107. Letter From the Assistant Secretary of State for Inter-American Affairs (Rubottom) to Milton S. Eisenhower1
Dear Milton: Following up our telephone conversation of a few days ago I would like to express a few thoughts in reply to your very good letter of November 25.2 You were certainly kind to [Page 429] comment on my performance “within established policy lines”, and I only hope that I continue to deserve your confidence.
First, I would like to comment on your statement that our relations in Latin America are degenerating due to the feeling in that area that their countries are being neglected in comparison to the treatment we are according countries in other regions of the world. Certainly it is true that, ever since the days of the Marshall Plan, that feeling has existed in Latin America either openly expressed or latent, however invalid and unreasonable it may have been. Your trip in 1953, and the report following it, helped greatly to overcome this problem and to point out the extent to which Latin America itself had profited from the Marshall Plan. I doubt that the feeling now is any more serious than it has been during the past decade.
However, there have been two other “plans” or “funds”, which have been publicized in the past two or three years which have fed additional fuel to the Latin American fires. One was the Asian Development Fund coupled with the Asian Nuclear Center announced for Manila. Both of them failed of meaningful implementation, and, I believe, the second was largely countered by your very successful efforts in leading our Latin American friends last year to agree to the recommendation to their presidents that there be established an Inter-American Nuclear Energy Commission. In the past three years, we have also helped many of the Latin American countries in the nuclear field on a bilateral basis to an extent at least equal to that we have other countries, so their original pique on that score has probably subsided.
Then there was the special fund for the Near East which was debated in and finally passed at the last session of Congress. This did not help our relations with Latin America, yet the problems in the Middle East were so acute and so immediate that there was a reluctant acceptance of the need of the leader in the free world to do something dramatic about it. I only wish that the results could have been more successful.
The most valid grievance, and certainly they have been articulate about it, which Latin America has had in recent months has been (1) the drop in the world market prices of their exportable commodities, and (2) the threat to impose increased tariffs on lead and zinc by the United States, and now possibly tuna and other products. You observed at first hand in Mexico the serious damage that both of the above items have done there, with United States-Mexican relations suffering probably more than the Mexican economy has. The same has been true in Peru, only more so.
With respect to (1) above, there is little that we can do except to hope that the indications hold up that the low point has been reached in metals prices and that coffee does not slump too badly, [Page 430] although, of course, we can and are giving prompt attention to Latin American requests for assistance to offset their reduced income from sales abroad as will be explained further below. As for (2), our relations with Latin America will suffer a body blow if the lead and zinc tariffs go through. A few constructive suggestions have been put forward at the Tariff Commission hearings. For example, one would increase the differential between the tariff on slab metal and that on ores and concentrates. It is too early to prophesy the outcome of the hearings but we shall hope for the best.
The picture is not entirely black, however. We are re-doubling our effort to help the Latin American countries on an individual basis when urgent requests are made of us, as is now the case more and more frequently. Today we are trying to rush through a considerably increased Title II or III grant food aid program for Colombia and Chile, in addition to all of the other things that we are doing in those countries. We are scrutinizing all pending applications in an urgent effort to steer Paraguay and Honduras into proper channels for early approval of Development Loan Fund projects. Now that the Constituent Assembly hurdle has been passed, we are actively searching for some additional means of helping Argentina, although that country probably will not get into high gear until after the presidential election in February and the inauguration in May of next year.
We have been able to use P.L. 480 effectively but the limited appropriation available this fiscal year has hurt us badly in Latin America. Argentina asked for 25 million dollars worth of cotton, then finally agreed to consider 10 million dollars worth. Try as we could, we could only offer 5 million dollars of cotton which the Argentines turned down, stating quite candidly that they did not wish to give up their right to rail against P.L. 480 (which does hurt their wheat market) for a piddling 5 million dollars. Colombia is seeking approximately 30 million dollars of P.L 480 products and will be lucky to get 10 or 12 maybe, which will not include the products of main interest to them. Paraguay requested 15 million this year under P.L. 480, finally asked for 5 million after we had argued them down and will probably obtain 3 million.
Of course, P.L. 480 was designed primarily to dispose of U.S. surpluses in such manner as to build up future markets for us. Altruistically, we also wanted to make food and fiber available in places where there was dire shortage. As it has turned out, many countries have sought P.L. 480 goods primarily to ease the drain on dollar exchange since payment may be made in local currencies, and secondarily to obtain the benefit of long-term loans of the sales proceeds. The above being the case, and have savored P.L. 480 in previous years, the small amounts now available earn us little kudos.
[Page 431]Your plan to use P.L. 480 proceeds, say from sales in Europe, to purchase goods needed in Latin America on initial consideration sounds reasonable. There are, however, practical objections to such so-called “triangular” deals. Wherever such a sale has displaced a normal seller in a market, he has cried to high heaven. The same cry has been heard from American businessmen adversely affected by such sales. Of course, an across-the-board program such as you suggested might offer compensations to European sellers since a loss in one market presumably might be made up in another market, although a few countries might be favored. The eventually objectionable feature however is that it encourages bilateralism, with all the consequences of discrimination and non-competitive practices implant therein.
The Pella Plan as you know envisages economic aid from the Marshall Plan countries to Asia and Africa out of the repayments due to the United States from loans (which is more favorable to Italy than most countries since Italy received more grant aid and less loans than others). There are similar rumblings elsewhere: I note that the Stevenson Plan this morning proposes the NATO countries as such offer aid to “underdeveloped areas”. This is intended also to exclude Latin America. I feel strongly that any such plan which excludes Latin America would bring a storm of protest much louder than anything we have heard and I am actively opposed to it. On the other hand, to join such a plan which would include Latin America would make a mockery out of our refusal to support an inter-American development fund or bank. Thus, you can see some of the dilemmas which we face.
I sincerely hope that we can get together soon to discuss some of these matters.
Billy and I are grateful for the President’s rapid recovery and feel that the prayers of the entire country, indeed the whole world, have been answered.
Very sincerely yours,