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BOLIVIA'S position in South America is unique. Geographically, she is almost in the center of the continent. Politically, she occupies a strategic situation as the only country bordering on all four of the so-called "ABCP Powers" -- Argentina, Brazil, Chile and Peru. These larger nations are therefore vitally interested in Bolivia's political activities and in her economic development. But unfortunately for Bolivia -- and for the peace of South America -- she is a landlocked country under a constant fear of economic strangulation by her more powerful neighbors. This fear has several times within the last century led to wars or threats of war. The recent conflict in the Chaco (where a definite peace settlement has not yet been reached) was directly caused by Bolivia's search for a port on deep water. Having failed to obtain such an outlet by war, she has now turned to the peaceful negotiation of economic agreements with her four large neighbors in order to remove the political and physical barriers to her foreign trade. On the success of this policy depends in no small measure the preservation of peace in South America.
Except for Tibet there probably is no country in the world where trade is more impeded by geographical obstacles than in Bolivia. The Bolivian plateau averages 12,000 feet in altitude and is walled in on all sides by the two principal ranges of the Andean Cordillera, varying in height from 20,000 to 24,000 feet. The lowest passes through these barriers are between 12,000 and 14,000 feet high. The cost of constructing railways and modern highways over these tremendous ranges is prohibitive for a country of Bolivia's limited financial resources. Consequently, the four railway lines which were built during the last half century to link the plateau with the Pacific and with Argentina were financed by foreign capital.
Lack of more such capital has so far prevented similar success in surmounting the mountains that wall off the tableland from the tropical lowlands to the east. Though the eastern part of Bolivia contains only one-fourth of her population, it represents three-fifths of her area. It is capable of producing in abundance the cereals, meat, cotton, leather, timber and petroleum that the cities and mining camps of the plateau have long had to import from abroad. But until recently the intervening mountains barred all commerce except that carried by pack animals. During and after the Chaco War several rough roads were built down from the plateau, but they do not provide good transport facilities. The republic can never realize its full economic potentialities, nor can it achieve complete political unity, until its highland and lowland parts have been effectively joined together.
Eastern Bolivia also lacks foreign outlets for its products. Until such outlets are arranged, the immense store of natural wealth in this vast region will lie dormant. At present it is cut off from the outside world except for one airline, the partly navigable branches of the Madeira River, and two mediocre roads out of Santa Cruz de la Sierra (one running to Yacuiba on the Argentine boundary and the other east to the Paraguay River).
At the time of its birth in 1825 the Bolivian Republic had access to the Pacific through its own territory. This outlet was, however, an unnatural one across the Desert of Atacama. Bolivar and Sucre, liberators of Bolivia, had sought to obtain for her a suitable seaport by negotiating for the purchase of Arica from Peru. Arica was, and still is, the natural port for the Bolivian plateau. But Peru refused to sell it. Bolivia therefore entered upon her national career with her existence dependent on the goodwill of her neighbors. At first this sense of incompleteness and frustration was not acute. But as time went on her territory suffered restriction through successive encroachments by the adjoining republics.
With each of these setbacks Bolivia's resentment against her neighbors grew deeper. In the War of the Pacific (1879-84), Chile seized not only Bolivia's coastal province of Atacama -- with its port of Antofagasta, its valuable guano deposits and its rich nitrate fields -- but also the adjacent Peruvian provinces of Tarapacá, Tacna and Arica. The Chilean annexation of Arica was scarcely less of a blow to Bolivia than the loss of Atacama; whereas Peru had placed few restrictions upon the use of that port by Bolivian Commerce, Chile at once imposed her regular tariff dues on goods in transit. The Bolivians, who never ceased to dream of possessing Arica, in 1891 sided with Argentina in a boundary dispute between that country and Chile. In return Argentina promised to help Bolivia secure a Pacific outlet. This
induced Chile in 1895 formally to recognize Bolivia's right to such a port. But Chile's fear of Argentine intervention on Bolivia's behalf was removed with the settlement of the Argentine-Chilean boundary dispute in 1902. Chile therefore fulfilled her promise to Bolivia only in part: in return for the latter's surrender of all claims to Atacama Province, Chile agreed to build a railway from Arica to La Paz and to give Bolivia port and customs privileges at Arica. The Bolivian section of this railway, not completed until 1913, passed within the possession of the Bolivian Government in 1928.
Though the Arica-La Paz railway was a boon to Bolivia, it did not reconcile her to territorial exclusion from the Pacific, for her foreign trade continued to suffer from numerous annoying interferences. Moreover, as long as all Bolivian commercial outlets remained in foreign hands, there was always the danger that her foreign trade would be obstructed, or even completely suspended, during disputes with neighboring countries. This danger proved only too real at the time of the Chaco War. Argentine neutrality laws prevented Bolivia from importing arms and munitions through Argentine territory, thereby placing her at a great disadvantage and undoubtedly contributing to her defeat. Had Chile and Peru applied an embargo, as Chile at first threatened to do, they might have kept the Chaco conflict from breaking out, or at any rate have insured Bolivia's defeat long before the war had run its sanguinary three-year course. Both, however, decided to allow Bolivia to receive arms, even after Brazil, the United States and most of the League states had imposed embargoes on munitions shipments to the belligerents. For neither Chile nor Peru desired to goad Bolivia into seeking revenge at some other more opportune time. On the contrary, the Chileans wanted Bolivia to win the war in order to divert her expansive energies toward the east, where she would stand in the path of Argentina, Chile's chief rival and Paraguay's unofficial ally.
In 1920 Bolivia formally placed her demand for a Pacific port before the first Assembly of the League of Nations. When the League refused to act, Bolivia sought the aid of the United States. In 1926 Secretary of State Kellogg proposed the cession of Arica to Bolivia, or else its neutralization, as part of his suggested solution of the Tacna-Arica dispute between Chile and Peru. Again Bolivia's hopes were shattered: the final settlement of the dispute in 1929 confirmed Chile's possession of Arica and Bolivia's total exclusion from the Pacific.
For more than a century Bolivia had been attempting to develop trade outlets on the Paraguay and Madeira Rivers. But these efforts had repeatedly been balked by political obstacles erected by Brazil, Argentina and Paraguay. By 1889 Bolivia had been forced to give up hope of obtaining a satisfactory outlet from the first two of these neighbors. Her only chance to secure her own port on deep water therefore lay in getting Paraguay to recognize her claims to the Chaco Boreal. In 1879, 1887 and 1894 Bolivia negotiated boundary treaties dividing this territory with Paraguay. Each treaty gave Bolivia access to the Paraguay River at, or to the south of, Bahía Negra. But none of them was ever ratified, and Paraguay proceeded to impose her military control over a gradually expanding zone of the Chaco territory. About 1877 the Bolivians established Puerto Suárez on a lagoon of the Upper Paraguay, opposite Corumbá, Brazil. But Puerto Suárez soon proved unsatisfactory, and in 1885 they therefore founded Puerto Pacheco, at Bahía Negra, on territory claimed by Paraguay. Three years later Paraguay took forcible possession of Puerto Pacheco.
In 1903 the Bolivian Government made another attempt to gain a suitable outlet in this direction. In that year it obtained from Brazil a small piece of territory on the Paraguay River north of Bahía Negra. Brazil also promised to build a railroad around the cataracts of the Madeira and Mamoré Rivers, in order to give northeastern Bolivia an improved though Brazilian-controlled outlet via the Amazon. Paraguay, however, disputed the Bolivian title to the territory ceded by Brazil along the Paraguay River. When the Bolivians attempted to explore a new route to the river through that region in 1928 their advance post at Vanguardia was destroyed by Paraguayan troops. War was averted only through the intervention of neutral American governments and of the League. Thus Bolivia was barred from the Paraguay River at all points where there was any possibility of creating a satisfactory port.
At about the same time Bolivia's hopes of obtaining substantial royalties from the Standard Oil Company's newly opened oil wells west of the Chaco were dashed by Argentina. The natural outlet for this oil was by railway or pipeline from Yacuiba across northern Argentina to Formosa on the Paraguay. But the Argentine Government refused to permit either the construction of a pipeline or the tariff-free transit of Bolivian petroleum across its territory. As the high-cost Bolivian oil could not surmount the Argentine tariff, Standard Oil was obliged to cap most of its wells.
This long series of frustrations naturally heightened Bolivia's fear of commercial strangulation. It dictated her opportunistic foreign policy and strongly influenced the course of her internal politics. It made her the friend of Paraguay against Argentina, Brazil and Uruguay in the terrible War of the Triple Alliance (1865-70). It helped to align her with Peru against Chile during the War of the Pacific (1879-84), and closely involved her in the long and bitter dispute between Chile and Peru over Tacna and Arica. It produced the treaty of alliance with Argentina against Chile in 1891. It brought her to the verge of war with Brazil over Acre Territory in 1899-1903 and with Peru over land along the Ucayali River in 1909-10. Intensified by the Vanguardia clash and by her final exclusion from the Pacific in 1929, this "claustrophobia" complex pushed Bolivia into the ruinous Chaco War in 1932.
President Salamanca, in his message to the Bolivian Congress at the outbreak of that war, referred to the fact that the Argentine tariff prevented his government from obtaining much-needed revenues from Bolivia's petroleum deposits. "The natural and logical remedy," he said, "would be to build a pipeline to the Paraguay River.[i] But there we are faced with the Republic of Paraguay, holding Bolivian territory, who also bars the passage. Bolivia cannot consent to live in poverty isolated from the world; she must strive after such conditions as will enable her to live her life to the full." The Bolivians entered the war confident of their German-trained army's ability to advance down the valley of the Pilcomayo and enforce Bolivia's claim to a port on the lower Paraguay. But again they were bitterly disappointed. The Paraguayans drove the Bolivian army back into the foothills of the Andes. There they cut the Yacuiba-Santa Cruz highway, thus closing eastern Bolivia's chief commercial outlet. The efforts of the Chaco Peace Conference to induce the Paraguayan army to relax its grip on this vital artery have not yet succeeded.
Defeated in the Chaco, Bolivia had to reconsider the previously rejected proposals of Argentina and Brazil for developing new trade routes through their territories. She therefore took advantage of the rivalries between the ABCP nations to secure important concessions. Under the auspices of the Chaco Peace Conference, she concluded bilateral agreements with those four Powers setting up mixed commissions of experts to recommend means for developing economic intercourse between them.
In the latter part of 1937 the Bolivian-Chilean commission submitted numerous draft conventions to the two governments. The most important stipulates that the "free transit" accorded by Chile to persons and goods going to and from Bolivia should cover "every class of cargo and at all times, without any exception," a clause confirming Bolivia's right, previously contested by Chile, to import arms and munitions without hindrance. Other recommendations call for the creation of a mixed Bolivian-Chilean commission to regulate the operation of the Arica-La Paz railway, for the elimination of the high Chilean visa fee for persons in transit to or from Bolivia, for joint measures to prevent smuggling, etc. In return for these concessions, Bolivia is to lower her tariffs on imports from Chile and afford the latter's capital certain advantages. By facilitating Bolivian commerce through Arica and Antofagasta, Chile insures the prosperity of her own trade with the plateau regardless of whatever alternative routes Bolivia may open up through Brazil and Argentina. The Chileans also hope, though not too confidently, that these accords will reduce Bolivia's yearning for a Pacific port of her own.
Peru, anxious to strengthen Mollendo's competitive position, has offered Bolivia concessions similar to those in the draft Bolivian-Chilean conventions. On December 15, 1937, the Peruvian-Bolivian mixed commission signed twenty-four draft agreements, among them: a transit convention duplicating Chile's guarantee of unobstructed passage for all classes of goods in transit to or from Bolivia; a convention simplifying traffic regulations on Lake Titicaca; a highway convention providing for construction of several roads, including the Peruvian-Bolivian sections of the Pan American Highway; an air navigation pact, joining the Bolivian and Peruvian civil airlines; conventions on economic and financial and on technical and industrial coöperation; and an agreement for a new commercial treaty. Also designed to strengthen Peru's position in Bolivia's trade is the construction of a new port at Matarani to replace Mollendo as the Pacific terminus of the Southern Railway of Peru. Matarani is on a well-sheltered bay, whereas Mollendo is an open roadstead.
On September 30, 1937, the mixed commission of experts representing Bolivia and Brazil recommended the construction of the following railways: (1) a line extending the state-owned Brazilian Northwestern Railroad from Porto Esperança (on the upper Paraguay River) to Corumbá, a project already authorized by the Brazilian Government; (2) a line from Santa Cruz de la Sierra to a point on the Porto Esperança-Corumbá line; (3) a line from Santa Cruz southward to Camiri, site of the Standard Oil refinery; (4) a line from Camiri to Sucre on the plateau; (5) completion of the Cochabamba-Santa Cruz railroad, started in 1928 with an American loan; and (6) a line uniting Santa Cruz with a port on the Ichilo River. It recommended that Brazil help finance certain of these lines in order to bring them to early completion. In February 1938 the two governments agreed to carry out these railway projects. Bolivia was granted the right to use Porto Esperança as her own port. They also signed a treaty for joint Bolivian-Brazilian exploitation of Bolivia's oil deposits.
These projected railways will open up a large market in Brazil for Bolivian petroleum. They will also give Bolivia's other exports an oceanic outlet through Santos or via the Paraguay-Paraná river system. In return, Brazil will secure a potentially important market for her rapidly growing manufactures and an overland source of petroleum products which would be useful in the event that her overseas imports were cut off. Moreover, the completion of the Cochabamba-Corumbá line will afford direct transcontinental railway connections across Bolivia between Santos and Arica, a distance of 2,735 miles. This route will reduce by about three days the time now required to travel by train between these two points by way of Argentina. The railway to the Ichilo River will give eastern Bolivia an improved outlet via the Amazon.
Brazil is also improving her transportation facilities on the internationalized Rio de la Plata waterways. Port improvements are being made at Corumbá. The recently nationalized Lloyd Brasileiro, Brazil's principal shipping concern, is building several new steamers for service on the Paraguay-Paraná River. The Bolivian airline connecting La Paz and Santa Cruz with Puerto Suárez was extended to Rio de Janeiro in January 1936. By means of these railway, steamship and air services, as well as by her highways, Brazil is seeking to divert to her own ports the commerce of the upper Plata basin, now flowing in ever-increasing volume through Argentina. The Paraguayan Government has announced that it will construct a 250-mile paved highway from Asunción to the Brazilian frontier at the Iguassu Falls, whence there is a highway to Curityba. This road will give Paraguay her first direct overland contact with the Atlantic.
Brazil's ambitious plans in this area collide directly with those of Argentina. For, as Foreign Minister Saavedra Lamas declared before the Argentine Senate in 1932, his government aims at reconstructing the economic unity of the old Viceroyalty of La Plata, which in Spanish days governed the territories now forming Argentina, Uruguay, Paraguay and most of Bolivia. Two Argentine-Bolivian conventions signed September 17, 1937, represent carefully calculated moves in this direction. One removed many of the impediments to trade between the two countries, while the other established a mixed technical commission to investigate the possibilities of a railroad running from the railhead of the state-owned North Central Railway of Argentina near Yacuiba to Santa Cruz, with a branch to Sucre via the Camiri oil wells and refinery.[ii] If the project is declared feasible, the Yacuiba-Camiri section is to be built at once. The preliminary engineering studies are being financed by Bolivia and directed by the Argentine State Railways. This much-desired line would traverse the heart of the Bolivian oil zone. It would also tap a potentially rich farming, mining, lumbering and stock-raising region and divert to Argentina much of the commerce that Brazil hopes to capture with the Santa Cruz-Corumbá railway.
The outcome of the Chaco War made Argentine coöperation more than ever essential in the development of eastern Bolivia's oil reserves. Argentina had refused to permit tariff-free transit of Bolivian oil through her territory, chiefly because of the hostility between Standard Oil and the Argentine state petroleum enterprise, both competitors in the Argentine market. But in March 1937 this obstacle disappeared when all Standard Oil properties in Bolivia were confiscated by the government. Bolivia was then able to offer Argentina a share in the exploitation of her oil resources in return for tariff concessions. Accordingly, in an agreement signed November 19, 1937, Bolivia was guaranteed tariff-free transit of her petroleum across Argentina on the Argentine State Railways -- a privilege which is to terminate if the Bolivian oil fields again come under private control.[iii]
These agreements give Bolivia important diplomatic as well as economic advantages. Since it is now to Argentina's interest that the Paraguayan hold on the Yacuiba-Santa Cruz highway be broken, she may support Bolivia in the Chaco negotiations still proceeding in Buenos Aires. In any case, the economic and political relationship between Argentina and Paraguay will very likely be less intimate in the future. After all, Bolivia has much greater natural resources than Paraguay. Though Bolivia lost the Chaco conflict in a military sense, she certainly won it from the economic point of view. For Paraguay, in addition to losing her opportunity to share in the development of eastern Bolivia, ended the war in a state of financial prostration, with her army rent by factionalism, her man-power seriously depleted, and without those mineral riches which assure Bolivia's rapid recovery. Moreover, Bolivia's new railways, when completed, will greatly improve the country's strategic position in the event of another Chaco War.
If Paraguay loses Argentine support in the Chaco controversy, she is certain to seek more intimate relations with Brazil. But Brazil is not likely to risk the valuable position open to her in eastern Bolivia for such inducements as Paraguay has to offer.
This series of economic agreements will, of course, serve to sharpen the rivalry among Bolivia's neighbors for preferential positions in exploiting her market and natural resources. The emergence of eastern Bolivia as a productive area will add a new and important element to South America's economic life. Furthermore, the struggle between Argentina and Brazil to canalize the trade of that rich region across their own territories portends a realignment of South American political forces. This trend, already perceptible in the rapprochement of Bolivia and Argentina, lends added significance to the current armament race among the ABCP Powers.
[i] This opinion was not concurred in by Standard Oil engineers, who after a survey reported to the company that a pipeline across the Chaco Boreal to the Paraguay River was not feasible.
[ii] The Bolivian Government has itself commenced work on a Sucre-Camiri railway: fifty miles were reported to be under construction at the beginning of 1938. But there is little prospect that Bolivia's war-strained finances will permit the completion and equipment of the entire line.
[iii] The Standard Oil Company's suit to recover its confiscated properties is still pending before the Bolivian Supreme Court.