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

MSA–FOA Director’s fries, FRC 56 A 632, “Rio Economic Conference”

Memorandum by the Acting Regional Director of the Office of Latin American Operations (Hardesty) to the Director of the Foreign Operations Administration (Stassen)

confidential

[Washington,] July 19, 1954.

Subject:

• The Sub-Cabinet Committee for the Rio Economic Conference

1. The following information pertaining to the Sub-Cabinet Committee for the Rio Economic Conference may be of interest to you as background for your luncheon tomorrow with Mr. Holland.

2 After 10 meetings of the Sub-Cabinet Committee, I have reluctantly come to the conclusion that the results of its work will prove inadequate. Only a few additional meetings are scheduled and I believe that when the final policy decisions are related to the needs of the situation, the Committee’s work will remain almost fruitless unless it is given the benefit of higher level directives.

3. Only two policy statements¹ have been finalized: the first recognizes the need on the part of most Latin American countries to improve their economic development planning and programming, and affirms the role of technical cooperation in such planning and programming, subject to numerous qualifying and inhibiting conditions; the second recognizes that “development banks” may serve useful functions, but again, the qualifications would make effective implementation difficult.

4. I have been pressing for two over-all policy objectives which have found practically no recognition by the Committee:

a. U.S. national interest requires a faster rate of economic development throughout Latin America. Accordingly, there is the need to give new direction and amplification to technical assistance programs, on a planned country basis, toward the achievement of improved living standards by means of greatly accelerated economic development.

b. It should be an objective of the United States to undertake to strengthen the present system of economic development financing by providing the missing component in essential capital needs through expansion of IBRD and Eximbank lending as a necessary stimulant or supplement to private investment. Also, consideration should be given to FOA development assistance advances.

5. So far, there has been little disposition to relate the recommendations of Dr. Milton Eisenhower² (the basis of FOA’s position) to the formulation of our economic policy toward Latin America. Both Commerce and Treasury representatives on the Committee accompanied Dr. Eisenhower on his trip. However, his recommendations, I understand, represented his own conclusions rather than those of his party.

6. With respect to financing economic development, FOA and State support a level of public loans up to $1 billion over the next few years for essential projects which do not attract private capital, the idea being that IBRD would be the first bank or recourse for such lending but that Eximbank and FOA would make up the difference for sound projects to the extent to which IBRD did not lend. The proposal is most vigorously opposed by Commerce and Treasury representatives on these grounds:

a. Any mention of a figure is tantamount to a commitment.

b. It is impossible to forecast the creditworthiness of Latin America.

c. Latin America knows that there is an unlimited source of financing in the United States, including IBRD and Eximbank; the inference is that the banks will look at such projects as are brought forward and relate them to the extent to which Latin American countries put their financial houses in order to enhance creditworthiness.

7. I feel a directive is needed which will say, not “how little can we do to appease Latin American desires for economic cooperation with the United States?”, but “how much must we do to insure the security of the United States?”, as both the time and opportunity to do this are running out.

8. There is a clear indication that the technical agencies participating in the Technical Cooperation Program are working toward independence from FOA in their operations. This cumulative self-interest could eventually eliminate FOA.

1. Neither printed.
2. Reference is to the set of recommendations contained in Dr. Eisenhower’s report submitted to President Eisenhower under date of Nov. 18, 1953, which resulted from the factfinding tour to South America that he conducted for the President between June 23 and July 29, 1953. Regarding Dr. Eisenhower’s trip and his report, see the editorial note, p. 196, and Mr. Bennett’s memorandum, Aug. 20, 1954, p. 229.