814.00 TA/10–1654
The Acting Director of the Foreign Operations Administration (FitzGerald) to the Secretary of State
Dear Mr. Secretary: This is in response to the letter of September 30, from Honorable Walter B. Smith, then Acting Secretary of State, proposing a $5,000,000 grant for Guatemala.1
The Foreign Operations Administration is fully aware of the United States policy of supporting the new non-communist government in Guatemala by improving the economic conditions in that country. Already we have (1) greatly increased the Guatemalan technical assistance budget from $190,000 to $1,300,000, to be used primarily [Page 1231] in the basic fields of agricultural extension and research, public health and sanitation, and education, and to provide industrial, economic and financial advisors on a short-term basis upon request by the Guatemalan Government, (2) made an economic development grant of $500,000, to be matched by the Government of Guatemala, for the Roosevelt Hospital, which will put into operation two units (pediatrics, obstetrics and general services) of that hospital.
Finally, we are prepared to make available modest additional funds on a grant basis for projects designed to help shore up the more vulnerable areas of the economy and to provide some immediate relief to the unemployment problem. We are not, however, in a position to provide Guatemala with a grant in the magnitude of $5,000,000 because of other high priority requirements for our limited funds and since it is not clear that sound projects have been or can be developed for the prompt use of this amount. While we will, in any event, have to use the authority granted the President in the Mutual Security Act of 19542 to transfer funds into the Latin American area, such transfer must be kept to the irreducible minimum. We believe, therefore, that we can carry out the foreign policy objectives of the United States in Guatemala by providing at this time for a grant of $1,000,000 and thereafter keeping the situation under continuous review.
While we realize that the Department of State has the primary responsibility for deciding whether a grant of $5,000,000 to Guatemala would have had any adverse effect on our relations with other Central American Republics, we should like to express our view, for such value as it may be to you, that the adverse effects would have been very considerable.3
As for the uses to which a grant of $ 1,000,000 would be put, we will request the United States Operations Mission Director in Guatemala4 to develop a proposed operating plan with representatives of the Guatemalan Government which would emphasize (1) immediate “impact” projects having the primary purpose of putting unemployed to work on sound, though probably small, public works projects, and other developmental activities, and (2) the preparation of detailed plans for sound bankable economic development projects for submission to the International Bank for Reconstruction and Development or [Page 1232] the Export-Import Bank. We would use our good offices in assisting Guatemala in presenting such projects to the banks for their consideration.
We understand that the Guatemalan Government has recently appointed a Coordinator of Technical Cooperation, which should facilitate the development of the most constructive proposals for the use of the proposed grant.
We are prepared promptly to advise the Guatemalan Government of an allotment of $ 1,000,000 on a grant basis, and will time such advice so as to permit the Department to obtain the maximum political advantage therefrom.
We also will have available shortly a suggested draft of a broad agreement covering the general terms and conditions of such a grant, which if you find it satisfactory, we would hope you could negotiate as soon as possible with the Guatemalan Government so that the United States Operations Mission can develop operating agreements promptly.
It is our understanding that the Operations Coordinating Board, at its meeting on October 6, approved a grant to Guatemala at this time of $1,000,000 and the use thereof for the operating programs indicated above.
Sincerely yours,
- Supra.↩
- For text of the Mutual Security Act of 1954 (Public Law 665), approved Aug. 26, 1954, see 68 Stat. 832.↩
- In a memorandum to Mr. Waugh, dated Oct. 15, 1954, Director of the Office of Financial and Development Policy Corbett, stated in part the following: “At staff level in FOA there is apparently a feeling that a grant to Guatemala would encourage similar requests for other American Republics, particularly those in Central America.” (714.5 MSP/10–1554)↩
- Edward J. Martin.↩