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

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

Memorandum by John C. Cady of the Office of Latin American Operations to the Director of the Foreign Operations Administration ( Stassen )

confidential

[ Washington ,] August 27, 1954.

Subject:

• Policies Developed by the Sub-Cabinet Committee on the Rio Economic Conference

At its nineteenth meeting on August 20, the subject Committee adjourned until sometime in October, when it will consider the individual position papers on Rio agenda items which are to be prepared by the Interdepartmental Committee on Latin American Economic Affairs (EA), pursuant to the policies developed by the Committee. The EA Committee, which includes FOA representation, will have its first meeting today—August 27.

The policies developed by the Sub-Cabinet Committee may be summarized as follows:

A. Programming of Economic Development and Role of Technical Cooperation

1. Favors the establishment of national agencies, where lacking, to prepare economic development programs, fix priorities and coordinate public and private investment. Endorses technical assistance in this type of activity (including the very limited use of joint commissions).

2. Adopted the position that United States should take the initiative at Rio in proposing that discussion of development programming and related problems of member countries be placed on the agenda for the 1955 annual meeting of IA–ECOSOC. The hope is that a realistic exchange of views on common problems will result in more effective development planning and programming.

3. Accepted the principle that technical cooperation has reached a stage of development in Latin America which requires broadening and more long-range planning. Endorsed the concept that it is the United States’ intention to proceed, subject to the interest and participation of the other country and availability of personnel and funds, with actual planning of activities for that period of years appropriate to the particular program from the viewpoint of the contribution it can make to balanced economic development.

B. Financing of Economic Development

1. Adopted the position that the economic development of Latin American countries will be best served by adherence to the principles of the private enterprise system; that the United States should exert constant but discreet practical pressure in favor of private initiative. Measures toward that end would include expanded use of Eximbank to assist private enterprise; technical assistance, preferably through private channels, and encouragement to private United States firms and business associations (also IBRD) to develop more productive programs for promoting private enterprise.

2. Proposes the announcement that (a) the United States is prepared to conclude as promptly as possible appropriate agreements for the avoidance of international double taxation and the prevention of fiscal evasion, urging the Latin American States to be more receptive to the United States’ proposal to negotiate such agreements, and (b) the United States will continue to explore measures that will progressively reduce and eliminate international double taxation and avoid discriminatory or unduly burdensome taxation and thereby encourage the flow of private capital to countries which by their own tax regimes and other policies are attractive to United States capital.

3. Endorses the position that IBRD is the primary source of development financing for projects not attractive to private capital. Proposes the annoucement at Rio that Eximbank, within its prudent lending capacity, will supplement IBRD lending to the extent necessary to satisfy all applications for the financing of sound development projects which are in our common interest and which are not being financed by IBRD. This lending will depend to a very considerable extent upon the degree to which the other country desires to obtain private and public capital and takes “house-in-order” actions to attract it. (The Committee, with FOA reserving its position, considered that the foregoing, plus the flow of private capital, would satisfy all development financing needs, and it did not therefore accept the proposal of utilizing FOA development advances as loans or grants, nor did it accept the concept of United States loan assistance to create a Latin American Development Bank to finance small industries and a Latin American Clearing House to facilitate convertibility.)

4. Recognizes, subject to limiting qualifications, that a useful function can be performed in some cases by “national development banks” in mobilizing domestic capital and promoting economic development, and that in such cases United States assistance may be appropriate through loans and other means as circumstances may warrant in each case.

C. International Trade and Price Stabilization

1. Considers that special measures are not needed to maintain an equitable relationship between the prices of primary products and those of manufactures, nor that an international price parity system is a practical possibility. Normal market prices can be relied upon to achieve fair and equitable price relationships.

2. Places more reliance upon normal corrective forces through the market price mechanism than on special measures such as buffer stocks and commodity agreements which would be made use of only in exceptional cases, the burden of the proof of feasibility and effectiveness to rest with the proponents of the measure.

3. Adopted the position that the long-term stockpiling policy should not be presented at Rio as a significant solution to the price stabilization problem and that the delegation should confine itself to the statement that a stockpiling program is being developed which is likely to have some tendency in the direction of greater stability of world prices.

4. Supports GATT,¹ hopes that countries which are not members will join, and endorses the aims to change the organizational provisions and trade rules of the GATT to make it a simpler and stronger instrument for international cooperation and the expansion of international trade.

5. Considers participation in COCOM ² and CG by Latin American Governments as unwarranted since the problems of concern to participants are those of highly industrialized economies heavily engaged in exporting advanced technological items. (In accordance with Caracas Resolution LXXV³ recommending ample exchange of views on restrictions on trade in strategic raw materials, discussions are under way with certain of the Latin American governments regarding controls over exports to the Soviet Bloc.)

6. Proposes the announcement at Rio that it is the policy of the present Administration to pursue stable long-term trading policies, including the gradual selective reduction of United States tariffs and other barriers to trade.

1. Reference is to the General Agreement on Tariffs and Trade, concluded at Geneva, Oct. 30, 1947, and entered into force for the United States, Jan. 1, 1948; for text, see Department of State Treaties and Other International Acts Series (TIAS) No. 1700, or 61 Stat. (pts. 5 and 6). For documentation relating to the negotiation of the agreement, see Foreign Relations, 1947, vol. i, pp. 909 ff.
2. Reference is to the Coordinating Committee of the Paris Consultative Group, an informal international organization established in 1950 by a group of non-Communist nations for the purpose of controlling the export of strategic goods to Communist countries; the senior body within the committee was known as the Consultative Group (CG). For documentation concerning the formation of COCOM, see ibid., 1950, vol. iv, pp. 65 ff.
3. For text, see Tenth Inter-American Conference: Report of the Delegation of the United States, p. 139.