Memorandum by the Director, Office of Financial and Development Policy (Ness) to the Assistant Secretary of State for Economic Affairs (Thorp)

At the January 14 meeting of the Policy Committee of the Bogotá Conference, Mr. Armour1 suggested that a statement from OFD on an affirmative economic program and policy of assistance to Latin America would be desirable.

Attached is a statement setting forth in general terms what might be the principal elements of such a program.


A Positive Program of United States Assistance for Latin America

latin american views on u.s. assistance

To the Latin American countries economic development is a foremost objective of national policy. At international conferences, at United Nations meetings and whenever the opportunity arises, they have actively sought measures to promote economic development. The U.S. has repeatedly stated its desire to assist in their development programs, but in their eyes performance by the U.S. has been disappointing. They have been increasingly dissatisfied over their economic relations with the U.S. as evidenced recently at the conference in Rio de Janeiro and at Havana2 where their opposition has centered around the question of economic development. Their dissatisfaction has been increased by the U.S. occupation with the ERP and other foreign aid programs which they feel are crowding out consideration of their needs and will delay still further their plans.

The Latin American countries desire (1) financial assistance, (2) allocation of capital equipment and supplies, and (3) technical assistance. They are displeased over their inability to obtain capital financing, equipment and supplies, and technical assistance in amounts adequate to their needs.

The International Bank has made no loans to Latin America, although at Bretton Woods3 there was inserted in the Articles of [Page 6] Agreement at the urging of the Latin Americans a clause providing “equitable consideration to projects for development and projects for reconstruction alike”. At the annual meeting of the Boards of Governors of the International Monetary Fund and International Bank in London in September 1947, the Latin Americans because of disapproval of the Bank’s policies planned to introduce a resolution affecting the Bank’s administration. Due to U.S. efforts the statement finally presented by Mexico on behalf of the Latin American countries was fairly mild. Because of the Bank’s limited funds, demands upon the Bank from Europe and other areas and the Bank’s hesitancy in making loans to Latin America, it does not appear that the Bank will adequately meet the needs of these countries.

Export-Import Bank lending to Latin America has for the past year or two been on a restricted basis since the U.S. has regarded the International Bank as the principal agency to make long term loans for development purposes. If the Export-Import Bank were to embark upon a broad lending program in Latin America it would require additional lending authority from Congress.

a comprehensive program

Officers of the Department have indicated to the Latin Americans that there is to be no plan for Latin America comparable to that proposed for Western Europe. These statements do not mean, of course, that this country has or is to have no policy of assistance to Latin America. What is needed is not so much a new policy as more effective and integrated implementation of existing economic policy.

The economic and strategic importance of Latin America to the United States is generally accepted, as is the fact that the United States has considerable to gain from development in Latin America. The principle of hemispheric solidarity has gained widespread recognition in Latin America as well as in the United States. Congress and the American public have long felt a special relationship to Latin America. They have previously supported special aid to these countries.

While the U.S. has extended a considerable amount of aid to Latin America over the years, the assistance has been to a large extent uncoordinated and on a project by project basis. Moreover, the extent and nature of the aid have not received the public attention in Latin America which would come from a unified program presented as this country’s contribution to development of the Latin American economy.

The amount of assistance that can be effectively utilized for development purposes in Latin America is quite small in contrast to that being planned for European recovery. Furthermore, the largest burden on the U.S. from European aid will occur during the next 15 months [Page 7] and will be on a decreasing scale thereafter, whereas amounts to meet Latin American needs would be small at the outset and increase gradually, the total amounts still remaining comparatively small. As the program proceeds it is hoped that private investment will expand and that the more urgent needs of these countries will have been met.

A unified and positive program of assistance for Latin America should emphasize self-help, cooperation, and internal stabilization measures. This country’s bargaining power, moreover, in obtaining an adequate quid pro quo would be increased if the various aid measures were combined into a single program. Thus the U.S. should insist upon a more favorable attitude toward private foreign investment. Better coordination between financial assistance, the lending of technical experts and of grants for cultural and other purposes would provide more effective utilization of this country’s assistance. The entire program, furthermore, should be closely linked to this country’s military needs and to cooperation by Latin America in this field.

At the Bogotá Conference the Secretary should express with emphasis the U.S. desire to assist, within its capacity, the American Republics in the prompt realization of a broad program of economic development. He should point out that during the war and the period since the end of hostilities, the U.S. was able to extend a considerable amount of aid to these countries in spite of urgent demands elsewhere. He should then state that it is now time to accelerate the economic development of the American Republics and that the U.S. stands ready to assist actively in this endeavor.

The Secretary should urge the speedy establishment of effective machinery, as proposed in the Basic Agreement, to increase not only the tempo but also the scope of development activities. He should suggest that the Inter American Economic and Social Council immediately undertake, with the cooperation of each country interested, to prepare a program for the development of the hemisphere based upon the economic potential of each country. He should pledge the full support of the U.S., emphasizing that the realization of the goal sought is to a large extent dependent upon concrete internal measures of self-help and upon the cooperation of all the countries. The immediate objective, which might be indicated by the Secretary, would be a 5-year development program covering the following points:*

1. Expansion of Production

The Council would consider the main types of production to be expanded, such as steel, textile, cereals, etc., and the suitability of the [Page 8] proposed expansion to the different areas. The Council should not attempt to prepare a blue print for Latin American production but should endeavor to determine in general terms what commodities the countries need most, which ones are most efficiently produced at home for domestic consumption and export, and which ones are obtained more economically by importation. The study would endeavor to establish realistic production targets for certain commodities for the 5–year period, taking into account costs, availability of capital equipment, technical and managerial skills and possible financing.

2. Financing

The Council would study possible means of financing the program including the availability of existing resources, both internal and external, and the maximum amount of debt each country should contract. The survey would suggest the amount of development which might be financed internally and the amount required from external sources; including private investment, the International Bank, the U.S. and other governments. In this connection it is essential that measures be taken by the various countries which would encourage the inflow of private investment capital from abroad, and which would promote the domestic accumulation of capital and its retention at home.

3. Economic and Financial Stabilization

The Council would consider the internal economic and financial reforms which are necessary to the success of a development program, especially in the fields of currency, taxation, and fiscal administration. The Council would ask countries to undertake certain reforms, where necessary, if they wished to become eligible for assistance and to participate in the general program. The Council would recommend, in consultation with the International Monetary Fund, monetary and exchange measures which would facilitate international trade among the American Republics themselves and with the outside world. In particular, consideration would be given to the possibility of a common. Latin American currency.

4. Technical Assistance

The Council would survey the types of technical assistance needed and would assist countries in obtaining qualified experts promptly, as contemplated by the Basic Agreement. An important type of assistance would be the provision of technical training at home or abroad for qualified individuals.

5. Foreign Trade

The Council would recommend commercial policies, in consultation with the International Trade Organization, important to an expansion, of trade and to the entire development program.

[Page 9]

measures to be undertaken by the u.s.

The U.S. for its part in the program, and provided the Latin American countries accepted and carried out their part, would expect to undertake the following which should be stated by the Secretary:

To liberalize this country’s lending program through the Export-Import Bank, both as to amount and as to the purpose and maturity of loans, in harmony with the overall program.
To support the establishment of Inter-American machinery whether under the Council or otherwise, to study development problems, serve as a center of information and facilitate development generally through such functions as may be assigned to it.
To expand this country’s grants for health, sanitation, education and cultural purposes.
To make available a greater amount of technical aid and to this end to build up a group of experts in various fields who would be available to go to the different countries for periods of a few months to a year or more to work closely with local officials, as authorized by the recently enacted Mundt Bill.

  1. Norman Armour, Assistant Secretary of State for Political Affairs.
  2. For documentation on the Inter-American Conference for the Maintenance of Continental Peace and Security, Quitandinha, Brazil, August 15–September 2, 1947, see Foreign Relations, 1947, vol. viii, pp. 1 ff. For documentation on the United Nations Conference on Trade and Employment, Habana, November 21, 1947–March 24, 1948, see ibid., 1948, volume i .
  3. For documentation on the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1–22, 1944, see ibid., 1944, vol. ii, pp. 106 ff.
  4. It is expected that the U.S. would be able to guide the preparation of the program through the technical assistance which it would provide. [Footnote in the source text.]