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

734.5622/11–453

Memorandum of Conversation, by Robert M. Sayre of the Office of Regional American Affairs

confidential

[ Washington ,] November 4, 1953.

Subject:

• Interest of Paraguay in Obtaining United States Aircraft

• Participants: Mr. Leighton Cain, Office of the Secretary of Defense
• Lt. Col. Charles McGarrigle, Office of the Assistant for
• Mutual Security, Department of the Air Force
• Mr. Paul J. Kern, Department of the Air Force
• Col. Sydney T. Smith, Chief, U.S. Air Force Mission to Paraguay
• AR—Mr. Jamison, Mr. Sayre
• OSA—Mr. Havemeyer

A meeting was held in Mr. Jamison’s office to discuss a prospective purchase by Paraguay of United States military aircraft costing approximately $2,000,000. (The estimated cost and availability of the desired aircraft is given on the attached data sheet.¹)

The principal problems raised by this prospective purchase were (1) whether Paraguay was economically in a position to make such dollar expenditures and (2) what procedure Paraguay should follow in presenting its request to the United States.

Colonel Smith said that the purchase of United States aircraft had first been discussed with him by the Commander in Chief of the Paraguayan Armed Forces. The original proposal involved only procurement of twenty T–6D aircraft.² However the President of Paraguay added the additional aircraft³ as also being necessary and desired. Colonel Smith considered the request reasonable although he did think it might be advisable to space procurement over several years. He said the Paraguayans contemplated spreading it over a four year period. He also said that he was himself in a position to place the request before the U.S. Government for Paraguay.

Mr. Havemeyer expressed concern over the dollar expenditure such a purchase by Paraguay would require. He noted the meager dollar resources available to Paraguay and Paraguayan efforts to obtain loans from the Export-Import or International Banks to carry out projects important to the Paraguayan economy, and difficulties they had with making payments on such loans. He thought it would be difficult to justify these efforts to obtain loans at the same time sizeable dollar resources were being spent on military equipment and that it would be particularly difficult to explain if, as a result of such purchases, Paraguay defaulted, as it had done, on existing or possible future loans.

Mr. Jamison agreed that this was something that had to be carefully considered but he also noted that we were selling military equipment to other countries that were obtaining loans, some in financial straits similar to those of Paraguay. While the Department or our Embassy might diplomatically point out to the Paraguayans this problem, in the final analysis the manner in which Paraguay, or any other government spent its money, was for that government to decide.

With respect to any payment terms except cash dollars in advance, Mr. Cain said that this was a matter to be decided by FOA. He thought that this purchase would be eligible for the “dependable undertaking” method of payment which, in the case of Paraguay, would probably be an irrevocable letter of credit drawn on an American bank. Mr. Jamison added that he did not personally think we should recommend any credit terms for Paraguay which might involve risk of default in payment after the equipment was delivered.

With respect to the procedure being followed by Paraguay in presenting its request, Colonel Smith said it was not quite clear to him why the Paraguayan Government was reluctant to have its Embassy in Washington handle the matter. Mr. Jamison thought unless there were overriding reasons that the normal procedure should be followed, i.e., a request submitted through the Paraguayan Embassy in Washington to the Department of State. Unless it were handled in the usual manner he had some difficulty in seeing how the transaction could be concluded, especially with respect to the sales contract which must be signed by an authorized Paraguayan official.

Colonel Smith said that when he returned to Paraguay he would discuss the matter with the United States Embassy. It appeared that the best thing to do was to suggest to the Paraguayan Government that it submit a request now only for those aircraft that it wanted immediately and could pay for and submit requests over the next four years for the remaining aircraft as it wanted and could pay for them. Regarding procedure, if the Paraguayans were for whatever reason unwilling to go through the Embassy channel, it might be possible for the President of Paraguay to designate a Paraguayan officer to serve, in effect, as a purchasing mission.

Mr. Jamison agreed that this appeared to be a satisfactory way to handle the problem. He wanted to emphasize, however, that the Department of State might have reservations on economic grounds, and that in discussions with the Paraguayans every effort should be made to avoid the impression that the request had already been or would be approved.⁴

1. Not printed.
2. The estimated total price of these aircraft ($1,434,000) included the cost of refitting them with certain types of armament equipment.
3. Four helicopters and four Beech Bonanzas.
4. Department instruction A–42, to Asunción, dated Nov. 17, 1953, reads in part as follows: “If deemed necessary to do so, the Embassy may inform the Paraguayan Government that the Department would have no objections to the purchase of these aircraft. At the same time, however, the Department believes it to be desirable for the Embassy to suggest orally to appropriate officials that Paraguay may wish to consider this sizeable dollar expenditure in connection with its possible effect on the country’s ability to obtain and service dollar loans.” (734.5622/11–653)