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

confidential

[Washington,] November 8, 1954.

Subject:

• FOA’s Views Regarding the Proposed U.S. Positions for the Rio Conference

The Sub-Cabinet Committee on the Rio Economic Conference, so far as we can determine, has not yet completed its work of preparing proposed U.S. positions for the conference. Assistant Secretary Holland has, however, made public statements outlining in some detail the positions which the U.S. will take at the conference. These announced positions are in general agreement with the policies which, at this point, appear to be forthcoming from the Sub-Cabinet Committee. Mr. Hardesty has, in the Sub-Cabinet Committee, consistently noted FOA’s dissent on a number of proposed positions, and as we understand it, other agencies (notably Defense and Labor) have also noted some dissents. The following are the main proposed positions on which FOA has dissented:

1. Development Financing

There is general agreement that, from the standpoint of

(1) the needs of Latin America for development capital in order to achieve the economic development which U.S. interests require in that region, and

(2) the views of the reasonable elements in Latin America as to the assistance which the U.S. should provide to that region in obtaining needed development capital,

the U.S. position at Rio should indicate that the U.S. is prepared to give greater assistance to that region in obtaining needed development capital than it has provided up to now.

The proposed U.S. position on development financing is that the U.S., through the Eximbank exclusively, will make loans available for economic development projects where:

(a) funds are not available from private sources, from other governmental sources, or from the IBRD,

(b) the loan is economically sound,

(c) the project is in the mutual interest of the two governments and their peoples,

(d) the loan is within the lending capacity and charter powers of the Eximbank.

It is FOA’s view that, for various reasons, the Eximbank will not find it possible to fulfill all of the financing requirements of Latin America which are not met from non-U.S. sources and which, from the standpoint of Latin America’s needs and expectations, it is in the U.S. interest to meet. The established U.S. policy for the hemisphere is that, where trade and the development loans available from private sources, IBRD and the Eximbank are inadequate for the purpose (and only where these sources are inadequate), the U.S. will finance, through development assistance loans, the initiation or acceleration of projects which are in the basic U.S. interest and which would otherwise not be undertaken or would not be carried out at the rate required by U.S. foreign policy objectives. In accordance with its understanding of this established policy and basic U.S. objectives in Latin America, FOA believes that the U.S. should undertake the following program to supplement the other sources of development capital available to Latin America, and that the United States should announce this program as part of its position at the Rio Conference.

(a) Bilateral Development Assistance Financing.

FOA believes that the U.S. should undertake to provide bilateral development assistance financing to meet requirements of Latin American countries which come within the broad standards set out in the established policy described above. Such financing would normally be on a loan basis with the option of repayment in local currency, although provision should be made for grants as necessary to meet emergency situations such as were recently encountered in Guatemala and Bolivia.

(b) Assistance to a Latin American Regional Development Bank.

FOA believes that the U.S. position at Rio should be to respond favorably to the Latin American initiative for the establishment of a Latin American regional development bank by a counter-suggestion limiting it to a bank to which the U.S. would be prepared to provide $100 million of the original capital on a loan and matching basis. The primary function of the Bank would be to provide comparatively small loans to private Latin American businesses for the development of industrial and related productive enterprises.

The Sub-Cabinet Committee has rejected the FOA proposal, and Secretary Holland has publicly announced that the United States will oppose proposals for the establishment of a new Latin American or Inter-American development bank.

FOA believes that a regional development bank such as it has proposed would go far toward fulfilling Latin America’s acknowledged need for increased assistance from the United States in obtaining development capital. This proposal promotes the announced general U.S. objective of orderly economic development in Latin America, and in addition, furthers the established U.S. policy of evidencing sympathetic consideration for Latin American regional economic actions to concert sound development plans.

2. Financing Expanded Intra-Regional Trade.

In order to further the announced U.S. objective of orderly economic development in Latin America by helping to expand intra-regional trade, and to carry out the established U.S. policy of evidencing sympathetic consideration for proposals for constructive Latin American regional economic actions to promote increased trade, FOA has proposed that the U.S. at Rio favor the establishment by the Latin American countries of a clearing union in which foreign exchange balances arising out of international transactions could be settled in sterling or in dollars, and that the U.S. announce its willingness to loan at least $50 million for the initial swing account of such a clearing union. The Sub-Cabinet Committee has rejected the FOA proposal. Secretary Holland has made no mention of this topic in his public statements and, so far as we know, the Sub-Cabinet Committee is not preparing any position on it for Rio.

The two topics just discussed are the main ones on which FOA has regularly registered a strong dissent in the Sub-Cabinet Committee against the tentative position proposals of that Committee. FOA has also pressed for expansion and clarification of other tentative Sub-Cabinet proposals, as follows:

1. Technical Cooperation

According to Secretary Holland, the U.S. at Rio will take the position that it will strengthen and diversify the technical cooperation program in Latin America, as may be desired and requested by the Governments of that region. The Sub-Cabinet Committee will undoubtedly propose the same position, perhaps suggesting also that the United States announce its intention to program technical cooperation on a longer term basis. This position is in accord with the established policy on technical cooperation.

FOA is in agreement with this proposed position, but believes that the position should be clarified and strengthened in the following two respects:

(a) The U.S. should be prepared to make clear at Rio that, to the extent that may be necessary to accomplish the desired strengthening and diversification of the technical cooperation program, the U.S. is prepared to seek moderate increases in the funds annually appropriated for this program.

(b) In addition, FOA believes that the U.S. position should expressly state that the U.S. intends to expand training in the U.S. for Latin Americans in specialized fields important to the economic development of Latin American countries. This is directly in line with established policy.

2. P.L. 480 Use in Latin America

Assistant Secretary Holland’s statements have made no mention of the possible utilization of P.L. 480 (Agricultural Trade Development and Assistance Act of 1954) in Latin America, and so far as we know, no proposed position has been prepared by the Sub-Cabinet Committee.

FOA believes that the U.S. should make as encouraging a statement as is feasible on this subject at Rio.

3. Investment Guaranty Program

As we understand it, the proposed Sub-Cabinet Committee position is that the U.S. should simply be prepared to answer any questions which the Latin Americans may raise at Rio regarding the investment guaranty program.

FOA recommends that the U.S. make an affirmative statement on that program at Rio and that, furthermore, in informal discussions, the U.S. express a willingness to attempt to work out the problems which have, so far, held up the extension of that program in Latin America.

Congress has emphatically called for more vigorous action to get this program underway in Latin America.

4. Measures to Stabilize World Market Prices for Latin American Products

According to Secretary Holland’s public statements, the U.S. position is that it does not favor any measures that have so far been proposed to help stabilize prices, but that it is “not unwilling to consider those proposed by other American states.” The position, in effect, is that the U.S. will reluctantly acquiesce in discussions of this problem when Latin American countries insist. The FOA position is that the U.S. should express a willingness to discuss this problem.