ince the middle of the XIXth century, Bolivia and Paraguay quarreled on the definition of their common borders in the area of Gran Chaco. The region was hot, desertic or marshy, and it was only inhabited by a few nomad Indian tribes. The principal interest of this inhospitable green hell was the presence of potentials oil layers which were targeted by the Standard Oil Company (on the Bolivian side) and the Royal Dutch Shell company (on the Paraguayan side) since 1920. In order to delimit their borders, Bolivia and Paraguay built a double fortified line, with sparse military garrisons posted in small forts.
There were frequent incidents at the Paraguay-Bolivia borders, with repeated attacks against the forts on each side. In 1928, the two countries were very close to declare the war.
In 1931, Daniel Salamanca who became president of Bolivia, took stronger political decisions regarding Chaco by reinforcing Bolivian military troops at the Paraguayan border. In June 1932, a Bolivian military patrol took possession of the fort Carlos Lˇpez located at the edge of the Chuquisaca lagoon. This lagoon represented a major strategic interest because it was one of the rare drinkable water reserves in the heart of this vast desertic area. This event marked the beginning of the military escalation between the two countries and lead to the war. A short time after, the Paraguayan troops took back the fort, and the Bolivian army reacted by attacking other forts...
Although in numerical superiority, the Bolivian forces did not manage to take the advantage in the conflict. The Paraguayan troops were used to the hostile territory and climate, contrary to the Bolivian soldiers originating from the Andean altiplano.
On June 14, 1935, Bolivia and Paraguay signed the armistice. During the war of Chaco, 55,000 Bolivians died and 35,000 Paraguayan died. Bolivia lost three quarters of the Northern Chaco.
The war of Chaco had similar aspects to the war of the Pacific. Big foreign industrial companies destabilized a fragile area in order to satisfy their economical interests. The irony of this story was that the large oil layers that were so much targeted in this region had never been discovered, except a few wells which are still today exploited on both sides of the border.