102. Memorandum From the Director of the Executive Secretariat (Howe) to the Under Secretary of State (Hoover)1

3:00 p.m. Appointment with Senator Smathers

Attached at Tab A is a briefing memorandum from Mr. Rubottom, with which Mr. Barnes concurs, for your meeting with Senator Smathers at 3:00 p.m. today.

At Tab B is a memorandum from E—Mr. Robinson raising certain questions in connection with Mr. Rubottom’s memorandum. Mr. Murphy considers that Mr. Robinson’s points are well-founded and suggests that, since lack of time prevents reconciliation of the outstanding differences, you take note of both points of view.

Fisher Howe

[Tab A]

Memorandum From the Acting Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Under Secretary of State (Hoover)2


  • Meeting with Senator Smathers March 26, 3:00 p.m.

United States economic policy toward Latin America is based on cooperative effort by the countries involved and ourselves to establish self-reliant economies which will afford individual citizens a steadily improving standard of living and, consequently, greater dignity and enhanced opportunity to participate in a democratic form of government. Senator Smathers undoubtedly would agree with this policy. The disagreement with him arises over the means of achieving the above objectives.

The Administration believes, and this policy has been really in effect under the administrations of both parties, that these objectives can best be obtained by adhering strictly to the private enterprise line, with exceptions recognized in certain key economic areas, and in relying to the greatest extent possible on trade, domestic and foreign private investment, and loans. This line can be defended, in [Page 411] our opinion, when one recognizes the favorable position held by Latin America in its access to the U.S. market.

There is a gap which has not yet been filled by trade, investment and loans. Part of this gap, and this applies especially to the public sectors like health and education and extending also into agriculture and other fields, is being filled by our technical cooperation program. Still another gap, acknowledging that there are bona fide emergencies that do arise in an area as big as Latin America, is being filled by grant aid where such crises exist—Bolivia, Guatemala and Haiti. Senator Smathers argues that there is yet another gap which he desires to fill in with funds from this program, gaps which cannot be filled by private investment or even loans.

I believe that we are now affording one-third of the countries, seven so far, with the assistance that he has in mind under PL–480 loans and there may be possibility of extending this type assistance to others. We might also reexamine Export-Import Bank loan policies to help in some of the fields he has in mind. Certainly World Bank loans might be feasible, if the countries would energetically seek them.

We can encourage and actively work toward a more liberal loan policy in line with the above, and we should redouble our efforts to encourage responsible, honest and efficient government administration in Latin America. No type of aid, Smathers Funds or otherwise, can offset such maladministration and malfeasance as has occurred recently in Haiti, Honduras and Ecuador.


On balance, I recommend that you tell Senator Smathers that (1) we are very sympathetic with the objectives he has in mind, (2) we intend to redouble our efforts to assist Latin America in the ways which will count most and which, in some cases, do not involve funds of any kind, (3) in the present climate, to recommend additional dollar assistance is simply not in accordance with the Administration’s view, and (4) if the Congress in its wisdom decides to vote the funds anyway, we shall see that they are spent wisely.

[Page 412]

[Tab B]

Memorandum From the Special Assistant in the Office of the Deputy Under Secretary of State for Economic Affairs (Robinson) to the Acting Assistant Secretary of State for Inter-American Affairs (Rubottom)3


  • Meeting with Senator Smathers

Unfortunately time has not permitted us to give your memorandum to the Under Secretary the thorough staff review which we should have liked. However, the following comments may be useful to you:

We seriously question the advisability of suggesting to Senator Smathers that Eximbank loan policies should be “more liberal.” Accordingly, we suggest that the material on this point toward the bottom of page 1 be deleted.
Although we have no specific objection to Recommendation No. (2), we don’t quite know what it means and would, therefore, raise a question with respect to it.
We suggest the insertion in Recommendation No. (3), after the words “dollar assistance”, of the following: “specifically earmarked for Latin America.” The purpose of this addition is to avoid prejudicing the Government’s decision regarding a development fund which would be world-wide in scope (including Latin America).

  1. Source: Department of State, Central Files, 720.5–MSP/3–2657. Confidential.
  2. Confidential.
  3. Confidential.