Unfortunately for Paraguay, and for Bolivia, there was the unsettled question of sovereignty over the Chaco Boreal, an uninviting and unpeopled wilderness of scrub land, dense forests, and swamps. At the conclusion of the Paraguayan War, Argentina had seized the area between the Bermejo and Pilcomayo rivers, while Brazil had taken the lands north of the Apa River. The greater part of the area of the Chaco Boreal was a desolate void between Paraguay and Bolivia, and the rivalry for its possession, begun in colonial days, was bitter. The polemicists of both nations used barrels of printer's ink to prove the validity of their claims. Cynics in Asuncion and La Paz spoke derisively of the learned disputants as doctores en Chaco. Bolivians rested their case on the fact that the Spanish Audiencia of Charcas, created in 1559, had united the Gran Chaco with Upper Peru (Bolivia). Paraguayans argued that missionaries and settlers from Asuncion had long maintained outposts in the disputed region. Bolivians countered by citing their own missionary and military activities. The outsider, viewing this empty wilderness, inclines to agree with Harris G. Warren: "Actually, neither country was right until the Chaco War decided the issue."
War had long been inevitable. Paraguay, profoundly humiliated by its losses in the 1860s, sought vindication of its national honor by extending its borders. Bolivia, cut off from access to the sea by the War of the Pacific (1879-84), now sought ports on the Paraguay River which would giver her access to the Atlantic through the Rio de la Plata. International rivalries played a part: Chile urged Bolivia on, while Argentina encouraged Paraguay. Furthermore, the unproved rumors of huge oil deposits in the Chaco excited both contestants. The lines of the conflict began to be drawn early in the twentieth century. By 1907 both nations were enlarging their frontier garrisons. Repeated efforts were made by outsiders to quiet the ominous rivalry. In 1927-28 President Alvear of Argentina made a futile effort to secure agreement between the claimants. In December, 1928, Paraguayan patrols attacked a Bolivian fort at Vanguardia, the first of a series of incidents. The interchange of charge and countercharge increased, and the arguments of neither side were impressive. Paraguayan spokesman claimed that Standard Oil of New Jersey, holding a concession in Bolivia, was actively financing Bolivia's army. Bolivian apologists replied by accusing Argentina, in league with Great Britain, of inciting Paraguay to attack. The heights of absurdity were reached by Communist spokesmen: "At bottom," writes the long-time servant of Moscow, William Z. Foster, "it was a war between the Royal Dutch Shell [largely British-owned] and Standard Oil."
The Chaco war broke in full fury in 1932. Bolivia had the advantage of a population three times that of Paraguay but was handicapped by the general apathy of its people and by a weak and vacillating government. Furthermore, the Indians from the two-mile-high Bolivian altiplano were physically unfit for service in the lower lands of the drenched Chaco. Paraguay, on the other hand, had the support of its citizens, who regarded the struggle as the defense of their homeland. It also had the advantage of an able president, Eusebio Ayala, who had proved his worth in private business and public service, and an excellent chief of staff, General Jose Felix Estigarribia. Paraguay, regarded by many as the aggrieved party in the conflict, found it easier to get supplies of arms than did Bolivia. The senseless war ground on for three years. At times not less than 50,000 men were on the battle front of each nation, with an equal number serving the supply lines in the rear. Battles were fought in the heavy jungles and on the scrub lands; in the rainy seasons, soldiers floundered through flooded swamps; in the dry season, scarcely a drop of water was to be found. Malaria, dysentery, and other plagues killed as many men as did the guns of the enemy. The poisonous snakes which abound in that "green hell" took their toll. Paraguay gradually gained ground. In 1035 a truce of exhaustion was finally signed. The treaty of 1938 confirmed the victory of Paraguay, which (says Warren) had won "20,000 square miles...at the cost of about three Bolivians and two Paraguayans for each square mile." If it was a costly victory for Paraguay, it was a cheap one for Argentina, whose diplomacy won her the major credit for the final settlement. An enlarged Paraguay, in which Argentine investors would garner more profit, served the statesmen of Buenos Aires.
Paraguay's record since the Chaco War includes the rule of six war heroes who have taken their turns in the presidency. Ayala, the best president Paraguay ever had, was too fair and conciliatory in the peace settlement for the taste of strident nationalists; he was unseated in 1936. After two brief and ineffective dictatorships, General Estigarribia of well-earned war fame gave promise of rather better performance; but, after serving for a year, he was killed in an airplane crash. Higinio Morinigo ruled from 1940 to 1948 in a fashion unpleasantly reminiscent of earlier tyrants. Dissenters were jailed or fled into exile. World War II brought new demand for Paraguayan products, and the country prospered. Morinigo skillfully negotiated with foreign powers. Fortified with loans from Washington and Lend-Lease gifts of arms and planes, he was well equipped to crush uprisings that threatened his continuance in office. He faithfully did as Washington bade: he broke with the Axis in 1942, declared war and joined the United Nations in 1945 --- did everything except put an end to German activity in his own country.
When first Ramirez and then Peron came to power in Buenos Aires, Morinigo was more than willing to collaborate with the nation whose investors controlled three-fourths of the foreign interests in Paraguay. With fine impartiality, Morinigo journeyed to Rio de Janeiro for a visit with President Vargas, where he got the promise of free port privileges in Santos and an extension of the Brazilian railways from Sao Paulo to Concepcion in Paraguay. He visited President Penaranda in Bolivia, celebrated the happy amity now existing between the former foes, and made plans for a pipe line to carry Bolvia's oil to the Paraguay River. Having thus cemented cordial relations with his near neighbors, he traveled north, made a triumphal entry into Washington, was feted by his "great and good friend," Franklin D. Roosevelt, and was given an honorary doctorate by a reputable university (at the suggestion of the United States Department of State). Meanwhile, political prisoners rotted in his jails, rivals lived angrily in Montevideo, the press was muzzled, schools languished, and labor unions were silenced.
After the retirement of Morinigo in 1948, the reins of government passed through the hands of three men during the next year, no one of them able to rule the country or to maintain himself in power. When Federico Chavez was elected in 1949, he imposed a dictatorship much like that of Morinigo and managed to hold office until 1954, when another uprising brought a new president.