OAS Files, Lot 60 D 6651

Position Paper Prepared in the Bureau of Inter-American Affairs

IAM D–l/la

[Here follow a cover sheet and a negotiating brief on emergency economic cooperation.]


The agenda of the IAM provides for consideration of the following:

III Emergency Economic Cooperation—

Production and distribution for defense purposes.
Production and distribution of products in short supply and utilization of necessary services to meet the requirements of the internal economies of the American Republics; and measures to facilitate in so far as possible the carrying out of programs of economic development.


The objective of the United States is to secure the full cooperation of Latin America in the mobilization of economic resources, goods and services to assure their maximum production, distribution, and utilization, and the adoption of measures of economic defense, for the common purpose of achieving security. The consideration of this objective [Page 950] will precipitate IAM discussions of issues which are complicated per se. Furthermore, LA holds certain grievances based on allegedly indifferent consideration by the United States of their economic problems and development aspirations during World War II and thereafter. Specifically, problems will arise concerning formulation of an inter-American policy with regard to:

General Framework of Emergency Economic Cooperation
Increased Production
Allocation of Production essential economic activities by means of allocations and other administrative devices
Price Controls
Intergovernmental Consultation
Transportation Facilities
Technical Cooperation Programs
Economic Development
Economic Defense and Security Measures

Problems (1), (2), (3), (4), (5), and (9) are of immediate emergency concern to the defense effort. Problems (3), (4), (6), (7) and (8) are of great importance to Latin America both as a corollary to emergency economic cooperation and for the post-emergency period.

The position of the United States must be realistic with relation to the exigencies of the defense programs, the maintenance of economic equilibrium in the Americas, and the continuance of inter-American solidarity. This position must be within the policy frames approved by the CFRS 2 on February 7, 1951 (IAM D-1).3


The United States must seek to obtain the IAM acceptance of certain principles (for procedure see specific draft resolutions in the Negotiating Brief under economic subject headings) as follows:

1. General Framework of Emergency Economic Cooperation:

A unanimous declaration of common cause and common sacrifice in economic cooperation for the defense of the free world.

2. Increased Production:

Full inter-American cooperation in maximizing production of strategic materials, and of other basic materials and essential manufactured goods, in meeting the needs of the common defense programs and the essential civilian requirements of the free world.

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3. Allocation of Production:

Full inter-American cooperation in (a) the international allocation of basic materials in short supply and to assure acceptance of principle that highest priority be given defense requirements, (b) that essential civilian economic activities be sustained, (c) that in reducing less essential civilian needs, the principle of relative equality of sacrifice should prevail.

4. Price Controls:

Maximum cooperation in the acceptance of necessary price controls as a means of facilitating commodity flow, curbing inflationary tendencies, and avoiding market dislocations and consumer distress.

5. Intergovernmental Consultation:

Full opportunity for Governments to consult with each other on the effect of emergency controls on international trade, but excluding any commitment for consultation prior to the imposition of controls.

6. Transportation Facilities:

The cooperation of Latin America, through IA–ECOSOC, in planning for the maximum utilization of all inter-American transportation facilities in anticipation of an emergency.

7. Technical Cooperation Programs:

Agreement on the desirability of actively planning and prosecuting technical cooperation programs.

8. Economic Development:

Agreement that priority consideration of economic development programs must be viewed in the light of, and in relation to, the defense effort; this criterion will place emphasis on economic development programs for the production of basic materials essential to the defense program but does not preclude consideration, in so far as possible, of the carrying out of other economic development programs.

9. Economic Defense and Security Measures:

Agreement on full inter-American cooperation in (a) applying export controls to direct shipments and transshipments to the Soviet Bloc of Items of strategic significance or in short supply, (b) controlling air cargo and maritime resources with a view to prohibiting the carriage to or within the Soviet Bloc of goods which are the subject of embargo, and (c) such other economic defense measures as may become necessary.


The IAM has been called by the United States for two basic reasons, i.e., (1) the necessity for enlisting the full collaboration of Latin American Republics in the political, military and economic fields, so as to further the common defense of the free world, and (2) because [Page 952] the impact of our national rearmament program upon Latin American countries is so great as to make such a meeting essential from their standpoint.

General Framework of Emergency Economic Cooperation:

The broad purpose of the United States in the economic field is to gain acceptance of Latin America that the defense program is vital to both and that each of the American Republics must contribute to the common effort for the benefit of the free world. A declaration of common purpose and common responsibility would be of help to the United States later in getting Latin America to take practical steps of economic cooperation, would develop a sense of common sacrifice, and would help to create an auspicious atmosphere for negotiations. Appropriate consideration must also be given to reserving the resources of Latin America for the free world.

The economic items on the agenda are of particular importance to the United States because (1) failure to reach agreement on economic cooperation will adversely affect political and military objectives, and (2) because Latin America is both a major supplier of materials vital to the common defense programs and also a consumer of industrial products from the United States and Western Europe which will be subject to increasing economic controls.

In 1950 Latin America exported to the United States $2.8 billions of goods, or about 35 per cent of total U.S. imports; in addition to basic foodstuffs such as coffee and sugar, Latin America supplied 25 per cent of U.S. imports of metal and manufactures, 46 per cent of wool imports, 61 per cent of petroleum, and more than 50 per cent of imports of copper, lead, nitrate, and henequen fiber.

In turn, the U.S. exports to Latin America in 1950 totaled $2.5 billions, representing 30 per cent of U.S. total exports of machinery, 30 per cent of iron and steel exports, 38 per cent of chemicals, 40 per cent of textile manufactures, 44 per cent of automobiles, and 44 per cent of iron and steel advanced manufactures.

Latin American imports from the United States in 1950 represented about 50 per cent of Latin America’s total imports from all sources, indicating the high percentage of dependence on U.S. supplies.

The economic items on the agenda will be complicated and controversial, both because of their inter-relationship with each other, and because of the history of Latin American economic relations with the United States during and after World War II. At the Rio Conference in 1942 the United States, recognizing the mutuality of the war effort, committed itself to equal treatment in the allocation of goods to cover civilian needs in Latin America and in the United States. Latin America holds the views that:

During a substantial period of World War II, the Latin American requirements for civilian supply were neglected by the United [Page 953] States as compared with treatment given to the U.S. civilian population;
During World War II the United States purchased materials from Latin America at controlled prices, whereas after the war, when Latin America was able to convert their dollar earnings into U.S. supplies, the United States lifted price controls and sharp price increases occurred;
That after World War II the United States did not give sufficient priority to Latin American aspirations for economic development.

The United States does not concede the validity in toto of these Latin American views, but their existence presages difficulties in negotiations in the IAM.

The new emergency faces the United States with precisely the same problems in these fields as arose during the last war, the difference being only in degree. The main lesson to be drawn from U.S. experience with the Rio doctrine is that the United States must avoid over-commitments on supply, and must insure administrative implementation of such commitments as are made.

Increased Production:

Latin America is today a vitally important producer of raw materials and production could be increased, substantially in most cases, with guidance and assistance from the United States. Also, Latin America has a modest industrial base which, within limitations, could be used for the production of manufactured goods of use to the common defense program.

Latin America is the major foreign source of the following materials on the U.S. stockpile list:

Item Source
1. Abaca (manila fiber) Central America
2. Antimony Mexico, Bolivia and Peru
3. Asbestos (certain grades) Bolivia
4. Beryl Brazil
5. Bismuth Mexico, Argentina, Bolivia and Peru
6. Castor Oil Brazil, Mexico, Haiti, Ecuador, Central America
7. Copper Chile, Mexico, Peru, Cuba
8. Iodine Chile
9. Ipecac Central America and Brazil
10. Manganese Brazil, Cuba and Mexico
11. Mica Brazil and Argentina
12. Monazite Brazil
13. Quartz crystals Brazil
14. Quebracho Paraguay, Argentina and Brazil
15. Sisal Haiti and Brazil
16. Tantalite Brazil
17. Tin Bolivia
18. Vanadium Peru
19. Wool (apparel) Argentina and Uruguay
20. Zinc Mexico, Peru and Bolivia

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Latin America is also a significant supplier of the following stockpile items: agar, chromite, cotton (long-staple), industrial diamonds, fluorspar, hog bristles, molybdenum and nickel.

The Western European countries are also dependent on Latin America for both strategic materials and essential civilian items, notably grain, meat, foodstuffs, cotton and wool.

In order to increase production of basic materials in Latin America, the United States may in some instances have to overcome difficulties from (a) the shortage of risk capital, especially in the case of marginal production, (b) the Latin American fear of economic dislocation upon termination of U.S. procurement programs, and (c) lack of assurance that capital equipment necessary for expanded output will be available from the United States and Western Europe. Other very important factors affecting the production capacity of Latin America will have to be taken into consideration by the IAM, such as inadequate standards of health and sanitation, ineffective manpower techniques, illiteracy, and inefficient agricultural methods; such problems are, and will be, dealt with through the Technical Cooperation Program with increased importance in relation to the common defense program.

Allocations and Priorities:

There is strong evidence that Latin America considers the maintenance of their civilian economies as the first line of civilian defense against internal subversive elements. As a means of securing adequate civilian supplies, Latin American governments are inclined to link their cooperation in supplying strategic materials to firm guarantees for reciprocity in material supplies from the United States. This will present a very difficult negotiating problem because while the United States is necessarily limiting supplies to Latin America, at the same time the United States must ask Latin America to expand the exports of basic materials. In this connection the United States, as principal supplier to Latin America, has a strong bargaining position, but an intransigent U.S. attitude might precipitate serious economic friction, jeopardize defense efforts, and create political disharmony. Consequently the United States must be prepared to meet the legitimate civilian requirements of Latin America in order to secure Latin American economic cooperation for the defense program. The United States must also place the problem of cooperation in the broad context of the defense of the free world and on the footing of a common cause. Divergent viewpoints must be balanced out within the supply limitations.

Price Controls:

The U.S. price ceilings on basic commodities imported from Latin America are, with very few possible exceptions, favorable to Latin America both historically and with regard to the relations between [Page 955] imported raw materials and exported manufactured goods. The United States considers that price controls confer reciprocal benefits and are a potent anti-inflationary measure. Under present price control policies the United States will be able to undertake to avoid discrimination against raw materials or against imported goods. Latin America is concerned, however, with the future purchasing power of the dollar balances which they will accumulate by reason of increased sales to the United States, and would like to arrive at some formula for maintaining the post-emergency purchasing power of these dollar balances. The United States is not able to give any practicable assurances on this latter point.

Intergovernmental Consultation:

The United States will provide the Latin American governments with full opportunity to consult with regard to the effect of emergency controls on international trade, but cannot commit itself, in all cases, to the prior consultation desired by Latin America.

Transportation Facilities:

Inasmuch as the maximum utilization of all transportation facilities will be increasingly important, cooperative studies of inter-American requirements versus availabilities should be prepared for possible emergency.

Technical Cooperation Programs:

Effective progress in the technical cooperation field is of immediate and increasing importance (a) as a shield against Soviet penetration by strengthening the inter-American front economically and socially, and (b) during this emergency period, its relation to the defense programs. The faith of Latin American peoples in the free-world system must be confirmed by concrete efforts to help them to help themselves in overcoming poverty, ignorance and disease. With technical cooperation, as planned, labor productivity may be increased and wealth created with a view to improving human welfare in economic and social fields. There will be strong pressure from Latin American delegations and U.S. groups for the affirmation by the IAM of a positive program of technical cooperation, and a realistic agreement in this regard is entirely consistent with U.S. policy objectives.4

Economic Development:

While material requirements for defense programs and basic civilian economic activities must have priority over other material requirements, there is the problem of facilitating, in so far as possible, economic development in Latin America during the emergency period. The free-world rearmament program will materially affect supplies of [Page 956] capital goods required in Latin America to (1) maintain and develop existing civilian industrial and agricultural industries, (2) complete developments recently started and not yet finished, and (3) carry forward developments which are planned. Opposition elements in Latin America are propagandizing that the free-world rearmament program will be used as an excuse by the industrialized countries to choke off economic development in Latin America and thus reduce Latin America to a dependent “colonial area”. Among pro-United States elements there is the feeling that since 1946 the United States’ emphasis on economic aid to Europe has left Latin America in a “neglected” status. Latin America will probably seek to obtain in the IAM a positive affirmation that economic development must go forward and that there be effective cooperation in facilitating the material requirements necessary for such development. This means that the United States must be prepared to assure the consideration of requests for capital assistance and material supplies for economic development, within the realities of the supply limitations. In this connection, experience gained in the last war proved that it is often possible constructively to relate other development (such, for example, as development of transportation and port facilities) with development for the production and distribution of defense materials.

Economic Defense and Security Measures:

In order to broaden the area of international cooperation in denying to the Soviet bloc strategic materials, services, or the use of funds, the United States should seek agreement on full Latin American cooperation in the matter of security controls. In this connection a resolution, to be unanimously acceptable to the Latin American countries, must avoid specific public reference to the Soviet bloc, but should provide for agreement on principle under which appropriate measures can be developed by bilateral or multilateral discussions. As regards financial controls, it is recommended that, if the opportunity presents itself, consideration be given to holding informal discussions on the technical aspects of foreign funds controls.

  1. Basic collection of records of meetings of the Organization of American States, other major inter-American governmental organizations, and inter-American conferences together with related subject files for the years 1939–1962, as retired by the Office of Inter-American Regional Political Affairs, and subsequently preserved as item 39 of Federal Records Center accession 71 A 6682. Documents pertaining to the Fourth Meeting of Consultation are contained in Boxes 98–99.
  2. Reference is to the interdepartmental Committee on Foreign Requirements and Supplies (CFRS), established January 19, 1951, as part of the Office of Defense Mobilization (ODM). The committee was charged with the responsibility for reviewing and evaluating foreign requirements for supplies produced in the United States and United States requirements for supplies from foreign sources.
  3. Not printed; it is contained in OAS Files, Lot 60 D 665.
  4. For documentation on United States technical assistance policy toward the American Republics as a group, see pp. 1038 ff.