810.20 Defense/1596

Memorandum by the Assistant Chief of the Division of the American Republics (Collado)23

Use of Lend-Lease Procedure for General Purposes

There have arisen recently a number of instances in which representatives of the other American republics have inquired regarding or [Page 144] have suggested the use of the lend-lease program for general purposes. Among these may be included:
Request of the Cuban Government for inclusion in the basic lend-lease program of over $2,000,000 for fire fighting equipment and for equipment for detecting illegal radio stations.
Request of the Bolivian Minister that the lend-lease amount for Bolivia be increased by $1,000,000 to provide for locomotives for the Bolivian railways or, alternatively, the allocation of $1,000,000 of the existing lend-lease amount for this purpose.
The Venezuelan Ambassador has suggested to Dr. Berle that rather than get military materials Venezuela would like to embark upon a program of highway construction, dredging of the mouth of the Orinoco River, construction of aviation fields and canalization of the upper regions of the Orinoco River and tributaries.
The Colombian and Paraguayan Governments have indicated a desire to devote part of the lend-lease funds, or additional funds, to construction of military hospitals, barracks, military roads, and other items.
The scope of the Act of March 11, 1941, with respect to such projects has already been partly delimited by counsel. It has been definitively ruled that no funds may be expended under lend-lease for local labor or other costs. The Lend-Lease Act applies only to the procuring of actual “defense articles” or “defense information” within the United States and its delivery, if desired, to any point either within the United States or even as far as the foreign country. The Lend-Lease Act includes the provision of services within the United States such as the repair of a vessel in a navy yard.
As defined in the Act “defense article” means military or naval matériel or “any agricultural, industrial or other commodity or article for defense”. Foodstuffs are being transferred to England “for defense” as the maintenance of the population is obviously necessary for the defense of Britain. A railroad is being constructed from Burma to China “for defense” as this railway will serve as the means for getting defense matériel to China. Although in the most general and indirect sense it could be said that any project which will contribute to the maintenance or development of the economies of the nations of the Western Hemisphere will contribute to the defense of the hemisphere, it would obviously be a thin extension of the basic purposes of the Act to try to cover within its scope such matters as general highways and railway development in the other American republics.
In addition to the legal limitations of the Act, which do as has been mentioned above include general agricultural, industrial or other articles so long as they are for defense purposes, we must look into the intention of Congress and of the Administration as developed in hearing [Page 145] and debates. The original hearings and debate of the Lend-Lease Act and the original appropriations included no mention whatsoever of the other American republics. Indeed in the hearings on the current appropriation bill, the Defense Aid witnesses made much of the fact that no funds had actually been devoted up to now to the other American republics. At the same time a part of the appropriation is now being requested for the other American republics with direct reference to the specific proposal of the War and Navy Departments for a $400,000,000 program of transferring naval and military matériel. The history of this $400,000,000 program leaves no doubt that it was intended to include only actual military equipment and no material which would be necessary for a general economic development program. It thus would presumably be necessary to go to Congress to receive authorization for including under the Lend-Lease Act any such general economic program.
Moreover, the authorization of the President for the Department to negotiate with the other American republics was with specific reference to the direct military program.
In addition to this legal background which makes it extremely unlikely that it would be proper to attempt to stretch the lend-lease program to cover general economic development works, there remains the broad and basic question of whether it is desirable to mix at this time this type of procedure with the general program moving forward with the Export-Import Bank. Obviously if lend-lease terms of only partial repayment are to be extended to general development works, no nations will wish to continue with Export-Import Bank credits. The possible difficulties of this extension are obvious.

This position is taken in spite of the fact that as an economist rather than as a political strategist or military technician I would personally be much happier to see the other American republics incur financial obligations in connection with projects of economic development. I believe, however, that until such time as the Department finds it desirable to obtain specific appropriations of Congress for particular development projects of a special mutual interest to the United States and the other American republics, such as the present bill which would grant $20,000,000 towards the completion of the Inter-American Highway in Central America, we should go forward with development projects financed through the Export-Import Bank and, as soon as we are able to establish it, the Inter-American Bank.

E[milio] G. C[ollado]
  1. Addressed to the Adviser on Political Relations (Duggan), the Under Secretary of State (Welles), and the Secretary of State. According to their notations on the original of this memorandum, the three officers agreed with these views of Mr. Collado.