896.00–R/3–2651: Telegram
The ECA Special Representative in the Philippines (Checchi) to the ECA Administrator (Foster)
priority
Toeca 251. Joint Embassy–ECA message. Reference: Ecato 236.1
(1) Our view is that loan proportion in proposed aid is much too high. Suggest strongly that in first year, at least, all of aid given be on grant basis. Base this opinion on fol:
- (a)
- Gen impression prevailing Phil Govt and business circles is that all or bulk first year’s assistance wld be on grant basis. This based on tenor Quirino–Foster conversations and observation ECA [Page 1524] operations elsewhere, particularly China, Taiwan and South East Asia where most of US assistance and all ECA assistance has been on grant basis.
- (b)
- Terms exacted from Phils as precondition aid and as spelled out in Quirino–Foster agmt have been more strict than for other countries receiving ECA aid. Phils cognizant of this. To treat Phils now with this generosity in matter of loan grant ratio wld arouse serious anti-American sentiment and in our view not be justified by savings involved.
- (c)
- Our concept of type program that can be most effective here is one requiring heavy expenditures local currency. Most difficult and probably impossible carry out this type program without aid substantial counterpart fund. Creation such fund depends on aid being in form grants.
- (d)
- Problem here in large part one of seeking exercise leverage on Phil Govt to adopt and enforce needed economic policies. This, in terms political institutional realities, impossible unless we in position dispose substantial amt grants and counterpart—well as other prerequisites such as numbers able technicians.
(2) Our joint urgent recommendation is that, if aid that to be made available first year is on order of magnitude of $50 million, it shld all or nearly all be in the form of grant. Believe otherwise wld be impossible, in light realities situation, run the only kind of program that wld stand chance being effective in realizing necessary reforms and tangible mass benefit.
(3) Our view also that $50 million the first year represents rock bottom minimum that is needed exercise necessary leverage and carry through effective program. Wld feel more confident if more than this amt cld be made available, not necessarily earmarked for Phils, but available in ECA hand for use here if situation warrants.
We wld suggest that if absolutely necessary include loans most acceptable formula wld be total FY 1952 aid program of minimum $50 million of which unspecified portion cld be for loans for specific projects.
- Not printed.↩