Origins
Though the region was sparsely populated, control of the Paraguay River running through it would have given one of the two landlocked countries access to the Atlantic Ocean. This was especially important to Bolivia, which had lost in 1879 its Pacific Ocean coast to Chile in the War of the Pacific. The disputed area roughly covered 600,000 km2.
In international arbitration, Bolivia argued that the region had been part of the original Spanish colonial province of Moxos and Chiquitos to which Bolivia was heir. Meanwhile, Paraguay based its case on the occupation of the land. Indeed, both Paraguayan and Argentine planters were already breeding cattle and exploiting quebracho woods in the area, while the small nomadic indigenous population of Guaraní-speaking tribes was related to that country's own Guaraní heritage. As of 1919, Argentine banks owned 400,000 hectares of land in the eastern Chaco, while the Casado family, a powerful member of the Argentine oligarchy, held 141,000. The presence of Mennonite colonies in the Chaco, who settled there in the 1920s under the auspices of the Paraguayan Parliament, was another factor in favour of Paraguay's claim.
Furthermore, the discovery of oil in the Andean foothills sparked speculation that the Chaco itself might be a rich source of petroleum. Foreign oil companies were involved in the exploration: companies mainly descended from Standard Oil backed Bolivia, while Shell Oil supported Paraguay. Standard was already producing oil from wells in the high hills of eastern Bolivia, around Villa Montes.
Paraguay had lost almost half of its territory to Brazil and Argentina in the Paraguayan War and was not prepared to see what it was perceived as its last chance for a viable economy fall victim to Bolivia. Border skirmishes since 1927 culminated in an all-out war in 1932.
Read more about this topic: Chaco War
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