168. Current Economic Developments1
OAS Economic Conference Successfully Concluded
The Economic Conference of the Organization of American States, which was held in Buenos Aires August 15 to September 4, reached a high degree of accord in resolutions on important and traditionally controversial subjects in inter-American economic relations. The US was faced with the delicate task of resisting the customary Latin American requests which it cannot accept, such as an Inter-American Bank, price stabilization and parities, and at the same time of maintaining a positive attitude and retaining Latin American confidence. Our delegation was successful in doing this and in getting unacceptable resolutions reworded in such a way that there was unanimity on all of them except one on commodity agreements which the US had to vote against. No policy commitments of any consequence were agreed. Attention was centered on the proposal for a general economic agreement but, when it became clear that it was impossible to negotiate such a treaty at Buenos Aires, a broad declaration of basic principles of economic cooperation was unanimously passed. Another resolution, which was generally hailed as a positive and forward looking step, endorsed the ultimate establishment of a Latin American regional market and recommended further study of this subject.
While the conference ended successfully from the US viewpoint in that we avoided commitments which the Latin Americans desired but which we could not make, it points up questions concerning the frequency, purpose and timeliness of such conferences. There can be no doubt that a conference of this type, with the high level of representation it commanded, raises hopes and expectations on the part of Latin American Governments and people. There is now a feeling in official US circles concerned with Latin America that it might be better to hold more specialized inter-American conferences to attack specific problems such as trade rather than the general omnibus type of conference held in Buenos Aires.
The Economic Declaration The Economic Declaration of Buenos Aires, as it emerged during the last week of the conference, is essentially a constructive statement of broad objectives without [Page 565] specific commitments, time limits or details of implementation. Its acceptance enabled us to avoid being confronted with an economic convention which we could not have signed without a whole list of reservations unless it were reduced to pointless generalities.
At the Bogota Conference of 1948 an economic agreement was signed but it had so many reservations, from other countries as well as the US, that it never came into being. The positions of the countries at this conference were about the same as they were at Bogota. The draft agreement which had been prepared by the OAS Secretariat was based on resolutions and declarations made in the inter-American system since 1889 and contained much that was included in the Bogota Agreement. From this standpoint, this Secretariat draft was hopeless as it was full of commitments to which we could not agree. It contained some things that were unacceptable to other countries, particularly Mexico, and it was with the help of those countries that the substitute declaration was drafted and approved. This did not come about until it became apparent that an economic agreement was not possible. Even after negotiations on the declaration had been started, the Conference Committee on the General Economic Agreement continued pro forma article-by-article negotiations and came up with a draft agreement with negative votes on nine articles by the US, four by Mexico and abstentions and reservations by Chile and Uruguay. US reservations on the agreement were in connection with articles on matters which have traditionally caused difficulty, such as treatment of private investment, stabilization of prices of basic commodities, financing of economic development, disposal of surpluses, and national merchant marines. This exercise, however, proved useful as we left the Latin American countries in no doubt where we stood on all issues and since it showed the US was not the only country blocking unanimous agreement. It was thought that some countries refrained from making their reservations known in the belief that agreement, in any event, would not actually be reached.
US action at Buenos Aires was in contrast to Bogota where we reserved on the articles most important to us but did not reserve on some others that we did not really like because we did not want to have too many reservations. This forthright position of the US at Buenos Aires had a good deal to do with the “burial nature” of the final resolution which referred to the OAS Council further consideration of the agreement. It is not expected that the Council will be able rapidly to conclude an agreement which has so long been under consideration and it is considered unlikely that an economic treaty will be scheduled for the agenda of the 1959 Quito conference. While some of the Latin American countries attached considerable importance to a general economic agreement, Uruguay and Costa [Page 566] Rica were the only countries which really believed almost to the end that one could be negotiated at Buenos Aires. All of the Latin American delegations seemed satisfied with the results of the conference on this issue.
The declaration reiterates the intention of governments to maintain conditions which promote the maximum economic growth of each country through attainment of high and stable levels of real income, employment, and consumption, in order that all their peoples may be adequately fed, housed, clothed, and have access to the services necessary for health, education and general well-being. For the realization of these principles and purposes the unofficial English text shows that it is the declared purposes of the governments to promote the following. 1) Expansion of trade among themselves and with other nations, on a mutually advantageous basis, including cooperative measures necessary for its attainment. 2) Reduction of barriers to inter-American and international trade, taking into account the measures which may be necessary in the light of the economic conditions and requirements of each of the American states or of several of them among themselves. 3) International cooperation, either through intergovernmental consultations or through other arrangements which may be agreed upon, relating to the problems of basic or primary commodities whose prices may be subject to excessive fluctuations, and relating to the orderly disposal of surpluses in a manner which will not unduly disrupt international trade. 4) Adoption of measures to facilitate the acquisition and exchange, for their mutual benefit, of capital, machinery, raw materials, techniques, and other material elements needed for their economic requirements. 5) Intensification of efforts, individually or through international financial institutions, to expand the flow of public capital to the countries of the American continent through the extension of credits for the sound financing of investments considered essential to development, and to encourage private investment therein, in order to promote their economic development and strengthen mutually beneficial economic relationships among the American countries. 6) Continuation of efforts toward the achievement of sound monetary and financial conditions. 7) Intensification of national and international efforts to improve, develop and utilize efficiently their means of transportation and communication. 8) Conclusion of agreements by the interested governments to facilitate free transit for landlocked countries for the purposes of their trade. 9) Effective support, through the OAS and appropriate international agencies, or directly between themselves, for technical and scientific cooperation programs which, taking into account the corresponding national or regional plans, may contribute to the acceleration of economic development and the improvement of the standards of [Page 567] living of the peoples of the continent. 10) Strengthening of the IA–ECOSOC so that it may respond fully to the purposes and functions assigned to it by the Charter of the Organization of American States, act as a coordinating organ of inter-American official activities in the economic and social field, and deal effectively with the consultation which the states may initiate with it for the prevention of difficulties or solution of economic problems.
With regard to encouraging private investment, the American representative pointed out in the plenary session that for foreign capital to flow in large amounts, it must have reasonable expectation of fair and equitable treatment. “The US assumes,” he said, “that foreign private capital will receive such treatment which should promote a constantly expanding flow of investment in the economic development of all of the Americas.”
Latin American Regional Market The question of Latin American regional markets was one of the most debated at the conference. The result was an acceptable resolution declaring the advisability of establishing a Latin American regional market, gradually and progressively, in multilateral and competitive form, and recommending that the IA–ECOSOC and the ECLA pursue their studies and cooperate closely with one another on this subject. The resolution doesn’t specifically give ECLA the lead in comparison with IA–ECOSOC but that is the intention of the Latin American countries, who regard ECLA as the more effective of the two organs for this purpose from their point of view. The resolution does note the ECLA Trade Committee work on payments and the goal of multilateralism.
The final resolution in the trade group replaced six proposals, none of which would have been fully acceptable to the US in original form. The protracted debate in the working group, with active US participation, centered around questions as to the nature of the eventual regional market and referred to the European Common Market. The US, with assistance from Brazil and other countries, was able to emphasize competition and that the final form of the eventual regional market—which still needs much study—not be prejudged. Our delegation was also successful in getting eliminated any reference to possible “selectivity” by product or industry. The US succeeded in changing the reference to the European Common Market from implying possible adverse consequences and inferring that the Latin American regional market would be desirable as a defensive measure, to merely noting that the European Common Market may have repercussions on Latin America depending on the nature of its evolution. Our delegation felt that the vigorous discussion in hammering out the language of this resolution was useful in conveying US views. The final text, which was pleasing to Latin [Page 568] American Governments, did not compromise the principles of economic integration emphasized by the US.
Five other resolutions in the field of inter-American trade were unanimously approved. One of these, considering that elimination of trade and payments restrictions is conducive to an increase in inter-Latin American, inter-American and world trade, recommends to Latin American Governments, if they find it advisable, to enter into contracts gradually to liberalize trade and payments in different regions of the area, with due regard to international obligations. This resolution was transformed from a Uruguayan proposal for regional commissions among countries interested in eventual economic integration. Instead of a proposal for a regional market in construction materials, a resolution was adopted asking the OAS to investigate whether trade restrictions on building materials constitute a major obstacle to development of low cost housing. If so, interested governments are requested to consider the possibility of lowering such restrictions with due regard for international commitments. Another resolution recommends that IA–ECOSOC present within two years to member governments a completed study on the problems of immigration to Latin America. Others recommend that governments study the possibilities of reciprocal agreements which, in conformity with international commitments, would give trade advantages to landlocked countries, and that governments give greatest possible free transit facilities for landlocked countries.
Commodity Problems One of the principal subjects in the commodity field concerned disposal of agricultural surpluses, with resolutions proposed which were really aimed at the US PL–480 program. Our delegation was especially pleased with the outcome, which was a resolution entirely acceptable to us. It recommends orderly procedure not unduly disturbing prices; that countries continue mutual timely and effective consultation on their disposal of surpluses; and a continued attempt to channel production to avoid creation and chronic accumulation of surpluses. The Argentine delegation was particularly helpful in resolving this issue.
The greatest difficulty in the commodity field, as expected, developed in discussions of the fluctuations of commodity prices, terms of trade and international price stabilization. When the conference opened there was considerable concern about specific commodities. The possibility of US legislation on lead and zinc was very disturbing to Mexico, Peru and others, but this tapered off when it became evident Congress would not take action this session. Chile was extremely concerned at the slide in copper prices which are now near the point where the two-cent export tax may come on. A plethora of proposals in this field was finally reduced to two major resolutions. The US found acceptable one of these, which would [Page 569] establish a standing committee to consider commodity matters. Our delegation voted against the other which looked toward the formulation of international agreements to stabilize the prices of basic products. This one was designed at US insistence to select out from the previously-mentioned resolutions those matters to which the US could not agree. The US also reserved on one of the “Whereas” clauses of a resolution regarding terms of trade which indicated that it was of great importance to the Latin American countries to be able to count on an equitable relationship between the prices of exports and the prices of the products they import as this implied Government control of prices.
The resolution on commodity matters which was unanimously accepted recommends that IA–ECOSOC create a permanent Committee on Basic Products which will study markets and, when circumstances warrant, propose meetings of governmental experts on the production and marketing of products. The resolution the US voted against recommends that this Committee on Basic Products in cases of special problems should study measures for reaching commodity agreements and make recommendations on them through IA–ECOSOC when it thinks this desirable. This resolution refers in the preamble to interest in the possibility of an international credit scheme (outlined by Chile) from which countries can draw when receiving below-normal prices for export of their primary commodities and to which they should make repayments when prices are above normal. The US pointed out that this proposal was even less practical than other commodity stabilization plans that have been suggested. Our delegation stated that it assumed that any government which joined the committee was free to leave it at any time or that it was free to participate only in those functions which it could support. The US will now have to decide whether it will become a member of the new committee. It would appear that we could participate in the functions outlined by the first resolution and not take part in any of the committee’s functions which involve commodity agreements.
A number of other resolutions were passed unanimously. These include a recommendation that IA–ECOSOC make a study of the national agencies having programs for agricultural products in the member states and report its findings to OAS governments; a recommendation that a regional center do research on diseases of cocoa and bananas; that the Special Committee on Bananas continue work; and that member countries create zonal commissions to study markets for common exports and measures for promoting exports.
Financing Economic Development The principal item in the economic development field was the perennial proposal for an inter-American bank. Three resolutions were proposed in this regard all aimed at [Page 570] creation of such an institution. Our delegation, with the informal aid of Peru in the working group, was successful in drafting and securing unanimous approval of an omnibus resolution on financing of economic development to replace the other proposed resolutions. It reiterates, in effect, the recommendation of the Committee of Presidential Representatives that a study be made of the problems of financing economic and social development, giving consideration to proposals for special regional financing institutions and to the US view that greater progress would be achieved by using existing institutions. The study will be made, it was agreed, through the IA–ECOSOC by a commission of governmental experts. The resolution expresses appreciation of the recent progress made by existing credit institutions, especially the Eximbank, and the expanded flow of private capital. It also requests governments to encourage to the greatest possible extent the flow of private capital and accompanying technical skills. A resolution calling for development of a model international tax treaty asks for the continuation of efforts to conclude bilateral tax treaties to eliminate double taxation.
The Mexicans introduced a resolution implying mild criticism toward implementation of the Rio resolution on local currency and general development financing (as opposed to project financing) by the International Bank in special cases. In the background was the Mexican desire to obtain loans outside of particular projects in support of development and to purchase certain items locally with such loans. The IBRD loans to Southern Italy and Australia were cited as a precedent. This resolution was changed to a request that IA–ECOSOC bring this to the attention of the International Bank so it could be discussed there. The US made clear that its position on IBRD lending policies would be formulated after consideration of the matter in the Bank and that its approval of the resolution did not signify a commitment to support a change in Bank lending policy.
Other resolutions in the economic development field urged that international credit institutions continue to give attention to financing sound land reform and resettlement plans and appropriate technical cooperation; that appropriate agencies consider increasing funds for greater technical cooperation and industrial technological research; that the possibility be studied of establishing a committee on continuing statistics through the Inter-American Statistical Institute in collaboration with IA–ECOSOC; that the importance of encouraging municipal economic activities to create local sources of employment and to set up public service enterprises be emphasized; and that the IMF make a study of the effects of inflation upon development programs and foreign exchange resources.
[Page 571]Other Matters In the field of technical cooperation the Latin American countries made an effort to get a larger US contribution to the OAS program. The result was agreement that the OAS should study ways to promote a larger program with larger contributions by all member states. A number of resolutions in the technical cooperation field endorsed the recommendations of the Committee of Presidential Representatives.
The key problems discussed in the Committee on Transportation were freedom of transit for landlocked countries and the development of the River Plate basin. The IA–ECOSOC was asked to undertake studies on these and related topics, such as freight and insurance rates, standardization of statistical data on the arrival and departure of ships and the use of identical forms.
[Here follows discussion of other subjects.]
- Source: Department of State, Current Economic Developments: Lot 70 D 467. Secret. A cover sheet and table of contents are not printed. Current Economic Developments was a semimonthly classified periodical prepared in the Bureau of Economic Affairs for internal use as a background and policy guidance report for policy-level officers of the U.S. Government serving in the United States and abroad.↩