Foreign Relations of the United States, 1964–1968, Volume XXXI, South and Central America; Mexico

500. Action Memorandum From the President’s Special Assistant (Rostow) to President Johnson¹

Washington, November 13, 1967.

SUBJECT

• Peru

At Tab A is a memorandum from Nick Katzenbach recommending approval of talking points for Ambassador Jones on the Mirage– F–5 question.² The talking points have been approved by DOD (Nitze) and AID (Poats).

Over the weekend three developments in Peru both improve and complicate the prospects for Peruvian acceptance of our F–5 offer:

1. Flexibility in War Minister Doig’s Attitude on Mirages.

Jerry O’Leary and our Chargé talked to General Doig (Reports are at Tab B).³ Both detected certain flexibility in his attitude toward the Mirages. Doig noted the difficulty of making a change now, but he also volunteered the precedent of the Peruvian switch from French to US helicopters in 1965. The Chargé thinks we have a fighting chance if we give the Peruvians a firm offer on F–5s.

General Doig spoke warmly of General Harold Johnson to O’Leary and our Chargé. Our Chargé recommends a confidential message from General Johnson to Doig to stimulate him to reverse the Mirage decision. I am leery of any written messages, but I think Ambassador Jones could talk to General Johnson and carry an oral message. We have so suggested to Covey Oliver.

2. Trouble on the International Petroleum Case.

For the past two years, President Belaunde has skillfully wended his way through the difficult IPC case to keep his pledge to me not to impair the Company. Last summer when the opposition-controlled Congress forced his hand with a law nationalizing IPC’s oil properties, Belaunde came up with what seemed like a wise solution. He signed the law nationalizing the oil fields which IPC was willing to give up in exchange for an operating contract, but he also worked out a formula allowing IPC to continue operating and referred to the Fiscal Tribunal the controversial question of IPC past taxes.

This past Friday⁴—on the eve of senatorial bye-elections—Belaunde published the Fiscal Tribunal’s finding that IPC has “unjustly enriched itself” and issued two resolutions instituting judicial proceedings against IPC to recover IPC profits over the past 15 years and back taxes over the past 8 years. It is hard to see how Belaunde will be able to continue delivering on his “no impairment” pledge. But before making a final judgment, we should await Ambassador Jones’ talk with him. Belaunde understands that there is no program loan if his bargain with me is not kept.

Politics seems to have dictated Belaunde’s action.

3. Belaunde Suffers Reverse in By-elections

An important senatorial by-election was held yesterday. Despite the grandstand play on IPC, Belaunde’s candidate is running far behind the opposition candidate. To compound Belaunde’s difficulties, the Christian Democrats announced on the eve of the elections that they were withdrawing from their alliance with Belaunde’s party. These reverses are not likely to improve Belaunde’s capacity for decision and leadership.

Despite the gloomy outlook, I think it is still in our interest to proceed with the F–5 offer—if Belaunde is willing to cancel the Mirage contract—and with the $40 million program loan offer—if he takes the self-help measures and finds the formula for undoing what he appears to have done to IPC. Belaunde is a weak reed to lean on but better than a de facto military junta. We should try to prop him up if he is willing to do those things which are indispensable for our support. The record should show we did everything possible, within reason, to preserve constitutional government in Peru.

I recommend that you approve the talking points.

Walt

Approve talking points⁵

See me

1. Source: Johnson Library, National Security File, Country File, Peru, Vol. III, 10/67–1/69. Secret. An attached note to the President states: “Mr. Rostow asked if you could give your attention to this memo at your earliest convenience.” Another note indicates that “the President called Mr. Rostow about this and talked at 2:47 p[.m.] 11–16–67.” Although the President’s Daily Diary confirms that the conversation took place, no substantive record has been found. (Johnson Library)
2. Tab A was a November 13 memorandum from Katzenbach to the President; attached but not printed. The talking points, drafted by Bowdler on November 10, presented the latest proposal to replace the existing Mirage contract with a similar agreement for F–5 fighter aircraft, including early pilot training and delivery beginning in December 1968. (Ibid., Johnson Library, National Security File, Country File, Peru, Vol. III, 10/67–1/69) In telegram 2347 from Lima, November 20, Jones proposed to avoid the aircraft issue in his conversation with Belaúnde, “as means help us evaluate future IPC impact on our overall interests here.” (National Archives and Records Administration, RG 59, Central Files 1967–69, PET 6 PERU) The Department replied that discussion of the issue was left to Jones’ discretion; the program loan, however, was not to be raised without further instructions. (Telegram 73160 to Lima, November 22; ibid.)
3. Telegrams 2213 and 2215 from Lima, November 11 and 12. (Both ibid., DEF 12–5 Peru) The telegrams were retyped and forwarded to the President. (Johnson Library, National Security File, Country File, Peru, Vol. III, 10/67–1/69) Jerry O’Leary, a Washington Star correspondent, was in Lima to interview General Doig.
4. November 10.
5. Neither option is checked, but a note on a copy of the Katzenbach memorandum indicates that the talking points were approved by the White House on November 17. (National Archives and Records Administration, RG 59, Central Files 1967–69, DEF 12–5 PERU)