Historian Herbert S. Klein notes that a counterinsurgency policy to combat "internal subversion" became a major theme of United States training for the Bolivian army. In 1963 Argentine-trained Bolivian officers established the Center of Instruction for Special Troops (Centro de Instrucción para Tropas Especiales-- CITE) under the Seventh Division in Cochabamba. In addition, by the end of 1963 Bolivia had more graduates from the United States Army Special Warfare School at Fort Bragg, North Carolina, than any other Latin American country. A total of 659 Bolivian officers received training at the School of the Americas in 1962- 63, and 20 of the 23 senior Bolivian officers attended or visited the school during 1963-64. United States military aid increased from US$100,000 in 1958 to US$3.2 million in 1964. This aid, which included weapons and training outside Bolivia, enabled Paz Estenssoro to strengthen the army more extensively than MNR leaders originally had intended. According to Klein, Paz Estenssoro constantly justified rearming the military to the United States "as a means of preventing communist subversion."

In March 1967, Bolivia became a prime target of Cuban-supported subversion when Ernesto "Che" Guevara and his tiny National Liberation Army (Ejército de Liberación Nacional--ELN) launched a guerrilla campaign. Despite its increased United States training, Bolivia's army still consisted mostly of untrained Indian conscripts and had fewer than 2,000 troops ready for combat. Therefore, while the army kept the 40-man guerrilla group contained in a southwestern area of the country, an 800-man Ranger force began training in counterinsurgency methods. With counterinsurgency instructors from the United States Southern Command (Southcom) headquarters in Panama, the army established a Ranger School in Santa Cruz Department. By late July 1967, three well-trained and well-equipped Bolivian Ranger battalions were ready for action. Supported by these special troops, units of the Eighth Division closed in on Guevara's demoralized, ill-equipped, and poorly supplied band. Guevara's capture and summary execution on October 7 ended the ill-fated, Cuban-sponsored insurgency.

The army's increased capabilities and its decisive defeat of the legendary Cuban guerrilla leader enhanced its prestige. The fact that Barrientos's vice president, Luis Adolfo Siles Salines, a conservative civilian, had to request permission from the military high command to assume his mandate after Barrientos's death in April 1969 indicated how powerful the army had become as an institution.

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To Ernesto "Che" Guevara (1928-67), an Argentine-born revolutionary and a major in the Cuban army of Fidel Castro (1926-), Bolivia seemed the one country in South America that was ripe for a Cuban-like revolution. In the fall of 1966, he and some 15 seasoned followers clandestinely arrived in Bolivia and set up a headquarters at Nancahuazu in a wild, unsettled region of the country. Unexpected troubles arose; their controller double-crossed them and absconded with a quarter of a million dollars, their food supplies ran low, and the several warring factions of the Bolivian Communist Party failed to give the expected support to Guevara's insurgency. The Bolivian army learned of the guerrillas' presence and, assuming there was a large force of Cubans, sent several thousand troops to patrol the region; small skirmishes ensured in which the guerrillas usually triumphed. In March 1967, Bolivian fighter planes strafed the guerrillas' area while American Green Beret-trained army units began an encircling operation; authorities were still not sure if Guevara, who had been reported dead earlier, was directing the actions of the guerrillas. On April 26, 1967, a French and an Argentine courier, who were trying to leave Bolivia to tell the world of Guevara's existence and intentions, were captured by the army, which used them to stir up the Bolivian people against the "foreign invaders." Three months later the army staged a surprise attack against Guevara's camp on the Morocos River and seized irreplaceable equipment. Nine guerrilllas were killed in an ambush at a river ford. By the fall of 1967, Guevara was retreating through the jungles with only 16 men against 1,500 soldiers in pursuit. A special army detachment discovered Guevara and his small band on the banks of the Yuro River on October 8, 1967; some were killed outright. Guevara was wounded and captured; he was taken to nearby La Higuera, where he was shot the next morning.