143. Memorandum From Administrator of the Agency for International Development Bell to President Johnson 1

I request your authorization to begin negotiations immediately with the Provisional Government of the Dominican Republic for the provision of $30 million of assistance to reduce political and economic pressures so that we can move toward the installation of an elected government and our withdrawal. We presently estimate that $50 million is the minimum needed for the balance of FY 1966. An additional amount of $25 million ought to be set aside now in case our estimates of financial and political needs and Dominican capabilities are proven wrong.

To meet these financial requirements $25 million can be made available from previously appropriated funds. This will exhaust the Contingency Fund. The balance would be dependent upon obtaining a supplementary appropriation. The $25 million currently available will meet our needs through December 31.

[Page 341]

Since it will take until December 1 to establish procedures tying dollar disbursements to U.S. exports, assistance provided for November will have adverse effects on our balance of payments. Not more than $12.5 million will be disbursed in November. All assistance over this amount will be tied to procurement of goods and services in the U.S. The Treasury Department has stated that it will not object to this arrangement.

Since the overthrow of the Dominican government in April the U.S. has made large amounts of supporting assistance available to reduce potential economic complications and elements of political instability by helping meet government payrolls and provide for employment. The Provisional Government has proven to be weaker than feared. President Garcia-Godoyʼs financial advisers, who appear to be intelligent and conservative men, have reported serious budgetary problems now and into next year.

In an effort to ascertain the full extent of the Dominican financial problem, Assistant Secretary Anthony N. Solomon recently visited Santo Domingo to discuss the financial situation with U.S. and Dominican officials.2 The estimates of external assistance needed are the result of his findings which are concurred in by the Country Team. Mr. Solomon, Ambassador Bunker, and the Country Team further believe that the weakness of the Provisional Government prevents our insisting on a commitment to devaluation of the exchange rate when shown necessary as we have when we negotiated program loans with Colombia, Chile, and Brazil. Therefore, the negotiating strategy will be to tell the Dominicans that our maximum assistance through FY 1966 will be $50 million and that requirements beyond that will have to be met by their own resources. This is intended to limit our financial help and force the Dominicans to reduce their expenditures, increase their revenues, or utilize domestic means of covering deficits.

Our assistance will continue to be focused on playing down possible political problems by helping the government pay government employees their salaries and providing emergency employment on important public works projects. The government needs at least an estimated $20 million for wages and salaries before the end of 1965 and cannot be expected to obtain this amount from other sources. Although we estimate that it can eliminate the deficit in ordinary budget operations in 1966, it will need an estimated $15 million for wages and salaries in 1966 before this occurs.

[Page 342]

The additional $15 million in this $50 million package includes $5 million for the balance of 1965 and $10 million for early 1966 to finance port reconstruction, irrigation, road maintenance and other high priority employment giving activities. These serve more importantly to siphon off potential dissidents from political activity.

Our best judgment is that $50 million will be required for the achievement of a political climate within which to pursue our aims but that an additional $25 million should be available since accurate projections of the Dominican situation are not possible to make. We will attempt to negotiate for the maximum self-help possible, subject to existing political circumstances. The negotiation of this package is a desirable alternative to the present situation where we receive piecemeal requests from time to time. Furthermore, we believe the Dominicans are prepared in connection with the U.S. assistance to impose increased taxes on imports and restrict internal credit.

David E. Bell 3
  1. Source: Johnson Library, National Security File, Country File, Dominican Republic, Vol. VIII, 11/65–1/66. Confidential. Drafted by William P. Stedman (ARA/ECP), and cleared by C. Allen Stewart and Shlaudeman.
  2. Assistant Secretary Solomon visited the Dominican Republic October 29–November 2 to examine food distribution problems and assess economic assistance needs for FY 1966.
  3. Printed from a copy that bears this typed signature.