S/ISA Files, Lot 52–51

Paper Prepared in the Department of State1


Economic and Technical Cooperation Program in the Other American Republics

I. General Summary

A sound cooperative economic and technical assistance program for Latin America is necessary to reduce the deficiencies in the Latin American economy that make for economic, political, and social instability. As has been stated above, the essence of that deficiency is the lot of the Latin American masses, which by and large, is one of poverty, ignorance, and sickness. Although there are obvious differences among the twenty Republics, those differences are of degree rather than of kind with respect to the basic problems. All of the countries have an inadequate, and often-times, declining, rate of agricultural production resulting from unscientific and exploitative land-use methods. The productive capacity of the populations of all the countries is undermined by the prevalence of disease, resulting from malnutrition, the absence of environmental sanitation and the inadequacies of the preventive measures now being employed. The incipient industrial development in all of the countries is handicapped by inefficient organization and deficient training of the labor force. In all of the countries, the funds available for governmental services are inadequate in relation to the urgent needs. This inadequacy is accentuated by the inefficiency [Page 1047] with which those funds are used. In most of the countries, there is weak administrative organization and inadequate technical competence in the administration of the social services which the various governments are now beginning to provide for their people.

Notwithstanding the great handicaps that history and geography have imposed, the people and the governments of the Republics of Latin America are today on the march. Throughout the area the people are demanding, and the governments are gradually providing, an increasingly firm foundation for the general economic development that alone will provide a higher standard of living. Everywhere the governments are assuming more leadership in projecting national programs for the improvement of the lot of their people. The governments and the private citizens of the Latin American countries are investing greater funds than ever before in agriculture, transportation, power, and industrial facilities. Throughout the area the governments are increasing their annual budgets for education, health, social security, public works, agricultural development and other social services to a degree that would have been inconceivable even ten years ago.

In virtually every country of Latin America, the increased funds devoted to national programs of social betterment have not provided a corresponding increase in the standard of service. A major reason for this is to be found in the fact that adequate technical and administrative skills and the structure of administrative organization that would permit effective utilization of available resources, are lacking in those countries.

Increasingly, as the nature of the problem becomes understood by them, the governments of Latin America are turning to the United States for the minimum of economic assistance and technical “know-how”, which can make their own great effort productive. For that reason, in this area of vital interest to the United States, extraordinary results can be achieved with a program of technical cooperation, supplemented by a relatively small expenditure of funds to enable the United States technicians to provide actual demonstrations of effective action programs related to specific problems.

The recognition by the Latin American Republics of the vital relationship that a program of technical assistance can have to their own national programs of economic and social development, is founded on the extremely rich experience of the technical assistance program which the United States initiated during World War II.2 At that time, because of wartime necessity, including our need for the active support of the Latin American countries against the Axis, the technical assistance program was projected on a comparatively extensive scale. A [Page 1048] great part of that program was related to the problems involving the allied military forces stationed in the hemisphere and other large-scale raw materials acquisition programs of the United States. Notwithstanding the handicaps under which these programs were initiated, including the dislocation of shipping and the diversion of civilian goods normally going to Latin America, they achieved real success. During the subsequent period of post-war retrenchment the cooperative programs were reduced and in some countries discontinued.

The post-war reduction in the scope of the program has been even greater than appears from the limitation of the funds employed because of the inflationary spiral that has characterized the Latin American economies since the war. In fact the funds available for the technical cooperation programs of the U.S. since the war period have been decreasing at a time when great inflationary pressures have been operating throughout Latin America. For this reason, the rate of operation has declined even more than the reduction in expenditures would indicate. The costs of all the elements that enter the programs, including salaries and wages, materials, supplies, and equipment, have in most instances more than doubled. In short, the 11 million dollar program of 1951 represents no more than a 5 or 6 million dollar program in 1945, although at that time we were spending several times that amount.

The programs that have been developed with this limited budget have been extraordinarily effective as demonstrative activities. However, the nature of the problem of maintaining Latin America as an area of democratic strength during the years immediately ahead, and of developing the region as an even more important source of materials for the free world, requires that we assist the Latin American countries to help themselves at a substantially increased tempo. The existing basic programs do not extend to many countries in which the needs are very large; in countries where the programs have been in operation, their benefits and impact on the economies should be broadened.

The program during the last eight years has demonstrated the manner in which our technical “know-how” can supplement and make effective the efforts of the Latin American nations in their own behalf. In addition, our experience has provided us with the specialized knowledge and understanding of sound methods of initiating and operating a technical cooperation program. The description of the proposed program, which is largely an extension of existing programs, must be presented against a description of what those successful methods are.

There are in general three major ways in which the United States has made available to the Latin American Republics its resources of technical knowledge and skill. One has been advice by technical experts who surveyed a particular problem and recommended a course of action to be carried out by the other government. For some types of [Page 1049] problems, such as those of public administration and fiscal policy, the advisory approach may be the simplest and most effective. Another has been for United States technicians in the other country to assume full responsibility for the execution of the work programs along lines that have been agreed upon with the host government in advance. Such an approach has been feasible in the procurement of strategic materials. A third method is to have the host government create a cooperative agency, usually known as a “Servicio” (or cooperative service) within an appropriate Ministry with authority to carry out a technical program in a given field. This Servicio is then staffed with nationals of the host country and a limited number of United States technicians; its activities are jointly planned and executed; and its operations are financed with funds contributed by both governments.

In practice, what has been referred to as a “Servicio” may be called by some other name. But the cooperative agencies through which the agriculture, health, and education programs have been carried on have significant characteristics in common. In each case the Servicio is in effect a bureau within the appropriate Ministry. The United States representative known as the Chief of the Field Party is nearly always also the Director of the Servicio and is thus, at least technically, an officer of the host government as well as a representative of the United States. The relationship between the Minister and the Chief of the Field Party in handling Servicio operations is that of co-equals, since the program agreement provides that there must be agreement between the Chief of the Party and the Minister in the development of basic policies and procedures, the planning and operation of specific projects, and the hiring of key Servicio personnel.

The United States makes two distinct types of financial contributions to programs using the Servicio plan. One is the direct contribution to project funds which is deposited to the credit of the Servicio along with the contribution of the host government which may often considerably exceed the U.S. portion. The other U.S. contribution is the payment of the salaries and expenses of the field party.

The use of the Servicio makes for a fuller sense of mutual responsibility; the control which the United States technicians exercise over Servicio operations assumes more effective use of the knowledge and skills of the United States technicians working on the program; it brings technicians and administrative personnel of the two countries together in an extremely close working relationship in a single agency attempting to solve common problems and produces a greater degree of mutual understanding and respect; and lastly, the Servicio approach means that the nationals of the host government learn and absorb information from the United States technicians in a context of operating responsibility which trains them to assume responsibility for such operations on a permanent basis.

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The Latin American governments have shown enthusiasm for this type of operation. During the fiscal year 1951 there were 34 Servicio-type programs in operation in 18 of the Latin American Republics. In addition, the United States carried out advisory and training programs on a varying scale in all of the 20 Latin American Republics. The funds made available for these purposes from the technical cooperation appropriation for FY 1951 totalled approximately $11,350,000 exclusive of the cost of Washington administration.

It is proposed that for the fiscal year ending June 30, 1952, the United States carry out a program of technical and economic cooperation in the Republics of Latin America in the basic fields and in approximately the amounts indicated by the following table:

1. Agricultural development and food supply and related activities (including food processing, feeder roads, etc.) $13,650,000
2. Health and Sanitation 7,900,000
3. Education 5,100,000
4. Mineral and Power Development 2,000,000
5. Industry and Labor 1,100,000
6. Public Administration and Technical Services 1,600,000
7. Transportation, Joint Commission, Special Projects, etc 2,400,000
Total $33,750,000

The above budget:

will permit the United States to continue its current technical cooperation programs,
will permit the expansion of existing programs in order to make them more effective in relation to the magnitude of the problem in these countries,
will permit the initiation of basic programs such as agriculture and education, etc., in countries where such activities are not now being carried on, and
will provide needed balance in the country programs.

Approximately $11,500,000 of the sum requested will permit the continuation on an annual basis of the minimum programs underway in fiscal year 1951 in accordance with item (a) above.

To provide for the expansion of these going activities to a scale more commensurate with the requirements of the job to be done will require that a minimum of $8,500,000 be added to the $11,500,000 annual budget now used. This means that the sum of $20,000,000 of the proposed budget is required to develop the existing programs to the extent made necessary by the problems being attacked and the approaching emergency, in accordance with item (b) above. This expansion provides for special development of the actual food supply programs in Bolivia, Chile, and Peru, in response to special emergencies that are developing in those countries, and which are of strategic importance to our defense effort. Approximately $3,500,000 of the proposed $8,500,000 expansion is absorbed by this factor alone.

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In addition, the proposed program provides approximately $11,000,000 for the initiation of basic programs of the type already successfully developed, in other countries that need and request them, and which do not have them at the present time. This expansion would provide for agricultural development programs in 8 new countries at a cost of approximately $5,000,000, for education programs in 9 new countries at a cost of approximately $2,500,000, and for new programs in health and sanitation, mineral and water development, public administration, industry, and other fields in all 19 republics at a cost of approximately $3,500,000. The proposed program will also provide approximately $3,000,000 for the development of activities such as industry and labor, fiscal administration, economic surveys and joint commissions for economic development that are essential to a broad program of economic and technical cooperation, but have been developed heretofore.

Since 1942, the financial contribution of the Latin American governments to the co-operative programs has been increasing. That contribution consists of funds given directly to the programs of services and facilities provided by the local governments, and of contributions made by third parties, usually communities that desire such facilities as environmental sanitation and water systems. In the past, the total of these contributions has increased year by year until it constitutes more than 50% of the cost of the programs. Under the program proposed for fiscal year 1952, also, the host governments will be required to contribute all they can afford as a condition to the initiation or continuation of these cooperative programs.

The proposed program provides for the major concentration of effort in Brazil, Chile, Peru, Bolivia, and Mexico, in that order, and over 40% of the proposed budget will be used in these five countries. These countries have approximately 60% of the population of Latin America. All of these countries are of strategic importance in relation to our defense effort. In all of them it will be necessary to expand considerably our technical cooperation program to assist them in carrying forward their economic development programs, and thus enable them to acquire greater strength as allies, and to increase their production of essential raw materials for us and industrial products for themselves. Chile, for example, has recently opened a steel plant which will enable her to supply not only most of her own needs, but also a large percentage of the needs of the neighboring Republics. The development of a new industrial center in Chile, which this plant is bringing about, is causing severe strains on other segments of the economy, especially those related to food supply, since the new industrial area is draining off supplies, already inadequate, of the Santiago region. The same situation obtains with respect to the increased production of copper in the northern region of the republic. There too, [Page 1052] an influx of population into the expanding copper mining camp has resulted in an acute shortage of food supplies. A cooperative agricultural program in Chile has been started, but this assistance should be made more extensive in order to enable Chile to solve its food supply problem.

Similar situations obtain in connection with Bolivia, Mexico, and Brazil. The expanded programs of mineral production developed in response to United States needs, have created serious food shortages. In all of these areas there are parallel problems related to health and sanitation and to industrial training. The proposed program will provide some of the assistance required by the governments in their attempts to solve these problems.

It will be noticed from the above table that relatively heavier emphasis is being given to the programs of agricultural development, food supply, and related fields. More than 40% of the total budget proposed will be used for this purpose. Approximately 24% of the proposed budget is to be used for health and sanitation and related activities.

The $5,000,000 proposed for educational programs is sufficient to continue those programs, if the problem of inflation is taken into account, merely at the rate at which they were initiated and to expand the program into several new countries. Education projects account for 15% of the budget.

The other activities proposed in public administration, mineral and power development, industry and labor, and joint economic surveys, which are essential factors in a total program, account for the remaining 21% of the proposed budget.

The Republics of Latin America desire U.S. technical assistance. No better proof of this can be found than their willingness during the last eight years to assume an ever-increasing share of the direct cost of the cooperative programs. In addition, they have increased their own budgets to continue, on a permanent basis, the services initiated by cooperative action. The direct contribution of the Latin American Republics increased year by year until in 1950 it was approximately $14,000,000 for all the U.S. programs. In addition, the work of the cooperative programs affected the form in which many millions of dollars in the Latin American budgets were employed. On the basis of past experience, therefore, it is anticipated that under the proposed program they will bear a large, fair share of the cost. Because the proposed program for FY 1952 is on a scale that is more nearly commensurate with the extent of the problem than has been true during the last few years, it will involve a proportionately large increase of U.S. expenditures over FY 1951. Most of this increase will be used to initiate new programs or to intensify food production in areas that are now of strategic importance. In these two situations it is not reasonable [Page 1053] to expect a ratio of contributions by the Latin American governments equal to the ratios that have been reached in old established programs after several years of operation. For that reason, although a reasonable increase in the direct contribution of the Latin American governments is to be expected, they will, in all probability, not maintain the ratios of 1951.

[Here follows further discussion of other aspects of the technical assistance program proposed for Latin America.]

  1. Drafted by Task Force II of the Foreign Aid Steering Group, and incorporated as Tab 2 of a document designated TF II D–17/5a, dated March 7, 1951, prepared for presentation to the Bureau of the Budget as part of the FY 1952 foreign aid program.
  2. Apparent reference to the Office of the Coordinator of Inter-American Affairs, and the program of its subsidiary, the Institute of Inter-American Affairs (IIAA). For information on the IIAA, see footnote 11, p. 1059.