S/P–NSC files, lot 61 D 167
Memorandum by the Assistant Secretary of State for Inter-American Affairs (Holland) to the Under Secretary of State (Smith)1
Subject:
- “Talking Paper” for NSC Meeting2
For several years in policy papers, in meetings and in public announcements the United States has been talking about how important its relations with Latin America are and about how we are going to start doing something to demonstrate our interest in the area.
It is my impression that when we get around to economics our performance has been largely verbal. I ask myself when we are going to start doing something about our relations in these countries and how long we are going to expect them to be satisfied with fine phrases.
The very narrow escape that we had in the Guatemala crisis has centered public and congressional attention on Latin America. The public and the Congress feel strongly that this Government has got to do whatever is necessary to bring these countries closer to us. In the economic field those policies are going to be weighed and measured at the forthcoming conference beginning in Rio de Janeiro on November 22.
I believe that we can go to Rio with policies that will make that meeting a success.
The subject that interests the Latins more than any other one is the question of trade barriers.
The people of Latin America are obsessed with a determination to strengthen their economies and improve living standards. The insistence of the governments on stronger economies is simply a reflection of this very strong feeling among the people.
The government leaders fully understand the obvious fact that Latin America cannot achieve much economic progress unless she trades with the United States. Therefore, the No. 1 problem at Rio is going to be the question of trade barriers. If we convince the Latins that the policy of this Administration will be to avoid tariff increases, quotas, and other trade barriers which would reduce existing levels of inter-American [Page 331] trade and that our policy would be one of gradual, selective reduction of trade barriers, they will be fully satisfied on this score. That happens to be the policy the President set out in his message to Congress on foreign economic policy of March 30.3
The next most important subject will be that of government finance. If we convince the Latins that there will actually be a more liberal policy on the part of the Export–Import Bank; that we are going to make loans available under the conditions outlined in the Planning Board recommendation, we believe that the Latin Americans will be satisfied on this point. In other words, if they are assured of a liberal Export–Import Bank policy I do not feel that grant aid or so-called “soft loans”4 are going to be necessary. To be effective this policy is going to have to be stated very positively. I think within the limits of the Planning Board paper which are pretty strict and include that of the lending capacity of the Bank we should say that we are prepared to meet the entire demand.
The important thing about our policies on these two points, trade and government credit, is going to be the subjective intent of the men who are implementing those policies. I think we should determine here and now whether we do in fact intend to try to prevent any increase in trade barriers which will reduce existing volumes of trade, and whether it is in fact the intention of this Government that the Export–Import Bank will pursue a substantially more liberal policy. If so, then I believe that these policies can be so stated to the Latin Americans as to satisfy them at Rio.
Another point that will be important at Rio is whether the United States Government is going to engage in any sort of a price stabilization program to assure minimum prices for the principal products of Latin America. I believe that the Latin Americans understand that we cannot undertake such a program, and that our failure to do so will not jeopardize the success of the Rio Conference.
The Latin Americans are going to be interested in our continuing our programs of technical aid, and I believe that our policies on this are sound.
A concrete example of the sufficiency of these policies to make a success of the Rio meeting is the case of Mexico. Until early this year our relations with Mexico were decidedly unsatisfactory. Today they are better than they have been in several years. There are four reasons for this. First, the Mexican Government was startled at the strong unfavorable reaction of its own people regarding Mexico’s stand on the anti-Communist resolution at Caracas. Second, the Government was startled [Page 332] at the very strong adverse public reaction to its devaluation of the peso. Third, the granting of an International Bank loan to rehabilitate the Southern Pacific Railroad of Mexico is interpreted as evidencing a favorable lending policy on behalf of this Government even if it was the International Bank. Fourth, the President’s decision to refuse to raise the tariffs on lead and zinc5 has been accepted in Mexico as proof that the President’s stated policy on expanding foreign trade will in fact be followed in this hemisphere.
I believe that the policies which have produced this result in Mexico will be adequate generally in the hemisphere if Latin America is convinced that we will follow them in good faith.
These points obviously don’t add up to a complete foreign policy for Latin America, but they are the most important features of an economic policy.
- Drafted by Mr. Holland.↩
- Apparent reference to the 212th meeting of the NSC, held Sept. 2, 1954, attended by Acting Secretary Smith; for an extract from the memorandum of discussion at the meeting, see p. 67.↩
- For text of President Eisenhower’s message, see Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1954 (Washington, 1960), pp. 352–364, or Department of State Bulletin, Apr. 19, 1954, pp. 602–607.↩
- Loans repayable in local currency rather than in dollars.↩
- For additional information concerning this subject, see Department of State Bulletin, Sept. 6, 1954, pp. 339–340.↩