Even more worrying was the embarrassment it brought to the government and raised questions about how President Evo Morales would react to the public relations setback.
Retired Gen. Rene Sanabria, the former head of Bolivia's anti-narcotics agency, was arrested in the presence of U.S. and Panamanian anti-narcotics agents and charged with trying to smuggle about 317 pounds of cocaine into the United States.
Analysts said the arrest highlighted the problem of corruption in high places that thwarted attempts by U.S. and Latin American authorities to control, if not entirely eliminate, the smuggling of hard drugs into lucrative underground markets in North America.
Sanabria pleaded innocent when he appeared in a U.S. federal court.
As widely predicted the arrest was promptly enmeshed in controversy because of the awkward and complex state of diplomatic relations between Bolivia and the United States.
The U.S. Drug Enforcement Agency was thrown out of Bolivia in 2008 by Morales in a row stemming from the Bolivian ruler's suspicion of U.S. motives. A year earlier Morales expelled the U.S. Agency for International Development and in more recent months there have been spats over Bolivian charges of inappropriate conduct by U.S. diplomats. Washington has dismissed all accusations as unfounded.
Bolivia, like populist Venezuela, opposes Washington's anti-drug program in neighboring Colombia and has consistently refused U.S. administration aid with anti-narcotics programs despite U.S. arguments the drug trade hurts both U.S. and Latin American interests.
Already this week Bolivian government officials were hinting the case against Sanabria could be part of a U.S. effort to discredit Morales and wreak vengeance on his government for expelling U.S. agents.
Sanabria's state-appointed lawyer, Christy O'Connor of the Miami public defender's office, told reporters Sanabria could face a life-in-prison sentence if found guilty.
Reaction to the arrest in La Paz is mixed. Felipe Caceres, a senior antidrug official in the Morales administration, admitted the intelligence unit Sanabria worked for was riddled with corruption. He said at least 15 other officials could be under investigation for complicity in an alleged cocaine smuggling operation from South and Central to North America.
Bolivian police arrested several members of Sanabria's former team in La Paz and Santa Cruz, Bolivia's largest city.
Caceres said Bolivia was cooperating in the U.S. investigation into Sanabria's activities but complained the Morales administration was never informed about the circumstances in which Sanabria was arrested in Panama and then flown to Miami. Security sources said the arrest was made on an international arrest warrant.
"We had no information from the State Department or the DEA," Caceres told reporters at a news conference.
The Morales governments wants Sanabria repatriated to Bolivia to face charges in the country, he said.