History of Bolivia (1920–1964)

Bolivia's defeat by Paraguay in the Chaco War of 1932–1936 marked a turning point in the modern history of Bolivia. Great loss of life and territory discredited the traditional ruling classes, while service in the army produced stirrings of political awareness among the indigenous people. A large portion of the contested Gran Chaco region was surrendered to Paraguay. In return Bolivia was given access to the Paraguay River where Puerto Busch was founded and, with this, free access to the Atlantic Ocean through international waters was possible. In 1936 Standard Oil's Bolivian operations were nationalized and the state-owned firm Yacimientos Petroliferos Fiscales Bolivianos (YPFB) was created. From the end of the Chaco War until the 1952 Bolivian National Revolution, the emergence of contending ideologies and the demands of new groups convulsed Bolivian politics.

During World War II and the Korean War Bolivian tin had enjoyed high demand and prices. Even as the quality of the ores fell, the U.S. built a smelter able to handle low grade Bolivian ores and continued to buy Bolivian tin. Following the nationalization of the mines, with the Korean War over, tin prices fell and the U.S. no longer needed tin to support a war effort. Additionally, when the mines were nationalized, the foreign mining engineers and managers left the country, leaving the mines with a lack of skilled replacement.