Created: 3/16/1954

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To assess the current situation and probable developments in Bolivia, particularly the character and stability of the present regime.


is one of tbe most economically retarded and politically unstablein Latin America. The presentRevolutionary Movement (MNR) regime is one of the few broadly based governments which Bolivia has had. It enjoys wide popular support, particularly from labor and middle class elements.

The only significance of Bolivia'sweak military and para-military threes lies in their ability to influence the domestic political situation. At present the MNR firmly controls all threeof Bolivia's forcesArmy (which includes the Airheand the civilian militia. If any two of these groups combined against the government, however, they could almost certainly seize power.

While the general orientation of the MNR is left of center, dominant influence in the government is now exercised by the party's moderate wing. Although it has accepted some support from Bolivia's two small Communist groups, the MNR is making increased efforts to reduce Communist influence. Nevertheless, it has hesitated torontal assault

on the Communists and they retain some influence, especially in the school system and among organized labor.

Although the MNR government was critical of the US when it first came to power, it has become increasingly pro-US in its outlook because of US support of the regime. However, should thelose confidence in US support, it almost certainly would revert to an anti-US orientation.

The MNR's ambitious program toand diversify Bolivia's economy and lessen its dependence on tin exports is the most vigorous attack to date onbasic economic problems, but it is unlikely to bring about substantialin output in less than two years. Meanwhile, owing largelyharpin tin prices, Bolivia faces growing economic difSculties, althoughUS aid has averted economic

Afterhen emergency US aid will be exhausted, the government's stability and political orientation willgreatly upon its ability to obtain



outside support. II it cansuch aid, the MNR will probably continue its present moderate course without any serious threat to itsin power.

In the absence of external aid, the government would soon face an economic crisis and its stability would becometenuous. The MNR's labor wing would probably demand and receive an increasingly important role in the government. It mightontrolling voice in the government, possibly with support.eftistwould almost certainly be turbulent and short Lived.

Moreover, to the extent that theregime moved leftwardould lose much of its moderate support. In these circumstances the chief opposition party, the rightist, uitranationalist BolivianFalangeould probably,eriod of time, amass sufficient backing to bringuccessful coup. Thus sooner or later the presentwould almost certainly be

FSB regime would not bestabilizing the economicitself receiving substantialaid. Even with suchFSB would have difficultypopular support.

any case, the basic weaknessesBolivian political, economic, andstructure are such that nowill be able to preventunrest and economic crises,degree of political instabilityfor some years to come.

IL Further political and economicwould alrnost certainlyCommunist strength. However, the Communists alone could not gain and maintain control of Bolivia In thefuture.


Bolivia ls one of the most economically retarded and politically unstable countries in Latin America. Formidable geographical obstacles and lack of transportation facilities have hampered national growth. The small population ofs clustered tnostly on the high Andean tableland, while the more fertile but less accessible lowlands to the east are largely undeveloped. Most of the population existsubsistenceThe only developed industry Is mining, particularly of tin, which provides the great bulk of government revenues and foreignNormally slightly over half of Bolivia's tin goes to the UK. and theto the US. The fact that Bolivia Is the sole significant Western Hemisphere source of tin gives It considerable strategic Importance to the US, although Boliviaprovidesercent of USrequirements

olivia's remoteness and poverty Inresources have greatly retarded Its social and political progress. The great bulk of the people are Illiterate Indians and(persons of mixed ethnic origin) who have had no effective voice In nationalmall minority of literate whites andhave constituted the effective bodyThe country has been dominatedtill smaller group of large landholders, senior army officers, and representatives of theinterests. These groups were unable to maintain political stability and showed little effective Interest In economic development or social Improvement. Bolivia's humiliating defeat in the Chacothe Ineptitude of the country's tradl-


leadership and stimulated the-demands ol middle class and labor elements for social, economic, and poliiical reform. Theinertia of the traditional ruling group in the face of these demands resulted in adecline of its prestige.

The National Revolutionary Movement (MNR) was organized by middle1 to press for economic and social reforms. The MNR participated in the Vil-Larroel, but the military elements dominant in that regime prevented the MNR from shaping majorNevertheless, during this period the MNR was able to broaden Its political base through its appeal to labor elements,to the miners. With the fall of VLUar-roel the MNR went into eclipse, but the failure of succeeding governments to effectreforms resultedevival of itsIn1 presidential balloting the MNR candidate, Victor Pazubstantial plurality of the vote of the narrowly restricted electorate, but thegovernment forestalled his election by Congress by turning over its powerilitary Junta. Inowever, this Junta was overthrownevolutionby the MNR with the support of the pobce and of armed workers, and Paz Estenssoro was called from exile ln Buenos Aires to assume the presidency.

The policies of the MNR government,its nationalization of the tin mines and agrarian reform, have aroused much Interest throughout Latin America. The other Latin American countries are closely watching the US attitude toward the new regime.


MNR. led by President Victorhas formulated the first broadof economic development and socialIt has undermined the power ofruling groups by purging the Armyits own militia, by nationalizingmines, and by instituting agrarianhas broadened the electorate lo includeIndians and mestizos byuniversal suffrage with no literacyand is making efforts to organize rural labor. Although these measures havethe embittered opposition of many in the previous ruling group, they have been generally popular and the net effect has been to strengthen the MNR's political backing.

IT. While the MNR regime is authoritarian. It enjoys broad popular support. Il has strong backing from urban and farm laborrobable majority of the middle class professionals, white collar elements, andof small and medium-sized farms. The MNR has the support of the powerful mine workers federation of0 members led by Juan Lechin, the leftistof Mines who is the second strongest figure in the present regime. The MNR also controls the other two major laborthe factory workers. and transport and communications unions. Moreover, the MNR dominates the Bolivian Labor Centralouncilby the MNR to represent labor at the national level and to strengthen government-labor liaison.

owever, the MNR Lsomogeneous party, and lis coherence is largely dependent on the personal relationsew key men. Although Paz Estenssoro is theleader and key figure, his party ls split roughlyresently dominant moderate wing, composed largely of middle classled by Vice President Siles Suazoore radical labor wing led by Lechin. Paz is Inclined toward the moderate wing. Thus far his unifying Influence, and the feeling of each wing that it needs the other have led both wings to accept compromise solutions on most Issues. For example, the labor wing pushed the MNR Into Immediateof the tin mines and expropriation of large landholdings, but the moderatesin securing approval of compensation lor these properties (although the amount has not yet been agreedhehave also successlully resisted laborfor sharp wage increases and for greater participation in management of the mines. Should Paz be removed from the scene, Lechin would probably succeed him. although not without some opposition.


eftist Influence in the MNR. Although dominant influence Is now exercised by its moderate elements, the general orientation of the MNR is left of center. The leftist cast of the MNR reflects not only the nature of some of its leadership and backing, but also the fact that it rose to powerevolutionary protest movement against previous conservativeAllegations have been made that the MNR Ls pro-Co minimis: because it hasvarying degrees of Communist support and because many of the objectives of the MNR (nationalization, agrarian reform,ave also been favored by the Communists

n fact, Bolivia's small and divided, but vociferous. Communist groups haveource of both support for and opposition to the MNR. They represent anotherof the same reaction that fostered the MNR. and have drawn their membership from some of the same social groups as has the MNR. Theyoothold In Bobvia by capitalizing on the growth of resentment against previous regimes and on the Latin American tendency to blame "capitalism" and "Yankee imperialism" for most national Ills. Two small parties are currently active, the Stalinist Bolivian Communist Party (PCB)rotskyUe group, the Revolutionary Workers Partyhe PCBembers, drawn mostly from middle class intellectual elements, particularly in the school system. The POR, withembers, is strongest among organized labor. The two partiesommon antl-US front on foreign policy, but have adoptedtactics on domestic issues. The PCB hasolicy of conditional support for the MNR; Itunited national front" and is apparently willing toat least temporarily. Its long termThe POR on the other hand, has been considerably more extreme and hasopposed MNR policies.

he advent of the MNR regime hasthe Communists in Bolivia and theyonsiderable degree of governmentof their activities. However, the MNR's attitude toward the Communists hasonsiderable evolution since the

evolution Initially the MNR accepted Communist support in its struggle for poweratter of expediency. Once In power, however, the MNR has tended to recognize the fundamental rivalry between itself and the Communists, and has graduallyore anti-Communist attitude. It has nbo recognized that close association with the Communists would diminish its chances of getting US aid. The Communists in turn have become increasingly critical of the MNR.

The MNR has made Increasing efforts to reduce Communist Influence in theand among labor and agrarian elements. For example, it hasumber of Communists and suspected Communists from important government and trade union posts, although the Communists retain somein the unions and in the school system. While Lechin. among others, cooperated with the Communists before the revolution, thus facilitating the spread of Communist doctrine in the labor movement, he and the POR are now rivals for control of labor. However, the MNR has hesitated torontal assault on the Communists because of: (a) thesupport it has so far received from the PCB; (b) its need lo draw upon PCB-influenccd groups for technical andpersonnel; and (c) its far greaterover Ihe threat from the right and its desire to avoid exposing both flanks

The Opposition from the Right. The rightist Bolivian Socialist Falange (FSB)the chief opposition to the MNR. Themall but militant ultranationaUst group drawn mostly from conservativeamong the middle class, has become the focal point for those opposed to the MNR. such as high ranking army officers removed by the MNR. the expropriated tin interests, and some large landowners. Some members of the Church hierarchy also are inwith the FSB, althwch the general Church attitude apparently is one oftoward the present government. The FSB denounces the MNR as Communistand seeks to overthrow it in favor of an authoritarian conservative regime. How-

ever, the FSB has so far been unable to gain much popular support, and itsoup are limited. Close MNR surveillance and security measures haveIt largely to clandestine activity. Many FSB and other opposition leaders have been forced into exile. The FSB is also weak in the key La Paz area, control of which has usually been essentialuccessful coup.

Military and Para-Military Forces. The only significance of Bolivia's extremely weak military and para-military forces lies In their ability to influence the domestic politicalAt present the MNR firmly controls all three components of Bolivia's forcesthe Army (which includes the Airhe police, and the civilian militia. No one of these groups could seize power If both others opposed it, but any two of them combined could almost certainly seize power,

The Army, the bulwark of previouswas shattered byut the MNR has rebuilt It to some extent. It now numbers0 and consists largely of short-term conscripts who receive little more than basic training. Its usable equipment consists largely of light infantry weapons. The Army Air Forceen,f them pilots, andircraft, mostly trainers. Its sole tactical unitofs. The MNR has purged the Army and the Air Force and keeps them under close surveillance. Most active officers are probably sympathetic toward the basic objectives of the regime. The regiments in the vital La Paz area and in the mining center of Oruro are the most dependable because .of higher pay and careful screening. However, many officers are disturbed by the leftist and alleged pro-Communist tendencies within the MNR; some of the younger ones areto the influence of various exiled officers who support the FSB.

There areational Police,long-service personnel, armed with light weapons. Except for the Army regiments In La Paz and Oruro, the police are probably the most efficient force in Bolivia, but are too few by themselves to cope with either the Army or the militia. They supported the MNR in2 revolution and arc now loyal to the regime.

civilian militia, numberingis composed in part of MNRdirectly responsible to President Pazpart of worker units controlled by theleaders. The MNR organizedfrom the armed workers andwhich supportedrder to bring them under control anda counterweight to the Army.the militia ls very poorlytrained, amounting in some cases tothan an armed mob, large numbersare fanatically loyal to thearc particularly strong in La Pazmining areas.


Bolivia's economic growth is hampered by formidable obstacles to communication; low levels. of literacy, health, and livinglack of investment capital; and Indian resistance to change. At least two-thirds of the population is engaged in agriculture and most farming isubsistence level. The small amount of commercial agriculture has been increasingly inadequate to meet the needs of the nonagricultural population. Thus Bolivia has toarge part of Its food. Industrial development, aside from mining, is limitedew simple processing and fabricating industries; it is retarded by the smallncss of the local market, highcosts, and the Inadequacy ofraw materials and fuels. Thus suchas exists for manufactured goods must also be satisfied mostly from abroad.

Under these conditions Bolivia's economy ls largely dependent upon mineral exports, mostly tin, antimony, and tungsten. Tinhave normally supplied aboutercent of Bolivia's foreign exchange andercent of government revenues. However, Bolivia is an Increasingly marginal tin producer and highly vulnerable to fluctuations in the world tin market. Since World War II, thetin content of Bolivia's ore and higher extraction costs have weakened Bolivia's com-


i ET-

position, thus reducing its ability to meet essential import needs. These economic difficulties have been aggravated by chronic governmental inefficiency andpersistent inflation, and political and social unrest

The MNR has launched an ambitious long-range program to expand and diversify the economy, largely by increasing production ofnd consumers goods. It hopes thereby to lessen Bolivia's need for extensive imports and consequent dependence onexports of tin. The government is stressing development of agricultural, forest, and petroleum resources in the lowlands and the Amazon basin. It is attempting tocommercial agriculture in place offarming, lo expand rail and highway facilities, and to encourage foreignThe MNR is utilizing US and UNassistance and hasoncession to private US interests lo develop oil deposits in southeast Bolivia.

However, the MNR has met seriousin its economic stabilization andefforts. Its hope that the revenues and assets gained from the nationalized tin mines would stabilize Its fiscal position and ease foreign exchange shortages was nullified by the precipitous decline in tin prices which began inoreover, thealso felt compelled toarge part of the liquid assets secured from mine nationalization In bonuses and unemployment compensation. These factors, together with continued governmental inefficiency and poor fiscal management, have intensified one of the most severe Inflations In Latin America. The government's attempts to stem the tideeries of wage, price, and currencymeasures have proved largely Ineffective.

Nevertheless by such means as borrowing on its foreign gold holdings, drawing on Its quota in the International Monetary Fund, liquidating exchange reserves, and above all securing emergency US aid, the MNR has at least temporarily staved off economicS grant orillion, mostly foodstuffs, In3 has helped assure adequate imports until about2 million increase Ln US technical assistance isood production program.


Bolivia's luture political stability willgreatly on the extent to which itscan prevent further economic de-terioratior. and meet development needs. Although the MNR hasigorous attack on Bolivia's basic economic problems, its ability to fulfil: Its ambitious program is limited not only by lack of capital but by the shortage of skilled administrative andpersonnel, the (eeling of insecurity in business circles, and some continuedand corruption in the government. None of the agricultural projects nowwill appreciably increase food production In the next year or two. Although the MNR apparently intends lo restrict expropriation to relatively few landowners, uncertainty on this point and occasional agitation overreform may lead to furtherood production in areas affected. Moreover, tin prices appear unlikely to rise significantly in the near future. Therefore, we estimate that the MNR is unlikely to be able to bring about substantial Increases Ln agricultural and industrial output In less than two years. Moreover, completion of the MNR program will require at least five years.

Meanwhile, the MNR's ability to retain broad popular supporl will depend greatly on whether it can meet the immediate problems of inflation and food shortages. Largelyesult of existing US aid further seriousdeterioration is unlikely beforend the MNR will probably face nopoll tic al challenge. Afterenewed economic distress is likely unless Bolivia can obtain additional external support If such aid were secured, the MNR would probably continue its present relatively moderate course; it would probably continue to move slowly on agrarian reform and would attempt to make some compensationto the tin interests.

the other hand, without economicthe MNR Government would soon exhaust its

slender resources and be unable tourther Inflationary spiral. Agitation from the right and left. Including the MNP. labor wing, would almost certainly Increase. We believe that tnase the MNR would feel compelled to move Increasingly toward the left to maintain its crucial labor support. The MNR's labor wing would probablyand receive an increasingly important role in the government It might gain avoice ln the government, possibly with Communist support However,eftist regime would almost certainly be turbulent and short-Uved-

Moreover, to the extent that the present regime moved leftward It would lose much of its moderate support. In these circumstances the FSB would probablyeriod of time amass sufficient backing, including disaffected army and police elements, to bring off acoup. Thus, without additional aid. the present government would almostbe overthrown sooner or later.

An FSB regime would not be capable of stabilizing the economic situation withoutreceiving substantial external aid. Even with such assistance, the FSB would have difficulty obtaining broad popular support. In particular, It would face formidablefrom the MNR.

In any case the basic weaknesses of the Bolivian political, economic, and socialare such that we believe that no Bolivian government, even with substantial external aid, will be able to prevent recurrent economic crises and social unrest from persisting for some years to come. Thus at best the long term outlook is for some degree of political InstabUlty.

Communist Prospects. So long as the MNR's moderate leadership feels relatively secure In power, it will probably continue Its efforts to contain and weaken theTo the extent that the MNR program Is successful, the government's ability to curb the Communists would be increased. By the same token, renewed economicand consequent political unrest would almost certainly lead to an increase inInfluence. If. in this event, the MNR moved more lo the left, it would be more willing lo accept Communist support If the MNR's labor wing went so tar as to split off, it would probably cooperate closely with the Communists.uccessful FSB coup would probably lead the MNRhole to cooperate at least temporarily with thein attempts to regain power. In any event, the Communists atone could not gain and maintain control of Bolivia in thefuture.


Bolivia's Internal weaknesses, Its past military defeats and losses of territory, and its lack of access to the sea have tended toational inferiority complex and senscof insecurity. Its long-range aspiration toacific port has occasionally caused strained relations with Chile and Peru. Fearful of the intentions ofcountries, successive Bolivian regimes. Including the MNR. have sought to playinterests off against each ether, as In the case of Argentina and Brazil. Althoughcordial relations with Argentina, an important source of foodstuffs, the MNR government Is resisting Argentineand seeking to decrease its dependence on Argentina by developing trade andwith Brazil.

The MNR's program has aroused much sympathetic interest in Latin America, and only Peru hastrongly unfavorable reaction. Peru fears that the example of the MNR program may lead to similar demands in Peru and that the MNR might encourage the Odria Government's opponents. Conversely, the MNR fears that its rightist opponents, many of whom have taken refuge in Peru, may secure Peruvian assistanceoup.

Bolivia's policy toward the US is primarily determined by its desire for US economicNevertheless, with the growth ofdemands for change which culminated in the MNR coup, there hasendency to blame alleged US "imperialism" for backing the tin Interests and for not helping Bolivia sufficiently, especially in times of economic

stress. This latent antl-US sentiment has been widely exploited by political leaders,the Communists, to blame the US for Bolivia's woes. When the MNR first came to power, domestic political exigencies and its uncertainty as lo US intentions made it quite critical or the USesult of subsequent US aid and the tolerant US attitude toward the regime, however, the MNR has become increasingly pro-US in Its outlook and has taken the position that Bolivia's interests will be best served by cooperating with the US. However, should the government come to feel that the US was not supporting it. active antl-US feelings would almost certainly increase again. Bolivia has generally supported the US ln the UN on important issues between the US and the Soviet Bloc, although like most Latin American states It has been less willing to follow the US lead on economic, colonial, and racial questions. In event of general war. Bolivia wculd almost certainly cooperate with the US,

t present. Bolivia has very limitedwith the Soviet Bloc. There arc no Bloc diplomatic missions in La Pax. although the Czech and Hungarianuenos Aires are accredited to Bolivia. Bolivia's trade with the Bloc is also insignificant.continuing economic difficulties would stimulate greater Bolivian Interest in closer diplomatic and trade relations with the Bloc, and thereby render Bolivian opinionto Communist propaganda. In thesethe USSR, by applying economic warfare measures to Bolivia, could securepsychological advantages there and elsewhere in Latin America.

-flCCKt J


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