PPS Files, Lot 64 D 5631

Paper Prepared in the Department of State2

top secret

Latin America Aid Programs

military program

[Here follows discussion of military grant aid to Latin America under the Mutual Security Program.]

(An estimate of the cost, beyond the amount which may be authorized and appropriated for fiscal year 1952, will be made by the Department of Defense).

C. Extent to Which Program Meets Needs of National Security.

Successful completion of the program will contribute to collective security of the hemisphere. The defense tasks which it is hoped this grant aid will enable other countries to perform are so essential to the national security of the U.S. that there would be no question that U.S. forces will be required to perform them if Latin American forces; are not available.

economic program

A. Minimum Objectives and Tasks.

To stimulate the volume and types of production of basic materials required for defense production and stockpiling by helping the Latin American Governments to solve problems that would otherwise inhibit the expansion of raw materials production.
To assist in overcoming present weaknesses in the Latin American economic structure which contribute to political and economic instability to the end that the orientation of the governments and people of the Latin American countries toward the U.S. may continue to be at least as favorable as at present.

B. Nature and Magnitude of the Program.

Measured against development efforts which are expected to be undertaken through private investment and loan capital the program will continue to be only a significant catalytic agent to stimulate efforts by local governments to help themselves. Primary reliance will continue to be placed on private investments and loans and on public investment by the Latin American Governments themselves to meet development needs in Latin America. U.S. Government funds will be used only to the extent necessary to increase production in Latin [Page 1070] America to the level which is required for the defense production effort and for assuring our political objectives in the region.

In addition to the general assumptions given on pages 2 and 3 of ISAC D–22/3a of August 31, 1951,3 the following special assumptions are applicable to the Latin American portion of the Mutual Security Program:

No technical assistance will be projected for Argentina but the current policy of extending no additional technical aid to Guatemala will be subject to revision should political conditions change.
In some of the Latin American countries, economic problems faced are of a magnitude too great to be solved by technical assistance alone.
There will generally be disappointment in Latin America that the grant aid program is not expanded more rapidly.
The relative contributions from Latin American countries will continue to increase or, in any event, will not be reduced.
Private capital will continue to be available in at least the current volume for economic development in Latin America.
The level of anticipated loan operations in Latin America by the Export-Import Bank and the IBRD will not vary significantly from the figure of approximately $350,000,000 attained in fiscal year 1951.

It is impossible to speak with certainty as to the cost of the program or even as to all of the elements which should comprise the program. This is true both because of the uncertainty as to the validity of the general and specific assumptions made with respect to the Latin American program and because of other uncertainties such as:

The amount of funds that will be authorized and approved by the U.S. Congress for the program for fiscal year 1952.
The extent to which the governments of Latin America will be able and willing to contribute to the program for fiscal year 1952.
The magnitude of U.S. import requirements of strategic and critical materials which, it is understood, have not yet been estimated by ODM.
The extent to which the maintenance of lower prices in the U.S. than in the world market for strategic and critical materials will interfere with the imports of such materials from Latin America and the extent to which it may accordingly be necessary to subsidize such importation either directly or indirectly.

In the light of these and other uncertainties, the following tentative estimates are made as to the elements and costs of the programs for fiscal years 1953 and 1954:

Elements comprising the program:
An expanded technical cooperation program which would be an extension and intensification of the present technical cooperation activities.
Contribution to the construction of the Inter-American Highway on a scale to assure its completion by 1959.
U.S. grant aid in the construction of other highways in Latin America to facilitate the production and acquisition of strategic and critical materials.

The lack of overland transportation facilities is a major impediment in Latin America to achieving a rapid increase in the production of strategic and critical materials. The lack of such facilities not only limits access to the strategic and critical materials but interferes with the production and transport of equipment and supplies, including foodstuffs, needed in connection with the production of the materials. In general, primary reliance for the construction of transportation facilities will continue to be placed on the governments of the Latin American countries and private investment and on loans which may be floated in connection with particular raw materials projects. For example, it appears that it will be possible to use private capital and loan funds in Brazil to help finance the completion of a better 240 kilometer road in the Amapa region and in improving access to the Urucum deposits in order to speed up production of manganese. It is believed, however, that there are cases where it would be in the interest of the U.S. to use grant assistance in the construction of highways to facilitate the speeding up of strategic and critical materials production, especially where our potential need for the materials is great and the construction of transport facilities might seriously interfere with development of deposits in the event of a rapid increase in requirements of the materials. For example, new roads will be necessary in Brazil if remote deposits of tungsten are to be opened up, in Chile if certain copper mines are to be brought into production, in Bolivia to encourage increased production of tin and tungsten, and in Guatemala access to, and production of, rich lead and zinc properties is limited by the necessity of transporting ores approximately 200 kilometers by mule back. These and other cases should be thoroughly explored to determine just how far it would be in the interest of the U.S. to help improve access to raw material resources. It is believed that there are a number of cases where inadequate transport facilities in Latin America are not only seriously limiting current production of strategic and critical materials but that they would constitute an even more serious limitation on a rapid expansion of such production and that the only way of overcoming the deficiency at present may be the extension of grant aid.

2. Estimated cost.

The cost of the program for each of the two years is estimated as follows:

a. Technical assistance $30,000,000
b. Inter-American Highway $8,000,000
c. Grant aid for other highway construction in Latin America $25,000,000

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C. Extent to Which Program Meets Needs of National Security.

So long as the Latin American Governments maintain their present political orientation toward the U.S. and our dependence upon them for raw materials continues, increased production in Latin America should promote the national security of the U.S. The factors limiting the economic aid program proposed for Latin America are our desire to rely to the maximum extent possible on private enterprise, loans and the Latin American Governments themselves to finance their own economic development needs. Maintenance of the present ratio of Latin American contributions to U.S. contributions in technical cooperation activities means that the rate of expansion of such activities is limited by the ability and willingness of the Governments of Latin American countries to contribute. The program proposed for Latin America is also limited by the general assumption that there will be no general war and that our need for encouraging production of strategic and critical materials is therefore not as great as it would be in the event of such a war during this period. Should this assumption prove incorrect our requirements for strategic and critical materials would not only increase but these increased requirements would undoubtedly have to be met to an even larger extent from Western Hemisphere sources.

  1. Master file of documents, drafts, records of meetings, memoranda, and related correspondence of the Policy Planning Staff for the years 1947–1953.
  2. Prepared at the staff level for the International Security Affairs Committee (ISAC), and attached to a paper approved by ISAC, entitled “Summary Statement of Recommended Aid Programs for Non-European Areas”, dated September 12, 1951, and designated ISAC D–20/1a, not printed.
  3. Not printed.