S/SNSC files, lot 63 D 351, NSC 144 series

Memorandum by the Under Secretary of State (Smith) to the Executive Secretary of the National Security Council (Lay)1

top secret

Subject:

  • Second Progress Report on NSC 144/1, United States Objectives and Course of Action with Respect to Latin America.

Part I

NSC 144/1 was approved as governmental policy on March 18, 1953. It is requested that this progress report as of November 16, 1953 be circulated to the members of the Council for their information.

1. Political

High Level Consideration of Latin American Problems: The outstanding instance of high-level sympathetic attention to Latin American problems during the period under review was the trip of Dr. Milton Eisenhower through South America. Besides its eminent success as an expression of good will, the visit served to provide essential facts on which to build a revitalized Latin American policy. One of the outstanding by-products of the trip was the laying of the ground work for a marked improvement in our relations with Argentina. The improved political climate is reflected in Argentina by the virtual cessation of attacks on the United States in the controlled press, the resumption of [Page 27]service of the United States press agencies, indications of an improvement in the outlook for private investment, a readiness to support the United States position on the question of Indian participation in the Korean Conference2 and a greater number of prominent Argentines visiting the United States. On its part, the United States has removed its political reservations to Export–Import Bank assistance to business operations in Argentina, adopted a more favorable attitude on the supplying of certain items of military equipment, and indicated its willingness to cooperate with the Argentine Atomic Energy Commission in the development of Argentine uranium ore resources for sale in principal measure to the United States.

The acute economic problems confronted by Bolivia and the interest of Panama in reviewing the whole range of its special relations with the United States arising from the construction and operation of the Panama Canal have also received consideration at the highest levels of government. In an effort to forestall economic chaos in Bolivia, with the attendant possibility of the government moving further to the left, the Department of State and the Foreign Operations Administration, in consultation with the White House, have been engaged in drawing up a program of emergency grant assistance for that country. The program was announced on October 14, 1953 through an exchange of letters3 between President Eisenhower and President Paz, which were made public by the White House. The Governments of Argentina, Brazil, Chile and Peru were consulted with respect to the Bolivian situation and informed in advance about the total grant made. It is expected that recommendations on any further assistance to Bolivia will give full consideration to the degree with which more moderate elements have succeeded in establishing themselves in the Bolivian Government. This is in keeping with a basic postulate of our Latin American policy, that in determining the extent of United States assistance, consideration be given to the willingness and ability of the recipient state to cooperate with the United States in achieving common objectives. The United States Ambassador4 has been authorized in his discretion to inform the President or the Foreign Minister5 of this and instructed to tell the Bolivians that United States consideration of developmental loans, while not certain in any case, would definitely have to await “further economic and political stabilization” in that country.

Last April the United States acceded to the strong desire of the Government of Panama to enter into conversations on the whole range of special relationships between the two countries arising from the construction [Page 28]and operation of the Panama Canal. These talks opened in Washington on September 10 and are expected to continue for several months. Arrangements were also made for President Remon to visit Washington during the end of September6—the first visit of a Chief of State under the new Administration—in order that he might present the Panamanian viewpoint directly to President Eisenhower. The visit appears to have been highly satisfactory to President Remon and it is believed to have contributed to a better understanding between the two countries. The conversations with the Panamanian representatives are proceeding satisfactorily, the Panamanians having concluded the presentation of their problems. These problems are concerned principally with a desire for new concessions from the United States with a view to obtaining greater benefits for Panama from the Canal. Panama has also pressed for revision of the 19037 and 19368 Treaties, but has been given to understand that the United States will yield none of its basic jurisdictional rights in the Canal Zone, though it is willing to enter into any new arrangements with Panama which may be found feasible during the course of the present conversations.

President Eisenhower’s trip to the Mexican border to join President Ruiz Cortines of Mexico in the dedication of the Falcon Dam; the general fact-finding trip of Representative Jackson 9 and the tour through South and Central America of members of the Senate Banking and Currency Committee, headed by Senator Capehart,10 to investigate the obstacles to the expansion of trade, the problems facing private investment and the need for financial assistance from the EX–IM Bank and the International Bank in the hemisphere, represent further gestures of interest and good-will toward Latin America by persons at the top echelons of governments.

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During the month of October, Assistant Secretary Cabot delivered two major policy addresses on Latin America. In one11 he paid sympathetic attention to the economic problems confronting the American Republics and postulated four basic principles which should guide the United States in helping them to solve these problems. In the other12 he examined some of the specific political problems which the United States has recently faced in its relations with Latin America, particularly with respect to Argentina, Bolivia and Guatemala. In contrast to the sympathetic analysis of the problems facing Bolivia and the measures being taken by the United States to assist the Bolivian Government and the conciliatory statement regarding the improved climate in United States-Argentine relations, Mr. Cabot’s treatment of the outstanding issues with Guatemala—expropriation of American property and communist influence—indicated the seriousness with which the United States views the course of events in that Republic.

High level attention to Latin American military officials also continued during the period under review with the visits of the Defense Minister of Chile13 during July and the Air Minister of Peru14 during September, and the invitation to the Defense Minister of El Salvador15 to come to the United States to review various Air Force installations during November.

Consultation with Latin American States: During the period under review the United States informed or consulted with the other American Republics on two important issues: the composition of the Korean Political Conference and the British Guiana situation. On the former Latin American votes were crucial to the success of the United States position. As a result, a special effort was made to enlist their support and in so doing the reasons of the United States for limiting membership in the Conference to the participants in the Korean War were carefully explained. In the vote in the General Assembly on this issue seventeen of the twenty Latin American States sided with the United States and three other countries to block the inclusion of non-belligerents.

Following the firm action taken by the British Government in British Guiana to thwart the efforts of the communist-directed People’s Progressive Party to take over control of the Government of that territory, the United States communicated its views thereon to Latin American [Page 30]Governments. They were informed that in our view the establishment of a communist bridgehead in British Guiana would be a matter of deep concern to all the American Republics and that we considered that the American Republics should regard the measures taken by the British with genuine satisfaction. In an effort to counteract an apparent inclination on the part of some of the Latin American Governments to ignore or subordinate the immediate central problem of the threat posed by communist infiltration to the peripheral aspects of the colonial question, the United States has taken further steps to impress on Latin American officials the communist nature of the conspiracy and its threat to the security and independence of the American Republics.

Greater Utilization of the Organization of American States (OAS): The United States continued its active participation in the normal activities of the OAS throughout the period. With the approach of the Tenth Inter-American Conference, scheduled to open on March 1, 1954 in Caracas, Venezuela,16 these activities have been increasingly directed toward preparations for this quinquennial plenipotentiary meeting. The Council of the Organization of American States, during the period under consideration, has been engaged in the formulation of the agenda for the meeting. In accordance with the objective of using the Organization of American States as a means of achieving United States aims, the United States on October 6 presented a proposal for an agenda item on communism entitled “The Intervention of International Communism in the American Republics”. Under this general heading it is expected that the United States will submit specific resolutions on the subject of travel controls with the ultimate purpose of obtaining action by as many American Republics as possible to deny necessary travel documents to native and alien communists or communist sympathizers, and thereby to reduce the amount of travel to, from and throughout the Western Hemisphere on behalf of international communism. Consideration is also being given to declarations on the subject of communist penetration in the fields of education and labor and the threat posed by communist propaganda.

Control of Subversive Activities: The United States encouraged other American Republics to take action against the activities of communists and fellow-travellers through an exchange of information. The United States Embassies were requested twice during the period under review to acquaint the Latin American Governments with the nature of forthcoming communist-front international conferences and the action which the United States proposed to take to prevent its nationals from attending in the hope that they would adopt similar measures.

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During Dr. Milton Eisenhower’s visit, President Peron indicated that he planned to take stronger action against the official Argentine Communist Party. There are indications that this policy is being put into effect. …

. . . . . . .

Control of Shipment of Strategic Materials: As raw material, and especially metal, prices have declined pressures have increased in Latin America for a resumption of trade with Eastern Europe. Iron ore has been moving from Brazil to Poland under a bilateral trade agreement and Brazil’s 1954 trade agreement with Czechoslovakia, now ready for signature, will authorize the shipment of iron ore to an annual volume of $2 million. Although iron ore is not a highly strategic item the United States had received assurances from the Compania Rio Doce, Brazil’s largest source of iron ore, that its supply would be reserved for the free world. It was on this understanding that priorities were given by the United States, during the period of export control, for machinery required by Rio Doce.

The Bolivian Government has been persuaded to delay action on a draft Czech-Bolivian barter agreement involving some strategic material of secondary importance until further consultation on the subject can take place between the United States and Bolivia. The Bolivian Foreign Minister has stated that his Government has no intention of violating the Battle Act.17

Similar assurances continue to be given by the Chilean Foreign Minister.18 When there was evidence of a recent authenticated case of the delivery of Chilean copper, refined in West Germany, to an East-West trader, the Chilean government cooperated to prevent completion of the transaction. The United States is seeking to obtain, as a condition of the proposed purchase of Chilean copper, that Government’s agreement to institution of an effective import certificate-delivery verification system.

2. Economic

Encouragement of Private Investment: There appears to be some recognition by Latin American governments of the need for taking positive measures to assure fair treatment to foreign investors if they expect to attract foreign capital.

The Dominican Foreign Office has indicated that it expects to resume negotiations, suspended two years ago, for a Treaty of Commerce [Page 32]and Navigation with the United States. The Chilean Government has acknowledged, in the course of current copper discussions, that tax treatment accorded to copper companies should be improved. The Argentine Government has recently enacted legislation permitting remittance of dividends on new foreign investments up to 8 percent per annum and for repatriation of new capital invested up to 10 to 20 percent per annum. We have brought to the attention of the Argentine authorities the belief of American business concerns, both in Argentina and the United States, that the rate of return permitted will be inadequate to attract substantial amounts of capital. The Government of Ecuador has reached a settlement with foreign bond holders19 (subject to approval of the Ecuadoran Congress) which improves the outlook for future investments of capital in that country.

In Brazil, on the other hand, the outlook is increasingly unfavorable. The passage of the Petrobraz Bill, which virtually excludes foreign participation in Brazil’s petroleum development, represents a backward step. Also, recent public statements by the new Finance Minister to the effect that foreign investment is not desirable for Brazil unless strictly regulated has disturbed prospective investors. The effect of Brazil’s current austerity program, including the limitation of imports, has depressed the operations of many foreign investors already established in Brazil, and has tended to discourage new investors whose operations would require imported materials.

The outlook for foreign capital invested in Guatemala has not improved. The Department of State made an energetic formal protest to Guatemala against its expropriation of United Fruit Company lands without payment of fair compensation, and the text of the protest was released to the press20 in order to make clear the United States position.

Progress in Removal of Shipping Discriminations: The outlook for United States shipping lines operating to the East coast of Latin America continues to show improvement. Brazil has legislation pending which will revoke (1) a law providing for a 50 percent reduction in consular fees on cargo shipped in national vessels, and (2) warehousing and berthing priorities in Brazilian ports previously enjoyed exclusively by Brazilian shipping companies. The United States has a bill pending before the United States Congress for authorization to sell 12 vessels to Brazil to improve its coastal transportation. Recent indications concerning Brazilian maritime policy suggest that the Brazilian government is denying all preferences to Lloyd Brasileiro21 and is following what appears [Page 33]to be a new non-discriminatory policy toward foreign flag shipping. This is a marked accomplishment in our shipping relations with Brazil. The United States is continuing its representations to the Chilean Government with respect to its recent action arbitrarily to divert commercial cargo to Chilean vessels. This problem is being discussed in current copper negotiations in an attempt to find a solution. The United States also made representations to the Ecuadoran Government concerning a 50 percent reduction in consular fees for goods shipped on Ecuadoran or Flota Grancolombiana22 vessels.

A Civil Aviation Agreement with Venezuela, which has been in the process of negotiations for approximately three and one-half years was signed in Caracas on August 14, 1953.

International Bank and Export–Import Bank Loan Activities: Loan authorizations by the International Bank and Export–Import Bank, during the third quarter of 1953, totaled $51.9 million as compared with a quarterly average of $63.7 million in 1949–52 inclusive. Loans authorized by the International Bank for Reconstruction and Development (IBRD) during the third quarter totaled $47.09 million, distributed as follows:23

Brazil power 7.30
Nicaragua road construction 3.50
power .45
Chile pulp and paper mill 20.00
Panama farm machinery 1.20
grain storage .29
Colombia highways 14.35
47.09

The Export–Import Bank of Washington made two loans totaling $4.8 million, one of $2.5 million for the development of iron ore properties in Peru and one of $2.3 million for the completion of the Quevedo–Manta Highway in Ecuador. Action on a $3.11 million loan requested by a Brazilian airline, which was deferred pending satisfactory settlement of a rate problem affecting United States airlines operating in Brazil, was approved on October 30, 1953. No further action has been taken on the $120 million loan requested for development of the Toquepala copper project in Peru or the $4 million credit application for airport expansion in Ecuador. Both loans are of considerable political significance [Page 34]in our relations with these two countries. The Bank also approved on October 28 an increase of $2.4 million in the Cochabamba–Santa Cruz Highway credit to provide for the completion of the base surfacing of the highway and the overhauling of the construction equipment which will revert to the Bolivian Development Corporation upon termination of the project. The reconditioning of this equipment will enable the Bolivians to continue construction of feeder and access roads in the Santa Cruz area.

Chile’s proposal to tie a commitment of United States Government support for large development loans to Chile into the copper negotiations was rejected. The proposal afforded the United States an opportunity to stress our policy of considering loans individually on the basis of their economic merits.

Grant Aid for Highway Construction in Central America: Notes have been exchanged24 with the Nicaraguan Government providing for the use of the $1,000,000 appropriated by the Congress for continuation of construction on the Rama Road. The $1,000,000 appropriated for continuation of construction of the Inter-American Highway is being apportioned.

Emergency Grant Aid: In accordance with our policy of extending grant aid in cases of emergency, where desirable from the standpoint of foreign relations, we have announced a grant of $9 million to Bolivia, $5 million under the Emergency Famine Relief program and $4 million for Foreign Operations Administration funds. The Technical Assistance program in Bolivia is also being increased from $2 million to $4 million in an effort to increase Bolivia’s production of essential foodstuffs.

Improving the Trade Outlook for Latin American Export Commodities: An international agreement for the stabilization of the world sugar market25 was concluded in London in August at a conference sponsored by the United Nations. For a period of years, the United States has supported Cuba’s efforts to secure a new international sugar agreement. It participated with Cuba and other governments in producing the draft agreement used as a basis for negotiation, and sent a government-industry delegation to the conference, which worked effectively with Cuba and other Latin American countries to bring about an agreement. The agreement provides machinery to keep supplies in the world market in line with world demand to assure a price fair to both producers and consumers, and seeks also to increase consumption and reduce subsidies. Although the agreement is not yet operative, it is anticipated [Page 35]that it will be ratified by the required number of governments and come into force January 1, 1954.

Technical Cooperation Program: Programming of funds appropriated by the Congress for fiscal year 1954 has been completed. The technical cooperation program will continue on about the same basis but at a slightly expanded rate, with primary emphasis being given to agriculture, education and health and sanitation.

Monetary Stabilization and Fiscal Reforms: Fiscal, budget and exchange reforms were announced in Brazil during the third quarter at the instance of the new Finance Minister, who was given broad powers by the President26 as a means to correct Brazil’s serious inflation and balance of payments problem. A new exchange system went into operation on October 12. Three effective buying rates are established, one for coffee exports, a second for all other commodities, and, third, a fluctuating free market rate for invisible items. On the import side, five categories are established, based on the degree of essentiality, and each is allocated a specified proportion of the exchange available. The selling price of exchange within each category is to be determined by demand and supply, but the Bank of Brazil, through its allocation of exchange and management of the categories, plays a significant role in determination of the rates. The introduction of this auction system represents a de facto devaluation of the cruzeiro, but no new parity rate has been submitted to the Fund. It would appear that the amount of exchange flowing into the free market will be reduced. Arrangements to control authorizations to obtain exchange in this market will be required to prevent rates from rising to a much higher level. The Fund did not object to the new scheme as a temporary measure.

Haiti became a member of the International Bank for Reconstruction and Development and of the International Monetary Fund on September 8, 1953. It may now apply to the International Bank for loans to cover new development projects, instead of relying exclusively on the Export–Import Bank.

3. Information and related activities

Reduction of Information Programs: The resources of the informational and educational programs in Latin America were diminished at the beginning of the quarter by reductions in staff, operating funds, and supporting services, including the elimination in July of the Voice of America’s Spanish and Portuguese broadcasts to the area. Although this readjustment occasioned some interruptions and curtailments of activity, substantial work was done on all of the major tasks of the program.

Programs Directed to the Specific Needs of Individual Countries and Areas: Informational activity was coordinated with diplomatic action [Page 36]to explain and emphasize especially in the Central American countries, the legality of the United States position with regard to Guatemalan expropriation of United Fruit Company lands, and at the same time to impress hemisphere opinion with the gravity of the Guatemalan Communist situation. Similarly coordinated action was taken to temper exaggerated expectations on the part of the Panamanian public in the period prior to discussion of the Panama–Canal Zone relationship, and subsequently, to reap advantage from the successful outcome of President Remon’s visit to the United States in September. Special materials were prepared in anticipation of the celebrations, to open in November, of the fiftieth anniversary of Panama.

In Bolivia, where anti-United States feeling was ameliorated at the opening of the period by the visit of Dr. Milton Eisenhower, and announcement of the United States decision to sign a contract for tin and to provide direct economic aid, the information program dealt with the problem of maintaining this improved psychological climate through a long period of waiting until the emergency aid was actually awarded. That this effort was at least partially successful has, however, been largely due to the prudently patient attitude shown by the Bolivian Government.

In Chile the uncertainties surrounding the problem of copper exports, together with growing inflation, fanned nationalistic feeling against American-owned companies and United States trade policies, with the result that Communist propaganda increased in volume and effectiveness. Efforts were made to combat the demagogic campaign in favor of selling copper to the Soviet Union by building public awareness of the consequences of such sales in terms of United States-Chilean relations and by discreetly pointing out the unreliability of the Union of Soviet Socialist Republics as a customer. Although the problem was not one which propaganda alone could solve, the meager success of these efforts revealed the inadequacy of the information program in the face of the current tendencies towards social demoralization in Chile. This inadequacy was borne out by an opinion survey completed during the quarter and submitted to the Department for study. Accordingly, steps have been taken to provide new information facilities and activities addressed to the sector most adversely affected, i.e., Chilean labor.

A campaign involving cooperation between our military and information officials in Cuba has been developed, in order to dispel a developing wave of resentment, based chiefly on misunderstanding, of our Military Assistance Agreement with Cuba.

Soviet Imperialism: Soviet imperialism gained a psychological advantage during the period as propaganda on behalf of Latin American trade with the Soviet bloc increased sharply. The campaign was given impetus by the signing of an Argentine-Soviet trade pact, the activities throughout South America of a Soviet trade mission based in Buenos [Page 37]Aires, the departure of several Latin American trade missions to Satellite countries, and the implementation by Brazil of a trade agreement with Poland. Much United States informational activity—the revelation of poor economic conditions behind the Iron Curtain, exposure of the Soviet’s predatory trade practices, et cetera, as well as the constant promotion of Free World solidarity—tends to build resistance to this propaganda, but it is recognized that in the months to come a concerted effort will be necessary to reduce the attractiveness of the Soviet appeal to Latin American self-interest and combat the political effects of such Soviet bloc trade as may materialize.

Three interlocking youth congresses held in the Soviet area in August and September drew large attendance from Latin America, much of it attributable to the paid travel arranged by international Communist organizations. The Third Congress of the World Federation of Trade Unions, held in Vienna in October,27 also attracted a considerable Latin American contingent. Communist achievement in these projects, while undeniably significant, was tempered by the action of a number of Latin American governments in confiscating the films and printed propaganda brought back by the delegates and by wide dissemination of the reports of certain travelers who were disillusioned by what they observed.

Local Communist and other anti-United States Activities: Improvement in United States-Argentine relations, discussed above, resulted in the almost complete cessation of hostile Argentine propaganda and instead an occasional constructive article which gave reason to hope that Argentina might turn its elaborate information program to purposes more compatible with the United States.

Decided headway has been made in overcoming the effects of Communist agitation against the United States on the issue of racial discrimination. Developments in Korea were utilized with good effect against the “peace” and “bacteriological warfare” claims of local pro-Communist groups.

Association of Latin American Interests with United States Objectives: Effective efforts were made to expand and prolong the popular impact of the gestures of interest and good will towards Latin America made, as recounted in preceding paragraphs, by top-ranking representatives of the United States. Concerted use was made of such informational tools as films, pamphlets, and graphic materials to impress the significance of these developments upon Latin Americans at all social levels and to direct the pro-United States sentiment thus stimulated into support for this country’s views and policies.

The tendency of Latin Americans to consider the British Government’s action in breaking the control of local political leaders in British [Page 38]Guiana unjustified, even in the interests of hemisphere security, presented the information program with new problems, i.e., the prospect of increased dissatisfaction with the United States position on colonialism in the Americas, and the emergence of the Caribbean area as a subject of increased interest to the rest of the Continent. Attention is being given to developing new materials and facilities to meet these needs, and to coordinating our efforts, as appropriate, with those of the British information services.

4. Military

Military Assistance Program: The Congress appropriated $15,000,000 for the Military Assistance Program for fiscal year 1954 and re-appropriated some $50,000,000 of unexpended balances from the appropriations for fiscal years 1952 and 1953. Thus, total appropriations for the program in three fiscal years is approximately $101 millions.

Military Assistance Agreements with the following eight Latin American countries are now fully in effect after initialling of the secret military plan with Uruguay on October 14, 1953:28 Brazil, Chile, Colombia, Cuba, Dominican Republic, Ecuador, Peru, Uruguay. Each of the eight countries, except Brazil, Cuba and Uruguay, has contributed currency for local administrative expenses and Military Assistance Advisory Groups have been established in Brazil, Chile, Colombia and Peru. Shipments of equipment have been made to each of the eight countries, except the Dominican Republic and Uruguay. About $11.1 million of the $101 million appropriated to date had been spent on equipment delivered, as of July 31.

There appears to be some basis for considering the inclusion of Haiti in the Military Assistance Program. The Department of the Navy has under consideration a proposal to assign Haiti the defense task of patrolling the Windward Passage with naval craft furnished by the United States.

Military Staff Discussions with Venezuela: The possibility of an effective renewal of staff discussions with Venezuela has improved materially during the period. The principal stumbling block to such renewal has been Venezuelan dissatisfaction over procurement of military equipment from the United States. During the last 60 days it has been possible to comply with a Venezuelan request for Army equipment having a total sales price of over $7 million and to offer it for delivery within 90 days on liberal payment terms authorized by the Mutual Defense Assistance Act. Since this offer appears to have created a favorable Venezuelan attitude toward the resumption of the talks, Embassy Caracas believes that firm arrangements should now be made to this end at an early date.

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Requirements for Military Installations in Latin America: United States Air Force personnel, with the consent of the Brazilian Government, are planning a survey of possible sites in Brazil for the location of an instrumentation station of the United States Air Force Missile Test Center. The Air Force is studying the feasibility of plans to conduct a similar survey for suitable sites in Venezuela, provided that the Venezuelan Government consents.

Preparations are being made for a possible approach to the Brazilian Government with a view to obtaining rights for the establishment of a United States Army Communication Center in the Recife area. Surveys have disclosed that this location is probably the best in the world for the establishment of a center to relay messages from the United States to Africa and Europe, and vice versa. It would operate in conjunction with other such stations established or contemplated in Eritrea, Ceylon and Hawaii and will cost approximately $10,000,000.

The Department of the Navy is now working on plans under which shipping control stations in Latin America would be established by agreement between the United States and the Latin American countries concerned. The responsibility for working out these arrangements has been assigned to the United States by the North Atlantic Treaty Organization. Two problems are now holding up finalization of United States planning.

(1)
It is expected that the quid pro quo for agreeing to the establishment of such stations will be a request by the Latin American countries for equipment to operate them.
(2)
The Department of the Navy is meeting rather strong resistance from the United Kingdom in making North Atlantic Treaty Organization classified documents on signals and other matters available to Latin American countries, although it is essential that all such stations throughout the world use the same signals, etc.

Inter-American Defense Board: The Board has continued with the preparation of annexes to the General Military Plan. Five Annexes29 have been prepared, and approved by the Inter-American Defense Board to date for submission to the member governments for approval:

  • Annex 1—Area of Particular Strategic Importance—10 April 1952
  • Annex 2—Intelligence and Counter-intelligence—27 March 1952
  • Annex 3—Logistics—11 September 1952
  • Annex 4—Standardization—11 June 1953
  • Annex 5—Communications—23 July 1953

Chile has approved the General Military Plan. This makes a total of ten countries that have approved the Plan.

Joint Brazil–United States Defense Arrangements: Still under consideration is a proposal to establish a new defense board composed of United States and Brazilian officials. The only problem which now appears [Page 40]to be holding up the formal creation of the Board is a decision by the United States as to (1) whether the Brazilian Foreign Office and the Department of State are to have full membership on the Board and (2) the name of the new board.

Army, Navy and Air Force Mission: During the period under review Army Mission Agreements with Cuba30 and Costa Rica,31 an Air Force Mission Agreement with Cuba,32 and a Naval Mission Agreement with Chile33 were extended for two or more years. Negotiations for an Army Mission Agreement with Nicaragua are underway.34 Peru,35 Paraguay and Honduras36 have requested the extension of Army Mission Agreements and Paraguay, Honduras37 and Chile38 have requested the extension of Air Force Agreements. Mission Agreements with Colombia, Bolivia, Ecuador and Guatemala have lapsed. These countries continue to comply with the provisions of the Agreements. With the exception of the Mission Agreements with Guatemala, discussions have been held on extension of these agreements.

As a matter of United States policy it has been decided that United States Army and Air Force Missions should be maintained in Guatemala, even though the present Guatemalan Government is strongly [Page 41]influenced by Communists. Guatemalan Armed Forces apparently have not been infiltrated by the Communists and appear to be the most significant element in Guatemala capable of influencing the present undesirable political situation. United States Missions could perform the useful role of promoting pro-United States attitudes among Guatemalan military personnel. Although the Agreements with Guatemala have expired, the Guatemalan Government continues to observe their provisions and there are indications that Guatemala desires to retain the Missions.

Training in United States Service Schools: A substantial number of Latin Americans continued to receive training in Service Schools either in the United States or in the Canal Zone. During fiscal year 1953 the three Armed Services gave training to over 2700 Latin Americans as follows: Army, 797; Navy, 1382 and Air Force, 563.

Contributions to United Nations Action in Korea: Although the Dominican Government had indicated an interest in contributing a battalion of infantry for service in Korea, the signing of the armistice in Korea caused it to condition the offer on the breakdown of the truce and a resumption of fighting.

Colombia continues to be the only Latin American country with forces in Korea. There was renewed pressure from Colombia to obtain an early settlement of its reimbursement bill, now over $10 millions, after a statement by Colombian President Rojas in a press conference that Colombia owed this amount to the United States for logistic support furnished Colombian forces in Korea and would pay it if asked to do so. Pending a legal decision by the Attorney General39 on a new reimbursement policy and at the request of the President, no active efforts are being made to effect collection of the reimbursement bill now owed by Colombia.

United States Air Force Good Will Jet Aircraft Tour of Latin America: The United States Air Force has decided to make a tour of Latin American countries to demonstrate United States jet aircraft with the object of persuading Latin American countries desiring jet aircraft to buy them from the United States rather than from European countries. While the tour may achieve some success in this respect it is expected that it will also probably (1) create good will in Latin America for the United States by demonstrating United States interest in Latin America, (2) enhance the prestige of the United States Air Force Missions in Latin America, and (3) train United States Air Force personnel assigned to the tour.

Sale of Military Equipment to Latin America: During the period under review there has been a sharp increase in the value and amount of military equipment being purchased by Latin American countries. [Page 42]Significant purchases or procurement requests include: Venezuela, $7,000,000 worth of M–41 tanks and spare parts; Argentina, $500,000 worth of tank motors; Argentina, Brazil, Colombia, the Dominican Republic and Ecuador, a total of 200 T–6D aircraft worth approximately $3,000,000. The first of two submarines built for Peru was launched at Groton, Connecticut on October 27, 1953.

El Salvador’s ambitious program for the procurement of military equipment, as a result of increased pressures from Guatemala, appears to have been dropped or at least deferred. No action was taken on an offer of the Department of the Army on July 24, 1953 to sell some $2.3 millions worth of equipment. Instead El Salvador is purchasing a relatively small quantity of military equipment.

Cuba is planning to buy a rather substantial quantity of arms from the Department of Defense, mostly as a result of recommendations made from time to time by the United States Army Mission to Cuba. These arms will materially improve Cuba’s ability to participate in hemisphere defense but, at the same time, it is fairly apparent that Cuba has chosen this time to procure arms from limited financial resources for domestic political reasons.

Guatemala, possibly as a result of an inability to obtain military equipment elsewhere as well as a desire to have United States military equipment, has continued its pressure on the United States Government to permit Guatemala to purchase military equipment in the United States. This was probably the foremost problem in the minds of Guatemalan military officials when the Assistant Secretary of State for Inter-American Affairs visited Guatemala. The assignment of a new Guatemalan Military Attaché40 to the United States in October furnished an opportunity to raise the problem again with the Department of the Army. The Military Attaché was told that Guatemala was not eligible by public law to purchase military equipment from the Department of Defense. Guatemala has been denied export licenses for commercial arms purchases because these arms might be the means of keeping a government in power which is strongly influenced by the Communists.

Procurement by Latin American Governments of Military Equipment from Non-United States Sources: A review of data on procurement by Latin American Governments of military equipment from non-United States sources indicates that the Latin American Governments are purchasing fairly substantial quantities of military equipment from commercial firms in Canada and the following European countries: Belgium, Czechoslovakia, Denmark, France, Italy, Spain, Sweden, Switzerland and the United Kingdom. The United Kingdom has supplied only jet aircraft and a limited quantity of ships. There have also been sales by Argentina, Brazil, the Dominican Republic and Mexico to other Latin [Page 43]American countries. It appears to be confirmed that Latin American Governments have purchased from other sources because the United States Government could not make the desired equipment available or the price and terms of purchase offered by the United States were not as attractive as those offered by other suppliers.

Most of these purchases have been on a cash basis. The only significant barter deal was for jet aircraft between the Cotton Council in the United Kingdom and the Brazilian Government. Indications are however that more barter arrangements may be in the offing. The prices paid have been, in the case of jet aircraft and vessels, substantially lower than United States prices. In a few cases availability rather than price has been the primary consideration, e.g., Venezuela.

With the possible exception of the use of Dominican manufactured carbines by an MDAP unit in Colombia, and the procurement by Brazil of equipment for an MDAP naval unit, none of the non-standard military equipment purchased by Latin American Governments was destined for MDAP unit.

The procurement of non-United States equipment does not present a serious threat to United States Service Missions but does pose a serious threat to standardization objectives of our national policy. Continued and increased purchases will lessen the influence of such missions and might result in a decision by some Latin American Governments not to continue the missions. This appears most immediate in Guatemala. Some of the purchases have resulted in the training of Latin Americans in Europe and the assignment to the purchasing country for temporary periods of civilian technicians to train personnel and advise on the use of equipment. In general, however, a decision by a Latin American Government not to keep a United States military mission would probably be based more on other considerations that the ability to obtain military equipment from the United States.

Part II

No evaluation of the policy stated in NSC 144/1 is attempted at this time pending issuance of Dr. Milton Eisenhower’s report41 and because NSC 144/1 was just recently adopted.

Walter B. Smith
  1. A title sheet and summary are not printed. Drafted by Mr. Bowdler, Mr. Sayre, Jean H. Mulliken, and Miss Keany; cleared with the Offices of South American Affairs and Middle American Affairs, the Offices of Financial and Development Policy and International Materials Policy, the Policy Planning Staff, and the Department of Defense.
  2. For documentation concerning this subject, see volume xvi .
  3. For text of the referenced letters, dated Oct. 1 and 14, 1953, see Department of State Bulletin, Nov. 2, 1953, pp. 584–586.
  4. Edward J. Sparks.
  5. Wálter Guevara Arze.
  6. For information concerning President Remón’s visit and the text of a joint statement by President Eisenhower and President Remón, released to the press on Oct, 1, 1953, see Department of State Bulletin, Oct. 12, 1953, pp. 487–488.
  7. Reference is to the Isthmian Canal Convention between the United States and Panama, signed at Washington, Nov. 18, 1903, and entered into force, Feb. 26, 1904; for text, see Department of State Treaty Series (TS) No. 431 or 33 Stat. (pt. 2) 2234.
  8. Reference is to the general treaty of friendship and cooperation between the United States and Panama, signed at Washington, Mar. 2, 1936, accompanied by 16 exchanges of notes embodying interpretations of the treaty or arrangements pursuant thereto, signed at Washington, Mar. 2, 1936 and Feb. 1 and July 25, 1939, and entered into force, July 27, 1939; for text, see TS No. 945 or 53 Stat. (pt. 3) 1807.
  9. Representative Donald L. Jackson (R.–Cal.), a member of the Subcommittee on Inter-American Affairs of the House Committee on Foreign Affairs, visited most of the countries in Central and South America during the period from Sept. 15 to Nov. 4, 1953; documents pertaining to his trip are in file 033.1100 JA.
  10. The so-called “Capehart group”, which included Senators Homer E. Capehart (R.–Ind.), John W. Bricker (R.–Ohio), and J. Allen Frear, Jr. (D.–Del.), and Representative Brent Spence (D.–Ky.), visited a number of countries in Central and South America during the period from Oct. 18 to Dec. 7, 1953; pertinent documents are in file 033.1100 CA.
  11. Reference is to Mr. Cabot’s address made before the Pan American Society of New England, at Boston, Oct. 9, 1953; for text, see Department of State Bulletin, Oct. 19, 1953, pp. 513–518.
  12. Reference is to Mr. Cabot’s address delivered to the General Federation of Women’s Clubs, at Washington, Oct. 14, 1953; for text, see ibid., Oct. 26, 1953, pp. 554–559.
  13. Col. Abdón Parra Urzua.
  14. Col. Mario Saona.
  15. Lt. Col. Oscar Adan Bolaños.
  16. For documentation concerning the Tenth Inter-American Conference, held at Caracas, Mar. 1–28, see pp. 264 ff.
  17. Reference is to the Mutual Defense Assistance Control Act of 1951 (Public Law 213), approved Oct. 26, 1951, commonly called the Battle Act, after Representative Laurie C. Battle of Alabama; for text, see 65 Stat. 644.
  18. Arturo Olavarria Bravo.
  19. For information on this subject, see Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1953, pp. 67–68.
  20. Reference is to an aide-mémoire handed to Guatemalan Ambassador Guillermo Toriello Garrido on Aug. 28, 1953 and released to the press on the same date; for text, see Department of State Bulletin, Sept. 14, 1953, pp. 357–360.
  21. A shipping company owned and operated by the Brazilian Government.
  22. A shipping company with capital subscribed by Colombia, Ecuador, and Venezuela.
  23. For additional information concerning IBRD loans to Brazil, Chile, Colombia, Nicaragua, and Panama, and Export–Import Bank loans to Bolivia, Brazil, Ecuador, and Peru during the third quarter of 1953, see documentation on U.S. relations with these respective countries.
  24. For text of the exchange of notes providing for the resumption of construction of the Rama Road, signed at Washington, Sept. 2, 1953, and entered into force on the same date, see TIAS No. 2853 or 4 UST (pt. 2) 1944.
  25. For text of the referenced agreement and documentation relating to the International Sugar Conference, which was held at London, July 13–Aug. 24, 1953, see United Nations Sugar Conference, 1953: Summary of Proceedings (New York, 1953).
  26. Getúlio Dornelles Vargas.
  27. Oct. 10–21, 1953; documentation on this subject is contained in file 800.062 WFTU.
  28. For documentation on the referenced military plan, see pp. 1535 ff.
  29. None printed. Regarding the General Military Plan, see footnote 49, p. 23.
  30. For text of the exchange of notes, signed at Washington, June 2, Sept. 21, and Oct. 13, 1953, and entered into force on the latter date (operative retroactively to Aug. 28, 1953), extending and amending the agreement of Aug. 28, 1951, providing for the services of a U.S. Army mission to Cuba, see TIAS No. 2962 or 5 UST 735.
  31. For text of the exchange of notes, signed at Washington, July 2 and Sept. 18, 1953, and entered into force on the latter date, extending the agreement of Dec. 10, 1945, as amended, providing for the establishment of a U.S. Army mission in Costa Rica, see TIAS No. 3109 or 5 UST (pt. 3) 2502.
  32. For text of the exchange of notes, signed at Washington, July 7, Sept. 21, and Oct. 13, 1953, and entered into force on the latter date, extending the agreement of Dec. 22, 1950, as extended and amended, providing for the services of a U.S. Air Force mission to Cuba, see TIAS No. 2869 or 4 UST (pt. 2) 2200.
  33. For text of the exchange of notes, signed at Washington, Oct. 6 and 26, 1953, and entered into force on the latter date, extending and amending the agreement of Feb. 15, 1951, providing for a U.S. Navy mission to Chile, see TIAS No. 2867 or 4 UST (pt 2) 2185.
  34. An agreement providing for a U.S. Army mission to Nicaragua was signed at Managua, Nov. 19, 1953, and entered into force on the same date; for text, see TIAS No. 2876 or 4 UST (pt. 2) 2238.
  35. An exchange of notes, signed at Washington, Mar. 18 and Apr. 20, 1954, and entered into force on the latter date (operative retroactively to June 20, 1953), extended and amended the agreement of June 20, 1949, providing for the services of a U.S. Army mission to Peru; for text of the notes, see TIAS No. 2997 or 5 UST (pt. 2) 1290.
  36. An exchange of notes, signed at Washington, Oct. 5 and Nov. 23, 1953, and entered into force on the latter date, extended the agreement of Mar. 6, 1950, providing for the establishment of a U.S. Army mission in Honduras; for text of the notes, see TIAS No. 2873 or 4 UST (pt. 2) 2215.
  37. An exchange of notes, signed at Washington, Oct. 5 and Nov. 23, 1953, and entered into force on the latter date, extended the agreement of Mar. 6, 1950, providing for the establishment of a U.S. Air Force mission in Honduras; for text of the notes, see TIAS No. 2872 or 4 UST (pt, 2) 2212.
  38. An exchange of notes, signed at Washington, Sept. 9, 1953 and Mar. 15, 1954, and entered into force on the latter date (operative retroactively to Feb. 15, 1954), extended the agreement of Feb. 15, 1951, providing for the establishment of a U.S. Air Force mission in Chile; for text of the notes, see TIAS No. 2929 or 5 UST 358.
  39. Herbert Brownell, Jr.
  40. Col. Enrique Peralta Azurdia.
  41. Dr. Eisenhower’s report on the results of his factfinding mission to South America, submitted to President Eisenhower under date of Nov. 18, 1953, was published as United States-Latin American Relations: Report to the President (Department of State Publication 5290, Washington, 1953); it is also printed in the Department of State Bulletin, Nov. 23, 1953, pp. 695–717. See also the editorial note, p. 196.