VI. The World Wars and the Interwar Period, 1914–1945 > E. Latin America and the Caribbean, 1914–1945 > 2. South America > c. Paraguay
  The Encyclopedia of World History.  2001.
(See 1908–12)
c. Paraguay
The presidency of Edward Schaerer saw economic development and relative political stability. Industry, ranching, and agriculture expanded, transportation and communications were improved, and foreign capital was invested. Paraguay remained neutral during the First World War, and in 1920 it became an original member of the League of Nations.  1
Manuel Franco, president.  2
On Franco’s death, José Montero, the vice president, succeeded.  3
Manuel Gondra, president. He was forced to resign by a revolutionary group.  4
After the short presidencies of Eusebio Ayala (1921–23), Eligio Ayala (1923–24), and Luis Riart (1924), Eligio Ayala was elected president. Representing the Liberal groups, he inaugurated a policy of social legislation.  5
José Gugiari, president.  6
During Gugiari's administration, the dispute with Bolivia over the Chaco territory came to a head. Despite earlier agreements (1913, 1915), claims on the potentially oil-rich territory were still unsettled. In Dec. 1928, the forces of the two states clashed and war seemed inevitable. Diplomatic relations were severed and Paraguay appealed to the League of Nations, but the Pan-American conference at once offered to mediate. Direct negotiations were agreed to, but skirmishes in the contested area continued until a temporary arrangement (return to status quo ante) was arrived at (April 2, 1930).  7
THE CHACO WAR. The League of Nations and the Pan-American Union both called upon the two parties to desist from hostilities and accept neutral arbitration, but to no avail. Standard Oil of New Jersey and Royal Dutch Shell, supporting Bolivia and Paraguay respectively, fueled the conflict because of a belief in rich oil deposits in the region. The Paraguayans, after a series of major campaigns, occupied the larger part of the Chaco but failed in their attempts to invade Bolivian territory. During the war the relations between Paraguay and Chile became badly strained because of the service of Chilean officers with the Bolivian army and employment of Chilean workmen by Bolivia.  8
At the suggestion of the League of Nations, some 20 nations lifted the embargo on arms in favor of Bolivia, while retaining it against Paraguay. Thereupon Paraguay announced withdrawal from the League.  9
June 14
Paraguay and Bolivia concluded a truce, at the instigation of the U.S. and five South American governments. A peace conference at Buenos Aires met in July. A definitive peace treaty was not signed until July 21, 1938 (approved by plebiscite on Aug. 10). The treaty provided for arbitration of boundaries between American states. The territorial award assigned the greater part of the Chaco to Paraguay, but provided Bolivia with an outlet to the sea by way of the Paraguay River.  10
The Encyclopedia of World History, Sixth edition. Peter N. Stearns, general editor. Copyright © 2001 by Houghton Mifflin Company. Maps by Mary Reilly, copyright 2001 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved.