Bolivia from the War of the Pacific to the Chaco War, 1880-1932

16

BOLIVIA FROM THE WAR OF THEPACIFIC TO THE CHACO WAR, 1880-

1932

The year 1880 marked a major turning point in Bolivian history. Themost dramatic event was the total defeat of Bolivia's army at the hands ofthe Chilean invaders and the loss of its entire coastal territory in the Warof the Pacific. Less dramatic but equally important was the establishmentof a new government to replace the previous caudillo regime. Though thereplacement of governments by military coups had not been anuncommon feature of political life in the Republic during the halfcentury since its creation, the new regime did in fact mark a fundamentalchange in national political development. It represented the first viablerepublican government of a civilian oligarchic nature. Though the lossof its direct access to the sea remained the most intransigent of Bolivia'sinternational problems from 1880 to the present day, the establishmentof a modern political party system and a civilian-dominated governmentled to political, economic and eventually even social and cultural changeswhich profoundly shaped Bolivia's historical evolution.

The fundamental stabilization and maturation of Bolivian politics after1880 was not the result of the war with Chile, but rather derived frombasic changes within the Bolivian economy that had begun at least 30years previously. Whereas Bolivia had been a major mineral exporterthroughout the period of colonial Spanish domination, it emerged in therepublican period as a minor exporter of silver and other minerals. Thecollapse of the imperial economy in the 1790s, the regional agriculturaldisasters of 1804 and 1805, the devastation of the civil wars andinternational conflicts of the independence period (1809-25), the break-up of the imperial customs union, and finally the collapse of the mitasystem of forced labour after 1825 all contributed to the decline of thesilver mining industry. In the 1840s production was only half that of the

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5 54 The Andean Republics

1790s. By 1846 it was estimated that there were some 10,000 abandonedmines in the Republic, two-thirds of which still contained silver but wereflooded and incapable of producing without the introduction of capitaland machines on a major scale. There were, in fact, only 282 active mineowners and their mines in the Republic in 1846 and they employed onlysome 9,000 miners, most of whom were part-time specialists whoworked in agriculture as well.

Apart from mining, woollen textiles for home or local consumptionand food processing were the predominant national industries. In theyears after independence the republican government attempted todevelop the cotton textile industry. But despite sporadic prohibitionsand continually heavy tariffs against cheap English cottons, the textileindustry of Cochabamba producing tocuyo (coarse cotton cloth) neverregained its eighteenth-century importance. Whereas in the colonialperiod it was estimated that the tocuyo industry of Cochabamba hadseveral hundred obrajes (workshops) producing cloth, these numberedjust one hundred by 1846. The cheap cotton textile needs of the Bolivianswere now filled by British cloths which dominated the market.

Bolivia thus remained an overwhelmingly rural society. Almost 90 percent of the 1.4 million population lived outside the cities and hamlets andproduced over two-thirds of the national product. Within rural society,the balance between haciendas and free Indian communities remainedmuch as it had been in the late colonial period. In 1846 there were over5,000 haciendas valued at 20 million pesos, and some 4,000 freecommunities valued at only 6 million pesos. The majority of the workforce, however, lived in the free communities. According to the 1846census 5,135 heads of families were hacendados and 138,104 heads ofhouseholds lived in the comunidades. Over 620,000 Indians lived on thecommunities and they made up a total of 51 per cent of the total ruralpopulation. The hacienda population olyanaconas (or landless labourers)probably numbered between 375,000 and 400,000, and the other 200,000persons of the rural population were probably freeholders in thesouthern regions or landless migrating workers who rented lands fromeither the communities or the haciendas.

While the haciendas obviously constituted the more commerciallyvaluable properties, they nevertheless were in a relative state ofstagnation and posed no serious threat to the densely populated regionswhere the free communities predominated, except in two exceptionalareas: the Yungas and the Cochabamba valley. The former was the major



Bolivia

Table i. Population of Bolivia for the principal departmentsand capital cities, 1846, 1900,

555

DepartmentCapital

La PazLa Paz

CochabambaCochabamba

OruroOruro

PotosiPotosi

ChuquisacaSucre

Santa Cru^Santa Cruz

TarijaTarija

BentTrinidad

Total

1846

412,86742,849

279,04830,396

95.3245,687

243,26916,711

156,04119.235

78,5816,005

63,8005,I29

48,4063,'94

1,378,896

1900

426,93052,697

326,16321,881

86,08113,575

325,61520,910

196,43420,907

171.592M,874

67,8876,980

25,6802,556

1,633,610

1950

948,446321,073

49°>47580,795

210,26062,975

5 34,39945,758

282,98040,128

286,14542,746

126,75216,869

H9,77OIO,759

3,019,031

Sources: 1846: Jose M. Dalence, Bosquejo estadistico de Bolivia (Chuquisaca,1851). 1900: Republica de Bolivia, Oficina Nacional de Inmigracion,Estadistica y Propaganda Geografica, Censo general de poblacion, 10 desetiembre de tfoo (2 vols., La Paz, 1902—4). 1950: Republica de Bolivia,Direction General de Estadistica y Census, Censo demografico, 19)0 (LaPaz, 1955).

source of coca production. The latter had seemingly recovered from theeconomic shock of the late colonial crisis and was now the principalnational producer of the two basic grains, wheat and corn.

Within the free communities there was, however, continuing changeand much internal stratification. The elimination of the mita obligationhad clearly favoured the originarios, or original members of thecommunities with the greatest access to lands. Their numbers seems tohave grown or at least stabilized and they were estimated in the 1840s torepresent 3 5 per cent of all heads of households in the free communities.The agregados with land (or later arrivals with lesser landholdings in the



5 5 6 The Andean Republics

communities) represented 42 per cent of households and a new andimportant group of foresteros without any land now accounted for 23 percent of all Indian families. Evidently, the slow growth of population wasbeginning to create a landless class of Indians in the free communitiesthemselves.

The stagnation of the mining industry and the failure of nationalmanufactures to meet local demands meant that for the first quartercentury of its existence - from 1825 until well into the 18 5 os — Bolivia wasin the unusual position of being in a constant deficit in its balance oftrade, which could only be met by the illegal exportation of silver and bya very active contraband trade. Government deficits were a constantphenomenon as expenditures, especially of a military nature, faroutstripped the resources of the state treasury. By mid-century, Boliviawas if anything in worse condition than it had been at the beginning of itsrepublican life, and it appeared that things would only deteriorate further.However, in the decades after 1850, paradoxically coinciding with themost chaotic political turmoil and violence, the export sector of theBolivian economy — the mining sector — achieved steady growth, first inthe traditional altiplano, and later in new areas on the Pacific littoral.

The cause of this growth still remains to be fully determined. To beginwith, it is evident that a series of events external to Bolivia played adecisive role in awakening the mining giant. The increasing productivityand declining costs of the steam engine in Europe and North America inthe first half of the nineteenth century meant that the steam engine of the18 5 os and 1860s was a far cheaper and more readily available and reliableitem than it was in the 1820s. Thus the costs of opening up a flooded minewere considerably reduced. Moreover, the growth of Peruvian andChilean mining in this period provided a general regional background ofcapital and technical expertise which could be readily exported to theincipient Bolivian industry. Finally, the decline of international mercuryprices reduced a major traditional cost item for silver extraction.

These were the favourable general international conditions for theexpansion of the mining industry in the Bolivian altiplano in the thirdquarter of the nineteenth century. The capital, however, was at firstBolivian, and the key question remains: where did this capital comefrom, given the relative stagnation of the Bolivian economy during thequarter of a century after independence? From an analysis of the earlymining companies in Potosi and Oruro, it is evident that a disproportion-ate share of the capital stock came from the merchant and landed



Bolivia 5 5 7

aristocracy of the grain-producing Cochabamba valley. It would thusappear that the steady but unspectacular growth of the nationalpopulation, despite some rather severe cholera epidemics in the 18 5 os,created an expanding internal market for agricultural production,especially for corn and wheat. From this, the Cochabamba elite was ableto extract surplus capital. Also Cochabamba seems to have had a class ofincipient entrepreneurs who were more than willing to undertake therisks of heavy capital investments in the traditionally quite unpredictablemining industry.

Starting in the 1830s, it became popular to establish national jointstock companies to mine silver, the most important of which was theHuanchaca Mining Company founded in 18 3 2 to work the Porco minesin the province of Potosi. After heavy investments and many difficultiesthe company was purchased by the merchant Aniceto Arce in 1852, whowas finally able to realize a profit from its production. It was also in themid 1850s that the Aramayo family bought out the bankrupt RealSocavon Mining Company of Potosi. Finally in 1855 the merchantGregorio Pacheco took over the Guadalupe mines from one of hisdebtors in the Chicas district of Potosi province. Thus within a few yearsthe three major silver mining dynasties were implanted in the miningdistricts of Potosi. With new infusions of capital and leadership, thereorganized companies began to prosper. By the 1860s the three leaderswere well into rationalizing their operations and undertaking long-termstructural changes in the industry through the introduction of modernmachinery, pumping operations and long-term shaft reconstructions. Inthe 1870s when the silver mines of Caracoles on the Pacific littoral alsocame into full operation, foreign capital began to arrive in everincreasing amounts. By the second half of the decade the Bolivian silvermining industry can be said to have reached international levels ofcapitalization and technological development and efficiency. By the late18 70s Bolivia was once again one of the world's leading producers ofrefined silver, and a thriving and vital export industry had revitalizedboth the internal economy and Bolivia's international trade.

The development of a modern sector created new demands not onlyfor labour but also for foodstuffs. A new dynamism entered the area ofcommercial agriculture and the opening up of the new railway linkscreated new markets for hitherto marginal areas. As a result the haciendasystem, which like mining had been stagnating for almost half a century,was able to recover and expand. At the same time, the decline in the



5 j 8 The Andean Republics

Table z. Silver production in Bolivia, iy 80-1909 (output in marks of silver)

1590-99*1740-49*

1780-891790-991800-091810—191820-291830-391840—491850-591860-691870-791880-891890—991900—09

Average annualproduction

803,27292,119'

387.'7O385,183*97>47*208,032156,110188,319

'9'.923201,482344.43 5'95 5.629f

1,111,568'1,655,762

799.791

Maximum yearoutput

887,448

"1,947

416,676404.02537i.4i6338,034177.7*7288,154256,064

2*4,31339J.3O4

1.150,7701,660,8042,630,9071,288,452

Minimum yearoutput

7*3.591

81,081

335.848369.37"194.34767.347

I3Z.433169,035142,029

189,5733I2, '7439I>3O4597,686

1,202,927

385.5**

Notes: " Maximum output decade in the colonial period.* Minimum output decade in the colonial period.' Estimated production figures. All production figures after 1859 have been convertedfrom kilograms to marks at the conversion rate of 230 grams = 1 mark.Sources: Pre-1780: see the more complete table in Herbert S. Klein, Bolivia, the evolution of amulti-ethnic society (New York, 1982), appendix table 2; 1755—1859: Ernesto Ruck, Gut'ageneral de Bolivia, primer ano (Sucre, 1865), 170-1; 1860-75: Adolf Soetbeer, Edelmetall-production und Werthverbaltniss qviscben GoldundSilher (Gotha, 1879); 1876~9i: The miningindustry, its statistics, technology andtrade, vol. 1(1892), 207; 1892—3: ibid., vol. 11 (1893), 333;1894: ibid., vol. VII (1898), 203; 1895-1904: Republica de Bolivia, Oficina Nacional deInmigracion, Estadistica y Propaganda Geografica, Geografta de la republica de Bolivia (LaPaz, 1905), 3 5 4—5; 1905-9: Walter Gomez, ha mineria en eldesarrollo economico de Bolivia (LaPaz, 1978), 218-20.

importance of the Indian head tax, at one time the major source ofgovernment revenues, meant that the national government no longerhad a vested interest in protecting the free communities in their lands.The land titles of the free communities were challenged during theadministration of Mariano Melgarejo in the 1860s, but Indians resistedand the communities effectively retained control over their lands. But bythe 1870s the whites and cholos (mestizos) were increasing their pressureand the growth of new markets provided the economic incentive for thelanded elite to undertake a full-scale attack. The attacks were justified onthe classic nineteenth-century liberal grounds that the communities were



Bolivia 5 5 9

an anachronistic system of land tenure and a barrier to social integration.The dominant landed class forced upon the communities in the 1880s asystem of direct land purchase in which the titles to the land were held byindividuals and not the corporate group. The creation of a free Indian'peasantry' holding dejure title gave the hacendados the power to breakup the de facto control of the communities by purchasing a few smallparcels and thus destroying the cohesion of the community. The rest wassimple, with fraud and force being as comon as simple purchase, andsoon there was a major expansion of haciendas throughout the highlandsand the adjacent sub-puna valleys.

Thus the period from 1880 to 1930 saw Bolivia's second great epoch ofhacienda construction. Still holding half the lands and about half therural population in 1880, the Indian communities held in 1930 less than athird of both. The power of the free communities was definitely brokenand only the marginality of the lands they still retained and the stagnationof the national economy after the 1930s prevented their completeliquidation.

The progressive decline of the community meant not only the loss ofland title, but of social cohesion as well. While many of the haciendas re-created the political and social organization of the free communities, thehacienda ayllus or governments, were often powerless to protect theirmembers from expulsion from the estates. Moreover, the need forlabourers on the estates was less than the requirements had been for theformer free communities. The result was an increased breakdown ofIndian social norms, migration to the cities and the expansion of thecholo (or mestizo) population, rural and urban. The only thing preventinga total destruction of Indian culture was the continued growth of theIndian peasant population throughout the nineteenth century. Though aseries of epidemics at mid-century had slowed that growth, thedisappearance of such communicable diseases as cholera by the lastquarter of the century allowed for the continued strong rates of growth.In addition, in the absence of public education in the countryside prior tothe 1930s, the mass of the rural population remained not only illiterate,but largely ignorant of even the national language. Quechua remainedthe predominant language, with Aymara second.

Bolivia remained predominantly a rural and Indian peasant nation wellinto the twentieth century, despite the growth of a modern export sector,the dramatic expansion of the commercial agricultural network and thehacienda system, and even the growth of modern urban centres. In 1900



560 The Andean Republics

at least three-quarters of the population remained rural and indigenouspeoples still accounted for a little over 50 per cent of the total populationof 1.6 million (see table 1 above). Spanish remained a minority languagein the Republic, though the only one used in national economic andpolitical life.

The civilian governments which were established in Bolivia after 1880were constructed on the base of a small percentage of the nationalpopulation. To all intents and purposes they were representative only ofthe Spanish speakers, at most only a quarter of the national population.And given the literacy requirements for voting, as well as the financialrestrictions for holding office, the Bolivian regime was in every sense ofthe word a limited participation political system. The electoratenumbered only 30,000 to 40,000 persons in the period up to 1900. Theelite were concerned to keep the Indian masses out of politics as well asdenying them access to arms or any other effective means of protest. Thearmy, especially after its professionalization and modernization, becamean indispensable tool to maintain Indian submissiveness, and wasconstantly called upon to suppress the periodic Indian uprisings. Theelite divided into political parties and even resorted to arms to overthrowgovernments. But such acts of conflict and violence were quitecircumscribed and largely urban and intra-class affairs. Appeals from theelite to non-elite and non-Spanish speaking groups were extremely rareand the political life for the period 1880-1932 was largely carried outwithin strictly defined rules. Only once, in 1899, would Indian peasantsbe allowed to participate even temporarily in a national political conflict,and this intervention ended in total suppression of the Indian kurakas(chieftains). For the Indian rural masses, political expression wasconfined to traditional village elders or temporary leaders of revolts wholed them in 'caste wars'. These were uprisings confined to smallcommunities and were exclusively defensive in nature, either protestingagainst increasing exploitation in general or attacks on land rights inparticular. Until well into the twentieth century, national politics werethe exclusive concern of only 10 to 20 per cent of the population.

Intellectual life, which had stagnated since independence, revived after18 80 under the combined impact of relatively stable civilian government,increased national wealth, the professionalization of the occupations,and the establishment of modern curriculums in the schools. Individual



Bolivia 561

writers now found kindred groups, and individuals of elite families hadample opportunity to live abroad, and participate in the latest LatinAmerican or European movements. Thus the Bolivian poet RicardoJaimes Freyre joined Ruben Dario in Buenos Aires and was a powerfulvoice in the modernist movement which swept through SpanishAmerican and Spanish letters. Writers like Gabriel Rene Moreno,Bolivia's leading historian, found employment in the libraries andarchives of Chile, and novelists and essayists like Alcides Arguedas,living in Paris, became known throughout the Americas. Bolivians cameto term the writers who came of age in this period as the 'generation ofthe i88os\ It was the first really coherent generation to appear in theliterary life of the Republic and provided an important base upon whichall later cultural developments were built. The period from 1880 to 1920was in many ways a golden age for national literature.

In the sciences, however, the traditional structures of the nationaluniversities prevented any serious advance. Although the Bolivianmining industry was as technologically advanced as any in the world bythe 1880s, all its machinery and its engineers were imported from the bestschools in Europe and North America. Few native engineers wereproduced and no significant discoveries, even in metallurgy, occurred inBolivia. The problem in what Bolivians called the 'exact sciences' was thetotal lack of an infrastructure. Low budgets and part-time teachersprevented the development of scientific laboratories or systematicresearch. Whereas novelists, poets, essayists, historians, even socialscientists could develop out of the traditional professions of law,theology and medicine, this was not possible in the sciences ortechnology. While Bolivians trained and working abroad did participatein the development of modern science in the advanced countries, untilthe present day Bolivia has remained an importer of science andtechnology.

In the plastic arts, economic stagnation and the concurrent decline ofthe Catholic church in the first decades of the nineteenth century hadserved to bring to an end the great age of creative artistic activity of thecolonial period. Sucre's elimination of tithes and confiscation of churchincomes and properties had brought the building of churches to a halt.With the church and wealthy pious citizens no longer available forpatronage, the demand for paintings and carvings also declined. Thenineteenth-century church also became less tolerant of folk Catholicism,more timid in its acceptance of native cholo and Indian art styles and




archly conservative in its overall artistic taste. Thus when churchrevenues again became significant after 1880 and major construction wasresumed, the clerics and the white elite rejected Bolivia's rich colonialartistic heritage and slavishly adopted the most reactionary of Europeanmodels. The result of these factors was the stagnation of Bolivian plasticarts until well into the twentieth century, and the elimination of theIndian and cholo masses from significant participation in the cultural lifeof the nation.

The growth of the export sector, especially the silver mining industry inthe second half of the nineteenth century, and especially during the twodecades after 1880 (see table 2 above for silver production, 1880-99),made the Bolivian economy increasingly vulnerable to internationaleconomic forces. Both the importers of manufactured goods who paidfor their purchases with hard currency earned from mineral exports, andthe government which had become totally dependent on taxes oninternational trade, were now intimately involved with the fortunes ofthe export sector, which in turn became ever more vulnerable tofluctuations in international demand the more successful it became. Thusthe government, the mine owners and the national elite were subject tointernational constraints creating problems of stability over which theyhad little control.

Bolivia was a classic example of an open economy. Since the bulk ofinternal purchasing power came from the leading mining sector, it wasextremely vulnerable to changes in prices of its primary exports.Moreover, even in the mining sector, until late in the twentieth century,it was an economy dominated by one metal - silver until 1900, and thentin. Thus world price changes had a direct and immediate impact on thelocal economy. Powerful regional elites could be eliminated overnightby abrupt changes in international prices with a consequent disruption ofthe very foundations of the governing elite. Bolivians learned to livewith this uncertainty and tried to respond as quickly as possible to newprice incentives. But the limitations of natural resources guaranteed thattheir response also had its limits and that long-term economic progresswas not inevitable for the nation as a whole. It was this uncertainty whichexplains much of the behaviour of the mine owners who were thepredominant political leaders in the post-1880 period.

Having initially organized themselves politically to break the govern-ment monopoly over foreign sales and forced local purchases, the new



Bolivia 563

mining elite soon began to operate as a more coherent pressure groupto obtain governments more responsive to their needs. With theirmines coming into full production just as a long-term secular decline insilver prices was beginning on the world market, the new elite wasconstantly forced to lower costs and raise productivity. This involvedthe increasing use of machinery, of electricity and, above all, themodernization of transportation, the most expensive element in themining process. While the mechanization of the mines and theirelectrification would be the exclusive concern of the Bolivian mineowners, the transport problems were beyond even their capitalresources. Government subsidies and international finance were impera-tive. Thus the miners wanted stable civilian government whose fiscalresources could be devoted to massive railway construction.

Political parties were created in Bolivia out of the divisions anddebates over the War of the Pacific. For the Bolivian mine owners theoutbreak of the war in 1879 was a terrible shock. They saw it as a fatalbreak with their new sources of capital in Chile as well as a seriousdisruption to international trade. They blamed the preceding militaryregimes for the war and, grouping themselves around two key figures,Mariano Baptista, a lawyer for the mine companies, and Aniceto Arce,the nation's largest single mine owner, formed a powerful pro-Chileanpeace party. Eventually the party threw its weight behind the enlight-ened General Narcisco Campero who had helped overthrow the Dazamilitary regime in December 1879, and who then directed the diminishedBolivian war effort. The Bolivian mine owners sought a rapid end to theconflict with Chile and indemnification for all lost territories to be usedexclusively for railway construction. Meanwhile, the anti-Chilean andanti-peace group gathered their forces behind the popular ColonelEliodoro Camacho, the leader of the anti-Daza revolt and a leadingliberal theoretician. Thus the Conservative and Liberal parties emergedby the end of the war. They were supposedly ideologically opposed. Butthe Conservatives, who modelled themselves on other similar LatinAmerican parties, were, for example, only modestly pro-clerical. Andalthough the Liberal party was vigorously anti-clerical, the Bolivianchurch, which had been nationalized by Bolivia's first republicangovernment, was too weak to be the cause of serious conflict. Bothparties in fact concentrated their energies on the problems of politicaland economic modernization.

General Campero completed his legal term in office, and presided




over completely free elections in 1884. The eventual winner, after thenecessity of a congressional second count, was the maverick mine owner,Gregorio Pacheco, Bolivia's second leading silver producer. WithMariano Baptista as his vice president, Pacheco initiated the era known asthe 'Conservative Oligarchy', which lasted from 1884 to 1899. Duringthis period the two parties fully defined themselves, while successivegovernments concentrated on achieving a settlement with Chile andpromoting major railway construction.

Although Pacheco promised to remain neutral in the elections of 1888,in fact the Conservative regime threw its support behind Aniceto Arce.As a result, the election of 18 8 8 became a violent affair with the embitteredLiberals finally abstaining altogether. Thus there was a return to the useof violence in politics in the late 1880s. This resort to violence was madeinevitable by the refusal of all governments, Conservative and, later,Liberal, to relinquish the presidency to the opposition party. Once inoffice and close to the only major source of income apart from miningand the haciendas, politicians refused to give up the spoils in office.Voting in all elections was open and readily controlled by centralgovernment appointees in all the local districts, and victories in bothpresidential and congressional elections were easily contrived. Thegoverning party guaranteed its majority in Congress, but did permit asubstantial representation there of the opposition parties, to provide aneasily supportable escape valve which did not seriously threaten its owncontrol over office. The position of president, however, had to besecured at all costs. Throughout both Conservative and Liberal eras,therefore, political violence was endemic. But it should be stressed thatthis violence was usually restricted to civilians, to the urban environ-ment, and involved little bloodshed. Violence also seemed to be confinedto periods following elections when a defeated opposition party, andmost of the voters, felt that the government had violated their rights.The tradition of golpes (coups d'etat) remained a permanent part of thepolitical landscape, but they did not necessarily represent either thebreakdown of civilian rule or the instability of political life. While latercommentators on Bolivia were to count the number of revolts andassume total disruption, the period from 1880 to 1956 was in fact one ofremarkable continuity and stability despite the periodic resort to limitedviolence.

The presidency of Aniceto Arce (1888—92) was notable for theinitiation of the vital railway link from the Chilean port of Antofagasta to



Bolivia 5 6 5

the city of La Paz, thus giving Bolivia access to the sea by rail for the firsttime in its history, and the beginnings of a modern road network. Arce,in what proved to be the most productive of the Conservative regimes,was also instrumental in professionalizing and controlling the army.Another fraudulent election in 1892 brought Mariano Baptista, theideologue of the Conservative party, to the presidency. Like hispredecessors, Baptista (1892-6) concentrated on railway construction.He also signed a preliminary peace treaty with Chile and began thedevelopment of Bolivia's natural rubber resources in the Acre territories.In his turn Baptista handed over the presidency to the last of theConservative oligarchs, the mine owner Sergio Fernandez Alonso(1896—99). By this time, however, the power of the Conservative regime,which was firmly entrenched in southern silver mining areas and the cityof Sucre, was being progressively eroded by the collapse of silver priceson the world market. In contrast the Liberals found their strengthprogressively increasing, associated as they were with the rising urbanprofessional classes of La Paz and with non-silver mining groups, aboveall the new tin miners, who aimed to displace the Conservative oligarchy.

The rise of tin production as the primary industry of Bolivia after 1900had its origins in developments during the Conservative era. The greatage of the modern silver mining industry had seen Bolivia obtaining thelatest in mining technology, including the \ise of power tools andelectricity. At the same time, the silver magnates and their Conservativeregimes had made modern communications their primary task; inparticular, a vital rail network connecting the mining regions to thePacific coast had been constructed.

When silver collapsed on the international market, technology andcommunications existed which could be transferred to other metals. Inthis case a fortuitous expansion in the world demand for tin (for canningand a hundred other new industrial uses), coinciding with the exhaustionof the traditional European tin mines, allowed Bolivia to capitalize on itsresources and to respond quickly and effectively. Tin had been animportant by-product of silver mining from the earliest times. But thecosts of shipping it in bulk to European smelters had always beenprohibitive, primarily because of Bolivia's geographic isolation andprimitive communications. The availability of cheap railway transporta-tion meant that it suddenly became profitable, for the first time, forBolivia to export tin. Equally, the fact that tin was to be found in exactly




Table 3. Tin production in Bolivia, 1900-39 (output in metric tons)

Average annualproduction

Maximum yearoutput

Minimum yearoutput

1900-091910-191920-291930-39

14,90924,710

25,864

21,34*29,100

47>>9I"58.7*3

9.739

19,08614,957*

Notes:" 1929 * 1933.Source: Walter Gomez, La mineria en eldesarrollo economico de Bolivia (La Paz, 1978), 218-20.

the same mining areas as silver, and often in the very same mines, meantthat there was relatively little economic or social dislocation in the shiftfrom silver to tin.

For the traditional silver elite the transition was less easy toaccomplish. First of all, the growth of tin mining took on a boom-likequality as production rose from quite minimal levels to massive exportsin a period of less than ten years. Although the general mining zonesremained the same, there was a subtle but important shift of emphasisnorthwards, with the mines in northern Potosi and southern Orurohaving the dominant role in production. Finally, the shift was sosudden and the capital invested in fixed assets so heavy, that many silverminers found it difficult to change over to tin. The result was that aplethora of foreign companies entered the market, and a new group ofBolivian entrepreneurs emerged for the first time on the nationalscene.

All these changes caused a major rupture in the national politicalscene. The old Conservative elite, entrenched in Potosi and its sup-porting town of Sucre, found itself incapable of containing the growth ofthe opposition Liberals. At the same time the enormous expansion of LaPaz, which now became the key servicing centre for the new tin miningindustry, accentuated its dominance in national economic and social lifeeven further. This led to a combined Liberal and regionalist revolt in1899, in which the largely Liberal elite of La Paz called for localautonomy and the overthrow of Conservative rule.

The revolt of 1899 was in fact a rather costly and extensive militaryoperation, which proved so difficult to win that the Liberals wentbeyond the traditional rules and encouraged the Indian peasant masses toparticipate. The result was the temporary intervention of some Indian



Bolivia 567

groups in national political life for the first time since the early years ofthe Republic. But once victory was achieved by the Liberals, not onlywas federalism forgotten as La Paz became the de facto capital of thenation, but the Indian troops were disarmed and their leadersexecuted.

The new century thus saw the establishment of a new government andthe creation of a new mining industry. The Liberal regime differed fromthe Conservative regime in few fundamental aspects. Both were com-mitted to massive government subsidization of transport, heavy supportfor the mining industry and the development and modernization of itsurban centres. Both regimes actively sought the destruction of the Indiancommunities and the expansion of the hacienda system. Finally, bothproved to be indifferent to the question of the church, which caused somuch conflict in most other Latin American states.

During the Liberal era, the old patterns of political participationpersisted. While congressional elections remained relatively free, elec-tions for the presidency were controlled, with a corresponding resort tolimited violence as the only means for 'out' politicians to reach theexecutive office. An open press and civil liberties (for whites andcholos) were maintained. But a new type of political leadership nowemerged. Reflecting the complexities of the new mining era, the tinminers were far too involved in their own affairs to participate directly innational life. At the same time, the systematic support given to educationand professionalization by the Conservatives had created a class oflawyers and letrados sufficiently numerous and experienced to run theaffairs of the government. Thus was born what later political analystswould call the rosca, a government of professional politicians operatingprimarily in the interests of the leading tin barons of the nation. Theeconomic power groups were now no longer required to intervenedirectly in the political process to obtain their own ends. The tin minerswere able to concentrate fully on the intense and competitive struggle fordomination in the Bolivian tin mines.

There were no restrictions on foreign investments in the tin mines andfrom the beginning of the tin boom Bolivia was open to all types ofentrepreneurs and engineers from abroad. European, North Americanand even Chilean capital competed with local Bolivian capitalists forcontrol of the tin mine sector, and hundreds of companies wereestablished, many of them often working the same local mountain of tin.It is therefore perhaps surprising that after three decades of intense




competition Bolivians emerged by the 1920s as the dominant group inthe industry.

Of the three major leaders, the most powerful was unquestionablySimon I. Patino. Born in the Cochabamba valley in 1860, Patino appearsto have come from an artisan and part cbolo background. He received alocal secondary education and then apprenticed himself to variousmining and mine equipment importing firms in the 1880s and early 1890swhen the silver industry still predominated. In 1894 he purchased hisfirst share in a tin mine in Oruro, in the canton of Uncia on the border ofthe province of Potosi. By 1897 Patino had acquired by purchase fullcontrol of the mine, and in 1900 he struck one of the richest tin veins everfound in Bolivia. By 1905 his La Salvadora mine had become the singlelargest tin mine in Bolivia, and Patino had a full complement of foreigntechnicians and the latest in refining equipment. From this initialinvestment, Patino rapidly expanded his holdings both vertically andhorizontally. In 1910 he bought out his neighbour, the British-ownedUncia Mining Company, and in 1924 completed his domination of thetwo mining centres of Uncia and Llallagua by buying the ChileanLlallagua Company. He now controlled about 50 per cent of nationalproduction, with a labour force of over 10,000 workers.

Meanwhile Patino turned his attention to the vertical integration of hismining operations, and, in a move rare in Latin American capitalistcircles, moved to control his European refiners. After joining forces withhis North American consumers, he eventually took over in 1916 theworld's largest smelter of Bolivian tin, Williams, Harvey and Companyof Liverpool. By the early 1920s, Patino lived permanently abroad andcould by then be more accurately described as a European capitalist,given his vast non-Bolivian holdings. Nevertheless, he remainedBolivia's dominant miner, its chief private banker and its most powerfulcapitalist until his death in 1943.

Of the two other leading tin miners who emerged to divide evenly theother half of total production, one was also Bolivian, belonging to theold silver mining family of the Aramayos, and the other, MauricioHochschild, was a European Jew. Both the Aramayo and Hochschildcompanies had heavy inputs of European capital, but both were — unlikethe Patino firms - largely run from Boh'via itself. While Hochschild hadsome investments in Chile, his primary residence virtually to the endof his career was in Bolivia, and this was also his principal area ofinvestment. For the Aramayo family too Bolivia was the primary area



Bolivia 5 69

of activity. Thus by the 1950s, the big three miners who dominated tinproduction, and a good proportion of the lead, zinc, wolfram and otherlocal mines as well, were based primarily in Bolivia or, like the Patiriocompanies, wholly owned by Bolivian nationals. Given the totally opennature of the Bolivian mining industry to all foreign entrepreneurs sincethe middle of the nineteenth century, such national control was trulyremarkable.

The withdrawal of Patino and the other new tin magnates from directinvolvement in national affairs left Bolivian politics in the hands of anelite of rising urban upper middle-class professionals and representativesof the provincial landed elite (men of modest landholdings and relativelyfew peasants, but with solid social backgrounds). Almost all these menhad legal training, and while committed to a liberal conception ofparliamentary government and constitutional law, believed strongly inthe caste system and rule by the white oligarchy.

The social structure of Bolivia remained surprisingly stable, despite allthe recent and very, rapid changes. Only 13 per cent of the populationwere listed as 'white' in the census of 1900. Equally, while the censussuggested a major growth in urban population since 1846, this was basedon the rather generous definition of urban as any community over 200persons. Using the more realistic definition of towns over 20,000population, however, little significant change had occurred. From 1846to 1900, the percentage of the population living in such towns hadincreased from 6 per cent to only 7 per cent. Even La Paz, the largesturban centre, had only grown to some 5 5,000 persons in 1900, or just12,000 more than half a century before. Though new mines had createdseveral new towns in southern Oruro and northern Potosi, the boomingmining industry in 1900, with its 13,000 workers, still absorbed only 1per cent of the economically active population.

Thus despite the growth of a new export sector, the expansion of anew elite, both white and cholo, and the massive breakdown of Indianlandownership in the rural areas, Bolivia remained surprisingly tradi-tional in its social makeup. The Liberals therefore felt little compulsionto concern themselves with the serious class and caste problems whichdivided this multi-ethnic society.

The first Liberal president was Jose Manuel Pando (1899-1904), thegreat leader of the party in its years of opposition. Once in office, theLiberals virtually adopted all the policies of the Conservatives and, for



5 7° The Andean Republics

example, totally rejected federalism. Pando's administration, however, isbest known for its abandonment of traditional international positions,and the loss of national territory. The first of two major internationaldisasters was the Acre dispute. In the heart of the Amazonian rubberboom area, the Acre territories adjoined the Brazilian border and werelargely populated by Brazilian migrants. When the last Conservativeregime succeeded in establishing a customs house on the Acre river atPuerto Alonso and collected an enormous sum on the rubber beingshipped through to Brazil, the local tappers revolted. The Liberalgovernment sent in troops to the distant eastern lowlands to crush therevolt, but covert Brazilian support gave the rebels enough strength tostand firm. The result was total defeat for Bolivian arms and theannexation of the Acre territory to Brazil, for the sum of £z. 5 million, inthe Treaty of Petropolis in 1903.

The Liberal government had made a stand on the Acre territory — andlost. It was much less aggressive on the Chilean front. Here it went wellbeyond the most extreme concessions ever proposed by its Conservativepredecessors in an attempt to obtain funds and terminate a long-standingand politically sensitive issue which it felt was distracting nationalresources. Reversing their previous irredentist stand, which demandedan unqualified return of the territory seized during the War of the Pacific,the Liberals signed a formal peace treaty with Chile in 1904. Boliviaagreed to cede all its lands seized along the littoral, and gave up itsdemands for a Pacific port. In turn Chile agreed to construct a railwayfrom Arica to La Paz, provide a formal indemnification of £300,000,guarantee internal Bolivian railway construction loans, and give up itsspecial most-favoured nation arrangements on trade with Bolivia. Whilethe treaty formally resolved the Pacific littoral question, the issue has infact remained the major unresolved question of Andean internationalrelations to the present day. At the time the Acre and Chilean accordsgave the Liberals relative peace on the international front and extensivefinancial support to continue the railway construction programme.

The second president of the Liberal era was Ismael Montes (1904-9).A lawyer by training, Montes represented the new breed of middle-classurban politicians. A forceful personality with a shrewd instinct forpolitics, he was able effectively to prevent the rise of an opposition partyof 'outs' until after the first world war. In this effort he was aided by thebeginning of the boom in the economy brought about by the risingexportation of tin (see table 4). This provided the funds for the expansion



Bolivia

Table 4. Bolivia's foreign trade,

thousands of bolivianos)

(in current

Year

18951896

1897

1898

1899

1900

1901

1902

1903

1904

1905

1906

1907

1908

1909

1910

1911

1912

1913

1914

1915

1916

1917

1918

1919

1920

1921

1922

1923

1924

1925

1926

1927

1928

1929

1930

Exports

20,914

22,047

21,990

27.45 727,366

35,658

37.57828,042

25,162

3'.46542,061

55.155

50,332

43.786

63,76477,622

82,631

90,123

93,722

65,801

95,210

101,485

M7,748182,613

144,252156,019

66,920

94,77o107,694

115,191

109,286

122,681

127,084

116,073

140,007

100,306

Relative

value of

minerals

(%)

n.a.

n.a.

n.a.

n.a.

n.a.

(67)

(72)

(79)n.a.

n.a.

n.a.

n.a.

n.a.

(89)(64)

(72)

(76)(8.)

(82)

(85)(86)

(81)

(87)

(90(88)

(90(90(94)(94)(95)(9°)(92)

(92)

(93)

(94)

(93)

Imports

13,89712,952

12,45711,897

12,840

'3,344

16,953

14,14316,253

21,137

27,87055,8io

37,89840,808

36,94048,802

58,37149,509

54,763

39,76i

22,575

31,098

33,48i

34,97061,997

65,540

7O,85 5

49,967

62,91562,863

68,665

70,831

96,105

64.591

7',4'752,442

Difference

7,017

9.095

9.533

'5,55914,526

22,314

20,625

13,898

8,90910,328

14,191

19,544

'2,434

2,97826,825

28,820

24,260

40,614

38,95926,040

72,636

70,387124,267

147.64582,254

90,679

-5.95444,802

44,77952,528

40,621

51,850

3°.97951.683

68,590

47,864

Sources: Gomez, LM mineria, 191-2, 208-9; a n ^ Republica de Bolivia,Oficina Nacional de Inmigracion, Estadistica y Propaganda Geografica,Sinopsis estadistica j geogrdfica de la republica de Bolivia (3 vols., La Paz,1903-4), 11, 294, 300. -




of the state bureaucracy, which in turn he used to buy out all potentialopposition.

Moreover, the national elite was also effectively won over to the newLiberal era by a massive commitment to public works. With a positiveand sizeable balance-of-trade surplus, Montes was able to secure privateinternational bank funding for governmental loans. In 1906 came a hugeUS private bank loan which enabled Bolivia to complete its internationalrail connections with spurs to the major interior cities of Cochabambaand Sucre as well as the international links to the mining centres of Potosiand Oruro. A new railway was constructed to Guaqui on Lake Titicaca,thus linking up with the Peruvian rail network. Major urban construc-tion, sanitation and lighting projects, and generally a high pitch ofeconomic activity took place until the crisis of 1913-14 on the eve of thefirst world war.

Montes was able to dominate the selection of his successor, EliodoroVillazon, and then to secure his own formal re-election in 1913. But thesecond Montes administration (1913-17) was not the unqualifiedtriumph the first had been. Liberal attempts to establish a national bankhad created bitter opposition from key elements of the elite. Next thesudden prewar crisis in international trade caused mineral exports todecline by a third between 1913 and 1914 (see table 4). At the same timeadverse weather conditions caused a severe agricultural crisis. Withgovernment revenues declining, Montes suddenly found himself with anintransigent opposition within the party which he could not buy off.Moreover, having been in power so long, he was unwilling to use tact orsubtlety to calm it. The result was the almost inevitable splintering of theLiberal party into two separate groups. The new party which emergedwas given the name Republican and was formally established in 1914.

Both Montes and the founder of the new party, Daniel Salamanca,recognized that the new political party was a carbon copy of the Liberals.It drew its strength from the same classes; it unquestioningly supportedall demands of the mining establishment; and it was as racist and oligar-chic as its opponents. Montes called the Republicans liberal 'apostates',and Salamanca claimed that his party's aim was only to guarantee freeelections and restrictions on presidential power. The final result of thereturn to the two-party system was a recurrence of closed andfraudulent presidential elections and the ultimate resort to violence andcoups by the opposition.



Bolivia 573

The recovery of Bolivia's exports during the first world war (see table4) enabled Montes to carry through his banking and financial reformswith little Republican opposition, and even to win popular supportamong the 80,000 or so voters in the Republic in congressional andpresidential elections. In 1917 he passed his government on to a moremoderate successor, Jose Gutierrez Guerra, who proved unable to keepthe Republicans under control. With strong support from disgruntledelements in the business community, the Republicans made considerableheadway and when Gutierrez Guerra attempted to control the electionsof 1920, the Republican party rose in a successful revolt and endedLiberal rule.

The advent of Republican rule, which lasted until 1934, brought a subtlebut important shift in the political system that had evolved since the endof the War of the Pacific. From simple two-party systems, nationalpolitics began to evolve towards a multi-party system. At the same timethe cultural norms inherited from nineteenth-century liberal ideologyand supported by a strong element of racism would slowly begin tochange. Finally, the extraordinarily open nature of the national economywould mean that Bolivia was one of the first nations in the world to feelthe full effects of the world depression which followed the Wall Streetcrash of 1929.

The economic growth which had been the hallmark of bothConservative and Liberal periods had initially affected only certain elitegroups. By the second decade of the twentieth century, this growth wasbeginning to have important effects on the cholo and Indian sectors.The expansion of the haciendas led to increasing land conflict with thecommunity Indians which in turn led to a series of major revolts in the1920s. Of even more immediate importance for the elite was theorganization of the first modern labour unions in Bolivia. Thoughorganizational activities went back to the nineteenth century, Boliviawas several decades behind its neighbours in labour agitation andorganization. It was not until 1912 that the first May Day celebration washeld, and it was not until 1916 and 1917 that even local urban labourconfederations were established. There were no important nationalstrikes until 1920.

In the 1920s the elite became aware of the existence of alternativedemands and of potentially threatening groups outside the elite political



5 74 Tbe Andean Republics

arena. As political life became more complex in the Republican era,minor parties emerged which for the first time seriously discussed theproblems and potentials of class conflict. The 1920s also witnessed thefirst stirrings of European Marxist thought as it filtered into Boliviathrough Argentinian, Chilean and Peruvian writers.

Almost immediately after seizing power, the Republican party dividedinto two opposing branches, one led by the urban middle-classintellectual, Bautista Saavedra, and the other by the Cochabambahacendado and politician, Daniel Salamanca. It was Saavedra and hisfollowers who were able to seize the initiative and take control of thegovernment and the party in 1921. Salamanca and his forces established anew 'Genuine Republican' party and proceeded to agitate activelyagainst the new regime.

The political violence and social conflict in the 1920s was more intensethan anything experienced in the previous decades. Hardly was Saavedrainstalled in office when a massive Indian uprising in Jesus de Machaca inthe Lake Titicaca district led to the killing of hundreds of Indians anddozens of local whites and cholos. Saavedra unhesitatingly used full forceto suppress the revolt and attacked the community governments {ayllus)as reactionary institutions that had to be forcibly suppressed. Thus hetook a classic nineteenth-century liberal position on the Indian question.

But Saavedra proved more open in his views on organized labour. Hebegan to view it as an important area of potential support, as his ownbases in the upper and middle classes were eroded by GenuineRepublican and Liberal opposition. He initiated the first modern labourand social legislation in Bolivian history, and expressed a willingness tosupport limited strike activity and unionization drives - the first time anational president had done so. But faced by increasing strike activities,including serious agitation in the mines and the first general strike whichoccurred in 1922, Saavedra quickly found himself withdrawing histentative support. In fact, troops were used in a bloody suppression ofminers at Uncia in 1923, one of the first of many such mining massacres.

The 1920s was a period when other members of the elite began slowlyto adopt non-traditional positions. In 1920 the first local socialist partieswere established. By late 1921 a national Socialist party was foundedwhich, though a small group of intellectuals with minimal laboursupport, nevertheless began to discuss such basic issues as Indianservitude (pongueaje), the legal recognition of the Indian communitygovernments, and the rights of labour and of women. While these ideas



Bolivia 575

were new and revolutionary in the Bolivian context, they were alreadypart of the well-established and more radical Marxist political tradition ofall Bolivia's neighbours, including Peru. The famous splintering of theLatin American Marxian socialist parties and the rise of the communistmovements in South America in the 1920s, for example, found no echo inBolivia. Bolivia did not produce even a moderate Marxist party until theend of the 1920s, and its Communist party was established only in the1950s.

Much of this early labour agitation was associated with the short butvery intense depression of the early 1920s which resulted in a severethough temporary drop in mine production and mineral exports (seetable 4). Once production resumed by late 1922, labour agitation beganto subside. Moreover, Saavedra found that the nascent organized labourmovement, though finally establishing its first national federations andproducing its first general strike, was too weak a support for his regime.The lower middle classes, finding themselves favoured for the first timeby mild social legislation, supported Saavedra. But given his strongpersonality, it was inevitable that the Liberals and Genuine Republicanswould join forces to oppose his regime, and he found it more and moredifficult to govern. In his search for popular support he turned towardsforeign private capital markets for funds to promote major developmentprojects. He negotiated a US$33 million private banking loan in NewYork to finance railway construction, public works and a national bank.These were the classic concerns of Liberals and Conservatives beforehim. But debt servicing for Bolivia was already high and the terms of theloan, which included direct US control over Bolivian taxation services,were totally unacceptable to most Bolivians. There was little question, infact, that Bolivian negotiators had been corrupted and that despite itsexcellent credit rating the nation had been forced to pay very highinterest rates. The opposition to the so-called 'Nicolaus' loan wasimmediate and intense.

To add to his problems, Saavedra in the arbitrary manner of Montesalso tried to resolve the great debate surrounding the petroleumconcessions in the Bolivian eastern lowlands region. In 1920 theRepublicans had opened up the reserve areas to foreigners after Bolivianentrepreneurs proved incapable of developing productive wells. In 1920and 1921, North American entrepreneurs secured concessions, but thesesmaller companies were fronts for the Standard Oil Company of NewJersey, which in 1921 was permitted by the government to purchase



5 id The Andean Republics

these concessions, add new ones and establish the Standard Oil Companyof Bolivia. Given all the special treatment accorded to Standard Oil, andthe intense opposition of the elite to Saavedra, it was inevitable that therewould be an outcry.

To all the usual issues of corruption, favouritism and presidentialdomination, Salamanca and his more conservative followers added atotally new theme: economic nationalism. Opposition to exploitation ofnatural resources by foreign companies started in Bolivia virtually assoon as the first concession was granted in petroleum. While no outcrywas ever raised over mining, and Guggenheim and other NorthAmerican companies actively participated in the economy, petroleumbecame a special issue and the attack against Standard Oil became part ofthe rhetoric of both the traditional right and the nascent left movementsin Bolivia.

By the end of his term, Saavedra was desperately attempting toappease all factions. On the one hand he helped the mine owners crushthe Uncia strike in June of 1923, with indiscriminate killing of workersand their families. On the other hand he carried out a major overhaul ofthe mining tax structure in late 1923 and succeeded in doubling thegovernment's taxes on tin production. In a rage, Patino early in 1924removed his mining company headquarters from Bolivia to the UnitedStates and incorporated Patino Mines and Enterprises in Delaware. Healso lent the government £600,000 for railway construction, in return fora guarantee that taxes would not be raised further for five years.

Despite every attempt to control his successor and even prorogue histerm, Saavedra was forced late in 1925 to turn his regime over to his ownparty candidate Hernando Siles, whom he opposed. The followingperiod saw a further splintering of the traditional parties. Faced bySaavedra's control of the Republican party, Siles created his ownNationalist party grouping. He supported the University Reformmovement, and in 1928 radical students established the first FUB(National Federation of University Students of Bolivia). Both thesocialists and the FUB, though still small groupings of intellectuals, werenow suggesting radical transformations of society, with both calling foragrarian reform and the end to 'feudalism'. They urged nationalization ofBolivia's natural resources and changes in the definition of privateproperty, and gave strong support to the nascent labour movement.

At the same time as the political scene was evolving into a morecomplex arena of conflicting class ideologies, the Bolivian economy



Bolivia

began to deteriorate to an alarming degree. In the period 1926-9, thegovernment faced increased budgetary deficits and growing difficultiesin meeting its international debt obligations. This was occurring just asthe price of tin on the international market had peaked and had begun itslong decline into the catastrophe of the world depression. In an attemptto meet this crisis, whose extent was as yet unknown, the governmentresorted to both traditional and some fairly radical measures. In 1927 and1928, with the backing of specially created taxes, new US private bankloans were secured. In 1928 the government adopted the reformsproposed by the US Kemerer mission and finally established agovernment-controlled Central Bank to oversee all aspects of thenational money supply. Towards the end of 1928, a temporary flare-upon the disputed Chaco border with Paraguay, which presaged even morebitter conflicts to come, forced Siles to call up the reserves and orderreprisals. He did not want a full-scale war to develop, however, and earlyin 1929 he negotiated an Act of Conciliation with Paraguay.

Politically, Siles had already shown himself to be too much in thetraditional mould to permit the free play of democratic forces. The borderincident with Paraguay gave him the excuse to declare a formal state ofseige and use it to control his internal enemies. This in turn had the effectof galvanizing the Liberals, the Genuine Republicans and the SaavedristaRepublicans into a temporary united front.

Meanwhile, the deterioration in international tin prices was makingitself felt. In 1929 Bolivia reached its all-time record output of 47,000tons of tin exported, but at a price which was below that of the early yearsof the decade. Whereas tin was quoted at $917 a ton in 1927, it haddropped to $794 a ton in 1929 and would eventually bottom out at $3 8 5 aton in 1932. As tin prices declined, so too did government revenueswhich were primarily taken from tin export taxes. By 1929,37percentofthe government budget was going for foreign debt servicing, andanother 20 per cent for military expenditure, leaving little for baregovernment necessities, let alone for public works or welfare.

Justifying his actions, like his predecessors, on the existence of anational crisis, Siles tried to continue in office beyond his presidentialterm. In mid 1930 he announced plans to have parliament elect him for anew term. He then handed the government over to a military junta tooversee his formal re-election. But opposition to this move wasuniversal. For the first time in national politics university students madetheir power felt by conducting major riots against the government. In




response, the army rose in rebellion, and the junta was forced to flee. (Inthe midst of the disorders there was even an invasion of Marxist radicalsat the southern frontier town of Villazon. They attempted to lead aworker-peasant uprising, an action which found some echo in the urbanlabour movement.)

In the following months, an all-party agreement allowed DanielSalamanca to run unopposed in the presidential elections of January1931. Salamanca, who took office in March, was however a politicianeven less attuned to the new developments on the student and labourfronts than either Saavedra or Siles. He was a rural landowner fromCochabamba, a famous parliamentary orator and otherwise an extremelyintemperate and unbending nineteenth-century style liberal. His onlyimmediate programmes were honest government and free elections, andeven these meaningless slogans he violated as rapidly as his predecessors.

It is clear that by 1930-1 the oligarchic republican government basedon limited participation which had been established by the Conservativesin the 1880s and continued by the Liberals after 1900 was beginningto come apart. The world depression struck the open Bolivianeconomy with unparalleled severity. Tin prices dropped dramatically,production fell and government revenues declined precipitously. At thesame time debt servicing arrangements virtually destroyed the govern-ment's ability either to generate new unmortgaged taxes or to find fundsfor even the most minimal necessities. The subtle but by now clearlyimportant shift in political ideology of the governing classes also beganto be felt. The university student reform had brought radical Marxistthought into the homes of the white elite for the first time in nationalpolitics. The labour movements began to attract national attention withever more severe strike activity, leading to military intervention in themines and open warfare. The only popular class which remainedrelatively quiescent in this agitated period was the Indian peasantry,which had been unusually restive during the previous decade; massiveuprisings, one at Jesus de Machaca in 1921 and one at Chayanta in Potosiin 1927 had been suppressed with much bloodshed.

In many ways the depression gave a reprieve to the Salamancagovernment. Massive lay-offs of workers forced many miners back intothe countryside and into subsistence farming, while the depressionwiped out most of the gains of the weakly organized labour movement.Indian peasants grew even more passive as the great age of haciendaexpansion drew to a close with the end of heavy capital investments in



Bolivia 5 79

rural landholdings. On the other hand, the university youth would notquietly disappear, and the depression created a greater politicalawareness which Salamanca was incapable of responding to, except withrepression. By the standards of the other countries of South America,Bolivian radicalism remained weak and relatively unsophisticated and agood generation or two behind developments in bordering countries.But the consistent refusal of Salamanca and his followers, unlike theRepublicans of the 1920s, to offer a hearing to these ideas meant that themarginal radical and reformist groups found themselves forced into aneven more violent confrontation with the traditional political system.These groups were nevertheless still only a small sector of the elitesociety, and might never have become the threat they did had not Boliviaundergone the greatest military disaster of its history under theleadership of Daniel Salamanca. The Chaco War was to provide thecrucial disruptive force by which the traditional system of the 18 8 o-19 3 2period would finally be destroyed.

The origins of the prewar crisis went back to the decline in tin priceswhich began in 1927. By 1929 the stocks of unsold tin were also rising,which depressed prices even further. At this time Bolivia, with threeother tin producing regions (Nigeria, Malaya and Indonesia), providedclose to 80 per cent of world production. Of the four, Bolivia had thelowest-grade ore and the highest transportation costs, and was thereforethe highest-cost tin producer. It thus felt the shock waves first and alsofound it impossible to force the other major producers to cut productionvoluntarily, since at negative prices for Bolivians the others could stillobtain some profit margins. In July 1929 at the urging of Patifio, avoluntary Tin Producers Association was formed by the privatecompanies working in the four major centres of production. They agreedto production cut-backs, which all three major Bolivian companieseagerly carried out in late 1929 and early 1930. But the non-Boliviancompanies did not follow suit and by mid 1930 the voluntary scheme wasconsidered a failure.

With free market conditions intolerable and voluntary restrictionsimpossible to achieve, the producers decided in late 1930 to take thedrastic measure of demanding government participation in the produc-tion control scheme. This was a major and abrupt change from theprivate mine owners' former belligerent stand against any kind ofgovernmental intervention in private enterprise. For the first time, the




Bolivian government was assigned the right not only to tax the industrybut to control production quotas, and this would lead in the followingdecades to control ov̂ er foreign sales. Clearly this was an act ofdesperation by which the main producers hoped to retain direct controlover governmental decisions which affected them. But equally, it madepossible the first really powerful intervention of the government inmining affairs. Although there would be rough agreements over quotas,the much reduced production schedules for all the firms meant thatany one of them could easily and quickly increase production if theirmarket quotas were changed by governmental decree. This suddenlyintroduced a special tension into the relationship between the big threemine owners, and brought their competitive conflicts into the verycorridors of government. The big miners began to pay considerablymore direct attention to the local political scene than they had for sometime, and they began to support differing factions in the elite itself.

Since there were only three major governments involved - Bolivia,the Netherlands and Great Britain - it turned out that a forced quotaproduction system could be successfully carried out, and in early 1931 theInternational Tin Control Scheme was initiated. On 1 March i93i,justafew days before the inauguration of the new Salamanca government, thequotas went into effect and Bolivian production was drastically reduced,creating a massive internal economic crisis for the Republic. Althoughthe scheme of restricting production eventually reduced the world'sunsold stock of tin and finally stabilized the price, it was not until 1933that Bolivian production slowly began to return to even moderate levels.

All these international changes and the resulting shock to the localeconomy were closely followed by the Bolivian elite. The interimgovernment (June 1930 — March 1931) had experimented with publicworks schemes and fully supported all Patino's production plans. It alsocut budget outlays to the barest minimum. Serious attention was paid aswell to the various national recovery projects being tried out elsewherein the world. Of all the groups engaging in this debate about the nationaleconomy, the Liberals offered the most concrete proposals. Althoughtheir approach was an orthodox one, they suggested serious governmentintervention. But Salamanca seemed oblivious to the whole issue.Constantly asked what his economic ideas were, he replied evasivelyabout the need for honest government. Such vacuous ideas might havebeen acceptable in times of growth with a stable social order, but weremeaningless in the current context. The result was that his Genuine



Bolivia 581

Republicans suffered total defeat in the congressional elections ofJanuary 1931 and the new Congress fell to the Liberals, who had anabsolute majority of votes. The rigid Salamanca suddenly found himselffaced by a hostile Congress completely outside his control, with aneconomy he little understood, and a society in severe malaise for whichhe could provide no solutions.

Almost immediately upon taking office, Salamanca proceeded toalienate most of the major groups in the society. While the previousgovernment had essentially continued the policies of the Saavedra andSiles periods of moderate reform and a strong interest in welfare as aresult of the economic crisis, the Salamanca regime was a return to themore rigid orthodoxies of the past. Salamanca also alienated thetraditional elite parties by making his government a partisan one, despitethe all-party support which had brought it to power.

His first Cabinet in office, despite the domination by the Liberals inCongress and the calls for a government of conciliation to deal with theeconomic crisis, consisted only of Genuine Republicans. Next heannounced to a rather startled public that the primary problem facing thecountry was not the economic crisis, but radicalism and communism.While radical and communist groups had finally established themselvesin national life during the 1920s, they were still essentially a fringeminority, even among the university youth and organized labourmovements. This obsession with the 'red' threat was something entirelynew on the part of a traditional politician. Moreover, Salamanca radicallyshifted government policy from a moderate neutral stand on labour toone of open hostility. A national strike by the legal Telegraph Workers'Union was not only opposed by Salamanca, but the union was dissolved,and a sympathetic general strike of the La Paz labour federation wasalso forcibly suppressed and its leaders jailed. Next the governmentannounced that government employees would be paid in promissorynotes as a result of the budget deficit, and in late July 1931 Salamancaannounced that Bolivia was defaulting on its external debt.

As the internal economic and political scene became ever tenser,Salamanca began to give much more of his attention to the Chacoborder question. Indeed he elaborated the most ambitious and expensivescheme for military penetration of the Chaco ever envisioned by aBolivian president. It represented a major shift in national policyfrom a largely defensive to a largely offensive position. On 1 July 1931,Salamanca used a typical border incident to break diplomatic relations




with Paraguay. Then, in his presidential address in August, heannounced that as a consequence of the continued decline in governmentrevenues virtually all government services had been cut, but went on toannounce that the military budgets would be expanded. At the same timea policy of total suppression of union or strike activity among theorganized working classes of the nation was proposed. Thus Salamancahad defined extreme positions at the same time as limiting all his politicaloptions.

In June, Salamanca had brought Demetrio Canelas, an Oruro partyleader, into the ministry of finance. Canelas broke with the conservativepolicy of the previous months and pressed Salamanca on the need formore radical economic measures to combat the crisis. His primaryproposal was for an inflationary monetary solution which was then beingadopted by many countries of the world. He wanted Bolivia to get off thegold standard, adopt inconvertible paper money, and then increase themoney supply. The Liberals at first opposed these changes, especially asthey controlled the Central Bank as well as Congress. But they wereforced to accept them when Great Britain itself announced in Septemberthat it was going off the gold standard. Bolivia, as part of the sterlingbloc, was forced to do the same, and Canelas got his reforms. But pricesimmediately started rising and the government position became ex-tremely unpopular. In response, the Liberals put new pressure on thegovernment and, after a series of aggressive parliamentary questions toministers, forced the Salamanca government to come to terms. Thoseterms included a formal bi-party pact and an agreement to give theLiberals veto power over all economic decisions.

Frustrated in his initiatives and independence in the economic sphere,Salamanca then attempted to implement his ideas on authoritariangovernment. Claiming a communist menace which few other traditionalparty leaders seemed aware of, he proposed at the end of 1931 to enact alaw of'Social Defence'. This was a bill granting extraordinary powers tothe president to deal with political opposition of the left and with thelabour movement. The reaction to this proposal was intense, and inJanuary 1932 mass demonstrations by labour, the small leftist parties, thestudents and the Saavedristas finally forced the government to withdrawthe projected law from Congress. At the same time, Salamanca oncemore tried to outrun Liberal opposition on the economic front. Faced bygovernment revenues anticipated to reach half of projected basicexpenditures, he proposed to float an international loan. This was



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rejected by the Liberals, who not only obtained the formal Ouster of thehated Canelas from the ministry of finance, but finally in March 1932forced Salamanca to accept three Liberal-appointed ministers in hiscabinet.

Salamanca was now completely dependent upon the Liberals in allbasic decisions affecting the economy. He also faced increasing radicalopposition which he had created in large measure through his anti-strikeand law of'Social Defence' activity. He thus became ever more embitteredabout the national political scene. But his impotence in national politicswas not matched on the international front, and increasingly in the bitterdays of 193 2 he turned his energies to the Chaco. This was an issue that hecould deal with, confident that the nation would follow him wherever heled them, and secure that the Liberals and the radicals could not impedehis field of action.

He systematically built up the army at the expense of every othergovernment service. He also pushed the army into an ever moreexpansive exploration and settlement programme in the Chaco. Soclearly aggressive were Bolivia's intentions that throughout the earlymonths of the year radical groups began calling for an end to the war-likepreparations. But on this issue there was a split between the fringeradicals and student groups and the more traditional parties. TheSaavedristas, who now called themselves the Republican Socialist party,and who had joined the left against the Social Defence Act, fullysupported Salamanca's Chaco adventure, while the Liberals also gaveSalamanca undivided support in his build-up of the army.

Thus Salamanca found himself with strong traditional backing whichhe decided to push to the absolute limit. In May and June a major link-upbetween two army divisions led to a typical minor clash over animportant watering spot in the Chaco. Bolivian troops ousted an alreadyentrenched Paraguayan force. Later claiming that such a Paraguayan fortdid not exist, the Bolivian army refused to relinquish the new post andbegan a major and rapid build-up in the area to oppose the expectedcounter-attack by the Paraguayans. In the last days of June the counter-offensive occurred and was beaten back by the Bolivians. Up to thispoint, this incident was no different from dozens of others, and thenumber of troops involved was quite small and the conflict limited.Standard procedure now called for formal negotiation, but at this pointSalamanca decided to break with all precedent and push forward with theattack, and by late July full-scale warfare had begun.




This decision of Salamanca had a great deal to do with his bitterfrustration in national politics and his perceptions that the deepeningeconomic crisis would lead to social anarchy. The fact that in May theInternational Tin Control Scheme adopted the radical procedure ofprohibiting all tin production for the months of July and August, and ofreducing production thereafter to one-third of 1929 output, meant thatthe most extreme cut-backs were proposed just on the eve of Salamanca'sdecisions concerning the Chaco. In response to the two-month closingand the extremely unbalanced trade situation which resulted, thegovernment took complete control over all the gold dealings of itscitizens and also forced mine owners to hand over 65 per cent of all theirletters of exchange upon foreign currencies to the Central Bank. There islittle question that this most extreme shutdown of the national exporteconomy was of crucial importance in the decisions taken by thegovernment in the following weeks.

There is no doubt, from all the documentation which has emergedsince the war, that Salamanca and the Bolivian government deliberatelyescalated a typical border incident into a full-scale war to the surprise ofeven the Paraguayans. It is also evident that when the final decisions weremade it was Salamanca who, against the written advice of his generalstaff, forced the conflict beyond any peaceful settlement and into whatwould become Bolivia's most costly war in its republican history.

In popular belief, however, it was almost immediately accepted astruth that the Chaco War was the result of a basic conflict over oil landsbetween Standard Oil of New Jersey, with its support of Bolivian claims,and Royal Dutch Shell, which was entrenched in Paraguay. There is nodoubt that towards the end of this long and bloody conflict, whenvictorious Paraguayan troops were reaching the limit of the Chacoregion and approaching the Andean foothills, oil became an importantconcern in their war aims. But until late 1955 the war was foughthundreds of miles from the nearest fields. Moreover, it was evident afterthe war that Standard Oil of New Jersey had illegally sold Bolivian oil toArgentina and then Paraguay, while claiming it could produce nothingfor Bolivia from these same fields. The cause of the war rather must befound in the complex political conflict within Bolivia and the strainscaused by the world depression on a fragile political system. Itscontinuation can only be understood in terms of Argentine support forParaguayan aims. The ability of Argentina to prevent peace moves untilthe end, along with continued Paraguayan successes, meant that once the



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war began Bolivia had little ability to stop the onslaught. This is not todiminish the importance of the generalized belief that the Chaco War wasan oil conflict. In the postwar period fundamental political and economicdecisions, including the confiscation of Standard Oil in 1937 and thecreation of a state oil monopoly company, were the direct result of thisbelief.

The Chaco War in effect destroyed the political system which had been inexistence in Bolivia since 1880. The end of the war saw the collapse ofboth civilian government and the traditional political parties. Ideaswhich had previously been the coinage of only a small group of radicalintellectuals now became the concern of much of the politically awareyouth and ex-combatants. So distinctive was this change that Boliviansthemselves would refer to the groups which came to maturity in theChaco War as the 'Chaco generation'. The Indian question, the labourquestion, the land question, and the economic dependence on privatemine owners became the new themes of national debate. Thesediscussions led to the creation of new parties and revolutionarymovements in the late 1930s and the 1940s, and finally to the socialrevolution of 1952.

The Chaco War also marked an important turning point in theeconomic history of the nation. The world depression and the resultingChaco conflict marked the end of the expansion and even thecapitalization of the mining industry. Thereafter production andproductivity began to decline in an industry that saw virtually no changein its structure or patterns of investment until 1952. In the rural area aswell, the relative stagnation of the national economy brought an end tothe great expansion of the haciendas which had lasted from the 1880suntil the late 1920s. By the end of this period landless peons had probablydoubled and the number of free community Indians was now consider-ably less than the number of peasants without land. But this fundamentalrestructuring of the rural economy ended before the complete destruc-tion of the free communities and provided an endless source of conflict inthe post-Chaco period as the haciendas went on the defensive.

All the growth which had occurred as a result of the great tinexpansion had little impact in modernizing the society as a whole. It wasstill estimated that in 1940 over two-thirds of Bolivians were primarilyoutside the market economy, and even as late as 1950 the number ofurban artisans in the national economy equalled the number of factory




workers. Though two-thirds of the economically active population wereengaged in agriculture, Bolivia was still a net importer of foodstuffs,including traditional highland root crops. Thus while the tin boom didaffect the third of the nation which was urban and Spanish speaking, itsmultiplier effects had little impact on the rural population, exceptpossibly to lower their standard of living as a result of the correspondingexpansion of the latifundia system.

Bolivia entered the Chaco War as a highly traditional, underdevelopedand export-dominated economy, and emerged from that conflict withthe same characteristics. But from being one of the least mobilizedsocieties in Latin America, in terms of radical ideology and unionorganization, it had become one more advanced than many of itsneighbours. For the war shattered traditional elite assumptions and ledto a fundamental rethinking of the nature of Bolivian society. The resultwas the creation of a revolutionary political movement that embracedsome of the most radical ideas to emerge on the continent. The warwould also create the climate for the development of one of the mostpowerful, independent and radical labour movements in the Americas.From these perspectives, the Chaco War, like the War of the Pacificbefore it, would prove to be one of the major turning pointsin Bolivianhistory.



Bolivia from the War of the Pacific to the Chaco War, 1880-1932

Documents

Transcript of Bolivia from the War of the Pacific to the Chaco War, 1880-1932