Foreign Relations of the United States, 1950, The United Nations; The Western Hemisphere, Volume II

Miller Files, Lot 53 D 26

Unsigned Draft Memorandum Prepared in the Department of State

restricted

[Washington,] January 4, 1950.¹

Briefing Material for Secretary²

a. general

1. Organization:

The first problem which we were faced with in ARA was obviously that of organization. When our new organization chart is published effective January 16³ it will have taken us nearly seven months to complete the organization of ARA. The most significant changes are as follows: Creation of positions of Assistant Secretary and Deputy Assistant Secretary for Inter-American Affairs; naming of full-time ambassadors (Daniels and Nufer⁴) to COAS and IA–ECOSOC respectively; implementation of Hoover Commission recommendations⁵ by transfer to ARA of Public Affairs Staff from P, fifteen officers from E and four officers from A. Illustrative of extent of reorganization of ARA is the fact that out of the six top officers who will constitute ARA delegation to the Conference of Ambassadors in Habana,⁶ five have assumed their duties since June and none of the jobs occupied by them was in existence prior to that time. All five nevertheless have extensive experience in Latin American Affairs.

2. Attention to Latin America:

The first problem vis-à-vis Latin America which had to be dealt with was the feeling on the part of the Latin Americans that since the end of the war the U.S. had become preoccupied in other parts of the world and had lost interest in hemispheric affairs. This has been dealt with in the following ways: (1) Secretary Acheson’s speech of September 19, 1949⁷ before the Pan American Society which constituted the most complete restatement of Latin American policy in many years. Although the speech attracted relatively little attention domestically, it was bailed throughout Latin America as constituting in itself a reversal of what they had feared was our attitude of neglect. (2) President Truman’s reception of the Ambassadors to the OAS on October 12 when he reaffirmed the principles of Mr. Acheson’s address.⁸ (3) The personnel changes referred to above, including the appointments of full-time representatives to the COAS and IA–ECOSOC. (4) The program of visits of Assistant Secretary Miller to Latin America. Mr. Miller has to date visited eight of the twenty countries and his present schedule calls for visits to all twenty countries by the end of his first year in office. Although these visits likewise have attracted little attention in this country, an indication of the enthusiasm with which they have been received in Latin America is indicated by the fact that during his four-day visit in Chile newspaper coverage of his visit amounted to 2500 column inches. Particular enthusiasm has been attracted by Mr. Miller’s visit to Ecuador following the earthquake and his attendance, together with Congressmen Battle and Jackson, at the inauguration of President Ulate of Costa Rica.⁹ (5) Invitation to President Gonzalez Videla to visit the United States and indication that President Truman might return his visit during his present administration.¹⁰ The high standing of Gonzalez Videla among Latin American presidents has caused his trip to this country to be viewed as an indication of our sympathy towards democratic regimes.

The proposed Regional Conferences at Habana and Rio¹¹ have been well received. Likewise the proposed visits to Latin American countries of Ambassador Austin and Mr. Kennan.

As a result of the foregoing, newspaper comment in general in Latin America in recent months has been decidedly favorable towards what they generally call a new orientation in United States policy towards Latin America. Likewise, there has been some increase in press coverage and editorial comment on Latin American affairs in this country. However, most of the steps enumerated above are in the psychological field and will have to be followed by specific acts of economic cooperation in order that the momentum will not lag.

3. Political Instability:

Press coverage of Latin America in this country has been directed primarily towards recent manifestations of political instability in Latin America. These include, during the last six months: unsuccessful military revolutions in Bolivia and Guatemala, successive political disorders in Paraguay, the recent series of Presidents in Panama and the very serious disorders in Colombia culminating in an election held under a state of siege from which one major party abstained.

In general the press in this country has tended to lump all of these occurrences together and to add them to previous military coups in Venezuela and Peru as indicating a trend towards fascism in Latin America.

Political instability obviously is one of the most serious factors deterring economic development in Latin America and the concomitant problem of recognition of de facto governments is probably the thorniest one with which we have to deal. There has been considerable misunderstanding of our recognition policy and there has been a tendency particularly among liberals in the United States and Latin America to construe our maintenance of diplomatic relations with governments, such as those of Venezuela and Peru, as indicating we are on the side of dictatorships.

Furthermore, there is a tendency to attribute many of these disturbances to Argentine influence, a tendency which we believe strongly overemphasizes the influence of Argentina in this Hemisphere.

Rather than constituting a trend towards fascism in this Hemisphere, it is our belief that all of this is the result of the impact of a new social consciousness on a society which until relatively recently had been comparatively static for centuries. The most important influence on this social consciousness is the United States. The impact of these new ideas on such a society has in our view projected an excessively rapid trend towards the adjustment of social rights which could not but result in a greater degree of political instability. This instability has been accentuated by the fact that some leftist parties upon accession to power have not proceeded with the responsibility that might have been expected.

In addition, it might be commented that there have been a number of favorable political developments in Latin America recently. These include the return to constitutional government in Costa Rica, the successful resistance of military coups on the part of the comparatively democratic governments of Bolivia and Ecuador, the favorable development away from one-man rule in Honduras and the recent trends towards constitutional forms in both Peru and Venezuela. This, of course, should be viewed in the light of the continued political stability in key democratic countries such as Brazil, Uruguay, Chile, Mexico and Cuba.

Insofar as concerns our recognition policy, we believe that no clearer proof of its correctness can be adduced than the recent step towards return to constitutional government in Venezuela¹² which in our view has been accomplished in some measure by the presence in that country and the efforts of Ambassador Donnelly. The main problem with which we are faced in connection with the recognition of de facto governments is to obtain proper popular understanding of our policy. We believe that the very successful consultation which we carried out in connection with the Panamanian situation has helped immeasurably in this regard. It should be pointed out that with the exception of Cuba and Venezuela, no country in the Hemisphere recognized the Arias Government¹³ until after the termination of our inter-American consultation and the communication to the other governments of our decision to proceed with recognition. Several of the governments, including even Cuba and Uruguay, accompanied their recognition by statements parallel to ours to the effect that recognition did not constitute approval.

During the last six months Communist penetration does not appear to have made gains in Latin America and we believe these efforts have lost ground. The recent “peace conference” in Mexico was not succesful and may have boomeranged.

Communist influence in the trade union movement has continued to lose ground. A potential development of great significance is the proposal recently discussed with us by the director of the Liberal Party of Colombia¹⁴ to cause the affiliation with the CIT (anti-Communist international trade union) of the Confederación de Trabajadores Colombianos which has heretofore refused to join the CIT, largely because of Communist pressure. This has been inspired to a great degree by the success of the recent London labor conference but even more may have been brought about by the realization on the part of the Liberal Party of their vulnerability to public criticism because of the role of Communism in their ranks. So far this is the only bright spot that has arisen from the recent difficulties in Colombia.

4. Financial Problems:

The dollar shortage was a key problem for most Latin American countries in 1949 and will be a continuing one until a solution is found to the basic distortion of the Latin American trade pattern. Although Latin America was successful during the first three years after the war in offsetting imports with a comparable value of exports, this area during the same period had a trade deficit of 2.7 billion dollars with the United States. This deficit was financed in part by Latin American drawings on its gold and dollar reserves and in part by utilization of gold and dollars paid by Europe in settlement of Latin America’s favorable trade balance with that area.

Since the gold and dollar reserves of both Latin American and European countries reached the danger point in 1948, availabilities for settlement of Latin America’s trade balance with the United States have largely been limited to the dollars accruing from ECA offshore purchases for European consumption. With the progressive reduction in United States financial assistance to Marshall Plan countries, it has been imperative to find a means by which Latin American countries can obtain the volume of import goods essential to their economic development and to the maintenance of a reasonable standard of living for their peoples.

In part, the solution lies along the lines of a further expansion of United States imports of Latin American goods and in an accelerated rate of United States private and public investment in sound projects. In perhaps greater part, the solution depends on the ability of the ERP countries to regain their role as a principal supplier of Latin America’s requirements for capital and other manufactured goods. With the expansion in European industrial production, the gradual improvement of marketing organization and the improved price situation resulting from devaluation, progress has been made in this field. Much more is needed, particularly in view of the fact that many commodities of vital importance in Latin American trade are expected to be in long supply in the next few years, including especially sugar, petroleum, tin, copper and rice.

5. Economic Development:

The single problem which most affects our relations with Latin America is their desire for capital from the United States for economic development. There is a tendency to measure the extent of our interest in their welfare according to the extent to which we advance public funds for economic development. There has been a tendency in Latin America and among critics of our Latin American policy in this country to minimize the extent of our contribution in this field largely because of the small amount of funds advanced as compared with the amount of ERP assistance to Europe. This, of course, is an illusory test since the problems are different. Nevertheless, in the past our Government has tended to compound the mistaken analysis of the problem by speaking of relative priorities of different areas of the world. Actually, no loan application has ever been turned down by either the Export-Import Bank or the International Bank on the ground of lack of funds and the aggregate capital available in the two Banks exceeds the absorptive capacity of Latin America for some time to come. During the last six months in excess of 94 million dollars of loans have been made to Latin America by the two institutions, as compared to 114 million dollars during the first six months of 1949. A number of additional loan applications are nearing point of final action.

Although the loans which have been granted have evoked some degree of satisfaction in Latin America, it should be recognized that that there is some merit in the Latin American complaint that loan applications are processed slowly and that they have gotten a very small amount of the total pie. While much of this is due to failure on the part of some of the countries to present adequate plans and projects, this does not appear to be a sufficient answer to their complaints. We must take a more positive and helpful attitude in helping the Latin Americans to plan for economic development and to get up sensible projects. The technique followed in the case of the Abbink Mission¹⁵ to Brazil and the Currie Mission¹⁶ to Colombia may be resorted to usefully in the future.

6. Private Investment:

The greatest single obstacle to economic development in Latin America is the slow rate of foreign private investment. This is due to two factors. The one of most importance is the absence of a favorable climate for private investment in those countries. The second is the fact that profits from foreign investment are taxed in this country at the same rate as profits from investments here.

As to the first obstacle, some indication of the reluctance in Latin America to create a really favorable climate is indicated by the fact that to date we have been able to sign only one treaty of economic development, namely the recent treaty with Uruguay. We look forward, however, to the fact that the Uruguayan precedent may accelerate the negotiation of further treaties. If the Uruguayan treaty should be followed by the conclusion of a treaty with Brazil, then more may follow. There is a suggestion in the Herter Bill that these treaties should in fact be imposed on foreign countries through the withholding of economic assistance from countries with which we have not such treaties. In our view this would be harmful to our relations with Latin America where the feeling already exists that our economic assistance comes too slowly. Furthermore, a treaty imposed in this way would not in our view be worth very much.

As to the tax problem, a treasury delegation has recently concluded a successful negotiation with Colombia which for the first time includes some tax incentives for foreign private investors. (This is for background only since the Treasury Department has not yet accepted Mr. King’s draft.) The negotiation of this treaty may be followed by others.¹⁷

A final factor involving private investment is lack of assurance of exchange convertibility for profits. In our view the enactment of the guarantee legislation would be of great value. This legislation has been opposed by business groups primarily because of the fear that guaranteed investments would be favored over other American investments in the particular country. We do not believe that this fear is justified since it is the intention of the Export-Import Bank to negotiate agreements with other countries providing for equality of treatment for both types of investments.

7. Technical Assistance:

The announcement of the Point Four Program has had a tremendous impact psychologically in Latin America. There are no programs in the area which are doing more to get at the grass roots than the programs of the Institute of Inter-American Affairs and the Interdepartmental Committee on Scientific and Cultural Cooperation. At the present time much more could be done if more funds were available. Among other things, we could do more to help get up sensible programs for economic development, including some badly needed ones of modest scale. Consequently, it is hoped that the Congress will promptly approve the Technical Assistance Program.¹⁸

8. Security Problems:

The last six months have been marked by continued insecurity and bickering in the Caribbean area. The Secretary’s speech of September 19 had some effect on this problem and a diminution of activity has occurrred in Costa Rica and Guatemala. However, the recent flare-up between the Dominican Republic and Cuba and the Dominican Republic and Haiti are a source of concern. In the case of Cuba and the Dominican Republic, both sides have overplayed the trouble for the sake of internal political advantage. Consideration of the situation is continuing before the Inter-American Peace Committee and much of the excitement, having been artificially stimulated, has died down.

However, at the same time there has been trouble between Haiti and the Dominican Republic in which President Trujillo seems to have been involved. The Haitian Government has invoked the Rio Treaty and it is probable that the situation will be considered by the Council of the Organization of American States as Provisional Organ of Consultation under the Rio Treaty.¹⁹ We are hopeful that constructive results will follow as in the case of the Council’s consideration in the same manner of the Nicaragua-Costa Rican incident last year.²⁰

At the other end of the Hemisphere, we continually hear complaints from the countries bordering on Argentina as to the latter’s subversive activities. These accusations came to a head in connection with the MNR revolution in Bolivia²¹ last August and September at which time Bolivia, Chile and Uruguay all complained to us of Argentine complicity in the revolt. It is impossible to assess the accuracy of these charges. The best guess is that there was some assistance to the revolutionaries from within Argentina although probably not at the instigation of the Argentine Government. At the same time, there is no doubt that Chile, Bolivia and Uruguay—and, on occasion, Brazil—use Argentina as a whipping boy in the effort to obtain favors from us.

9. Arms:

One of the most difficult problems which we are faced with in connection with Latin America, particularly within our Government, concerns the sale of arms. We now have no statutory authority to extend military assistance except the provision in the MAP act²² permitting the NME to make its procurement facilities available to Latin America. With the possible exception of Venezuela, no country in the Hemisphere has enough funds to afford to buy arms for cash. At the same time, the armed services are extremely anxious to bring about unification of types of armaments throughout Latin America and to keep out foreign military missions which are generally selected from the country which supplies arms. The presence of these military missions in turn generates a desire on the part of the foreign government to obtain arms.

The Department of State exercises primary responsibility for the administration of the control of the export of munitions. We periodically consult with the NME on applications but this consultation is on an ad hoc basis and in our experience it has been the usual tendency of the armed forces to certify virtually every proposed arms shipment as being necessary to the defense of the foreign country concerned. A recent case in point is the support by the Department of the Air Force of applications on the part of American suppliers to ship 4 jet planes to Peru and 18 fighter planes to Guatemala.²³ At the same time, both of these countries are requesting and receiving financial assistance from this country for economic projects.

This has been an extremely difficult problem for us and we propose to use these specific instances to bring about an entire review of the problem with the NME in the hope that we can arrive at certain definite criteria in determining the validity of applications for arms to Latin America.

[Here follows a section on particular country problems.]

1. An earlier version of this memorandum, substantially identical but not beaded “Briefing Material for the Secretary,” is dated December 30, 1949.

2. In his summary of the Secretary’s morning meeting held January 3, 1950, Carlisle Humelsine, Director of the Executive Secretariat, had reported in part that the Secretary had asked for briefing material on all areas of the world as a basis for a policy review before the Congressional committees concerned with foreign affairs. Mr. Humelsine had continued: “The Secretary indicated that he wanted to know more about the situation in South America. He said he was rather vague on this particular point. He wanted to know whether they were richer or poorer, going Communist, Fascist or what? He said he would like to be carefully briefed on this entire area.” (Executive Secretariat File)

   Although there is no definite indication that the draft printed here reached the Secretary, a memorandum of January 3 by Willard F. Barber, Deputy Assistant Secretary of State for Inter-American Affairs, indicated that all briefing material from his Bureau was to be given Mr. Humelsine by January 5. (Lot 53 D 26, Folder “Policy”)

3. For the organizational table of the Bureau of Inter-American Affairs included in Press Release No. 30 of January 11, see Department of State Press Releases, 1950, under date.
4. Paul C. Daniels and Albert F. Nufer.
5. A guide to published and unpublished materials concerning foreign affairs of the Commission on Organization of the Executive Branch of the Government is printed in its Concluding Report, (Washington: Government Printing Office, 1949), p. 76.
6. Held January 18–20, the Conference included U.S. Ambassadors to countries of Central America and the Caribbean. A record of its proceedings is filed under 120.43/1–2050.
7. Text of the address, “Waging Peace in the Americas,” is printed in the Department of State Bulletin, September 26, 1949, p. 462.
8. Text printed ibid., October 31, 1949, p. 664.
9. Laurie C. Battle of Alabama and Donald L. Jackson of California, both on the House Committee on Foreign Affairs, were members of the delegation (headed by Mr. Miller) to the inauguration of President Otilio Ulate Blanco, November 8, 1940.
10. For information regarding President Videla’s visit to the United States of April 12 to May 3, 1950, which was not returned by President Truman, see the editorial note, p. 785.
11. The Rio Conference of the United States Ambassadors to the 10 Republics of South America met March 6–9, 1950. A record of its proceedings is filed under 120.43/3–950.
12. On November 22, 1949, the Venezuelan Government had announced the partial restoration of constitutional guarantees and had outlined plans for local elections.
13. The Government headed by President Arnulfo Arias, in office from November 24, 1949, had been recognized by the United States on December 14.
14. Carlos Lleras Restrepo.
15. For documentation concerning the Joint Brazil–United States Technical Commission, see the memorandum of March 17, 1949, by the U.S. Co-Chairman, John U. Abbink, to Secretary Acheson, Foreign Relations, 1949, vol. ii, p. 552.
16. For information regarding the Currie Mission, see International Bank for Reconstruction and Development, Fifth Annual Report (1949–50) and Sixth Annual Report (1950–51), pp. 23 and 34–35, respectively.
17. For pertinent information, see the memorandum by Sheldon T. Mills, Director of the Office of North and West Coast Affairs, of a conversation held April 5, 1950, p. 814.
18. For text of the Act for International Development, approved June 5, 1950, see 64 Stat. 204.

19. For text of the Inter-American Treaty of Reciprocal Assistance, which entered into force for the United States on December 3, 1948, see Department of State Treaties and Other International Acts Series (TIAS) No. 1838, or 62 Stat, (pt. 2) 1681.

    For documentation pertinent to the charges brought against each other by the Dominican Republic and Haiti, see pp. 641 ff.

20. For pertinent documentation, see Foreign Relations, 1948, vol. ix, pp. 488 ff.

    Text of the Pact of Amity between the two countries is printed in Annals of the Organization of American States, 1949, p. 204.

21. For pertinent documentation on this subject, see Foreign Relations, 1949, vol. ii, pp. 525 ff.
22. The Mutual Defense Assistance Act of 1949, approved October 6; 63 Stat. 714. Documentation on the overall United States military assistance program is scheduled for publication in volume i.

23. Information on the resolution of the Peruvian request is contained in footnote 1 to Mr. Miller’s memorandum of June 1, 1950, ibid.

    For pertinent documentation regarding Guatemala’s request, see the memorandum of a conversation held. December 29, 1950, by Ernest V. Siracusa, Assistant Officer in Charge of Central America and Panama Affairs, p. 928.