Foreign Relations of the United States, 1964–1968, Volume XXXII, Dominican Republic; Cuba; Haiti; Guyana

9. Telegram From the Embassy in the Dominican Republic to the Department of State¹

Santo Domingo, July 16, 1964, 9 p.m.

62. For Asst Secy Mann. Embtel 57.²

1. Loath as I am to encumber you with Dominican problems on eve of Cuba MFM,³ I consider we are at a point of fundamental decision as regards this country. I refer to proposed IMF standby agreement and connected measures to put Dominican financial house in order, with attendant political strains which can be expected ensue from serious reform effort.

2. Largely through their own ineptitude and false confidence and despite our warnings, Dominicans missed July 1 deadline for putting standby into effect. It was not until end of June that Reid, heretofore shielded by faulty advice, became aware for first time of full implications of situation (Embtel 1221).⁴ For past two weeks he has been negotiating vigorously and seriously with IMF representative here on specific measures to be undertaken by GODR in connection standby although they have not settled on final details of agreement. We now understand that negotiations have been proceeding satisfactorily between USG, IMF and New York banks along lines para 4 mytel 1221. It seems important to us, in view Reid tendency step out high and handsome after favorable news, that final action not be taken Washington until Reid commits himself here to take further actions necessary. Otherwise money might well be spent to clear up arrears but without basic, long-term correction. For that reason we sent Embtel 57 yesterday, with para 4. General situation is urgent and I am counselling delay only long enough in order to get firm undertakings by Reid.

3. If Reid goes through with commitments he has agreed to in principle with IMF rep, there will be tightrope situation here. Reaction of forces of both right and left to first tentative steps toward austerity in Law 221 in May, resulting in taxi-dockworkers strike, offers evidence of what to be expected. Fears expressed to us by Reid in meeting requested by him July 14 that politicians and commercial people will immediately on imposition of controls begin efforts to suborn military with view to causing his ouster are probably not exaggerated.⁵ This will be a distinctly unpopular program imposed by a govt which has little or no popular base; and govt will be confronting venal, selfish groups who can be expected react sharply for their own self-serving purposes. Whatever our role or however much controls are exercised under IMF formula, U.S. can also expect draw criticism from affected circles for “imposing” Draconian measures on Dominican people.

4. In our July 14 meeting Reid again reiterated in strongest terms his determination “take every action except devaluation.” However, to counter expected reactions, Reid insisted he would need assistance from us in form:

(A) Statement by USG at time austerity program put into effect that we applaud GODRʼs willingness face up to financial difficulties and wish them well in their effort put house in order. Reid urged that for maximum effect locally statement come from President Johnson himself; however, this request made without knowledge of information received later that USG will be contributing financially to total package, a form of support that will speak for itself. Nonetheless, this program will constitute risky and courageous action on part of weak government and the higher the level our indication of sympathy—White House if possible—the better in my opinion.

(B) Announcement of agreement on aid program with us under Alliance for Progress of generous proportions, for purpose reassuring general public that broad-gauged attack on national problems beginning. There is a firmly based mystique here in both govt and private circles of “magic figure” of $50 million. However illogical this figure may be, I have come to conclusion that tangible and substantive evidence now of our long-range commitment to countryʼs future and sympathetic assistance in its very real problems of development, in addition to direct and immediate need of bulwarking insofar as possible a program of fiscal reform so necessary but so politically unpalatable to country, is in our own national interest. Accordingly, I propose we move urgently on AID program loan for $25 million for announcement concurrently with initiation standby-austerity program, which may be as early as next week. We realize that such dollar funds are not essential for the first stages of the stabilization program, but they will be needed during the next three to ten months if the stabilization develops as projected.

5. The financial program and the need for balance of payments assistance are the economic justification of the loan. Disbursement of the dollars would be tied to effective implementation of the financial program. Disbursement of pesos would in addition depend on mutual agreement on sound programs.

6. What I have in mind is announcement which will offer dramatic evidence of our determination assist Dominican people at a time when they are seriously disturbed over direction of events, i.e., a positive U.S. approach to supplement the very negative bite of austerity measures. We are caught here in a situation which grows increasingly grave, unless we are prepared to move rapidly, we may well see changes before long which will not be in our interests. Without positive evidence U.S. support, present govt, which appears ready make this effort, may not survive.

7. Nor do we consider that such a course would force the U.S. to do more than we have been thinking of. Due to inherent delays in reestablishment AID Mission here after 6 months lapse and endemic problems of Dominican bureaucracy, there has not yet been sufficient staff or time to work our programs in detail; but we have already identified fields of sound activity and specific programs (Embtel 1065⁶ showed guide lines and work now underway to flesh this out) total of which will easily exceed figure of $25 million. When Reid in July 14 talk proposed announcement of such program together with understanding no pesos would be released except on agreed projects, Ide and I pointed out difficulties and warned that disbursement of any such funds would have to be tied to sound stabilization program and made only in step with performance under it. Reid expressed full agreement with this concept. What proposed therefore is course which will offer Dominicans evidence of timely and generous U.S. policy, together with strict implementation in protection our own interests. We would spend no money until satisfied with soundness of detailed programs, but meanwhile, when needed most, we get benefit of dramatic impact of our announced intentions. I am persuaded that we tend become prisoners our own very valid planning process; by announcing each project only when it is finally and completely wrapped up, we lose public relations effect of totality of our general intentions and get little or no credit for the very fine things we do. And it is not enough to put out tabulations afterwards; I have seen the yawns go up in various countries as our statistics have been issued. Here, it seems to me, we have the opportunity of maximum public effect at no cost to sound procedures. I hope this can be done.

8. Admittedly we would all prefer to have more time to work these things out. Situation, however, is urgent. July 1 deadline on standby was missed and Aug 1 must not be allowed to go same way. Public already aware and concerned over problem and enough dope stories have appeared in press to make current uncertainty and speculation a decidedly negative factor in political as well as economic field. Reid is being accused more and more of “going way of Bosch” in sense of promises without performance.

9. As reported in previous messages we consider Reid has approached problems in soberer mood in recent weeks. Other foreign observers have indicated to us similar impressions. His approach to aid matters now parallels our own and he has given up his exaggerated public promises. These changes in him seem to have coincided roughly with resignation of Tavares from triumvirate and Reidʼs own belated awareness in late June of full dimensions local fiscal crisis. While I would not be so foolhardy as to predict a steady course ahead by Reid, he is at present in sounder and more serious mood than any time since my arrival here in March.

10. There seems to be a sensing of this among some local forces as well; or perhaps they are primarily motivated by concern over what would happen if Reid went. At any rate within recent days there has been a certain coalescing around Reid of some influential elements of what might be called the local “establishment.” For the first time in my stay here Bonnelly has begun appearing at social functions and talking at length with Reid publicly. Imbert, until recently a strong advocate of early elections, now argues that all “sound people” must rally behind Reid, provided he takes action on economic front. Amiama is described as holding similar views. These are at least heartening signs of some influential support for austerity program, and the two leading newspapers have been demanding it for some time.

11. In view of Aug 1 IMF deadline, time is of the essence. We need decisions, favorable I hope, on two proposals above in 4A. and B. within weekʼs time in order allow announcement stabilization program and aid loan as standby becomes effective. I realize this amounts to recommendation for strong U.S. support of weak de facto govt which has not always acted responsibly and will probably not always do so in future. We are, however, confronted with Hobsonʼs choice, and weak fabric of this country is burdened, as I have pointed out earlier, not with economic problems alone nor with political problems alone but with both simultaneously. If military should decide to turn on Reid—and there are some renewed rumblings—we know of no Castello Branco on local scene. It is the Trujillista elements of military who want Balaguer back and it should be remembered that latterʼs demagogic economic policies while in office contributed considerably to current state of affairs.

12. I deplore as much as anyone that in recent years we seem to get involved recurrently in this country with “rescue” operations. It is regrettably, after 33 years of Trujillo, that kind of country, but at least it still offers hope of rescue. This combined program may or may not work. If it does work it will not dispose of all our problems, notably political ones, but we have got to get through the present in order to be able to work on the future. If we do not confront the situation vigorously, there will be increasing possibility of some form of blow-up here in not too distant future. We all know who would have to pick up the pieces in such event. We had better batten the hatches, for the hurricane season is approaching.

Bennett

1. Source: Johnson Library, National Security File, Country File, Dominican Republic, Vol. I, 6/64–4/65. Secret; Priority; Limdis.
2. In telegram 57 from Santo Domingo, July 15, Bennett informed the Department that efforts by the Dominican Republic to meet the provisions of the proposed IMF standby agreement had not been successful due to bureaucratic weaknesses, political pressures, and further delays in implementation. (National Archives and Records Administration, RG 59, Central Files 1964–66, FN 1 DOM REP)
3. The Ninth Meeting of Consultation of Ministers of Foreign Affairs, serving as Organ of Consultation in application of the Inter-American Treaty of Reciprocal Assistance, was held at Washington July 21–26 to consider Venezuelan charges of Cuban intervention and aggression. For documentation on the meeting, see Foreign Relations, 1964–1968, volume XXXI, Documents 20–23. For excerpts of the Final Act signed July 22, 1964, see American Foreign Policy: Current Documents, 1964, pp. 328–334.
4. Telegram 1221 from Santo Domingo, June 30, recounted a June 28 meeting between Reid and Bennett about problems involved with the IMF standby agreement. Reid commented that his knowledge of these problems was inadequate to deal with them effectively. (National Archives and Records Administration, RG 59, Central Files 1964–66, FN 10 DOM REP)
5. This meeting has not been further identified.
6. Dated May 27. (National Archives and Records Administration, RG 59, Central Files 1964–66, AID (IDB) 9 DOM REP)