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

110.15 HO/9–1954

The Assistant Secretary of State for Inter-American Affairs ( Holland ) to the Deputy Assistant Secretary of State for Inter-American Affairs ( Woodward )¹

secret

Buenos Aires , September 19, 1954.

Dear Bob : In every country I am, of course, trying to take up and achieve approval of our policies outlined for the Rio conference. In general my approach is along more or less the following lines:

Throughout the Hemisphere there is intense popular interest in the improvement of living standards as regards income, housing, education, nutrition, and so forth. Our governments must coordinate their efforts to convince the American peoples that within the free enterprise system they can hope to satisfy this aspiration.

The basic problem that we must study are the means to achieve this purpose.

The overwhelming majority of the burden of this task [sic] must rest upon the people and government of each state. However, each state should make a determined effort to contribute in accordance with its own capacity to the efforts of the other American States in this regard.

Since the Caracas conference we have given intense study to the contribution which our own Government can make. In general, we feel that it falls in three categories:

1. Commerce

We feel that through intensified inter-American trade more than by any other means the nations can help strengthen their economies in order to achieve the basic goal indicated above. It will be our own policy to seek the expansion and stabilization of inter-American trade. To that end we shall seek the gradual, selective reduction of such barriers as tariffs and quotas.

In this connection I always point out that there are very strong sectors within our own people and Government who are sincerely opposed to general specific efforts in this field; that, therefore, our performance may not be uniformly consistent with those announced policies, but that it will be the basic guide to our actions.

I cite as instances of the application of this policy the President’s decisions with respect to tung oil and the lead and zinc case. In this latter case I emphasize his statement to the effect that he would not achieve the obvious benefits to our local industry at the cost of substantial prejudice to friendly suppliers of lead and zinc.

2. Government Finance

I state that we believe in the private enterprise system. Not because of any peculiar sanctity, but because it has demonstrated itself to be the best vehicle for efficient production of goods and services yet known. I argue that the bulk of the capital needed for economic development should come from private sources, particularly those within the countries. The United States Government recognizes, however, that private capital is not available for many desirable economic development projects. The International Bank, an excellent institution, was created to meet this need and it would be short-sighted not to utilize its services to the utmost. Accordingly, it should be the first source of governmental finance for projects in which private capital is not interested. We recognize that there will be many sound projects which lie beyond the scope of the normal activity of the IBRD.² With respect to these the policy of our Government will be through the Export–Import Bank to satisfy all applications for economic development loans which satisfy the following requirements:

a. Projects for which neither private capital nor local governmental capital³ is not available and which lie without the scope of activity of the IBRD,

b. Projects which are economically sound and are within the interest of both Governments, and

c. Projects whose amount exceeds neither the sound borrowing capacity of the applicant nor the lending capacity of the Bank.

It is our judgment that the lending capacity of the Ex-Im Bank is and will continue to be adequate to assure implementation of this policy.

The United States recognizes that there are sincere factors [sic] in Latin America who urge broad grant-aid programs or the granting of unsound loans. We feel that such programs of aid would demoralize our private institutions and businesses. Our experiences in Italy and in certain other areas of the world have satisfied us that such aid programs are not the best means either to strengthen local economies or to combat Communism.

3. Technical Aid

It will be our policy to expand and diversify technical aid, always respecting the wishes of the Governments affected both as regards the amount and the nature of our aid.

In Venezuela both the President⁴ and Foreign Minister⁵ assured me they would take the position that in these policies the United States has fully fulfilled the expectations of that Government. In Brazil the Ministers of Foreign Affairs⁶ and of Finance⁷ both gave us the same assurances. There, there were a number of officials including Roberto Campos, the Brazilian Consul General in Los Angeles and certain others in the Ministry of Foreign Affairs who state that this policy would provoke wide resentment as falling short of the value of aid generally expected. However, the two Ministers mentioned and assured us that by direct personal contacts they will undertake to convince the heads of other delegations that these policies are sound and reflect the most that should be expected of the United States.

In Uruguay the Minister of Finance⁸ assured us that these policies satisfy the expectations of his Government and that their delegation will support us. We were given the same assurances by the President⁹ and the Minister of Finance¹⁰ in Paraguay. In a conference this morning with President Perón he stated emphatically that these policies were fully adequate, and that any policy of extensive grant-aid would be positively harmful to our prestige and relations in the Hemisphere.

The foregoing is very closely the statement which I am making at each stop. I would be grateful if you would discuss it with Sam Waugh and others who may be interested. If you or they have suggestions for its improvement, please let me know. I realize, of course, that we have not yet reached the South American countries from which we can expect most of the discontent with these policies.¹¹

With warmest regards,

Sincerely,

Henry

1. Between Sept. 5 and Oct. 10, 1954, Mr. Holland visited Mexico and all of the countries of South America for the purpose of explaining to and gaining acceptance among the leaders of the respective governments for the policies developed by the Sub-Cabinet Committee in preparation for the Rio Economic Conference.
2. The words “Export–Import Bank” were crossed out here and IBRD added by hand.
3. The words “neither” and “nor local governmental capital” were added by hand.
4. Col. Marcos Pérez Jiménez.
5. Aureliano Otáñez.
6. Vincente Ráo.
7. Oswaldo Aranha.
8. Eduardo Acevedo Alvarez.
9. Gen. Alfredo Stroessner.
10. Carlos R. Velilla.

11. A memorandum by Mr. Woodward to Under Secretary Hoover, dated Oct. 5, 1954, reads in part as follows:

    “I believe you will agree that the approach taken by Mr. Holland is very sound and clear. However, I wonder if you share my apprehension concerning the possibility that he may be too sanguine that the NSC policy on loans by the Export–Import Bank will actually be carried out. I am afraid that we will never have a clearly established policy with respect to the use of the Export–Import Bank for economic development until we obtain clear-cut Congressional sanction for this purpose. Under the authorizing law, the purpose of the Bank is to facilitate exports and imports. We have had recurring struggles in order to use the Bank as an instrument of foreign policy and economic development, because there is no clear-cut Congressional sanction for these purposes.” (110.15 HO/10–554)

    An undated note initialed by Mr. Hoover is attached to Mr. Woodward’s memorandum and it reads as follows: “Return to ARA. Thanks, it looks encouraging.”