The Secretary of State to the Ambassador in Paraguay ( Beaulac )
284. Urtel 429 Aug 17. Dept hopes in comparatively near future to transmit to the field a policy directive regarding economic assistance to the other American republics but you may use substance of following paragraphs as basis for personal and confidential conversation with Minister of Finance.
US economic cooperation with individual American republics must take into consideration effectiveness of effort in those countries to establish their national economies on sound financial basis. If economic assistance is requested of US Dept could not recommend favorable action or justify before public opinion extension of financial assistance [Page 1308] without assurances regarding constructive use of funds and reasonable assurances of sound financing. This is a legitimate and businesslike approach especially in cases, such as the Paraguayan one, where the country concerned is in default on Export-Import Bank or other US loans or credits.
On this basis you could point out to appropriate Paraguayan officials that Dept must be concerned when it sees a country in a precarious economic position and desirous of continued financial assistance from us set aside large sums from their revenues for the maintenance of a military establishment which apparently has long received more than its share of national income. One of factors in working out program of military cooperation with American republics will be the economic and financial capacity of each country to support the military establishment suggested as basis of program.
It would be reversal in our policy of friendly interest in Paraguay’s welfare if we did not make clear the fact that Dept could hardly recommend additional financial assistance if steps are not taken to put Paraguayan economy on sound basis.
It was decided at recent IFEAC65 meeting that delegates of each country would request their governments to furnish the information on economic, financial and monetary situations mentioned in Resolution 17 of Mexico City Conference. Only reply received to date is from Mexico. Delegates will be asked at next IFEAC meeting if they have requested their govts to submit information.