720.56/1–2650: Circular airgram
The Secretary of State to Diplomatic Offices in the American Republics
The Department has supplied the Embassies of the other American republics, in Washington, with a statement explaining the applicability of the Mutual Defense Assistance Act of 1949,1 to other American republics. The Department has transmitted this statement in an informal and routine manner, in order to provide necessary information to the Latin American governments, without implying that this Government is in any way soliciting orders for armament at this time.
Although copies of the statement have been transmitted informally to Embassies of the Caribbean countries, in Washington, the Department is not inclined to give favorable consideration to any requests from countries in that area for significant quantities of armament, so long as present disturbed conditions prevail. The Caribbean countries have received copies of the statement because of the possibility that conditions in that area may have improved by March 1, the deadline which it has been necessary to impose on the receipt of requests from other American republics. In that event, it may be possible to give favorable consideration to requests for small amounts of equipment, particularly equipment which those countries require to maintain in operable condition the armament they already possess.2[Page 621]
[Here follows a discussion of procedural matters.]
The Mutual Defense Assistance Act of 1949
The Mutual Defense Assistance Act of 1949 (Public Law 329—81st Congress) was approved by the Congress on September 28, 1949, and signed by the President on October 6, 1949. It is an act to promote the foreign policy and provide for the defense and general welfare of the United States by furnishing military assistance to foreign nations. Title I of the MDAA provides for the furnishing of grant aid to the nations party to the North Atlantic Treaty; Title II provides for grant aid to Greece and Turkey; Title III provides for grant aid to Iran, the Republic of Korea, and the Republic of the Philippines; and Title IV, in Section 408(e), provides for reimbursable aid to Title I, II, and III nations, and to “a nation which has joined with the United States in a collective defense and regional arrangement.”
Eligibility under the MDAA
The above-cited Section 408 (e) has been interpreted to mean that only Latin American countries which have ratified the Inter-American Treaty of Reciprocal Assistance may participate under Section 408 (e) of the MDAA.
[Here follows a discussion of the possible applicability of other legislation to arms purchases by the American Republics.]
Terms of Payment
On the subject of reimbursable aid, your attention is drawn to the fact that Section 408 (e) of the MDAA stipulates that “the full cost, actual or estimated” of equipment, materials or services must be made available to the United States prior to any transfer or the execution of any contract. This means that a Latin American country participating under the MDAA must pay the full cost involved at the time an order is placed—this as distinct from payment upon delivery. Further, it has been determined that “full cost” means full original cost, actual or estimated—not current value. Hence, for example, it has been held that United States naval vessels may not be sold under the MDAA to Latin American countries for less than their full original cost regardless of their current value and need for rehabilitation which would add to their full cost.
[Here follows a discussion of procedural matters.]
In conversations with the foreign government regarding any request it may initiate, you should indicate that the great extent of the calls upon the United States for assistance limits the amount of procurement which can be undertaken for Latin American countries, and accordingly, that it may not be possible in every case, to provide Latin [Page 622] American countries with the full amount of equipment requested. You may indicate that, fortunately, by virtue of their geographical and political situation, the American republics do not at this time face a threat of aggression comparable to that experienced by many countries. You may state that the security of the United States and the entire hemisphere dictates that the greater share of limited United States resources available for foreign military assistance be made available to those countries outside the hemisphere which are immediately exposed to the threat of aggression.
You may advise the foreign government that in preparing any request for equipment it should give first priority to the need for maintenance and modernization of equipment already on hand and for such other equipment as may be necessary for the maintenance of internal security. You should discourage it from requesting equipment beyond the ability of its economy to support. You may indicate that, in the opinion of the United States, the Inter-American Treaty of Reciprocal Assistance4 and other Inter-American commitments to maintain peace in the hemisphere are effective safeguards against aggression as between American states.
In discussing with the foreign government the extent of its requests for military equipment, the point should be made that the present cost of military equipment will be equivalent to current cost, which cost is substantially higher than that for equipment previously furnished. Some savings might accrue to Latin American countries whenever their comparatively small requests can be added to large requirements and joint procurement undertaken.