Foreign Relations of the United States, 1950, National Security Affairs; Foreign Economic Policy, Volume I

720.5621/9–1250

The Secretary of Defense (Johnson) to the Secretary of State

confidential

Washington, 12 September 1950.

Dear Mr. Secretary: You will recall that a substantial number of patrol, auxiliary and amphibious vessels were sold to various Other American Republics under the provisions of the Surplus Property Act of 1944. Since the expiration of this Act in 1947, there has been no legal authority for such sales until the passage of the Mutual Defense Assistance Act (Public Law 329) in October 1949. However, vessel sales under that law were not practicable because of the “full cost” provisions. Public Law 621, 81st Congress, approved by the President on 26 July 1950, has amended this provision to permit sales at a “fair value as determined by the President.”

A plan for hemispheric defense is now being formulated by the Inter-American Defense Board. This plan will reaffirm the need for the standardization of military equipment, training and methods of operation among all countries signatory to the Rio Treaty. It is expected that the principal naval responsibilities assigned by this plan to the Other American Republics will be the protection of their lines of sea communications, over which must pass the major portion of the vast quantities of the strategic materials supplied to us by those countries.

Although these countries have indicated their desire to produce a plan of hemispheric defense and agree to it, in most instances they do not have the naval equipment to make such plans effective. The publication of the revised wording of Section 408(e) of the Mutual Defense Assistance Act¹ has raised the expectation and hope that, at long last, the purchase of excess U.S. naval vessels required for the implementation of the Inter-American Defense Board’s plans may soon be effected.

In light of the above, I recommend that a program of sale of excess U.S. naval vessels to certain of these countries be finalized at the earliest opportunity, and that the countries concerned be informed as to the vessels which we are prepared to sell to them, with the approximate prices. Such a program is set forth on the inclosure.² The prices tabulated in the inclosure represent the total of the following:

a. 10% of the acquisition cost.

b. Cost of rehabilitation, including a complete filling of allowances and correction of material deficiencies.

c. Cost of three weeks’ logistic support during the familiarization and ready-for-sea period.

I do not consider that the above prices should be inflexibly adhered to during the negotiations, so long as the provisions of the law are adhered to. Price deviations may be necessary for a number of technical reasons, such as the desire of the recipient country for a change in the ammunition allowance, equipage, etc.

If you concur in this recommended plan, the Department of Defense will proceed immediately with negotiations with the naval authorities of the countries concerned. When negotiations with a particular country have arrived at mutually satisfactory terms, final consummation of the sale will be carried out in accordance with established Mutual Defense Assistance procedures in effect for Section 408(e) of the Act.

Sincerely yours,

Louis Johnson

[Enclosure]

Recommended Sale Program

Purchasing country	Ships to be offered for sale	Approximate sale price to be used for commencement of negotiations
Argentina	2 CL	$7,935,000
	1 DE	1,300,000
Brazil	2 CL	7,935,000
	1 AP, 8 DE*	*5,278,300
Chile	2 CL	7,935,000
	1 DE	1,300,000
Colombia	1 DE	1,300,000
Venezuela	2 DE	2,600,000
Uruguay	2 DE	2,600,000
Peru†	3 DE	†3,900,000

1. Public Law 621, approved July 6, 1950 (64 Stat. 373).

2. In a memorandum of September 7, 1950, to Messrs. Warren and Miller, Duncan A. D. Mackay of the Office of Regional American Affairs said in part he had learned from the Defense Department that Secretary of the Navy Matthews had recommended to Mr. Johnson an allocation as set forth above, except that Mr. Matthews had suggested only one cruiser for Argentina.

   “It is understood that the Navy made this tentative allocation primarily on the basis of the need of these countries for these ships in their probable role in hemisphere defense; other factors considered were the governments’ traditional friendship to the United States and whether the government had requested this type of ship.

   Brazil and Chile, as you may know, have made requests for the exact number of cruisers tentatively allocated for them by the Navy, and are most anxious to purchase them. Argentina has requested either one heavy and two light cruisers, or two heavy and two light cruisers, as well as a number more DE’s than are proposed by the Navy be allocated.” (720.562/9750)

3. These vessels are now held by Brazil under Lend Lease. [Footnote in the source text.]
4. These vessels are now held by Brazil under Lend Lease. [Footnote in the source text.]
5. Negotiations to commence only after ratification by Peru of the Treaty of Rio de Janeiro (1947). [Footnote in the source text. The Peruvian Government deposited its ratification of the Inter-American Treaty of Reciprocal Assistance on October 25, 1950.]
6. Negotiations to commence only after ratification by Peru of the Treaty of Rio de Janeiro (1947). [Footnote in the source text. The Peruvian Government deposited its ratification of the Inter-American Treaty of Reciprocal Assistance on October 25, 1950.]