You're not wrong in thinking that it does sound like an excuse made by Bolivian officers about the soldiers serving underneath them and while yes, that would naturally affect an individual performance, the root of the problem does not lie in a question of altitude.

Let's talk about the Bolivian soldier of the Chaco War.

The Bolivian soldier in the Chaco War (1932-1935) was on average an illiterate peasant from the Bolivian highlands and of indigenous ethnicity who only spoke Quechua or Aymará who had been forcibly recruited into the army. They were given little to no training by officers who were the complete opposites of the men they led. That there was a language barrier between officers and soldiers goes without saying, seeing as the Bolivian officers spoke almost exclusively Spanish and had no way to communicate with their indigenous soldiers except by bilingual NCOs. The Bolivian officer corps was highly politicized and were of quite poor quality and completely unprepared to fight a war in the Chaco. More importantly for your question however, they had a very low opinion of their soldiers and had a racist and elitist perception of them. Throughout the conflict, Bolivian officers would act in a very incompetent manner and some would even run at the first signs of action.

With this said, why wouldn't the Bolivian government recruit soldiers from its urban centres? The reason for this is that they tried and failed. Urban men would actively try to avoid getting recruited and if they were finally caught and forced to join the army, they deserted at the first opportunity or made sure to wound themselves so as to be sent back. These factors led to the forced recruitment of indigenous men from the highlands. You mention the altitude and yes, there were an issue there but not due to the altitude: Coming from the high Bolivian highlands to the tropical environment of the Chaco, the indigenous soldiers were immediately hit by tropical diseases that they weren't immune to. It is also worth to mention that one, if not the most critical, of the challenges faced by the average soldier in the Chaco War (be it a Bolivian or Paraguayan soldier) was thirst. Due to the hot climate and the fact that there were few water sources in the Chaco during the long summer months, men would end up dying of thirst and would sometimes do very desperate decisions when they realized that their water supplies were dwindling and that they were left with no choice but to fight to get a drop of water.

Already, we see that there were some very critical weaknesses at play here: Officers unable to communicate with their soldiers, a lack of training, the sudden influx of new disease among the ranks and the extreme climate. All of this made the Bolivian soldier feel as if he was without a cause and the belittling way he was treated by his superiors caused widespread demoralization - if not the fact that they had been forced to fight in a place as unknown to them as the highlands they came for were for their officers. Soldiers without training or a will to fight are naturally not going to be good soldiers. Now, Bolivia would fight for three long years and it wouldn't have been able to do so had soldiers not actually fought. It is to the credit of the average Bolivian soldiers that despite everything, they still fought bravely. Yet with the unimaginative tactics and strategies of their superiors mixed with the incompetence of their officers who could not lead men they could barely speak to and the soldiers own insufficient preparation, the Bolivian soldier would not be able to perform as well as their Paraguayan counterpart.

With the war over and the dust settled, it would be the Bolivian officers who blamed their own soldiers for the loss of the war. There were many factors which led to the Bolivian defeat in the Chaco War, but it is in my opinion that the plight of the Bolivian soldier in the war is the one thing that we can truly call a tragedy.

Sources:

The most scholarly and most up-to-date overview of the war in English can be found in Wars of Latin America, 1899-1941 by René De La Pedraja (2013, MacFarland). Shorter accounts of the conflict and the soldiers involved can be found in Latin America's Wars Volume II: The Age of the Professional Soldier, 1900-2001 by Robert L. Scheina (2003, Potomac Books) and The Chaco War 1932–35: South America’s greatest modern conflict by Alejandro de Quesada (2011, Osprey Publishing).