710 Conference (W–PW)/1–2745

Mr. Merwin L. Bohan, a Technical Officer of the Delegation, to Mr. John McClintock, Special Assistant to the Assistant Secretary of State (Rockefeller)

Dear John: I left Washington with a briefcase full of ideas and little in the way of a general conception of our approach to the economic problems which will arise in the forthcoming conference. I was not satisfied with the extent to which thinking had crystallized in the Department, although fully appreciating the reasons for the situation.

Fortunately, a breathing space has been provided during which Sanders and I have had the benefit of many and helpful conferences with Ambassador Messersmith. Out of those discussions a general pattern has been emerging, and I did not want to delay communicating with you in order to determine if the ideas expressed are in accord with your thinking and that of the Department. You may rest assured that, until definite instructions are received from the Department, the views outlined herein will not be advanced in the discussions with the Mexican Government. Those discussions, which should begin today or tomorrow, will be kept on safe ground in so far as we are concerned, and every effort will be made to obtain as much information from the Mexicans as possible. The foregoing is my understanding of your desires, as well as those of Ambassador Messersmith. The problems, as I see them at this stage, are outlined below:

I. Responsibility of the United States with respect to the economic well being of the other American republics. This is the first question which must be answered. It is clear, both for political and commercial reasons, that our minimum responsibility is to cooperate in solving current and future problems affecting the well being of the countries of this hemisphere. It is also clear that we have more than a minimum responsibility in the interim and early post-war periods. We asked for and obtained the help of Latin America in the prosecution of the war—Latin America will ask, and we must give, help in the transition from war to peace. Our war-acquired obligations cannot be fully liquidated by maintaining that the cash we paid for their goods, the sacrifices we made in furnishing them with supplies, and the protection given by our armed forces constitute payment in full. Viewed from a strictly materialistic standpoint perhaps the accounts balance or even leave us with a credit balance. But Latin America, despite the scoffers and cynics, has contributed something more to the common effort than merely material things. It is the latter contribution which places a greater responsibility upon us at this time.

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The foregoing still fails to define the extent of that responsibility. How far do you agree with the following:

The United States should not:
Assume either the whole or greater part of the responsibility for economic readjustment in the Americas;
make large non-reimbursable financial contributions for readjustments;
encourage delays in facing readjustment problems;
encourage continuation of non-economic production arising from war demands;
permit Latin America to forget that each country has the primary responsibility for the transition of its economy from war to peace;
commit itself to any projects which would interfere with the full prosecution of the war (greater exports from U.S. to combat inflation; materials for development projects; lend-lease, et cetera);
encourage the philosophy of letting the United States, in the role of George, do it.
The United States should:
take the leadership in arriving at commodity agreements assuring markets for essential exports of Latin America at equitable prices;
take the leadership in assuring for Latin America an equitable share of the imports of liberated and conquered areas;
take the leadership in working out cooperative arrangements for the financing of trade with areas mentioned in (b) through International Bank or other international or inter-American means;
consider the possibility of stockpiling mineral inventories at end of war to permit current demand to be met by current production;
consider the possibility, in certain cases, of increasing the inventories mentioned in (d) above (plan of William L. Batt33);
reaffirm commitment to scale down procurement programs gradually, when necessary in order to provide opportunity for the supplying countries to readjust their economies;
see that the commitment in (f) becomes part of the operating policies of the emergency agencies and not merely a political policy;
Export-Import Bank credit for sound development projects which would cushion effects of readjustment.

In summary, the United States would furnish the leadership in a cooperative effort to assure Latin America of at least its pre-war exports of products essential to the economic life of the countries of this hemisphere. The objective would be to provide a floor to prevent the transition period from degenerating into one of economic depression. The program would not postpone inevitable post-war readjustments or free any country of the hemisphere from the responsibility for making such adjustments. It would merely reduce the problem to a point where the individual country could cope with it.

II. Extent of program suggested in preceding section. Sufficient data are not available to give you any final conclusions in this regard. [Page 66] The information presented herein is based more on assumptions than on facts, and I would appreciate, providing the program has merit in your eyes, that you have a careful study made in Washington to determine the feasibility of the proposals.

By a fortunate coincidence Lew Clark was able to furnish me with certain studies carried out by him while he was with the Bureau of Foreign and Domestic Commerce.34 These cover Latin American exports of 20 commodities during 1938. The commodities in question can be classed as those essential to the economies of the respective countries, while 1938 provides as nearly a “normal” pre-war period as could be found. There is enclosed a table35 showing the volume and value of the exports together with information as to the exporting and importing countries. The full study upon which the table is based can be obtained from George Wythe.36

Commodity agreements. The idea of such agreements is well within the policy of our Government. See Assistant Secretary Acheson’s statement on page 661 of the Department of State Bulletin for December 3, 1944; Resolution XXV of the Hot Springs Conference;37 and Resolution XXXIII of the Conference of Inter-American Development.38

The number of commodity agreements which would have to be contemplated during 1945 is surprisingly small if my assumptions are correct. It will be necessary for the experts in Washington to go over the list of products in order to determine whether or not the foregoing opinion is correct.

European markets. If each Latin American country attempts, in an uncoordinated manner, to reopen its pre-war markets in Europe, there can be no real progress made in reducing trade barriers in this hemisphere. Such factors as state trading, restrictions on foreign trade, shipping difficulties and financing will again create a mass of bilateral and compensation agreements and our foreign trade, especially with Latin America, will continue to be plagued for years to come. It is certainly to the interest of the United States to cooperate in a program designed to recreate an equitable European market pattern in which Latin America will have an equitable share.

Financing. This will be the main obstacle to the renewal of trade between Latin America and Europe. Unless it is solved, Latin America will be forced to go to the compensation system again. The [Page 67] International Monetary Fund and the International Bank appear to be ideal instruments to meet the situation, but these projects will probably not become realities in time to meet the need. If this is likely to be true, the Department might wish to give consideration to the possibility of suggesting an emergency inter-American fund utilizing primarily exchange accumulations of Latin American countries. I think that it would not be politically feasible for the Export-Import Bank to handle such financing even on a temporary basis, because of conflicting commercial interests as between the exporters of the United States and those of the affected Latin American countries. The problem is not insurmountable. Financing needs would probably not exceed 200 to 300 million dollars in the first year and thereafter from one-third to one-half that amount for a period of from between two to three years. This, again, is an assumption and is based on a study of 1938 trade. Petroleum and copper were omitted, since private financing would probably meet the needs in these cases. Likewise, Argentina was not included both because of its political position and its ample financial reserves. The emergency fund would be used primarily to finance exports where the producers themselves could not handle the financing. Such a fund would provide the same attack on the causes of trade barriers as the International Monetary Fund and the International Bank.

Stockpiling. The time has come, if the United States wishes to meet inter-American problems in a concrete fashion, to determine policies with respect to inventories held at the end of the war. It seems to me that in the case of minerals there would be every justification for stockpiling. This would permit current production to meet current interim and post-war demands and, in some cases at least, is an essential step if Latin American economies are to be protected.

The other points in the suggested program need no further comment. However, I want to end on the note that nothing proposed herein contemplates the formation of an inter-American trade block. The major objectives of the program constitute a cooperative effort to further international trade. The emergency measures are no more regional in character than the aid we propose to furnish to Europe in connection with the rehabilitation and reconstruction programs.

Sincerely yours,

Merwin L. Bohan
  1. Vice Chairman of the War Production Board.
  2. Department of Commerce.
  3. Not printed.
  4. American Republics Unit of the Bureau of Foreign and Domestic Commerce.
  5. United Nations Conference on Food and Agriculture, May 18–June 3, 1943. For documentation, see Foreign Relations, 1943, vol. i, pp. 820 ff.
  6. Conference of business men in finance, industry, and commerce, held in New York, May 9–18, 1944.