Memorandum by Gordon S. Reid of the Office of Middle American Affairs to the Deputy Assistant Secretary of State for Inter-American Affairs (Woodward)1


Part I

El Salvador is the smallest country in Latin America and, thereby, the smallest in this hemisphere. In the small area is crowded the largest population per square mile of any country in the hemisphere. It seems to me that Salvadorans are among the most literate and intelligent of all the Central Americans. It is a conservative country which has suffered under the brutal dictatorship of General Martinez,2 a theosophist, and considered by some a psychopath. At the same time it has had the experience of having been a primary object of the affections of the Communist Party back in 1931. With its very large population, its problems [Page 1001] are in many ways more complex than any other country of Central America. They are primarily economic. Salvador’s friendship with the United States has been one of long standing and Salvador’s admiration for the United States reached its peak in the late 1830’s and early 1840’s when Salvador earnestly attempted to have itself included as a territory and an aspirant for statehood in our Union. It is interesting to note that Los Angeles, California, is the second largest city of Salvadoran population.

Part II

Party politics are unknown in Salvador although there are parties and labels. Salvador is a country of political personalism and, of course, a country with a long history of internal revolts by one faction against another. At the present time there are two parties. PRUD is the Government Party and PAR is made up of all the outs except the Communists. The PRUD, however, is really a party made up of those persons supporting President Osorio. It is very likely that the PRUD will be out of the picture when Osorio leaves office. It is a coalition party of some conservatives, some so-called “new dealers”, the Army, and some intellectual socialists. The PAR is made up of the strange combination of persons extremely wealthy associating with persons of socialistic and communistic background in a party for the sole purpose of ousting the present government. It has failed in all recent elections to produce a vote of any size and until a leader comes along it probably is only a nominal opposition party. The Communist Party, outlawed as a legal party in Salvador, is now operating underground and its history is vigorous enough and long enough to make one view it with utmost suspicion at any particular time. There is no doubt but what the communist elements devote an enormous amount of their time to infiltrating both political parties but under the very firm hand of President Osorio their influence has been almost entirely mitigated up to the present time.

The Osorio Government came into office as the result of the revolution of March 14, 1948, when it overthrew in a bloodless coup the corrupt and vacillating government of President Castaneda.3 A junta governed until elections were held and the Osorio Government finally took office. The junta was made up of five men; Osorio, the present Minister of Defense Colonel Bolanos,4 the present Minister of Education Galindo Pohl,5 Colonel Cordova,6 now Military Attaché in Washington, and another civilian of no particular importance. Animosity and jealousy arising between Osorio, Cordova, and Bolanos resulted in Cordova’s exile to Washington. The Osorio Government is a government which came into office with a social progress program of a non-communist type and has so far received much of the support of [Page 1002] the wealthy landowners both because of the beliefs it expresses and because of the fear of Guatemala which is ever present in Salvadoran minds. To these minds the social progress envisaged and promised by Osorio seemed a much less fearsome thing than the Guatemalan variety. Should there be a lessening of the Guatemalan tension, it would almost seem axiomatic that Salvador’s present government would be endangered.

Part III

So long as the coffee prices hold up it is to be expected that Salvador will have a favorable balance of payments and will have a continuation of the present prosperity. The government has imposed higher income taxes, higher coffee taxes, has developed plans for low cost housing, improvements in agriculture, social security, public health, and social welfare, and while insisting that the unions do not join in one national union, has encouraged individual unions to become stronger. At the same time it has called upon the World Bank, the United Nations, and the United States to aid with money and technical assistance. If it may be assumed that the government will remain in power for another six years, vast changes are to be expected in the life of Salvadorans.

The most important enterprise undertaken has been the development of the Lempa River as a source of hydroelectric power, eventually, for use by the whole country. This is the first such project in Central America and is one which has such far reaching possibilities for both Salvador and Honduras that it must be watched in its development with great care. Power is expected to flow from its generators in February or March, 1954, and by 1957 it is expected that its major potentialities for Salvador life will have been initiated, although its final possibilities will have only been touched.

Salvador has two railways, the Salvador Railway Company and the IRCA. Both are bankrupt. Each uses a different gauge of track. The Salvador Railway is primarily a coffee freight line and the IRCA is the Salvador life-line to the Caribbean through Guatemala. If the present trend of highway construction increases in Salvador it is very unlikely that either of these railways will continue to exist separately. It is my personal opinion that a merger of the two would be an economic benefit to the country.

Part IV

Pending with El Salvador at the present time are the following items:

The purchase of military equipment by the Salvadoran Government during the next several years. We are now awaiting a priority list from the Government by which our Defense Department may be informed of which items the Salvadorans wish to purchase first. Salvador has set aside $2,500,000 for this program.
The Military Mission. The problem on this is simply that Colonel Bolanos, as is normal with him, is once again procrastinating and finding himself unable to agree to a pay scale for any enlisted men accredited to the Mission. The head of the Mission is to be Colonel E. J. Macherey who has impressed all of us with his intelligence and ability. It is my belief that he should be allowed to proceed alone to Salvador and through him eventual agreement may be reached.
We have reiterated to the Salvadoran Government many times our belief that improved police methods would be of benefit to their country and we have recommended the International Police Corporation as an appropriate organization to handle such problems. Again, it is my personal belief that this should be pressed by the Ambassador and the officers of the Department, including Mr. Cabot.
The Government of the United States has for a year and a half been protesting informally the Immigration Law of Salvador which governs the deportation from Salvador of American citizens engaged in business in that country or who are in El Salvador for any other reason. Our fault-finding has been entirely based on the fact that the Minister of Interior under the present law may make an administrative decision to expel a United States citizen without that citizen having the right of appeal. It is our belief that it is necessary to change that law before American citizens may operate in Salvador with a sense of security.7
Although Salvador wishes to attract private capital for investment purposes it has failed in the following ways to make Salvador attractive to such capital:
No guarantee of indemnity in case of confiscation or nationalization.
No corporation law and corporation supervision of any modern variety which would give adequate security.
The commercial code is in need of considerable revision and a commission charged to undertake this job was dissolved at the end of 1952 without making any progress.
Salvadoran courts in all recent judgements appear to be completely prejudiced against any foreigner bringing a case before them.
There is a lack of criminal law and police administration and criminal courts sufficiently up-to-date in their concepts of habeas corpus and similar principles of law to give security to American businessmen.
The recently enacted business license law authorizes the Minister of Finance to cancel a business license to anyone who appears to have defrauded the government of taxes and by another law such persons may be deported without trial.
Present export controls give the government the power to prevent export of practically anything.
The immigration law cited above together with the requirements for residence permits and the bureaucratic procedures for obtaining residence permits discourage foreign businessmen.
The government’s record of services to business and industry under the office established for that purpose has been very poor and the officer in charge is known to spend no more than two hours a day in his office.
The present Minister of Labor8 has shown himself to be prejudiced against foreign business in his labor-management relations.

In summary, an American citizen attempting to do business in Salvador (if he can get a residence permit) will find it extremely difficult to be successful unless he is married to a Salvadoran citizen (preferably wealthy and influential). Americans under the Point Four Program frequently forget that an American businessman is treated rather poorly by the present government since he carries no diplomatic passport or rights.

Part V

President Osorio is a military man who, although limited in his mental and educational background, has proven to be a strong opponent of communism and politically more able than was originally anticipated. He is extremely reserved and cold, taciturn and distrusting. He is of Indian background and is somewhat sensitive on this score. He has played off his cabinet members in such a way that his decision is always final in any issue carried to him, but he is very slow in making final decisions.

[Here follows comment on members of President Osorio’s Cabinet and the Salvadoran Embassy in the United States.]

Part VI

Our Embassy in San Salvador is well manned at the present time and the only problem for me to report there is its relationship with TCA. It is still the opinion of George Butler, the head of the TCA Program, that to be connected with an Embassy is almost a fate worse than death and he has attempted in all possible ways to separate his people and his functions from any connection with the Embassy. This has brought about unhappy relations and forced Ambassador Duke to insist [Page 1005] that the two groups stay away from each other. It is to be hoped that Ambassador McDermott can use his good offices to solve this during his tenure there. The Embassy buildings are in good condition and no immediate needs are known to me.

Part VII

It is my judgement that during the next several years the primary job in El Salvador will be to encourage the Salvadorans to defend themselves against the Guatemalan onslaught. To accomplish this will mean that we must give every consideration to the Salvadoran request for arms and other security and intelligence measures; we must maintain our TCA program in that country and where justified we should encourage the EXIM Bank and World Bank to extend further loans. A second job for the United States Government in Salvador is to take those actions which will be considered appropriate to encourage greater trade and closer economic relations with Honduras, particularly in the opening of international highways. Encouragement of ODECA should also be considered. Lastly, by all reasonable methods we should endeavor to bolster the part of the Cabinet most friendly to the United States, but never by advocating economic measures which amount to more than the economy can absorb.

  1. Addressed also the Deputy Director of the Bureau of Inter-American Affairs Neal and Officer in Charge of Central American and Panama Affairs Leddy.
  2. Reference is to Maximiliano Hernández Martínez, who ruled El Salvador from 1930 to 1944.
  3. Salvador Castañeda Castro, President, 1945–1948.
  4. Lt. Col. Oscar A. Bolaños.
  5. Reinaldo Galindo Pohl.
  6. Lt. Col. Manuel de J. Córdova.
  7. Documentation relating to this subject is in Department of State file 816.18.
  8. Mario Héctor Salazar.