Bolivia and Paraguay fought the Chaco War from 1932 to 1935 over control of the Chaco Boreal, the northernmost portion of the Gran Chaco. The war was the largest and bloodiest of the 20th Century in Latin America. That it dragged on for three years was largely a result of mistakes and military blunders from both sides. Most foreign aid to both countries was cut off during the war. In the end, Paraguay gained control of about 75% of the Chaco Boreal. It was believed that massive oil and natural gas deposits existed in the Chaco Boreal, although in reality it would be many decades before this was proven.
The Chaco War ended with a ceasefire in 1935, but a formal truce was not signed at that time. **
In peace talks in Buenos Aires in 1938, the Paraguayan delegation walked out of negotiations when the Bolivian representatives (backed by the Standard Oil representative) insisted that the Boreal should be divided equally between the two nations, insisting that Bolivian military forces had not been defeated, and the nation should not be punished for a conflict that the Paraguayans had initiated. The talks collapsed, and open conflict resumed in the Chaco on March 12, 1938 with a Bolivian air attack on Paraguayan army positions near Cordillera.
This was the start of the conflict later known as the Second Chaco War. In the two and a half years during which the ceasefire was in effect, both nations had taken the opportunity to refurbish and modernize their forces, especially the air components. Bolivia sought aircraft from the United States, Britain and France to update the FAB. However, arms imports from the United States continued to be severely limited by the US State Department, and only 10 CW-19R trainer aircraft were purchased from the U.S. A Bolivian purchasing commission in Britain failed to make a significant British aircraft purchase, though both Vickers Vildebeest and Vickers Wellesley bombers were considered. The Bolivians were also quite interested in the Vickers Venom project, and sought to negotiate a manufacturing license for it, but no Bolivian built Venom ever flew. The majority of aircraft to modernize and expand the FAB came from France. Between 1935 and 1939, The Bolivians received the following French aircraft:
20 Morane Saulnier MS 230 elementary trainers (1935)
10 Dewoitine D.501 fighters (1935)
12 Breguet Bre 270 observation aircraft (1935)
8 Dewoitine D.510 fighters (1936)
4 Liore et Olivier LeO C.30 observation autogiros (1936)
6 Bloch MB 200 bombers (1937)
10 Morane Saulnier MS.406 fighters (1939)
6 Potez 633 attack bombers (1939)
** Everything BEFORE the ** is true in the "real world" Everything after the ** is from my World War II Goes Hot in Latin America scenario.
Shown below are a Dewoitine D.501 from the first batch of French aircraft delivered in 1935. The second profile shows a D.510 delivered in1936. The third profile represents a D.501 modified by a consortium comprised of a tema of engineers from Bristol Aeroplane Company, Ltd, and men of the Cuerpo de Aviación Boliviana. The resulting aircraft was known locally as the D.501Br (converted D.510s were D.510Br). When the converted aircraft first flew in March, 1939, it was found to be very much superior to the D.501, but still inferior to the MS 406s then being delivered from France. All told, 11 Dewoitines were converted to "Br" status, and they saw service in the Second Chaco War.