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

U/MSA files, lot 56 D 551, “Latin America”

Memorandum of Conversation, by the Assistant Secretary of State for Inter-American Affairs (Holland)

confidential

[Washington,] July 20, 1954.

Subject:

• Work of FOA and the Department of Commerce on Investment Opportunities in Latin America

• Participants: Governor Harold E. Stassen, Director of Foreign Operations Administration
• Assistant Secretary Henry F. Holland

I suggested that the Governor let me summarize my views on his proposal of an extensive program to achieve two ends in Latin America.

1. Discovery of investment opportunities and securing U.S. investors for them.

2. Analysis of obstacles to an increased influx of U.S. capital into Latin America.

The objections I stated were:

1. His efforts would be cumulative of programs conducted by the Department of Commerce and the Department of State.

(a) Commerce has published an excellent work on obstacles to private investment in Latin America. They should be better prepared than any other agency to keep that study up to date.

(b) Commerce has long offered a service of bringing investment opportunities in Latin America to the attention of the U.S. public.

2. The program in many capitals of Latin America would duplicate services available on investment opportunities through well prepared private sources such as investment houses, banks, chambers of commerce, and similar organizations.

3. The program would be affirmatively prejudicial to our foreign policy in Latin America at this time because:

(a) Private capital is not entering Latin America today extensively because prospective investors are not accorded the protection of contract and property rights, assurances of sound monetary policies and of opportunities to earn a reasonable return on their investments which are conditions precedent to the entry of a reasonable prudent investor. If, while these conditions prevail, we persuade a large number of small U.S. investors to go into Latin America we will create problems that will severely strain our relations. Latin America today is a place where a well informed investor who can give adequate attention personally or by a trusted proxy to his business can make a good profit. On the other hand, there are a number of areas where the small investor who relies on absentee management will almost surely find himself in substantial difficulty.

(b) We are trying hard to persuade Latin American Governments to institute those policies and local conditions that will cause private capital, particularly their own, to invest itself in projects that will strengthen their economies. Generally, in each of the countries there is enough domestic private capital to meet the development needs of the countries. Because of lack of the basic assurances required by private investors, this domestic capital is either sent out of the country or invested in real estate. If we now start a program to encourage small U.S. investors to enter Latin America in large numbers our efforts to solve the basic problem mentioned above will be largely nullified.

In other words, Latin Americans are reluctant to invest their capital in productive enterprises in their own countries. They are reluctant to do so because they know that local conditions are such that their investment might be lost. Often they are entirely right. We are trying to get the local governments to see that until they improve local conditions they cannot expect private investors to risk their capital. We cannot very well at the same time be conducting a campaign to persuade numerous small U.S. investors to enter the same investment markets.

(c) The accusation is made against us in Latin America that the United States must find homes abroad for large amounts of capital which cannot be invested here. It is said that our interest in creating conditions in Latin America favorable to the investment of private capital are motivated by this selfish purpose, and not by any desire to strengthen their economies. The proposed FOA program would lend credibility to this argument.

When I concluded the statement outlined above, Governor Stassen asked me whether I thought the tendency in Latin America was toward or away from private enterprise, I replied that the trend was toward private enterprise. I pointed out the situation in Peru, the growing belief in Brazil that its oil industry will never prosper until private enterprise is admitted; the spectacular results of private enterprise in Venezuela, and the new trend in Mexico.

He asked me if I was satisfied with the labor situation in Latin America. I replied that I was not; that I felt that we needed more labor reporting officers in the embassies, men who had the language ability and other capacities necessary for them to exert influence on the local leaders.

Governor Stassen then said that he felt our conference had pointed out fundamental differences of opinion on basic policy concepts which made it easy to understand how we could disagree on the wisdom of a particular program. He went forward to enumerate four basic differences of opinion which he felt existed between us:

1. He felt that I was well satisfied with wages and living conditions generally in Latin America whereas he felt that they should be considerably improved.

I stated that he must have misunderstood me—that I shared his view that both wages generally and living conditions should be improved throughout Latin America.

2. He felt that, contrary to my belief, this was the time to encourage a large number of small investors to go to Latin America. He recognized that a good many of them might “lose their shirts,” but felt that the net result of their entry would be beneficial.

I stated that on this point we did disagree.

3. He felt that I opposed the establishment of organized labor unions in Latin America, whereas he felt that it would be a good thing.

I stated that he must have misunderstood; that it was my personal belief and the policy of the Department that extension of the organized labor movement to Latin America would be beneficial to this country as well as to the Latin American countries.

4. He felt that I opposed treatment of economic problems in the hemisphere on a multilateral basis. He said that the policy of the Department of State and of the Treasury was to insist on a modern day colonial approach, under which we insisted that the various Latin American countries deal bilaterally with the United States but without any extensive trade or economic relations among themselves. He drew parallels from English and Spanish history regarding such a policy.

I stated that I felt he misunderstood the Department’s policy; that we favored such multilateral relations between the Latin American countries.

Mr. Stassen gave me the impression when I left that he still felt there were basic and fundamental differences of opinion between us. Despite this, the meeting was cordial and I was happy to have the chance to explain our views.¹

1. Assistant Secretary Holland forwarded a copy of this memorandum of conversation to Secretary Dulles under cover of a memorandum dated July 23, 1954. In the July 23 memorandum, Holland requested the Secretary to sign an attached draft letter to Governor Stassen asking that he continue to hold up the proposed FOA program to stimulate U.S. investments in Latin America. (811.05120/7–2354) The Secretary signed the letter on July 28, and it went out on that date. (811.05120/7–2854)