796.5/3–1651: Telegram
The Ambassador in the Philippines ( Cowen ) to the Secretary of State
secret
Manila
, March
16, 1951—6 p. m.
2800. For Melby. Fol considerations offered re Philippines and unofficial State proposals1 that US Defense Dept finance part or all Philippine budgetary expenditures defense purposes:
- 1.
- Inasmuch as budgeted expenditures Philippine Dept Natl Defense fiscal year 1952 total 185 million pesos and will apparently be significantly higher in practice, US aid finance such expenditures wld [Page 1519] clearly go long way meet Philippine budgetary difficulties and [garble] even wipe out gen account deficit fiscal year 1952.
- 2.
- Assuming adequate control US Govt over Philippine disbursements defense purposes, such budgetary aid might well improve substantially Philippine defense program.
- 3.
- On other hand, fol dangers shld be noted since believe
they more than fully offset favorable aspects such
proposals:
- a.
- Dol aid cover Philippine peso expenditures wld probably remove willingness Philippine Govt effect econ, social, political measures as part ECA program. Believe such measures of major importance combatting Huks.
- b.
- Philippine balance of payments prospects sufficiently favorable without such assistance, so that extension dols budgetary aid might well lead either to further Philippine accumulation gold and dol reserves with inflationary impact little different from deficit spending or to needless drain on [garble] resource US due Philippine imports non-essentials at time US resources subject considerable strain meet defense and other requirements. In contrast, dols made available via ECA wld be spent important objective ameliorating defense economy, social, political conditions.
- c.
- Philippine Defense Dept now under much better management than pre-Magsaysay. In any event, believe Philippine Government sufficiently conscious anti-Huk and defense problems it will cooperate quite well admin Defense Dept in gen accord US objectives.
- d.
- Extension dol aid meet Philippine defense expenditures wld virtually remove internal pressure increase taxes with strong likelihood over-all budgetary deficits wld rapidly recur involving probable pressure and dol aid.
- 4.
- In event Dept considers appropriate, on basis all factors, extend dol aid fin Philippine defense expenditures, recommend effort be made obtain, as minimum, Philippine agreement drop claim dols 23 million resulting 1934 [garble] revaluation.
ReDeptel 2114, March 15.2 Do you mean by “50 to 75 million Export–Import loans” loans by the Export–Import Bank without reference to ECA or loans by the Bank through use of ECA funds?
Cowen