Progress Report Prepared in the Department of State for the Operations Coordinating Board1

top secret

Third Progress Report on NSC 144/1, United States Objectives and Courses of Action With Respect to Latin America

a. summary

1. Major actions

This report covers the period November 15, 1953–May 1, 1954.

The United States participated in the Tenth Inter-American Conference held at Caracas, Venezuela from March 1–28, 1954. The United States achieved its primary objective of obtaining a clear-cut policy statement3 against communism and laid the ground-work for subsequent multilateral action against communism in Guatemala. A decision was taken at the Conference to hold an economic conference at Rio de Jahneiro in the fall.4

Preliminary action has been taken to implement the Eisenhower Report through recommended increases in appropriations for certain [Page 46] programs now being carried out in Latin America. Comments on the Report have been received by the Department of State and are under study.

Grant economic aid to Bolivia was increased. A decision has been made to purchase 100,000 short tons of copper from Chile. Negotiations with Panama with respect to the Canal Zone are continuing.

In pursuance of the anti-communist resolution approved at Caracas, the United States is consulting with all Latin American countries except Guatemala regarding control of travel in the interests of communism.

There has been no significant change in the outlook for private investment in Latin America except some improvement in Argentina and Panama and a deterioration in Costa Rica and the Dominican Republic.

No significant changes are noted in the information and military assistance programs but there is continued concern over repeated setbacks on arms stan-dardization and our seeming inability to provide classified information to the Inter-American Defense Board so that it will be in a position to do realistic military planning.

2. Policy considerations

The existing policy appears to be satisfactory.

3. Extent of agency interests

The following agencies have an interest in this report: State, Treasury, Defense, FOA, USIA, Commerce, CIA, ODM and the Export–Import Bank.

4. Emerging problems and future actions

The economic situation in Bolivia and Chile continue to be serious with a further deterioration in Chile. Communism continues a threat to the hemisphere with the most serious problem in Guatemala which affects the whole Central American area and a lesser but growing problem in Brazil. The forthcoming economic conference in Rio de Janeiro will call for a series of decisions on our economic policy.

b. detailed developments of major action


5(a) Greater Utilization of the Organization of American States (OAS)— The principal event in our inter-American relations during the period under review was the Tenth Inter-American Conference which met during the month of March in Caracas, Venezuela. This Conference, the supreme organ of the OAS which convenes every five years, dealt with the whole range of Inter-American relations—juridical-political, economic, social, cultural and organizational matters. A brief summary of the action taken at Caracas is attached (Tab A).5 Communism and [Page 47] economic problems, being the issues of principal concern at the Conference, are discussed in the pertinent sections of this report.

Primary objectives of the United States at Caracas were to quicken Latin American awareness of the dangers of communist penetration in this hemisphere, to obtain agreement on measures to combat it, and to achieve further isolation of Guatemala, as the most significant center of communist influence in the Americas, laying the groundwork for subsequent positive action against Communism in that country through the OAS. The Conference approved a resolution embodying: (1) a clear-cut policy determination that the activities of the international communist movement constitute intervention in American affairs; (2) a recommendation on measures for exposing, and exchanging information on the activities of persons serving the international communist movement; and (3) a declaration that the domination or control of the political institutions of any American State by the international communist movement would call for a meeting of consultation to consider the adoption of appropriate action under existing inter-American treaties. Seventeen of the countries represented at Caracas supported this resolution, Argentina and Mexico abstained, and Guatemala voted against, at the same time denouncing Guatemala’s adherence to the anti-communist resolutions adopted at the Bogota (1948)6 and Washington (1951) Conferences.7

The consideration on the resolution, during which the Guatemalan situation loomed in the background but was not brought into the open, except by the Guatemalan delegation’s own aggressive attitude, revealed the ambivalent nature of the viewpoints of a considerable number of Latin American delegations toward the communist menace. As a general proposition, a substantial majority were willing to condemn the intervention of international communism and agree that collective action to combat it would be warranted when it gained domination or control over an American State. This disposition was not transferable in the case of every delegation, however, to the specific threat inherent in the Guatemalan situation. It appears from the views expressed that the number of Latin American states (particularly the more influential ones) which at this time regard the growth of communist influence in the Guatemalan Government as a serious threat to their peace and security is not sufficient to bring about OAS action.

In its capacity as member of the Inter-American Peace Committee and as one of the guarantor powers of the Peru–Ecuador boundary, the [Page 48] United States assisted in the establishment of an atmosphere which led to a settlement of two disputes between American states during the period under review. Consideration by the Peace Committee of the Haya de la Torre asylum case,8 which had been a constant source of friction between Colombia and Peru for the past five years, preceded the conclusion of an agreement between the parties under which Haya de la Torre was permitted to leave Peru. A dispute arising from a frontier violation, involving the trespassing and capture of Peruvian soldiers on Ecuadorian territory, was successfuly terminated through the intervention of the guarantor powers.

5(b) Consultation with Latin American States—During the period under review the United States consulted with the Latin American countries, for the purpose of enlisting their support, on several issues before the Eighth Regular Session of the United Nations General Assembly9 and the Tenth Inter-American Conference which were of major importance to the United States. In the United Nations these involved the items relating to Puerto Rico,10 Morocco and Tunisia11 and the Administrative Tribunal Awards.12 The success of the United States position on each of these matters was attributable in considerable measure to the support received from a substantial number of Latin American states. In preparation for the Tenth Inter-American Conference, United States missions in Latin America were supplied in so far as possible with a general outline of our views on the items on the agenda and instructed to communicate them to the Foreign Office as considered appropriate. Special consultations were held with certain Latin American states regarding our anti-communist resolution. These consultations served to clarify the motives and purpose of the United States proposal and undoubtedly contributed to the size of the affirmative vote which the resolution received.

5(c) High-Level Consideration of Latin American Problems—The composition of the United States Delegation to the Tenth Inter-American Conference13—which included the Secretary of State, two Senators and six other persons holding top echelon positions in various departments of the Government—marked a further instance of high-level sympathetic attention to Latin American problems. Secretary Dulles spent two weeks in Caracas, during which time he participated fully in [Page 49] the work of the Conference as well as the protocolary activities connected therewith. He also held private talks with a majority of the Foreign Ministers attending the Conference in order to afford them an opportunity to discuss special bilateral problems not directly related to the work of the Conference.

Dr. Milton Eisenhower rendered on November 18 his report to the President on United States-Latin American Relations based on his study trip to the ten countries of South America, during the period June 23–July 29, 1953. This report was referred by the President to all government agencies concerned for comments and suggestions on its implementation. It has been approved in principle by the President. The comments have been received by the Department of State and are now being studied. In anticipation of the Tenth Inter-American Conference at Caracas, and in line with recommendations of the Eisenhower report, however, the Department of State recommended to the Bureau of the Budget that consideration be given to increasing by some $17,000,000 existing programs in Latin America. Aside from continuation of existing programs at the current rate, increases were recommended for the bilateral and OAS technical cooperation programs, the Inter-American Highway and the Rama Road in Nicaragua, a development program in Panama, OAS organizations, the exchange of persons program, American schools in Latin America and the information program. All of these recommendations have not yet been acted on favorably but increased authorizations for the Inter-American Highway and Rama Road have been approved by the Congress, and increased appropriations for the exchange of persons program is now being considered.

During the period under review the acute economic problems confronting Bolivia, Brazil and Chile continued to receive consideration at the highest levels of government. On March 15, 1954 President Eisenhower approved a recommendation, concurred in by the Secretaries of State and Agriculture,14 the Director of Foreign Operations15 and the Director of the Budget,16 that the amount of agricultural commodities being made available to Bolivia be increased by $3 million. This increase was intended to assure that at least minimum supplies of wheat are available during the critical months of the Bolivian winter. The decision was taken in accordance with a basic postulate of our Latin American policy, that in determining the extent of United States assistance, consideration by given to the willingness and ability of the recipient state to cooperate with the United States in achieving common objectives. In recent months the moderate elements have gained increasing strength in the Bolivian government. This trend has manifested itself [Page 50] in the stronger anti-communist stand taken by the President and Foreign Minister, exemplified by Bolivian support for the anti-communist resolution presented by the United States at the Caracas Conference.

Following several months of consideration and negotiation, the United States on March 26, 1954 notified the Chilean Government of its decision to buy 100,000 short tons of Chilean copper. This action provided the Chilean Government with a much-needed breathing spell in a rapidly deteriorating economic situation. Throughout the negotiations the United States sought, in accordance with the postulate stated in the previous paragraph, to couple its offer to purchase copper with promises from Chile to reform the prevailing tax, exchange and sales system relating to copper production in order to place its copper in a competitive position in the world market and to adopt measures to prevent sales to the Soviet bloc. The decision to purchase the copper was taken after a bill, embodying most of the principles favored by the United States, had been submitted to the Chilean Congress and renewed assurances had been obtained, orally and in writing, that Chile would sell copper “from whatever source,” and “in all forms,” only for shipment and use in the Western world.

An urgent request by Brazil for wheat was met by agreement to negotiate the sale of 100,000 tons of surplus wheat for proceeds derived from the sale to the U.S. of an equivalent value of strategic materials from Brazil. The Department considered it inadvisable at this time to approve a Brazilian proposal to establish a new Cabinet level joint economic commission, but invited Brazil to hold bilateral talks with us on economic problems prior to the forthcoming Rio Conference this fall.

Negotiations with Panama covering the special relationsip arising from the construction and operation of the Panama Canal (discussed in previous progress report17) are continuing. The United States has completed its comments on the original Panamanian proposals. The talks are expected to recess shortly for several weeks while the Panamanian delegation returns to Panama for consultations. The Panamanian Delegation professes to find the United States position “too negative.” Many of the Panamanian Government’s requests were of such a nature that the United States had no alternative but to reject them since they would have impaired our basic jurisdictional rights in the Canal Zone or would have involved the expenditure of large sums of money in Panama’s behalf for which no satisfactory justification and/or commitment could be perceived. However, the overall adjustment which the United States Government has told the Panamanian Government that it is prepared to make would be favorable to Panama.

Further gestures of interest and good-will toward Latin America are evidenced by (1) the generally favorable report issued by the Senate [Page 51] Banking and Currency Committee18 on the findings of and recommendations reached by the Capehart Mission following its tour through Central and South America; (2) the special missions to the installation of Jose Figueres as President of Costa Rica and the 50th Anniversary celebrations of the founding of the Republic of Panama,19 headed in each instance by Governor Lodge20 of Connecticut, as personal representative of the President; and (3) the attendance of Vice-President Nixon at the special session of the Council of the OAS in observance of Pan American Day.

Similar high-level attention in the military field continued during the period under review with the visit of the Minister of War of Colombia21 to the United States at the invitation of the Department of the Army, a good-will tour of a squadron of U.S. jet military aircraft through Central and South America, and the visit of the aircraft carrier U.S.S. Roosevelt to Brazil, Uruguay, Argentina and Peru.

6(a) Control of Subversive Activities—In November and December, 1953 Cuba and Panama, respectively, outlawed communist activities within their jurisdictions.

United States efforts to further the objective of encouraging individual and collective action against communist activities centered on proposing action by the Tenth Inter-American Conference on specific measures which the governments might take in this respect, and on follow-up action to implement this recommendation. In adopting the anti-communist resolution submitted by the United States, the Caracas Conference recommended to the American republics that they give special consideration to the following steps:

Measures to require disclosure of the identity, activities and sources of funds, of those who are spreading propaganda of the international communist movement or who travel in the interests of that movement, and of those who act as its agents or in its behalf; and
The exchange of information among governments to assist in fulfilling the purpose of the resolutions adopted by the Inter-American Conferences and Meetings of Foreign Ministers regarding international communism.

Following the Conference, United States Missions in all the American republics, except Guatemala, were instructed, in their discretion, to provide the local government with copies of a study,22 prepared by the Department of State on the attendance of Latin Americans at communist-sponsored conferences, pointing out that the study was being made [Page 52] available in accordance with the Caracas resolution. At the same time the missions were requested to bring to the attention of local governments copies of the United States passport and visa regulations and to encourage them to adopt similar regulations.

6(c) Control of Shipment of Strategic Materials—A shortage of copper in Soviet bloc countries has brought renewed efforts by East-West traders to obtain supplies from Mexico and Chile either directly or by transshipment. Informal arrangements with Mexico’s principal copper exporters for screening all questionable transactions have continued effective. Controls in Chile promise to become more effective with the adoption by the Chilean Government of the Import-Certificate-Delivery Verification system. In connection with the recent U.S. agreement to purchase 100,000 short tons of copper for the U.S. stockpile, Chile renewed its promise to restrict sales to the free world by means of a confidential note23 promising not to sell copper, in any form or from any source, except for shipment to and use in western countries. Chile also agreed to require delivery verification on all shipments in order to prevent transshipments or fraudulent use of documents.

An increasing interest in trade with the Soviet bloc is apparent throughout Latin America, and a number of trade agreements have been negotiated with curtain countries. The commodities covered by agreements concluded so far are not, however, of strategic significance.


7(a) Encouragement of Private Investment—The outlook for private investment has improved in Argentina and Panama and deteriorated in Costa Rica and the Dominican Republic. Elsewhere there has been little change.

The Argentine Government, and President Peron himself in both confidential and public utterances, has indicated acceptance of the idea that attraction of foreign private capital is essential to Argentine economic development. Argentina had previously enacted an investment law designed to attract foreign private capital. American businessmen, both in Argentina and in the U.S., have expressed reservations as to the overall attractiveness of this legislation, and these reservations have reached the ears of the Argentine Government. As a result, the Argentines have under study modifications designed to satisfy expressed objections, and some changes in the implementing regulations have already been made.

The Panamanian Government is increasingly aware of the need for encouraging private investment. Contracts were signed recently by the municipalities of Colon and Panama City with the American-owned power and light company, ending a long and bitter period of litigation [Page 53] which has had an adverse effect on U.S. investments in Panama. These contracts provide for a moderate lump sum payment to the municipalities by the company in return for exemption from municipal taxation for twenty-five years.

American firms operating in the Dominican Republic have been subjected to increasing harassment and discriminatory treatment in recent months. An official protest was made to the Dominican Government early this year. It was pointed out that the policy would inevitably discourage further investments. Following these representations the position of the American companies concerned has improved somewhat, but the outlook is not encouraging.

Since the inauguration of President Figueres in November 1953 the climate for private investment in Costa Rica has deteriorated. A growing nationalism is evident in new legislation to raise import taxes and in the extreme terms which the Government is trying to force on the United Fruit Company in the renegotiation of its contracts.

The Caracas Conference focused attention on the problem of facilitating the flow of private capital into underdeveloped areas, and the ways in which countries seeking new investments can encourage them. Taxation treaties, in particular, received attention.

Shipping, Aviation and Telecommunication—The outlook for United States shipping lines operating to Latin America continues to improve. Legislation in the United States and Brazilian congresses is now in the final stages looking toward the completion of the major aspects of the U.S.-Brazilian shipping program, which should eliminate the basis for discrimination against U.S. shipping lines. The problem regarding the discrimination, by the Chilean Government, on cargoes moving from the west coast of the U.S. continues. It is believed that negotiations now under way will assist in correcting this situation.

The civil aviation agreement with the Government of Venezuela has been ratified, and the services envisaged under this agreement have been put into operation. However, the United States still has some outstanding problems in the aviation field in Brazil, Colombia and Mexico.

In the field of telecommunications, the North American Regional Broadcasting Agreement, which was signed in 1950,24 is still before the U.S. Senate for consent to ratification. A meeting with representatives of the Government of Mexico looking toward the working out of an interim agreement on telecommunication matters closed on April 2,25 [Page 54] after a week’s discussion, without arriving at any agreement. Another meeting is scheduled in Mexico City in October 1954.

The second meeting of the Interim Committee of the Pan American Highway Congress, which is working on the plans and agenda for the 6th Pan American Highway Congress to be held in Caracas in July,26 is completing its work. The U.S. was able to secure acceptance of the major portion of its proposals for this meeting.

7(b) International Bank and Export–Import Bank Loans—Loans authorized by the International Bank and the Export–Import Bank for the five month period November 15, 1953–April 15, 1954 totaled $69.926 million, with an additional $18 million pending. This is roughly equivalent to the quarterly rate of lending throughout the period 1949–52, $63.7 million, and indicates a slowing down of loan activities of the Export–Import Bank.

Loans authorized by the IBRD totaled about $51.5 millions, distributed as follows:27

$ millions
Brazil Railway construction $12.5
Electric power 28.8
Ecuador Highways 8.5
Peru Agricultural machinery 1.7

The following credit is under negotiation by the Bank and the NAC has advised the US Executive Director28 that it has no objection to its favorable consideration:

$ millions
Peru Irrigation $18.0

[Page 55]

Loans made by the Export Import Bank, listed below, are principally small exporters credits:29

$ millions
Argentine* Locomotives $2.520
Brazil Textile machinery .705
Chile Railway equipment .072
Cuba Power 12.000
Colombia* Textile machinery 1.000
Mexico Textile machinery .054
Uruguay Steel mill expansion 2.475

The Export–Import Bank has also allocated $2.5 million out of previously authorized credits for the improvement of airports in Ecuador.

7(c) Economic Assistance to Latin America—The Executive Branch has requested the Congress to appropriate $23.5 millions for bilateral technical cooperation programs in Latin America and $1.5 millions for the program of the OAS for fiscal year 1955. Funds in the amount of $9 millions to continue the economic grant program to Bolivia have also been requested.

The Congress is considering the appropriation of $1,000,000 for the Inter-American Highway and $1,000,000 for the Rama Road in the regular appropriation for fiscal year 1955, and a request will also be made to the Congress for the supplemental appropriation of $5,000,000 for the Inter-American Highway. In April the Congress, in the Federal Aid Highway Act of 1954,30 authorized a total of $40,000,000 in addition to the sums heretofore authorized for the Inter-American Highway. Likewise an additional $4,000,000 was authorized by the Congress to be appropriated to complete the Rama Road.

7(d) Improving Trade Outlook for Latin American Export Commodities—The United States has done little during the period under review to facilitate sales of Latin American products in the U.S. Our overall relations with Argentina have definitely suffered as a result of U.S. trade restrictions and U.S. agricultural surplus disposal programs.

Chile’s copper export problem was relieved materially by the U.S. agreement to purchase 100,000 short tons of copper at current world prices. Stocks of about 80,000 tons remain unsold, however.

[Page 56]

Uruguay’s wool tops may now enter the U.S. under a countervailing duty of only 6% in place of 18% as a result of a recent Department of the Treasury decision to reduce the duty. Imports of tops have been very small since the duty was first imposed last year, and it is doubtful that the duty adjustment will provide any great stimulus.

Bolivia has been informed that barring Congressional action to extend the operations of the Texas City Smelter, the U.S. is not interested in purchasing additional tin ores from Bolivia at the present time.

Argentina has suffered from the imposition by the U.S. in December of an import quota on oats which bore most heavily on Argentina and required cancelation of existing contracts. Imposition of a quota on imports of tung nuts and oil, now under consideration, would also be a matter of serious concern to Argentina and Paraguay. Contemplated restrictions on the importation of rye would also limit Argentina’s markets.

Argentina, and other Latin American exporters of grain and dairy products, have expressed grave concern lest the expanded U.S. surplus disposal program31 now under consideration endanger their export markets.

One favorable development in the Latin American export picture is the increase in coffee prices, which may net the coffee exporting countries a billion dollars or more in excess of their returns from that product last year. About two-thirds of this will be dollar exchange. Latin America’s exports to the U.S. in 1953 were valued at $3.4 billions of which about $1.5 billions represented sales of coffee. An increase of a billion dollars, distributed among sixteen countries, would bring material improvement in Latin America’s capacity to finance its own economic development.

8. Monetary Stabilization and Fiscal Reforms—Early in 1954 Peru requested a loan from the United States Treasury for the purpose of halting the decline of the sol. Heavy government investment in development projects, declining prices for its exports, and undiminished demand for imports resulted in pronounced weakness in the exchange value of the sol during the last six months of 1953 and early 1954. The Peruvian Government, in the belief that the sol had declined beyond its true value as the result of speculation and undue pessimism, sought financial aid from the U.S. Government, the International Monetary Fund and private institutions to restore confidence in the sol.

Recognizing that Peru’s basic economy was sound, that anti-inflationary measures had been introduced in recent months, and that the decline of the sol had fostered strong internal criticism of Peru’s liberal trade and monetary policies, the United States Treasury made a $12½ [Page 57] millions stabilization loan to Peru.32 The IMF granted Peru a like amount, while Chase National Bank provided $5 millions. As a result of these loans Peru announced its determination not to reestablish exchange and trade controls, and to continue its liberal trade and monetary policies as the best means to foster foreign private investment and economic development.

Chile, in October 1953, declared to the IMF a new par value of 110 pesos to the dollar in place of the former par rate of 31 pesos which was accepted by the IMF. Chile applied late in 1953 for a drawing of $25 million from the IMF but was granted only $12.5 million. In addition the Government borrowed $12.5 million in December 1953 from the National City Bank to meet Government year-end obligations. In spite of this the financial situation is deteriorating rapidly. Through 1953 living costs increased at the rate of about 4½% a month, and the free market rate for the peso continues to deteriorate. Partly to strengthen the Chilean economy and to obtain improved treatment of U.S. copper companies operating in Chile, the U.S. agreed to purchase 100,000 short tons of Chilean copper at the market price for the strategic stockpile. The Chilean Government, on its part, has introduced legislation providing more favorable tax rates for the American copper companies and authorizing them to use the free bank rate of 110 pesos per dollar instead of the present rate of 19.37 pesos for conversion of dollars spent in Chile to cover costs of producing copper. The measure would also return to the companies a greater degree of control over sales, which would help us prevent diversion to the Soviet bloc.

At Costa Rica’s request FOA sent a tax consultant to that country temporarily to assist in a proposed revision of the tax system and plans to furnish one on a permanent basis at a later date.

Argentina is not a member of the International Bank (IBRD) or the International Monetary Fund. The President of the Bank33 and several assistants recently made an informal visit to Argentina,34 and conversations with Argentine officials left the impression that Argentina had some interest in joining the Bank but had reservations about subjecting itself to the control of the International Monetary Fund.

The IBRD has assigned a permanent representative to Panama to assist that Government in carrying out fiscal and economic reforms which the Bank has recommended.

[Page 58]

On April 17, the Mexican Government announced a change in its monetary exchange rate from 8.65 to 12.50 pesos to the dollar. The International Monetary Fund concurred in the action. The United States Stabilization agreement with Mexico remains in force.

Information and Related Activities

9. In view of the reduction in funds available for the information program in Latin American reported in the Second Progress Report, programs in the smaller countries have been reduced to the minimum while those in the larger countries are now operating on a more restricted basis. Reprogramming is taking place to direct the limited resources available at only the most critical psychological problems and to selective groups for maximum impact.

Steps are well advanced toward instituting effective information and educational exchange programs in dependent areas in the Caribbean, particularly British Guiana and British Honduras.

Continued attention to the Bolivian problem in conjunction with the aid program discussed above appears to have achieved positive results in the form of recognition of communist danger to Bolivia and the gradual change in position of the Bolivian Government, with the backing of reputable information media in the country, to a stronger public anti-communist position.

Increased anti-American sentiment in Brazil, the deteriorating political situation, coupled with increasingly effective communist activities, have been the occasion for making increased information facilities available in that country and work is under way to provide materials especially designed to promote a better understanding of the U.S. economic policy vis-à-vis Brazil.

The Soviet effort to purchase Chilean copper, and delay in reaching an agreement for the purchase of 100,000 tons of that copper, created a serious psychological problem not only in Chile but in other countries of Latin America where the Soviets are playing heavily and effectively on the theme of increased trade with Iron Curtain countries. Our ability to deal with this problem was limited because of delicate negotiations which made it impossible to present the facts and state our position to the Chilean people without a serious clash with high officials of the Chilean Government. As a result the U.S. position was widely misunderstood.

Efforts are being made through the information program and diplomatic channels to discredit and possibly force cancellation of forthcoming [Page 59] communist sponsored youth festivals in Chile35 and Guatemala36 and the Conference of American Women in Rio de Janeiro.37

Some effective work was done in connection with staving off attempted communist infiltration of the Second Congress of Latin American Universities.38 Because of budgetary limitations the exchange of persons program was able to bring to the United States only about 158 persons from the Latin American area which compared to approximately 1,000 who went to Iron Curtain countries under the auspices of communists in 1953.

Beyond normal anti-communist activities carried on in all countries, special attention was given to the situation in Guatemala and its effects in other countries of the hemisphere. With the “discovery” by the Guatemalan Government of the alleged “plot” to overthrow that Government in January, and the expulsion of journalists and radio commentators from the country, effective work was accomplished in identifying the Government with communist objectives. Senator Wiley’s39 speech given on January 14,40 was particularly effective in forming opinion among responsible people in Latin America. Despite these and other efforts, however, Guatemalan propaganda efforts played on old alleged wrongs and raised doubt in the minds of Latin American officials and private citizens as to United States motives regarding Guatemala. Many believe that the U.S. (1) is interested principally in pushing claims of the United Fruit Company and (2) is overly concerned with communism in Latin America despite efforts of the information program to meet these two problems. Communist-front “Friends of Guatemala Societies” were established in a number of countries and little headway was made in discrediting these organizations.

Plans are under way to create among the people of Latin America a better understanding of the U.S. economic system particularly in view of the forthcoming economic conference in Rio de Janeiro, because a lack of understanding of U.S. economic policy is one of the most serious causes for lack of improvement in U.S.-Latin American relations.

[Page 60]

The Eisenhower Report was given heavy attention throughout the area with reaction uniformly good but anticipation continued regarding its implementation.

A number of cultural events in the U.S. were heavily exploited for the purpose of emphasizing our continued interest in Latin America and the cultural maturity of the U.S.

Action was taken during and after the Caracas Conference, to make the U.S. position better known in Latin America and to create an atmosphere favorable to the adoption and implementation of an anti-communist resolution with some evidence of effectiveness.


Military Assistance Program: The Executive Branch has requested the Congress to appropriate an additional $13 millions for grant military assistance to Latin America for fiscal year 1955. In addition, unexpended balances from appropriations which for fiscal years 1952–54 totaled approximately $101.9 millions would be continued available, if the request is approved.

A military assistance agreement was signed with Nicaragua on April 23, 195441 making a total of nine Latin American countries with which the United States has such agreements. Negotiations with Honduras for a similar agreement were planned for early May.42 El Salvador has indicated some interest in an agreement but is reluctant to consider negotiations until after the May national elections.43

Cuba and Uruguay have not made local currency available to establish MAAGs in those countries. Equipment is being sent to Cuba, however, where United States Armed Services missions are handling the program. Only Air Force equipment is being sent to Uruguay, where an Air Force mission is maintained. Navy equipment will be sent when United States naval personnel are on hand to receive it. Shipments valued at $24.6 millions, as of January 31, 1954, have been made to the countries participating in the program, except Nicaragua.

The Department of Defense proposed, and the Department of State concurred on February 16 in a recommendation, that Haiti be included in the program, but the recommendation has not been sent to the President for the necessary finding of eligibility under the Mutual Security Act44 pending formal approval by the Department of Defense.

[Page 61]

16. In pursuance of the policy of assisting “in the protection of sources and processing facilities of strategic materials” military staff discussions with Venezuela are still under consideration. Prospects for successful military staff discussions with Venezuela have dimmed again with a decision by that country to purchase French rather than United States tanks for its Army. It appears likely that this decision was as much the result of graft as pique over United States prices, delivery and credit terms.

18a. United States participation and leadership in the activities of the Inter-American Defense Board have been impaired as a result of the inability of the United States to furnish classified information to an international organization whose membership includes Guatemala. The most recent instance of this was a decision by the State–Defense Military Information Control Committee which declined to approve the release of classified information which was to be used by the Board for a defense estimate of the situation. Such an estimate is considered essential prior to consideration of a revision of the general military plan.

Haiti and Nicaragua have approved the General Military Plan for the Defense of the American Continent. Other countries which have approved the plan are Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, Dominican Republic, Ecuador, Honduras, Peru, United States and Uruguay.

The Chairman of the Board, Lieutenant General Howard A. Craig (USAF) has completed a series of visits45 to each Latin American country to discuss with local defense officials activities of the Board and to encourage more active support of the Board and its work.

A new Combined Board on Defense, Brazil–United States is to be established as soon as a decision is made by the United States as to whether foreign office representatives of the two governments are to be members of the Board. The Board would meet annually, alternating between Washington and Rio de Janeiro. It would make recommendations on defense plans of concern to the two governments and coordinate the work of the Joint Brazil–United States Military Commission in Rio de Janeiro and the Joint Brazil–United States Defense Commission in Washington.

18b. During the period under review the following Army, Navy and Air Force Mission Agreements were extended: Chile, Air Force; El [Page 62] Salvador, Air Force;46 Honduras, Army and Air Force. An Army Mission Agreement was signed with Nicaragua and a Mission established in that country.

Extensions of the following Agreements are being negotiated: Bolivia, Air Force; Brazil, Navy; Colombia, Army, Navy and Air Force; Ecuador, Army and Air Force; Mexico, Air Force; Paraguay, Army and Air Force and Peru, Army.

Extensions of the Army and Navy Mission Agreements with Bolivia and Venezuela, respectively, are being considered by the appropriate Armed Service. The status of Army and Air Force Missions in Guatemala is under review but for the present remains the same.

18d. Colombia continues to be the only Latin American country participating “in the United Nations action in Korea.” Legislation which would permit the President to settle at less than full reimbursement logistical support bills of countries with forces in Korea, including Colombia’s bill which is now approximately $11.5 millions has been prepared but has not been submitted to the Congress because the Department of Defense has not concurred and there is some doubt as to the advisability of submitting the legislation at this time. In the meantime, no action is being taken to settle Colombia’s bill which remains unpaid.

18e. In pursuance of the policy of “ultimate standardization” of military equipment in Latin America along United States lines, fifteen jet and six support aircraft of the United States Air Force visited the following Latin American countries during the period January 16–February 14, 1954: Argentina, Brazil, Chile, Cuba, Dominican Republic, Mexico, Nicaragua, Panama, Peru, Uruguay and Venezuela. Defense officials of countries not visited attended the demonstrations in the Canal Zone.

The tour was warmly received, was highly successful and appears to have created a greater respect for United States defense capabilities and our leadership in the free world. Reports have all been laudatory of the jet demonstrations and the conduct of the Air Force personnel making the tour indicating that it materially enhanced the prestige of the United States Air Force Missions and other personnel of the Air Force in Latin America and created a favorable impression in Latin America of the United States Air Force. An estimated 2,500,000 Latin Americans witnessed the demonstrations which were staged in all countries visited by the jets. Latin American newspaper coverage was extensive and favorable, evidencing a genuine friendship for the United States and the effectiveness of United States Information Agency operations in Latin America. Communist efforts to discredit the tour were singularly unsuccessful.

[Page 63]

As a result of the tour Colombia has purchased six T–33 jet trainer aircraft and other Latin American countries have expressed an interest in purchasing United States jet aircraft. But as a general matter efforts to further standardization have met with further setbacks, significant instances being the purchase of French tanks by Venezuela and British jets by Chile. Approval of pending legislation should help solve the problem of better credit terms and consideration is being given to revising procedures for processing reimbursable assistance requests because existing procedures appear to be a contributing factor to the present unsatisfactory situation.

c. policy considerations

The existing policy appears to be satisfactory and to require no revisions at this time. The Department of Defense is, however, concerned over the implementation of the policy with respect to the Inter-American Defense Board (paragraph 18a.) and standardization (paragraph 18e). That Department believes United States leadership in the Inter-American Defense Board is impaired as a result of our inability to furnish classified information to the Board while Guatemala is a member. The Department of Defense is also concerned over continued substantial purchases of military equipment from non-United States sources which adversely affect efforts to standardize military equipment in Latin America. A study of these two problems is suggested by the Department of Defense.

d. extent of agency interests

The following agencies are informed of national policy on Latin America by having copies of NSC 144/1 furnished to them:

State, Defense, Foreign Operations Administration, Treasury, Office of Defense Mobilization, Central Intelligence Agency, and Bureau of the Budget.

The following agencies participated in the preparations for the Tenth Inter-American Conference and/or were represented on the United States Delegation to the Conference:

State; Treasury; Defense; Justice; Interior; Commerce; Agriculture; Labor; Health, Education and Welfare; United States Information Agency; Foreign Operations Administration; Export–Import Bank; Housing and Home Finance Agency; Tariff Commission and Federal Reserve Board.

The decision to purchase copper from Chile was made by the Office of Defense Mobilization.

Action on control of subversive activities is based in part on information furnished by the Central Intelligence Agency.

[Page 64]

Action on control of the shipment of strategic materials is the responsibility of the Foreign Operations Administration which also administers the bilateral and technical cooperation program.

Shipping, aviation and communication matters are of interest to the Department of Commerce, Civil Aeronautics Authority and Federal Communications Commission, respectively.

Any financial matter reported on is of concern to those agencies which are members of the National Advisory Council.

The section in this report on information and related activities has been discussed with the United States Information Agency.

The military section of this report was made available in draft to the Department of Defense and through it to the three Armed Services. Their comments were taken into consideration in the report.

e. emerging problems and future actions

The principle emerging problems or those which may require future action are receiving consideration by the appropriate agencies.

The serious economic situation in Bolivia appears to be somewhat ameliorated but is by no means solved and requires very careful watching. While our purchase of Chilean copper should give Chile a breathing spell, heroic measures are required to correct the deteriorating economic situation in that country and it is doubtful that the present administration there will cope effectively with the problem.

Communism continues to be a threat to the security of the hemisphere. While it constitutes a problem in most of the countries of the hemisphere it is particularly serious in Guatemala and the focus of communism in that country, if not actually responsible for is at least materially contributing to, the unsettled political situation in Central America. The political situation in Brazil continues to be uneasy because of a not too satisfactory economic situation which is being capitalized on by the communists in their current strong bid for official status in that country.

The forthcoming economic conference at Rio de Janeiro in the fall will require a series of decisions on our economic policy.

f. special annexes

There is attached as an annex to this report a “Brief Report on the Tenth Inter-American Conference.”47

  1. Covering memorandum by Mr. Holland and Walter Radius, the Operations Coordinator, dated May 11, 1954, is not printed. Drafted by Mr. Sayre; cleared with the Offices of Regional American Affairs, Middle American Affairs, and South American Affairs, the Bureau of Economic Affairs, the Policy Planning Staff, the Office of the Deputy Under Secretary of State, the United States Information Agency, and the Department of Defense. The report was prepared for the Operations Coordinating Board; it was transmitted to the OCB under cover of a memorandum by Mr. Radius to Mr. Elmer Staats, Executive Secretary of the OCB, dated May 25, 1954, not printed. (OCB files, lot 62 D 432, “Latin America, 1953–1954”)
  2. The source text contains no indication of a drafting date; the date supplied is that of the transmittal memorandum.
  3. Reference is to Resolution XCIII (“Declaration of Solidarity for the Preservation of the Political Integrity of the American States Against the Intervention of International Communism”), adopted by the Tenth Inter-American Conference; for text, see Tenth Inter-American Conference: Report of the Delegation of the United States of America With Related Documents (Department of State Publication 5692, Washington, 1955), pp. 156–157.
  4. Reference is to the Fourth Extraordinary Meeting of the Inter-American Economic and Social Council (Meeting of Ministers of Finance or Economy), popularly referred to as the Rio Conference, which was held at Quitandinha, Brazil, Nov. 22–Dec. 2, 1954; for documentation relating to the conference, see pp. 313 ff.
  5. Not printed.
  6. Apparent reference to Resolution XXXII (“The Preservation and Defense of Democracy in America”), adopted by the Ninth International Conference of American States; for text, see Ninth International Conference of American States: Report of the Delegation of the United States of America With Related Documents, pp. 266–267.
  7. Apparent reference to Resolution VIII (“Strengthening of Internal Security”), adopted by the Fourth Meeting of Consultation of Ministers of Foreign Affairs; for text, see Fourth Meeting of Consultation of Ministers of Foreign Affairs: Proceedings, pp. 244–246.
  8. Reference is to the case involving Victor Raúl Haya de la Torre, the Peruvian political leader who had sought asylum in the Colombian Embassy in January 1949 and was unable to leave until Mar. 23, 1954, when the Peruvian Government permitted him to proceed to Mexico.
  9. The Eighth Regular Session of the General Assembly, which met at New York, Sept. 15–Dec. 9, 1953, recessed without being reconvened.
  10. For documentation relating to this subject, see vol. iii, pp. 1427 ff.
  11. For documentation concerning these subjects, see volume xi, Part 1.
  12. For documentation relating to this subject, see vol. iii, pp. 312 ff.
  13. For a list of the U.S. Delegation, see Tenth Inter-American Conference: Report of tht Delegation of the United States, pp. 203–205.
  14. Ezra Taft Benson.
  15. Harold E. Stassen.
  16. Joseph M. Dodge.
  17. Reference is to the second progress report on NSC 144/1, dated Nov. 20, 1953, p. 26.
  18. A study of the operations in Latin American countries of the Export–Import Bank and International Bank and their relationship to expansion of international trade; an interim report; Senate Report 1082, 83d Cong., 2d Sess. (Washington, 1954).
  19. For information on the referenced special missions to Costa Rica and Panama, see the Department of State Bulletin, Nov. 2, 1953, p. 586.
  20. John Davis Lodge.
  21. Brig. Gen. Gustavo Berrio Muñoz.
  22. Instructions were contained in a circular airgram, dated Apr. 19, 1954, not printed. (720.001/4–1954)
  23. Reference is to Chilean Foreign Office note No. 3, dated Mar. 25, 1954; a copy and translation were transmitted to the Department of State under cover of despatch 763, from Santiago, dated Mar. 26, 1954, not printed. (825.2542/3–2654)
  24. For text of the agreement, with final protocol, signed at Washington, Nov. 15, 1950, by representatives of Canada, Cuba, Dominican Republic, United Kingdom in respect of the Bahama Islands, and the United States, and entered into force for the United States, Apr. 19, 1960, see TIAS No. 4460 or 11 UST 413.
  25. The referenced discussions were held at Washington, Mar. 29–Apr. 2, 1954; summary reports by the U.S. Delegation are in files 911.40/5–654 and 911.4112/5–1154.
  26. The sixth Pan American Highway Congress convened at Caracas, July 11–23, 1954; the final report of the U.S. Delegation, dated Sept. 1, 1954, is filed under 398.2612 IA/9–1454. For text of the final act of the Congress, see Sexta Congreso Panamericana de Carreteras: Acta Final (Caracas, 1954).
  27. For additional information on the following loans, see the documentation concerning U.S. relations with Brazil, Ecuador, and Peru.
  28. Andrew N. Overby.
  29. Additional information on the following loans granted by the Export–Import Bank is included in the documentation concerning United States relations with Argentina, Brazil, Chile, Cuba, Colombia, Mexico, and Uruguay.
  30. Approved in principle but credit not yet formalized. [Footnote in the source text.]
  31. Approved in principle but credit not yet formalized. [Footnote in the source text.]
  32. Authorized but not yet announced, since final negotiations have not been completed. [Footnote in the source text.]
  33. Public Law 350, approved May 6, 1954; for text, see 68 Stat. 70.
  34. For documentation on this subject, see volume i .
  35. For text of announcement by Secretary Humphrey, dated Feb. 18, 1954, concerning the signing of a stabilization agreement between the United States and Peru, see Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1954 (Washington, 1955), p. 289.
  36. Eugene R. Black.
  37. Presumably a reference to Mr. Black’s visit to Argentina, Mar. 14–17, 1954, as part of a larger tour by a group of IBRD representatives to ten Central and South American countries (Argentina, Brazil, Costa Rica, Ecuador, Honduras, Nicaragua, Panama, Peru, El Salvador, and Uruguay); documents relating to the tour are in file 398.14.
  38. Apparent reference to a meeting of the Federación Mundial de la Juventud Democrática (World Federation of Democratic Youth), scheduled to convene in May in Santiago; documentation relating to the meeting is contained in file 720.001 for 1954.
  39. Apparent reference to a meeting of the Friendship Festival of Youth and Students of Central America and the Caribbean, originally scheduled to convene in Guatemala City in October, but rescheduled to open in Santiago in January 1955; pertinent documents are in file 720.001 for 1954 and 1955.
  40. Reference is to the Latin American Conference of Women, which met in Rio de Janeiro, Aug. 27–30, 1954; a report on the results of the conference is contained in despatch 265, from Rio de Janeiro, dated Sept. 13, 1954, not printed. (720.001/9–1354)
  41. The referenced congress convened at Santiago, Nov. 23–Dec. 4, 1953; a report on the results of the meeting is contained in despatch 38, from Santiago, dated Dec. 21, 1953, not printed. (398.43 SA/12–2153)
  42. Alexander Wiley (R.-Wis.), Chairman, Senate Committee on Foreign Relations.
  43. Apparent reference to remarks concerning Guatemala made by Senator Wiley on the Senate floor; for text, see Congressional Record, 83d Cong., 1st Sess., vol. 100 (pt. 1), pp. 248–250.
  44. For text of the military assistance agreement between the United States and Nicaragua, signed at Managua, Apr. 23, 1954, and entered into force on the same date, see TIAS No. 2940 or 5 UST 453.
  45. A military assistance agreement between the United States and Honduras was signed at Tegucigalpa, May 20, 1954, and entered into force on the same date; for text, see TIAS No. 2975 or 5 UST 843.
  46. No military assistance agreement between the United States and El Salvador was signed in 1954.
  47. Of 1951.
  48. Between Nov. 17 and Dec. 5, 1953, Lieutenant General Craig visited Argentina, Bolivia, Brazil, Chile, Paraguay, Peru, and Uruguay; pertinent documents are in file 397.5 IA.

    Between Feb. 15 and Mar. 2, 1954, he visited Colombia, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panamá, and Venezuela; pertinent documents are in file 711.5820.

  49. For text of the exchange of notes, signed at San Salvador, Dec. 2, 1953, and Mar. 11, 1954, and entered into force on the latter date (operative retroactively to Dec. 31, 1953), extending the agreement of Aug. 19, 1947, providing for the services of a U.S. military aviation mission to El Salvador, see TIAS No. 2933 or 5 UST 416.
  50. Not printed.