Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 2

752.5 MSP/11–1854

No. 925
Memorandum of Conversation, by the Officer in Charge of French-Iberian Affairs (West)

confidential

Washington, November 18, 1954.

• Subject: Spanish Ambassador’s Comments on U.S. Aid Program

Participants:

• Sr. Don Jose Maria Areilza, Spanish Ambassador
• The Under Secretary
• Mr. West, WE

In the course of his courtesy call on the Under Secretary, the Spanish Ambassador stated that he had been instructed to express his Government’s keen disappointment concerning the terms of U.S. aid to Spain which had been expressed to the Spanish Government by Governor Stassen during his recent visit to Madrid. The Ambassador stated that it had been the Spanish understanding from the start that the so-called McCarran aid (Section 109 of the Mutual Security Appropriation Act of 1955¹) would be in the form of a grant rather than a loan. Now, at a rather late date, the Spanish Government had been told that a portion of the $55 million must be repaid. He stated that Spain had already imported some $10 million worth of cotton and had placed further orders for $6 million worth. Orders had also been placed for several million dollars worth of cottonseed oil. He said that he realized that it was bad business practice to order goods before the terms of the transaction had been made clear, but the need for the cotton was urgent and the Spaniards had no reason to believe that even partial eventual payment would be required. His Government felt sure that it had never been the intention of the late Senator McCarran that any part of the $55 million should be repaid. He added that his Government was also very upset at the arbitrarily unfavorable exchange rate that had been set.

The Under Secretary stated that he was not yet familiar with the question raised by the Ambassador and suggested that the substance of what the Ambassador had stated be put in writing.² This the Ambassador agreed to do. It was pointed out to the Ambassador that, whatever the late Senator McCarran’s intentions might have been in proposing Section 109, that Section clearly referred to the provisions of Section 402 of the Mutual Security Act of 1954.³ The U.S. Government was obliged on a global basis to require that some $200 million of aid must be in the form of loans. Faced with the necessity of making a Solomon’s decision, it had been necessary to designate to each recipient country a certain amount of aid as being on a loan basis. Actually, the proportion of loans to grants was lower in the case of Spain than for several other countries. This was particularly noteworthy in view of the fact that many of the recipient countries were relatively less developed than Spain and less able to assume loan obligations.

1. For a summary of the McCarran Amendment, see Document 921.
2. An aide-mémoire, not found in Department of State files, was submitted by the Spanish Ambassador in response to this suggestion on Nov. 19.
3. Mutual Security Act of 1954, P. L. 83–665 (68 Stat. 832), Aug. 26, 1954. Section 402 authorized the use of $350 million for financing the purchase by foreign countries of surplus agricultural commodities.