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Chaco War (1932-35), costly conflict between Bolivia and Paraguay. Hostile incidents began as early as 1928 over the Chaco Boreal, a wilderness region of about 100,000 square miles (259,000 square km) north of the Pilcomayo River and west of the Paraguay River that forms part of the Gran Chaco. The conflict stemmed from the outcome of the War of the Pacific (1879-84), in which Chile defeated Bolivia and annexed that nation's entire coastal region. Thereafter, Bolivia attempted to break out of its landlocked situation through the Río de La Plata system to the Atlantic coast; athwart that route lay the Gran Chaco, which the Bolivians thought had large oil reserves.

Bolivia seemed to enjoy overwhelming advantages over Paraguay: it had thrice the latter's population, an army well-trained by the German general Hans von Kundt, and an ample supply of arms purchased by loans from American banks. But the morale of Bolivia's army of Indian conscripts was low, and Paraguayans were better fitted to fight in the lowland swamps and jungles, in which many Bolivians died of disease and snakebite as well as gunfire. Both countries had maintained military posts in the disputed region.

On Dec. 5, 1928, Paraguay initiated a series of clashes, which led to full-scale war in spite of inter-American arbitration efforts. Both belligerents moved more troops into the Chaco, and by 1932 war was definitely under way. In June the Bolivians seized Paraguayan positions in the northern Chaco and launched a successful attack in the central Chaco against Fortín Boquerón. In August Paraguay ordered mobilization and sent forces under General José Estigarribia in their first major offensive against Fortín Boquerón, which fell at the end of September. Kundt was recalled by Bolivia, and he concentrated his forces in the south to attack Fortín Nanawa, where there was heavy fighting for several months.

Paraguay formally declared war on May 10, 1933. Estigarribia launched a series of attacks along an extended front late in October and made such impressive gains that the Bolivian president Daniel Salamanca replaced Kundt with General Enrique Peñaranda. At the end of a three-week truce, Estigarribia renewed his drive (Jan. 9, 1934) against the Bolivian post of Ballivián, where from March to July the heaviest fighting of the war occurred. Ballivián fell on November 17, and Salamanca was forced to resign. Paraguay's advance continued into indisputably Bolivian territory in January 1935.

After Bolivian counterattacks put Paraguayan forces on the defensive, a truce was arranged on June 12, 1935. About 100,000 men lost their lives in the war. A peace treaty was arranged by the Chaco Peace Conference, which included Argentina, Brazil, Chile, Peru, Uruguay, and the United States. It was signed in Buenos Aires on July 21, 1938. Paraguay gained clear title to most of the disputed region, but Bolivia was given a corridor to the Paraguay River and a port (Puerto Casado). The war had caused disruption of the Bolivian economy, provoking demands for reform among the deprived Bolivian masses. Argentina was given the main credit for the settlement, and Argentine investors profited greatly from Paraguay's territorial gain.