Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

Eisenhower Library, papers as President, Whitman file, NSC records

Memorandum of Discussion at the 212th Meeting of the National Security Council on Thursday, September 2, 1954¹

top secret
eyes only

September 2, 1954

Present at this meeting were the Vice President of the United States,² presiding; the Acting Secretary of State; the Acting Secretary of Defense; the Director, Foreign Operations Administration; and the Director, Office of Defense Mobilization. Also present were the Acting Secretary of the Treasury; the Acting Attorney General (for Item 1); Assistant Secretary Anderson for the Secretary of Commerce (for Item 3); the Director, Bureau of the Budget; Assistant Secretary of State Holland (for Items 2 and 3); Assistant Attorney General Tompkins (for Item 1); the Chairman, Joint Chiefs of Staff; the Acting Director of Central Intelligence; Robert Cutler, Special Assistant to the President; Robert R. Bowie, Department of State; the NSC Representative on Internal Security (for Item 1); the Acting Executive Secretary, NSC; and the Coordinator, NSC Planning Board Assistants.

There follows a summary of the discussion at the meeting and the main points taken.

[Here follows discussion concerning organizational arrangements for internal security and also significant world developments affecting United States security.]

3. U.S. policy toward Latin America (NSC 5432;³ NSC 5419/1;⁴ NSC 144/1; Annex to NSC 144)

Mr. Cutler briefed the Council on the background and content of NSC 5432. He pointed out that the Planning Board had intensively reviewed a March 1953 statement of policy toward Latin America (NSC 144/1) in the light of recent developments. In this review the Planning Board had had two basic objectives in mind: (1) to recommend the additional U.S. efforts needed to strengthen the hemisphere against extra-hemisphere infiltration and to reverse those trends which offer opportunities for Communist penetration, and (2) to recommend decisions which should be taken in order that the U.S. might have an effective position at the economic conference in Rio on November 22.

Mr. Cutler asked the Council to look first at a provisional draft of the Financial Appendix⁵ on Latin America circulated at the meeting (copy filed in the minutes of the meeting). He read the totals in Table I, and called attention to some of the principal items of expenditure, such as technical assistance and military assistance.

The Vice President, referring to page 9 of the Financial Appendix, noted that under the educational exchange program only 165 grants were made in FY 1954. He asked whether this was the total for all of Latin America. Mr. Cutler replied in the affirmative, but called attention to the fact that the State Department provides grant-in-aid to the American Council on Education to help American-sponsored schools in Latin America. The Vice President said he felt it was important to do a great deal more in the educational exchange field.

Mr. Cutler then read the “Major Points in Proposed Revision of NSC 144/1” (pages 1–3 of NSC 5432).⁶ He noted that Assistant Secretary of State Holland was present at the meeting as Chairman of the Interdepartmental Cabinet Committee preparing for the Rio conference. Mr. Cutler said he had also received the views of the Joint Chiefs of Staff (copy⁷ filed in the minutes of the meeting), who were in general agreement with NSC 5432 subject to certain suggested changes which could be taken up during the Council’s paragraph-by-paragraph consideration of the paper.

Finally, Mr. Cutler said he had requested and had just received Dr. Milton Eisenhower’s comments (copy⁸ filed in the minutes of the meeting), which he read to the Council.

Secretary Smith said he would like to start the discussion by relating an Army experience. He once knew a Colonel who issued a great many detailed orders, and who always ended with a paragraph which said “This order will be obeyed.” Secretary Smith felt that NSC 5432 contained an adequate U.S. program toward Latin America provided it is carried out. In other words, it is a good order, but the order must be obeyed. In the past our performance in Latin America, particularly in economic matters, has been largely verbal. The Rio conference will be an economic conference pure and simple, and we must follow it up with adequate performance.

The Vice President asked who would represent us at Rio. Secretary Smith said we would be represented by a strong contingent, and he would be glad to give the Vice President a complete roster of the delegation.⁹ He said that trade, government credit, and price stabilization would be the principal topics at Rio, and that if we handled these matters properly we had an opportunity to improve our relationships with the countries of Latin America. Secretary Smith said that Mexico was a case in point. Our relations with Mexico had been very bad until recently, but were now improving as a result of four developments: (1) Mexican public opinion had reacted strongly against the Mexican Government’s stand on the anti-Communist resolution at Caracas; (2) Mexican public opinion had reacted strongly against currency devaluation; (3) the International Bank had recently made loans to Mexico which were interpreted in that country as indicating a friendly U.S. attitude; and (4) the President had decided to reject an increase in the tariff on lead and zinc.¹⁰ Secretary Smith said he had talked about Mexico to show that a relatively small number of actions by the U.S. could produce a change in our relations with another country. He felt that if NSC 5432 were adopted and implemented it would produce favorable reactions throughout the hemisphere. But, he added, the paper must be implemented; that is, the order must be obeyed.

Turning to paragraph 4–b,¹¹ Secretary Smith noted that there was a difference of opinion as to whether economic development in Latin America should be “accelerated”. He regarded the word “accelerated” as misleading, because Latin America had gone through an enormous acceleration of its economic development since the war, and it might be impossible to accelerate this development any more.

Governor Stassen said that FOA had joined with ODM in proposing the word “accelerated”. He would not insist upon any particular word in this paragraph, but he did want to state at this point his general views on economic development in Latin America. FOA, he continued, is in the position of being more directly concerned than some other departments with the economic outlook in Latin America. He considered the Latin American situation serious and our program to meet it inadequate. He cited the following as factors which led him to conclude that the situation is serious:

1. The population in Latin America is growing at the rate of 2½% per year (one of the highest rates in the world), but gross national product is increasing at a rate of only 1% per year in an area where the standard of living has always been very low.

2. The rate of capital investment in Latin America is too low; indeed, there has been a net outflow of capital from the area in the past year, a development which has multiplied inflationary pressures.

On the basis of these factors Governor Stassen concluded that an explosive situation was developing in Latin America. He thought we were in a rut with respect to that area; that is, we never seem to make any dramatic moves there. We had greatly improved the situation in Iran by the expenditure of a modest sum of money,¹² and Governor Stassen thought similar action was urgently needed in Latin America to check inflation, attract capital, and build confidence in the future. The courses of action in NSC 5432 were good, but inadequate. Governor Stassen wished to refer particularly to Export–Import Bank loans and International Bank loans to Latin America. He said that from February 1953 to the present, Export–Import Bank loans to all of Latin America had totalled only $35 million. The tragic inadequacy of such loans indicated to him that we must shake off our lethargy and really do something. He felt the Rio conference would be the time to act.

The Vice President asked how the $35 million in loans to Latin America compared with other areas of the world. Governor Stassen replied that this total was below that for other areas, both absolutely and relatively. He added that the argument was sometimes made that capital would be invested in Latin America if a “favorable climate for investment” existed. He agreed that a favorable climate was necessary, but thought it could only be created by U.S. governmental action. Although such action would cost money, it would be a good investment in terms of realizing our objectives in Latin America. Governor Stassen said he was willing to drop the FOA proposal in paragraph 4–b, but wished to emphasize again that U.S. economic policy toward Latin America must be reversed.

Secretary Smith said his views in general were in accord with those of Governor Stassen. However, he was compelled to differ with Governor Stassen on several points, including the question of procedure. For example, he felt the tactics which had been successful in Iran could not be applied to Latin America. Moreover, he felt Congress would not appropriate enough funds for a large economic aid program. Governor Stassen was inclined to think that Congress would appropriate funds for Latin America more readily than for any other area in the world. Mr. Hughes said he was convinced that the U.S. could not afford to substitute government aid and capital for private investment. He was sure the recent flight of capital from Latin America was due to restrictions and fear in that area. He felt that private investment would flow into Latin America if a favorable climate for investment could be created. Governor Stassen said it would be impossible, in his view, to change the present “climate” in Latin America without U.S. Government action. He agreed that if the climate were changed as a result of U.S. public funds, then private capital would be attracted to the area.

Dr. Flemming called attention to the serious economic situation which might be created in Latin America by a cessation of stockpile purchases.¹³ He recalled that a year ago the Council had been very much disturbed by the situation in Bolivia when we found that we could not buy any more tin. Bolivia was now the only country in Latin America receiving economic assistance, but other countries might be in the same position when the U.S. reached its stockpile objectives. He suggested that we should prepare now for the time when Latin American countries will lose their stockpile market in the United States. Otherwise we would be under heavy pressure for economic aid or continued stockpile purchases beyond our needs.

The Vice President asked what issues at the Rio conference required U.S. decisions at the present time. Secretary Smith said that NSC 5432, if approved, would provide an adequate basis for the U.S. position at Rio. He then summarized the issues expected to arise at the Rio conference, as follows:

1. The problem of trade barriers is most important. If we can convince Latin America that our policy is gradual selective reduction of trade barriers, Latin America will be satisfied.

2. Latin Americans are very much concerned about our loan policy, and we must convince them that we will adopt a more liberal policy than we have followed in the past. There is no great demand for a grant-aid or soft-loan¹⁴ program, but the State Department would like to have authority to make soft loans in case the need for them arose. The Vice President asked whether State would also like authority to provide grant aid. Secretary Smith said yes, in small amounts to meet emergencies.

3. Price stabilization—that is, the establishment of minimum prices for Latin American exports—might be demanded at Rio. However, we would not incur much ill will by refusing to agree to price stabilization, since our probable refusal to agree is already well understood in Latin America.

4. Latin Americans want continued technical assistance, and we should be able to satisfy them on this point.

Secretary Smith then called attention to paragraph 5–i,¹⁵ which provided for encouraging the incorporation of Canada into the Organization of American States. He felt that Canadian membership would not be an unmixed blessing. Consequently, he proposed that the paragraph be deleted or, alternatively, be revised to indicate that we would have a receptive attitude toward a Canadian desire to join the OAS. The Vice President suggested that if we didn’t want Canada in the OAS it would be preferable to delete the paragraph.

Secretary Overby expressed great concern with respect to paragraph 9–a,¹⁶ which provided for gradual selective reduction of U.S. barriers and tariffs on trade. He said this was the first policy statement which came out flatly for gradual and selective reduction without any qualification. The President’s message¹⁷ on the Randall Report¹⁸ had used the word “revision”, not “reduction”, and had asked for authority to reduce tariffs in accordance with the Reciprocal Trade Agreement Act.¹⁹ In the light of the President’s message, Secretary Overby felt that we should qualify gradual selective reduction by the phrase “pursuant to the trade agreement program and established practice.”

Secretary Smith said he favored paragraph 9–a as written because gradual selective reduction was what we wanted. He felt the President wanted a reduction of tariff barriers, and he was reluctant to add qualifications to the policy of reduction.

In response to an inquiry from Mr. Cutler, Secretary Holland said that the Interdepartmental Cabinet Committee had studied trade barriers for a long time, and had reached the conclusion that the U.S. could not carry out its policies in Latin America unless the countries of the area believed we would permit them to trade with us. He felt that the reduction of barriers to hemisphere trade was the single most important point in our policy.

Secretary Overby said that paragraph 9–a went farther than the President’s message, and that his amendment was designed to include by implication the qualifications of the President’s message.

The Vice President said we should shake ourselves out of our lethargy and make a bold statement. He added that of course we would follow established practices and the statutes, but he preferred paragraph 9–a as written. Mr. Cutler said the Planning Board deliberately made the paragraph blunt in order to raise the issue. The Vice President suggested that the Council might adopt paragraph 9–a as written and then call the President’s attention to any differences between it and his message.

Assistant Secretary of Commerce Anderson expressed some anxiety about the broad language in paragraph 9–a. For example, he felt it might be interpreted as a mandate for raising the Peruvian sugar quotas, a problem which would soon come up. The Vice President said the paragraph had built-in escape clauses, such as “selective” and “gradual”. We talk a good game, he added, but we don’t do much, and if we make errors we should make them on the side of vigorous action.

Secretary Smith said he favored the paragraph as written because he needed all the ammunition he could get when he started discussions with the Bureau of the Budget and the Treasury Department.

Mr. Cutler summarized the decision of the Council by saying that paragraph 9–a would remain unchanged but would be brought to the President’s attention as suggested by the Vice President.

Mr. Cutler then called attention to the alternative versions of paragraph 9-b.²⁰ He said the majority of the Planning Board wished to “assure the financing of all sound economic development projects”, while Treasury wished to “assist in the financing of” such projects. Secretary Overby said that under the statutes and established practice, the Export–Import Bank could only participate in financing such projects. He felt the paragraph went far beyond Export–Import Bank practice and policy, and he had taken the liberty of speaking to General Edgerton, who would prefer that the paragraph read “assure participation in the financing”.

Secretary Holland said the discussions in his committee had identified three levels of Government financing for Latin America: (1) a very restricted policy of Export–Import Bank loans; (2) a middle-of-the-road approach along the lines of NSC 5432, an approach which would, in his view, assure the success of the Rio meeting; and (3) the liberal policy described earlier in the meeting by Governor Stassen. Secretary Holland added that he would agree 100% with Governor Stassen on the need for a more vigorous program, but he believed that vigorous implementation of NSC 5432 would result in a realization of U.S. objectives in Latin America.

The Vice President noted that this paragraph also had some built-in qualifications. For instance, each loan must be within the Export–Import Bank’s lending capacity. Secretary Overby felt the qualification should be the practice, not the capacity, of the Bank. The Vice President asked exactly what was meant—the Bank’s rules, the Bank’s policy, the statutes governing the Bank, or what? Secretary Overby said he meant the Bank’s practice. Mr. Cutler said that one of the purposes of NSC 5432 was to change the practices of the Export–Import Bank.

Secretary Smith agreed that the policy of the Export–Import Bank in the past had been far too restrictive in Latin America. He would go even further than the Planning Board paper, and say that sound economic projects in Latin America should be financed “through a liberalized policy of Export–Import Bank loans”. Mr. Hughes felt that the word “assure” did not mean 100% underwriting of loans by the Export–Import Bank. The Vice President agreed, and added that there were other qualifications, such as the word “sound”. He suggested that paragraph 9–b as written should be recommended to the President. He detected a general feeling around the table, with Treasury dissenting, that the loan policy of the Bank should be liberalized. Secretary Overby felt that at the very least the paragraph should read “assure the financing of all necessary dollar costs”, in order to avoid a policy of underwriting foreign currency costs. Secretary Smith and Governor Stassen could not agree with this proposal. Secretary Smith added that he still liked his suggestion for inserting “a liberalized loan policy” in the paper, but he wouldn’t press it. The Vice President said that Secretary Smith’s views were part of the legislative history of this paper. He added that the Planning Board apparently wanted to “goose” the Bank. He suggested that any difficulty arising from the laws or the Bank’s charter might be avoided by adding at the end of subparagraph 9–b–(3) the words “and charter powers”, so that each loan would have to be within the charter powers of the Bank.

Governor Stassen said that paragraph 9–c²¹ had been proposed by FOA and ODM as a means of financing projects which could not be financed under the paragraph just discussed (9–b). He said paragraph 9–c did not involve an automatic spending procedure, but did make it possible to move decisively toward accelerated economic development in Latin America. Secretary Smith said his very competent advisers, some of whom were present, viewed this paragraph with misgivings. They wanted sound loans or grants, and were against uneconomic loans. Secretary Smith, however, personally felt that if the language of the paragraph meant what it seemed to mean, there was no reason for alarm. Consequently, he would not oppose inclusion of this paragraph in the paper.

Secretary Overby was opposed to the paragraph. He said this policy might discourage trade, private investment and private enterprise; it might impair the lending standards of our lending institutions; and it was not something Latin America was demanding. Secretary Smith said the paragraph had hidden assets. He would like the Export–Import Bank to know that if it turned down loans to Latin America they could be made in some other say. Secretary Overby said that if we started making fuzzy loans, all Latin American countries would want them rather than sound loans. Acting Secretary of Defense Anderson suggested that these loans might be made for projects which were in the basic U.S. interest “as determined by the Secretary of State and the Secretary of the Treasury”. Secretary Smith objected to this formula.

Dr. Flemming said that his representative on the Planning Board had not been instructed by him to propose this paragraph. He added that the Defense Production Act²² contained a provision for a revolving loan fund which the Director of ODM, with the concurrence of the Special Committee, could use to make non-bankable loans if a loan application had been turned down as not bankable. Dr. Flemming then asked whether the proposed paragraph 9–c did not give the State Department a useful tool in economic warfare; if so, he was inclined to favor the paragraph.

Governor Stassen felt the paragraph would be a very useful policy tool and would be implemented under proper financial safeguards. Mr. Hughes said he had understood Secretary Holland to say that this paragraph was not necessary. Secretary Smith called attention to the fact that he and he alone was representing the State Department. Secretary Smith then wondered whether this paragraph should not be the subject of further study. The Vice President felt the paragraph should not be deleted, since this would rule out the possibility of development assistance loans. As an alternative to deletion he suggested that the paragraph should be revised to say that if the policies in 9–a and 9–b were inadequate, then we would fall back on development assistance loans as described in paragraph 9–c. Governor Stassen agreed with this suggestion.

Dr. Flemming said he would not press the ODM suggestion for paragraph 9–f.²³

Governor Stassen called attention to paragraph 9–g,²⁴ proposed by FOA. He said he felt the U.S. could not reasonably oppose Latin American initiative in regional economic actions. If Latin American countries would devise an economic mechanism of their own choosing to couter inflation and promote the growth of the area, we might have to use fewer dollars in Latin America. Mr. Cutler said the Planning Board had not endorsed this paragraph because it was felt that regional economic groupings might tend to break down the Organization of American States. Secretary Smith said this Government had usually opposed the Latin American tariff unions. However, he would prefer to study any proposed regional economic action or grouping on its merits rather than undertake a blanket commitment not to oppose any regional grouping. He therefore suggested that paragraph 9–g begin as follows: “Consider sympathetically, but on their individual merits, any proposals on Latin American initiative to create …”.

Dr. Flemming explained paragraph 9–h,²⁵ proposed by ODM and FOA. He said that the Agricultural Trade and Adjustment Act permitted a start in the direction of building up large-scale non-deteriorating assets in place of strategic stockpiles. However, this Act was fuzzy. (Note: The above-mentioned Act is correctly titled “Agricultural Trade Development and Assistance Act of 1954”;²⁶ the original action has been revised to reflect this.)

Secretary Smith said that State did not object to the proposed paragraph, which could be a tool of tremendous value. However, he saw one objection to the paragraph, in that it might create in Latin America industries whose sole purpose was to exploit our stockpile laws.

Dr. Flemming said this paragraph might become an effective weapon in economic warfare. He added that the President had recently remarked that in the cold war the side with the corner on strategic commodities would have the advantage.

Secretary Overby referred to paragraph 26 of NSC 5422/2,²⁷ which provided that the U.S. stockpiling program should not normally be used to help stabilize international markets for the exports of under-developed countries. He felt that the proposed paragraph 9–h of NSC 5432 was inconsistent with the approved policy in NSC 5422/2. He asked whether the proposed paragraph 9–h reflected an aid program or a stockpiling program. Mr. Cutler said the proposed paragraph 9–h had nothing to do with the stockpiling program. The Vice President remarked that in any case the words “seek legislation” in the proposed paragraph allowed four to five months for study of the question.

Dr. Flemming said that paragraph 26 of NSC 5422/2 referred to the defense stockpile, which was entirely separate from the present question. He felt that a supplementary stockpile would help in disposing of agricultural surpluses and would also help allay any domestic political misgivings which might arise if we started purchasing from abroad for the defense stockpile, goods which were domestically available.

Secretary Overby wondered whether the proposed paragraph 9–h would help in disposing of agricultural surpluses. He thought the paragraph was a purchase, not a barter, provision. Dr. Flemming said the new law contained barter authority. Mr. Hughes said the proposed paragraph had tremendous budgetary implications. He felt the policy should be decided on a separate over-all basis rather than as part of a Latin American paper. Governor Stassen agreed that the implications of the proposed policy were world-wide. Secretary Smith said he would strongly support the policy contained in the proposed paragraph 9–h if it were presented to the Council as a separate world-wide problem.

Mr. Cutler inquired whether the Council wished to delete paragraph 9–h from NSC 5432 and consider the proposed policy when NSC 162/2 was reviewed. Governor Stassen said he had no objection to including the policy in paragraph 9–h in a future revision of NSC 162/2, but he thought this policy should also be included in the Latin American paper. He suggested it could be directly related to Latin America by beginning the paragraph with the words “Utilize, in relation to Latin America, the authority in the Act, etc”.

Mr. Cutler noted, with reference to paragraph 11,²⁸ that the Planning Board was split on whether information, cultural, education and exchange programs for Latin America should be “expanded” or “developed”. He observed that the word “develop” was used in the Far East paper.²⁹ The Vice President felt that the word ought to be “expanded” both in this paper and in the Far East paper.

Mr. Cutler said that the Joint Chiefs of Staff wished to delete paragraph 20–c³⁰ and substitute the following:

“Continue to provide training in the United States for selected Latin American personnel.”

The Acting Secretary of Defense said that the Army had had difficulty with overcrowding at West Point. However, he personally felt that the quotas for foreign students should be increased, as proposed by the Planning Board, rather than decreased. The establishment of an Air Force Academy³¹ ought to relieve some of the overcrowding at West Point.

Admiral Radford said the Armed Services had objected to increasing quotas for foreign students at the Service Academies. However, even though he had signed the memorandum transmitting the Joint Chiefs of Staff views³² (filed in the minutes of the meeting), he personally felt that the quotas for foreign students should be increased. If the Council wished to adopt paragraph 20–c as recommended by the Planning Board, he would put the necessary heat on the Services.

Mr. Cutler noted that the Joint Chiefs of Staff proposed the omission of the bracketed phrase in paragraph 20–e,³³ “if necessary by higher priorities”. Acting Secretary of Defense Anderson felt that priorities for the delivery of military equipment should not be established in an NSC policy paper. Secretary Smith remarked that the Defense position was theoretically correct. However, in practice Latin America was at the bottom of the heap as far as military priorities were concerned. As a result, we make it impossible for Latin American countries to obtain U.S. military equipment, so they buy such equipment in Europe.

Admiral Radford felt that any priorities for the delivery of military equipment should be determined on a case-by-case basis. Secretary Smith said he would agree to omit the bracketed phrase from paragraph 20–e if it were clearly understood that we really wanted Latin American countries to use our military equipment.

Secretary Overby was concerned about the suggestion in paragraph 20–e that we might accept foreign currency to facilitate Latin American purchase of U.S. military equipment. He felt it would be preferable to give Latin American countries this equipment rather than accept unusable soft currencies. Admiral Radford remarked that if we accepted soft currency from Latin America, other countries would also want to pay us in soft currency. Secretary Smith said we were merely granting most-favored-nation treatment to Latin America in the purchase of military equipment.

Mr. Cutler pointed out that the Planning Board recommended that the approved version of NSC 5432 should supersede NSC 5419/1, “U.S. Policy in the Event of Guatemalan Aggression in Latin America”. The Planning Board felt that NSC 5419/1 was no longer applicable, particularly in view of the incorporation in NSC 5432 of paragraph 6, relating to action against anti-U.S. subversion or intervention in Latin America and to the application of sanctions in the event of domination of a Latin American country by Communism.

The National Security Council:³⁴

a. Discussed the subject on the basis of the statement of policy in NSC 5432; in the light of the views of the Joint Chiefs of Staff presented orally at the meeting; and the views of Dr. Milton Eisenhower as read at the meeting by Mr. Cutler.

b. Adopted the statement of policy contained in NSC 5432, subject to the following amendments:

(1) Paragraph 4–b: Delete the bracketed phrase and the footnote referring thereto.

(2) Paragraph 5–i: Delete.

(3) Paragraph 9–b: Delete the bracketed phrase and the footnote referring thereto, and add the words “and charter powers” at the end of subparagraph 9–b-(3).

(4) Paragraph 9–c: Revise to read as follows:

“c. Only if a and b above prove to be inadequate, finance through development assistance loans the initiation or acceleration of projects or activities which are in the basic U.S. interest and which, in the absence of such additional assistance, would not be undertaken or, if undertaken, would not be carried forward at the rate required by U.S. foreign policy objectives.”

(5) Subparagraph 9–f–(1): Delete the bracketed phrase and the footnote referring thereto.

(6) Paragraph 9–g: Revise to read as follows:

“g. Consider sympathetically, but only on individual merit, any proposal by Latin American initiative to create regional economic actions and groupings to promote increased trade, technical cooperation and investment, and to concert sound development plans.”

(7) Paragraph 9–h: Delete, and substitute therefor the following:

“h. Utilize, in reference to Latin America, the authority in the Agricultural Trade Development and Assistance Act of 1954 to build non-deteriorating assets valuable to the future of the United States.”

(8) Paragraph 11: Delete the bracketed word “develop” and the footnote referring thereto.

(9) Paragraph 20-e: Revise to read as follows:

“e. Seek ultimate military standardization along U.S. lines, of the organization, training, doctrine and equipment of Latin American armed forces; countering trends toward the establishment of European military missions in Latin America, or agencies or individuals with a similar function, other than those of the United States; and facilitating the purchase of U.S. equipment by offering Latin American countries competitive prices, more rapid delivery, and credit terms, including long-term payments, pre-delivery financing of long lead time items, and, if feasible, use of foreign currency and, in exceptional cases, barter arrangements.”

c. Discussed the preliminary draft financial appendix for NSC 5432 circulated at the meeting, and noted that a final revised version would be circulated with the policy as approved.

d. Agreed that the statement of policy contained in NSC 5419/1 should be terminated as no longer applicable.

Note: NSC 5432, as amended, approved by the President; referred to the Operations Coordinating Board as the coordinating agency designated by the President; and circulated as NSC 5432/1. The action in d- above approved by the President and transmitted to the Operations Coordinating Board and to all holders of NSC 5419/1.

[Here follows discussion of certain organizational aspects of foreign military assistance and also United States objectives and policies with respect to the Near East.]

1. This memorandum was drawn up by the Coordinator of the NSC Board Assistants, Marion W. Boggs, on Sept. 3.
2. Richard M. Nixon.
3. The text of the draft statement of policy designated NSC 5432, dated Aug. 18, 1954, is identical to that of NSC 5432/1, dated Sept. 3, 1954, p. 81, with the exception of the amendments adopted as a result of this meeting, and additional amendments to paragraph 9, sections (b), (c), and (g) adopted subsequently at the 224th meeting of the National Security Council, held Nov. 15, 1954. The additional amendments are explicated in footnote 2, p. 83.
4. NSC 5419/1, titled “United States Policy in the Event of Guatemalan Aggression in Latin America”, dated May 28, 1954, is printed on p. 1135.
5. The referenced draft Financial Appendix, dated Aug. 31, 1954, which contains estimated cost figures for financing the implementation of the policies proposed in NSC 5432, is not printed; no copy was found with the source text, but a copy is contained in S/P–NSC files, lot 61 D 167.
6. The “Major Points in Proposed Revision of NSC 144/1”, not printed, are omitted from NSC 5432/1.
7. Not found with source text. The Joint Chiefs of Staff expressed their views in a memorandum, signed by Chairman Radford, to the Secretary of Defense, dated Aug. 31, 1954. (JCS files, 381–Western Hemisphere)
8. Not found with source text.
9. A list of the members of the U.S. Delegation to the Rio Conference is printed in the Department of State Bulletin, Nov. 29, 1954, pp. 837–838.
10. Documentation on this subject is included in volume i .
11. The text of the referenced paragraph reads as follows: “An orderly political, military, and [an orderly, accelerated] economic development in Latin America so that the states in the area will be more effective members of the hemisphere system and increasingly important participants in the affairs of the free world.” The text indicates that the bracketed alternative language was an “FOA and ODM proposal”.
12. For documentation concerning U.S. relations with Iran, see volume x .
13. For documentation concerning U.S. policy with respect to stockpile purchases, see volume i .
14. Loans repayable in local currency rather than in dollars.
15. The text of the referenced paragraph reads as follows: “Encouraging the incorporation of Canada into the Organization of American States.”
16. The text of the referenced paragraph reads as follows: “Adopt stable, long term trading policies with respect to Latin American countries, including gradual selective reduction of U.S. barriers and tariffs on trade.”
17. Reference is to President Eisenhower’s special message to Congress, dated Mar. 30, 1954, and transmitted to the Congress on the same date; for text, see Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1954, pp. 352–364; or Department of State Bulletin, Apr. 19, 1954, pp. 602–607.
18. Commission on Foreign Economic Policy (Randall Commission, after its chairman, Clarence B. Randall), Report to the President and the Congress (Washington, 1954). For additional information about the report, see documentation concerning U.S. foreign economic policy in volume i .

19. For text of the Act to amend Title III of the Tariff Act of 1930, commonly referred to as the Reciprocal Trade Act of 1934 (Public Law 316), approved June 12, 1934, see 48 Stat. 943.

    For text of the Tariff Act of 1930 (Public Law 361), approved June 17, 1930, see 46 Stat. 590.

20. The text of the referenced paragraph reads as follows: “Be prepared to assure the financing of all [to assist in the financing of] sound economic development projects, for which private capital or IBRD financing is not available, through Export–Import Bank loans; subject to each loan being:

    • “(1) in the interest of both the United States and the borrowing country,
    • “(2) within the borrower’s capacity to repay,
    • “(3) within the Bank’s lending capacity.”

    The text indicates that the bracketed alternative language was a “Treasury proposal.”

21. The referenced paragraph proposed by FOA and ODM reads as follows:

    “c. Finance through development assistance loans the initiation or acceleration of projects or activities which are in the basic U.S. interest and which, in the absence of such additional assistance, would not be undertaken or, if undertaken, would not be carried forward at the rate required by U.S. foreign policy objectives.”

22. For text of the Defense Production Act of 1950 (Public Law 774), approved Sept. 8, 1950, see 64 Stat. 798.
23. Reference is to paragraph 9–f, subparagraph (1) the text of which reads as follows: “Reasonable and non-discriminatory laws and regulations affecting business, [including legislation providing opportunity to domestic capital to acquire a reasonable share in new enterprises.]” The bracketed language indicates the ODM proposal.

24. The text of the referenced paragraph proposed by FOA reads as follows:

    “g. Not oppose Latin American initiative to create regional economic actions and groupings to promote increased trade, technical cooperation and investment, and to concert sound economic development plans.”

25. The text of the referenced paragraph proposed by FOA and ODM reads as follows:

    “h. Seek legislation, outside the scope of the present Stock Piling Act, which will sanction the building of large-scale non-deteriorating assets valuable to the future of the United States rather than acquisitions limited as at present to strategic reserves for strictly defense uses.”

    Stock Piling Act refers to the Strategic and Critical Materials Stock Piling Act of 1946 (Public Law 520), approved July 23, 1946; for text, see 60 Stat. 596.

26. Public Law 480, approved July 10, 1954; for text, see 68 Stat. 454.

27. NSC 5422/2, titled “Guidelines Under NSC 162/2 for FY 1956,” dated Aug. 7, 1954, and approved by President Eisenhower on the same date, is printed in volume ii .

    NSC 162/2, titled “Basic National Security Policy,” dated Oct, 30, 1953, and approved by President Eisenhower on that date, is printed ibid.

28. The text of paragraph 11 reads as follows:

    “The United States should expand [develop] and make more effective, information, cultural, education and exchange programs for the countries concerned. The U.S. Information and Cultural Programs for Latin American States should be specifically directed to the problems and psychology of specific states in the area, with the objective of alerting them to the dangers of Soviet imperialism and communist and other anti-U.S. subversion, and convincing them that their own self-interest requires an orientation of Latin American policies to our objectives.” The text indicates that the bracketed alternative word was a “Treasury and Budget proposal.” In their memorandum of Aug. 31, 1954, to the Secretary of Defense, cited in footnote 7, p. 68, the Joint Chiefs of Staff expressed a preference for the original wording of the paragraph.

29. Apparent reference to NSC 5429/2, titled “Review of U.S. Policy in the Far East”, dated Aug. 20, 1954, and approved by President Eisenhower on the same date; it is printed in volume xii .

30. The text of the referenced paragraph reads as follows:

    “Increase the quotas of qualified Latin American personnel for training in U.S. Armed Forces schools and training centers; encourage Latin American countries to fill their authorized quotas for the U.S. Military and Naval Academies; and provide and encourage Latin American countries to fill a similar quota for the Air Force Academy.”

31. The United States Air Force Academy was established Apr. 1, 1954 in temporary quarters on Lowry Air Force Base at Denver, Colorado, and moved to its permanent location at Colorado Springs, Colorado, in 1958.
32. Reference is to the JCS memorandum of Aug. 31, 1954, to the Secretary of Defense.

33. The text of the referenced paragraph reads as follows:

    “Seek ultimate military standardization, along U.S. lines, of the organization, training, doctrine, and equipment of Latin American armed forces; countering trends toward the establishment of European military missions in Latin America; and facilitating the purchase of U.S. equipment by offering Latin American countries competitive prices, more rapid delivery [if necessary by higher priorities] and credit terms, including long-term payments, pre-delivery financing of long lead-time items, and, if feasible, use of foreign currency and, in exceptional cases, barter arrangements.” The text indicates that the bracketed alternative language was a “State and FOA proposal.” The Joint Chiefs of Staff in their memorandum of Aug. 31, 1954, to the Secretary of Defense, gave the following reason for their desire to have the bracketed phrase omitted: “Priorities governing the allocation of military equipment to United States forces and to the forces of friendly countries are established in accordance with criteria designed to correlate the supplying of such equipment with world-wide strategic requirements. Changes in the order of precedence should be responsive to changes in these strategic requirements and should neither be considered in isolation nor be resorted to as a device to accelerate deliveries to a particular country or group of countries.” (JCS files, 381–Western Hemisphere)

34. Paragraphs a–d constitute NSC Action No. 1209.