Georgetown, April 11, 1965, 4:00 p.m.
376. Following is course of developments over past 36 hours in Burnham–D'Aguiar budget crisis since our tel 375 London 2012In telegram 375 from Georgetown, April 9, Carlson reported his talk with D'Aguiar earlier that day about the latter's intention to resign. D'Aguiar told Carlson he had “no political future,” the PNC intended to merge with or swallow up his party, and that, therefore, he would direct all his efforts towards doing a “good job as finance minister.” D'Aguiar thought that since “there is no hope in hell of balancing the budget” due to PNC politically inspired spending increases, that the only hope for the country was “in providing image which will attract private investment” through a good budget, “especially by abolition property tax.” (Ibid.) which indicated grave threat to continued coalition. This threat now appears to have been brought under control and impasse resolved after intensive pressure by ConGen.
During mayor's reception evening April 9 for newly appointed BG commissioner to UK, Lionel Luckoo, Minister of Works and Hydraulics Kassim (UF) told me that at cabinet meeting scheduled that evening it was anticipated that decision would be made for D'Aguiar to leave cabinet. Kassim did not know whether other UF ministers would remain but thought they would. This meeting apparently went far into night but without real results. D'Aguiar did not attend but other UF ministers did with his permission.
On morning April 10 at briefing on rice problem by Dr. Efferson (Dean of School of Agriculture, Louisiana State University) in Burnham's office which was attended by Kassim, Minister of Trade and Industry Kendall, Minister of Agriculture JOHN, and by myself and other US representatives, message was received about one hour later from Burnham summoning key ministers to special meeting at his residence. On way out I urged Kendall, whose political judgment Burnham respects, to see that if D'Aguiar had to go that it be done smoothly on grounds personal and health reasons, preferably with commendatory letter of appreciation from Burnham, but sought impress on Kendall importance of retrieving situation if at all possible. I also spoke with Kassim, who seemed uncertain and depressed. Gave him same advice along with view that D'Aguiar's departure from government would be damaging but departure of UFs would be disastrous and consequently every effort must be made to retain D'Aguiar's services.
Toward midnight April 10 I learned [less than 1 line of source text not declassified] that UF executive had held meeting at which D'Aguiar claimed matter of principle and substance was involved on which he felt strongly: that party's choices were: (1) for him to resign with other UF ministers remaining; (2) for all UF ministers to resign; and (3) for all UF members to resign from legislative assembly. After lengthy discussions executive voted for all ministers (3) to resign and to defer question of leaving assembly (7 members) until constitutional aspects could be determined. Report also indicated that D'Aguiar scheduled meet with Burnham at 9 a.m. April 11 for final session.
Immediately sought reach Burnham without success. Called D'Aguiar early morning April 11. He was just arising so invited him to breakfast. [less than 1 line of source text not declassified] Decided try combination of flattery, pleading, and strong language related to horrible consequences of breakdown anti-Jagan forces. Told D'Aguiar how much US entities appreciated his contributions to Burnham administration, what favorable impact his presence in government had on various visitors, e.g., that American businessmen usually say after seeing ministers that they are good but D'Aguiar is really outstanding. (D'Aguiar usually does make better impression than any other minister on businessmen.) Told him one of main reasons for USG support and confidence in BG was coalition and constructive role D'Aguiar was playing; everyone knew he was outstanding member of cabinet and counting on him; that Washington would not be able believe that on issue of abolition of property tax worth about $1 million he would hand BG to Jagan on a silver platter; that I had just been to Washington and had given optimistic appraisal stability Burnham administration, and USG on basis such reports had gone to extraordinary lengths to expedite aid and to make it substantial; that because of this stability and his presence in cabinet potential foreign investors were being encouraged; that I could not believe that after all effort put into saving BG from communism, including strenuous efforts by D'Aguiar (all those miles and all those speeches), it was going to be thrown away. I stressed it would be bad enough if he felt he must leave government but to permit UF to leave was to sell his country out; that with all trouble spots Secretary and senior officers had to cope with, such as Vietnam, Russians, Castro, Chinese, were we now going to have to add BG to the list? I asked him to think about consequences in BG itself which would doubtless see return to violence, possibly against his own supporters.
Then suggested that there must be compromise and that he must realize Burnham could not give way totally under ultimatum of resignation. Burnham must save face and D'Aguiar must give at least little bit. I asked if he would accept idea of moratorium if I could obtain Burnham's agreement, or some kind of depletion allowance which would permit government to collect property taxes with one hand and refund it with the other. We discussed matter and arrived at compromise whereby existing industries could deduct cost of any expansion or capital improvements from taxes owed or, if company did not qualify in this way, purchase of government debentures would be regarded same as paying tax. New industries would be exempt from tax. (First $50,000 is not taxable in any event under existing legislation.) At my insistence he also reluctantly authorized moratorium of two years but only as last resort if Burnham rejected above.
At this point, with D'Aguiar's concurrence, I informed Burnham that 9 a.m. meeting with D'Aguiar postponed if agreeable and I would meet with Burnham first. He agreed. D'Aguiar said he also wished have Burnham's agreement to downward revision of income tax rates and to simplifying tax structure by decimal system. This tax now ranges from 6 percent on first $1,000 to 70 percent on $13,200 and above. Total cost of D'Aguiar's plan would be about $125,000 BWI. He was prepared not to inaugurate it until 1966 but wished make some allusion to possibility in budget message scheduled April 14.
Finally, D'Aguiar confided other matters which have been bothering him in coalition, some of which are petty annoyances which probably loom much larger than otherwise in view his fatigue: there were too many long cabinet meetings at night with important matters decided at late hours; lack of expeditious handling of agenda items, inadequate air conditioning, and belief that no one but he felt free to be critical. I offered to talk to Burnham about reducing number of night sessions or possibly exempting D'Aguiar in some fashion, as well as proposing more personal consultation with D'Aguiar. D'Aguiar thought it would be good idea have committee with each side represented on party basis to express freely to the other any matters of concern. I did not commit myself to support this idea as I am not certain that it would be productive.
D'Aguiar throughout whole first part of discussion, kept reiterating desire to resign, but by end of discussion had specifically agreed to stay indefinitely and to give it another try.
I saw Burnham immediately afterward and informed him of likelihood UF ministers resigning, possibility of UF leaving legislative assembly and recalled series of serious consequences previously drawn to his attention. Told him it seemed essential to keep D'Aguiar in government at least at this stage and to settle this tax issue at any cost. Told him Washington had been given favorable view of stability his administration during my recent visit, that USG would find collapse of coalition over tax involving $1 million incomprehensible, that if events should take this disastrous turn, I had little doubt USG would have to reevaluate its aid program since there would be little point in improving country for Jagan. I then described compromise which D'Aguiar was now willing to accept on tax issue and Burnham readily accepted it, even claiming he had proposed most of it to D'Aguiar yesterday. (This may be more face-saving.) Told Burnham that more than just taxes was involved here: D'Aguiar was tired, unsure he was really wanted or appreciated, and Burnham should pat him on the back occasionally. I outlined D'Aguiar's complaints and suggested Burnham find ways to ameliorate them. I suggested he call D'Aguiar in at least once each week and talk over important matters personally, making clear that D'Aguiar was not just another minister. In short, that although Burnham might find it distasteful, he should turn on some of his charm.
In order not to risk agreement coming apart in Burnham–D'Aguiar meeting, I suggested that no meeting be held but that either Burnham or I simply inform D'Aguiar of Burnham's concurrence with tax compromise. Burnham agreed and telephoned D'Aguiar, who said he wished to see Burnham anyway “to thrash out a few things.” Burnham then asked me to remain during this session. D'Aguiar made notes on all major tax changes in new budget, asking Burnham in each case to agree. Burnham was considerate, readily agreed, although offering occasional language changes. Burnham exempted D'Aguiar from cabinet meeting evening April 11 or any meeting April 12 to free him to work on budget. He agreed to try operate cabinet meetings more expeditiously, to consider farming out items to subcommittees, to have better air conditioning in cabinet room, and to have more personal consultation. D'Aguiar suggested periodical special committee meeting on party basis in which criticism would be freely offered on any subject without thought of offense. Burnham agreed but suggested it be limited to cabinet officers and parliamentary secretaries. D'Aguiar agreed and read back all of his notes. By this time three hours had passed and Burnham invited us sample his bar.3In an April 12 memorandum to Cobb, Shullaw reported that he sent the following message to Carlson: “Heartiest congratulations your efforts.” (Department of State, INR/IL Historical Files, British Guiana Chronological File (Burdett), 1965)