Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

23. Memorandum of a Conversation Between the Assistant Secretary of State for Inter-American Affairs (Holland) and President Castillo Armas, Guatemala City, February 14, 1955¹

Guatemala City , February 14, 1955

I outlined to the President our views on a number of points:

General U.S. Attitude Towards Guatemala

The President, Vice-President, Secretary of State and all top U.S. Government officials have a constant and intense interest in seeing that the Government headed by Colonel Castillo Armas is successful. Our Government assigned to Guatemala an Ambassador whose prestige and recognized abilities serve as a measure to the world of the importance which we attach to the success of his Government. We assigned to the Embassy one of the most capable younger Foreign Service Officers to insure that the Ambassador would have vigorous resourceful support in his task. I was particularly interested in the assignment of Mr. Mann because my long close contact with him has given me complete confidence in his judgment and ability to meet fully the very difficult problems of his assignment. I assured the President that through the Ambassador and Mr. Mann, he had rapid and constant access to all officers and agencies of our Government and that, if he accepted my assurances regarding our desire to support him, he could get maximum benefit from these policies through close constant and detailed contact with the Ambassador and the Counselor.

The president thanked me for these expressions and emphasized his confidence in our officers here. He explained the great difficulties which he is encountering in his task, mentioning particularly the lack of experienced and capable personnel. He said that he himself was poorly prepared to cope with many of his problems and that he desperately needed advice and guidance from us.

Oil Legislation

I explained that I was a lawyer, only recently entered in Government service, and that much of my practice had been in the petroleum field; that a few days ago I had seen a memorandum on a draft of an oil law which had gravely concerned me in that the terms were such as would logically obstruct the entry of responsible oil companies into the local field. I said that I feared it might facilitate the entry of a few companies, but at the expense of broad access to the entire industry which was essential to the development of a strong, well-balanced and aggressive oil development. The President said that the proposed legislation had been recommended to him by Lic. Cordova Cerna; that Mr. Mann had criticized it, and that he was rejecting it. I said that while Mr. Mann had been out of the law practice for a number of years, he had a considerable background in the petroleum field, and that his judgment on the essentials of a sound law would be excellent. I pointed out that the President had access to advice from Mr. Batzell’s representative and from Mr. Merritt. He said that he would utilize their help, but that he would reach no final decision without consulting with Mr. Mann. I said that this course would gratify me as I was sure that Mr. Mann would give me an opportunity to comment on any proposed final decisions; thus the President’s proposal would assure him of whatever help I could give on the subject as well.

I emphasized the importance of adopting a complete petroleum law rather than piece-meal regulations which would force oil companies to make decisions on such matters as exploration without knowing just what the regulations would be on other phases of the industry.

Economic Programs

The President discussed generally the importance to his Government of an effective economic program and of measures to reduce unemployment. I replied that an economic program required adequate planning, effective personnel and adequate financing. As to the planning, we would help as much as we could on the problem of personnel, the recent FOA contract with Klein and Saks should greatly increase our assistance. On the question of financing, I said that there were several ways that we could be helpful:

1. Grant aid such as that which we are giving for the Roosevelt Hospital and the Pacific Highway. I explained that it was difficult for us to give large amounts of aid in this category because it inevitably provoked requests from other governments to whom we were not giving grant assistance. I said that I felt we could continue some grant aid, but that I hoped he could understand the serious problems that it caused us.

2. Inter-American Highway. I explained that grant aid for the completion of the Inter-American Highway was much easier for us because our Government and our Congress were accustomed to thinking of grant aid for this project, and that appropriations for this purpose would not provoke requests from other governments, because it was generally recognized in the hemisphere that this was a long time goal of our Government.

3. Loans to His Government. I explained that such loans could come from the International Bank and the Export-Import Bank. Every effort should be made to obtain maximum advantage from International Bank financing because the institution is well disposed, its personnel are extremely capable and, of course, it has abundant resources. I pointed out that in the event that projects were unduly delayed in the International Bank they could always be removed to the Export-Import Bank but that every effort should be made to coordinate the services of the two banks to insure maximum benefits to his Government. I stated that under certain conditions the Export-Import Bank could finance both the dollar and the Quetzal components of projects.

4. Loans to Private Enterprise. I explained that our policy is to intensify the activities of the Export-Import Bank, and that it is prepared to make economic development loans to private enterprise without governmental guarantees. I pointed out to him that this is an important additional source of capital, one the utilization of which will not reduce the borrowing capacity of his Government if loans are obtained without governmental guarantees.

He then mentioned two proposals which have been submitted to the Government by private companies. One is submitted by Baister International Inc. of Miami, Florida, and relates to a housing project on government lands. The other is a proposal submitted by an engineering company to complete the Atlantic highway upon condition that the investment could be amortized through a 10 cent gasoline tax. I said that I could not express an opinion on these proposals, but would report them to the Embassy.

Coffee Prices

He expressed his concern about the falling coffee prices. I said that I wanted to eliminate from his mind any question as to whether it was the purpose of our Government to depress the price of coffee. I said our policy was to permit the price to be determined by the free influence of the factors of supply and demand. I described to him the decision of the Bell Senate Committee, recommending that the coffee be subjected to Government regulation and said that I felt sure that for the immediate future the policy of our Government would be to avoid any attempt to regulate coffee prices.

German Problem

He said his Government was troubled by the insistence of the former owners of German coffee fincas upon the return of their properties. The refusal of the Arbenz regime to return these properties had been politically popular, and his Government would be criticized if it were to do so. He said that he was willing to pay a token indemnity of $10 or $15 million for the properties, but that he would not return them. He said he was willing to discuss the problem in Guatemala or in Washington, but that he would not accept proposals for its discussion in El Salvador.

I said that I was not prepared to discuss the matter myself but that I would report his views to our Government.

Establishment in Guatemala of a Branch Office of an American Bank

The President said he was very anxious to persuade some American bank to establish a branch office in Guatemala and mentioned Chase and the National City Bank. He said that he felt the volume of banking business would justify such an investment. I said that obviously I could express no opinion on the matter, but that I would be glad to discuss it with our banking contacts.

1. Source: Department of State, Central Files, 611.14/2–1655. Confidential. This memorandum of conversation was forwarded to the Department as Enclosure 1 to despatch 699 from Guatemala City, February 16. Assistant Secretary Holland accompanied Vice President Nixon on a tour of 11 countries of Central America and the Caribbean, February 6–March 5. The group was in Guatemala, February 12–15. In despatch 690 from Guatemala City, February 24, the Embassy recorded its impressions of the Guatemalan response to Nixon’s visit. (Ibid., 814.00–TA/2–2455) Additional documentation on the Nixon trip is ibid., 033.1100–NI.