mule and llama caravans, and this is still the system except for mining import-export, and a few other industrial needs, since the few railroads, built by the government in partnership with private monopolies, are too costly except for the use of large capitalists. Communications between Bolivia’s three zones: mountain, plateau, and jungle are extremely difficult, and Bolivia has no ports, using the Chilean ports of Antofagasta and Arica on the Pacific. These ports, however, are available only for western Bolivia, since the Andean range cuts down the middle of the country and isolates the eastern half, in the southern part of which is the Chaco Boreal, largely cattle plains.

The secret of Bolivia’s wealth, and of Bolivia’s troubles, is one metal: tin. In Spanish-colonial days a great amount of gold and silver was mined here, and the famous Potosi mines, which became a synonym for fabulous wealth, produced much of it. But tin, which is to be found in large quantities only in Bolivia and in Java and the Malay States, is in these industrial days a precious essential product. Especially for war purposes, tin must be had, and because of the War, therefore, Bolivia became suddenly a vast tin-mine, so that at the end of the war tin had become 70% of Bolivia’s exports, and provided about half the national revenue.

Like Cuba and the Caribbean countries, Bolivia became a one-product country and an extremely important spot in world economy. To exploit tin-wealth, the capitalists found it necessary to dislodge the “free” Indians from their communal lands, for in view of the scanty population the mine lords must either import labor and pay somewhere near a living wage, or else kidnap, expropriate and enslave the unbound peasants. They took, of course, the latter alternative, arguing that only Indians could work at the high altitudes necessary (10 to 15,000 feet) – and “they need so little”!

For these measures it was necessary to control the government, and then began a struggle between the great landlords and the mining capitalists, acting for, and in partnership with, American and British interests: Patiño Mine and Enterprises, (National Lead Co. and the Bolivian Simon Patiño, controlling about 80% of the output): the Guggenheims, controlling most of the rest, and a few small companies, chiefly American-backed.

The tin mined in Bolivia is not smelted there. There is no coal; hence a premium on oil exploitation, and also electric power. British interests monopolize Bolivian tin-smelting, but once smelted, it is consumed chiefly by the United States, over half of the British smelting output being bought by United States Steel. Thus tin ore is American property, smelted tin becomes British, and the metal ready for the making of cans, is bought back by American firms. Plenty of fuel in Bolivia might do away neatly with the British smelting business, and with the metal smelted in Bolivia itself, or in Chile or the Argentine, the tin supply the United States will need when war comes, is in the bag.

Enter the Standard Oil, with seven and a half million acres of holdings, spread down the middle of Bolivia and overlapping the western end of the Chaco Boreal. To ship this oil to the Pacific would mean sending it over the Andes, an impossibly costly undertaking. On the other hand, a pipe-line run through the Chaco to the Paraguay River, and oil shipped down that river through the middle of Paraguay to the Plata and Buenos Aires, there or en route to be refined and either shipped back or sent on into the Atlantic is a feasible undertaking. So the old dispute over the ownership of the Chaco, which in itself would never have caused a war, is revived. To Bolivia, it means a possible oil-port; to Paraguay it means Bolivian ships travelling through the heart of the country, and puts the capital itself at their command. Furthermore, there is oil in Paraguay and in the Argentine too, controlled by Dutch Shell (British) which of course is not anxious to see Standard open up vast new fields.

In 1920, Bolivia was rated a wealthy country. The production of tin had climbed steadily, reaching its peak in that year, and the government had borrowed some $8,000,000 (beginning 1909) for railroads, sanitation, and “administrative expenses”. In 1920 Bolivia’s credit was excellent. Her revenues had climbed, tin was high, and she was building roads in the direction of the Chaco. In 1921 the production of tin, which had increased in steady parallel as the price went up, began to drop, while the price continued to climb. In 1921–22 the price of tin was very high, but production had gone down to below the 1907-11 level, and since the revenue comes from production, the government was in a jam financially. It issued oil concessions to the Richmond Levering Company, at the same time passing a law placing the government royalty on oil at twelve and a half and fifteen percent. In July of that year, a “revolution” overthrew this government and put in power Bautista Saavedra, who took the royalty down again to eleven percent, and the Richmond Levering concession passed over to Standard Oil ($2,500,000).

In the year 1922 the Chaco War is clearly forecast. The Saavedra government, having borrowed $1,000,000 from Stifel-Nicolaus, with an option on future loans for three years granted the bankers, needs money badly, and is forced or bribed into taking a $33,000,000 loan at 8%, redeemable not before 1947 from a combination of Stifel-Nicolaus, Equitable Trust and Spencer Trask Co. Purposes: to refund previous loans (Morgan, Chandler and Co., Equitable Trust) some at lower rates than 8%; to cover short-term Customs Notes; for railroad building and “improvements” (Chaco roads and munitions); for “administrative expenses”; for bankers’ commissions and expenses. This loan, which is one key to the entire Bolivian situation, was secured as follows:

  1. Controlling shares in the National Bank of Bolivia.
  2. All revenues representing dividends upon said shares.
  3. Taxes on mining claims and concessions.
  4. Revenues from the alcohol monopoly.
  5. 90% of the revenues from the tobacco monopoly.
  6. Taxes on corporations other than mining and banking.
  7. Tax on net income of banks.
  8. The tax on mortgage interests.
  9. Tax on the net profits of mining companies.
  10. All import duties.
  11. Surcharge on import duties.
  12. All export duties.
  13. Mortgages and liens on all railroads “constructed or to be constructed from Villazon to Atocha and from Potosi to Sucre, including their franchises, concessions, equipment and other appurtenances, and upon the net income of such railroads ...”

To superintend the collection of national revenues, a Fiscal Commission of three, two of the three “nominated” by the bankers, was appointed. One of the members was put in charge of Bolivia’s finance, the other was made director of customs. One of these two also functioned as a director of the Bolivian national bank. Expenses to be paid by the Bolivian government. If at any time the national revenues dropped to less than one and one-half the sum needed for the service of the loan, Bolivia was to pledge all other revenues, except taxes and revenues from oil and oil development, and these were to remain pledged until the revenue was triple the amount needed for the loan service. Furthermore, if the railroads were foreclosed, bondholders would have the option to purchase them, pay in bonds, and were to be granted 99 year concessions.

After 1922, tin production did not increase, and in 1926 the government was again in a jam. It was overthrown by a coup d’etat and the new Dictator, Siles, negotiated a loan (Dillon Read) of $14,000,000. In 1927 Prof. Edwin Kemmerer was called in to overhaul Bolivia’s finances. The price of tin reached its high in 1926 and then very gradually began to slide. In 1928 the Chaco dispute flared up, there were some skirmishes, but the League of Nations put the fight to sleep. In 1930 the price of tin collapsed. Bolivia’s revenues went well under the amount needed for the loan service, and taxes were laid on thickly. A threatened revolution was aborted and a militaristic government under General Blanco Gallindo took power. In his cabinet were the lawyers of the Standard Oil and of the tin interests. In. 1931 a tin-production control agreement was made which cut Bolivia’s share to 38% under the 1930 amount, and in September of that year fighting again broke out in the Chaco. In that year Bolivia defaulted on her bonds. By that time Bolivia’s income was less than half the 1929 amount, and in the summer of 1932, under the “elected” Daniel Salamanca government (representing the imperialist interests) the Chaco War began. Thus a government under the thumb of foreign interests, being used by them to bleed the national treasury, bankrupt and desperately in need of income, with all national resources except oil mortgaged, and all finances in the hands, openly, of American bankers, undertook to seek a new source of wealth in the Chaco. Where did the money for the war come from? Well, take a look at the slick-paper magazine, Bolivia, issued by the New York Consulate of that country. Page 1: full-page ad of Curtiss-Wright Osprey, who recently were allowed to ship over a million dollars’ worth of airplanes and war supplies, on the pretext (Hull!) that the order had been placed before the embargo. Page 2: half-page ad, General Motors; half-page, Colt’s revolvers. Page 3 : half-page, Ford; quarter, Federal Laboratories, Pittsburgh; quarter, Granwell Corporation. Page 4: half-page, Webster & Ashton, advertising “commission agents and representatives” – of the American Armament Corporation, as can be seen by another half-page in the back of the book. And a half-page, Tide Water Oil, represented by the same agents as General Motors. In the back: half-page, Bolivian Bank (“Formerly Bolivian National Bank”); half-page, Grace Lines; another half, Webster & Ashton, advertizing Remington Dupont, and on the next page American Armament. Below, General Flectric. On the next page, Goodrich Tires, and below, Webster & Ashton again, for International Motor Trucks.

Meanwhile, let it be noted that Chilean-American interests have a big share in Bolivian tin and oil enterprises. In fact, economically and financially the two countries are interlocked, and moreover, Bolivia does all her importing-exporting through Chile. Hence, Chile now makes the first under-cover manœuvres to enter the war, if necessary, since if Bolivia loses it means a tremendous loss to American bankers, oil and tin boys, and munitions merchants, and Chile is American controlled via Guggenheim, Standard Oil and other interests. On the other hand, Paraguay stands in the same relation to the Argentine as Bolivia to Chile; so Chile cannot fight without a grave danger of the Argentine being involved, as British-Argentinian interests have been financing Paraguay.

In the early part of the war, the Bolivian Indians fought in American uniforms, “bought cheap”, and from which they even “forgot” (!) to remove the scream-eagle buttons. In Paraguay, the economic pressure of the war is so great that everything is taxed to the hilt, and even so Paraguay has threatened to kill Bolivian prisoners, now used in forced labor, to save the cost of their upkeep. At present boys fifteen and sixteen are being sent to the front, Indians are being kidnapped from over Brazilian territory, and the Paraguayan press is full of shrill denunciation of) the war-profiteers, getting fat on sugar-monopolies and other food-pools.

It seems hardly likely that this war can be settled unless Bolivia gets her port, or until all the men are dead (as happened once when Paraguay fought the ABC powers) but it seems more possible that it will spread to involve Chile at least. Chile has a strongly organized, militant labor movement, which may perhaps succeed in mobilizing the Bolivian proletariat, and together with it, lead a victorious workers’ revolution that even the Standard Oil could not crush.

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