4. National Security Council Progress Report1


(Policy Approved by the President September 3, 1954; As Amended by NSC Action No. 1270–b, November 16, 1954)

(Period Covered: December 1, 1954, through July 14, 1955)

A. Summary of Major Actions and Decisions

Latin American reaction to the President’s briefing on June 30 of Latin American Ambassadors on the Geneva “Summit” Conference2 has been very favorable.
Vice-President Nixon’s visit to the ten Middle American countries in February and March 1955 created goodwill and was helpful in initiating action on legislation to accelerate construction of the Inter-American Highway. Congress has authorized the completion of the Highway in three years and appropriated $25,250,000 for the first year.3
Guatemala ratified the Rio Treaty on April 6, 1955,4 and it is now in force among all twenty-one American Republics. Guatemala and Venezuela approved the IADB General Military Plan;5 Mexico is now the only country which has not approved, except Panama, not now a participating member of the IADB. Argentina and Uruguay only have not ratified the OAS Charter.6
Grant military assistance agreements with Haiti and Guatemala have been concluded, thus making twelve Latin American countries now participating in the Grant Military Assistance Program. The military assistance program for FY 1950–55 for Latin America totalled $198 million, including the value of excess stocks. (Of this cumulative total, $23 million was programmed for FY 1955.) Of this amount, $150 million has been expended or shipped. The total paid for material obtained under reimbursable aid has amounted to $48.5 million, which had an original acquisition cost of approximately $150 million. (See also 21 c. below).
The bilateral military plan between the U.S. and Cuba was revised to provide a substantial increase in the Cuban military forces to be supported by the U.S. under the provision of MDAP.
The U.S. in January and February 1955 strongly supported the action of the OAS in applying the Rio Treaty to the invasion of Costa Rica by armed elements based abroad.
The United States signed bilateral agreements with Argentina, Brazil, Colombia and Venezuela for the supply of information and materials for atomic research programs.

B. Evaluation of Progress in Implementing NSC Policies and Objectives

With a few exceptions, the United States has made good progress in carrying out the courses of action outlined in NSC 5432/1.
Hemispheric Solidarity: The Rio Economic Conference7 was successful in averting divisive tendencies which might have threatened hemispheric solidarity. The U.S. commitment to satisfy all applications to the Export-Import Bank for sound economic development loans provided stated conditions were fulfilled, and the subsequent invigoration of the Export-Import Bank’s lending program, discouraged Latin American proponents of an Inter-American Bank and has to a considerable extent renewed confidence in U.S. continued constructive interest in this area. The successful action of the OAS in the Costa Rican situation not only enhanced the prestige of the OAS but furthered hemispheric solidarity by preventing a serious split between the so-called democratic countries and those with more authoritarian regimes. This action also strengthened the prestige of the United States in the majority of the Latin American countries. It also strengthened the principle of non-intervention which had been called into question by erroneous interpretations put on the circumstances surrounding the Guatemalan revolution of June 1954. It also served to confound Communist propagandists.
Increased Action Against Communist Penetration: The struggle against the Communists produced mixed results. The Brazilian and Chilean governments banned Communist-sponsored hemispheric meetings. The Governments of Bolivia, Chile, Cuba and Mexico showed increased awareness of the threat of Communism and acted against it, but any losses sustained by the Communists in Chile due to government action were offset by their success in forming a “popular front” with three small leftist groups and thus gaining control of two Senators (out of 45) and 14 deputies (out of 147). In Brazil, as well as Chile, political fragmentation and the inability of the governments to remedy the countries’ economic ills, have produced a situation where the Communists could advantageously fish in troubled waters.
Other Measures: The ICFTU Regional Organization of American Workers (ORIT), due to the active efforts of U.S. trade unionists in that organization, is now resisting indiscriminate anti-Americanism in the labor movements where it has affiliates or contacts. In general, ORIT is making headway in developing training and educational facilities, but it is still far from converting the backward Latin American trade union movements into a constructive force. The outlook for free trade unions in Guatemala has improved, due in part to U.S. Government policy and the backing of U.S. trade [Page 9] unions. The labor situation has improved in Honduras, but because of the immaturity of the government in handling labor matters the situation has to be watched very carefully.
Increased Stability and Economic Development: The United States in general maintained stable trading policies and moved toward reduction of barriers on trade. The administration’s project to extend the Trade Agreements program was approved by Congress without crippling amendments, and amendments to restrict the importation of petroleum products were beaten off. However, to avoid U.S. quotas, it was necessary to work out agreements with Argentina and Paraguay for voluntary limitations on their exports to the U.S. of tung nuts and oil and to discuss with the Venezuelans the possibility of similar voluntary restrictions on petroleum. Further, the Sugar Act of 1948,8 as amended, is currently under review in circumstances which indicate the probability of treatment for Cuban sugar considerably less favorable than that now being accorded.
Loans to Latin American countries authorized by the Export-Import Bank were $167 million as compared with $114 million in the preceding 7-month period. IBRD loan authorizations totalled $78 million (including the imminent $18 million Guatemala authorization)9 as compared with $77 million in the preceding period. Latin American countries paid $72 million to the Export-Import Bank and $7 million to the IBRD against the principal of outstanding loans. Economic development has been otherwise furthered by the continuation of grant aid to Bolivia, Guatemala and Haiti because of special conditions in those countries. Congress has authorized and appropriated $38.0 million for Development Assistance Programs in Latin America for FY 1956. This amount is $17.0 million more than the $21.0 million initially proposed by the Executive Branch. In FY 1955, Development Assistance obligations stood at $18.3 million.10
Programmed funds for technical cooperation for FY 1955 were increased from $23.5 million to $28.2 million.11 The most substantial increases were made in Bolivia, Chile and Guatemala. The specialized training program was stepped up. 481 trainees were brought to the country between December 1, 1954, and June 30, 1955, as compared with 375 in the same period the year before.
Following the Rio Economic Conference the trend toward state control of the economies of the Latin American countries, while not reversed, diminished. A variety of U.S. actions contributed to this trend. In Guatemala the Government, at considerable political risk, restored certain land to the United Fruit Company expropriated by the previous regime, thus opening the way for new investment by that company. A draft law to regulate petroleum development has just been promulgated in Guatemala, and Bolivia is giving serious consideration to legislation which would permit limited participation by private concerns in petroleum exploration and has carried on conversations regarding compensation with the former owners of the nationalized tin mines. Legislation has been approved in Chile easing some of the restrictions which weighed on the copper industry, and the Argentine Government also moved toward a limited revision of restrictions on foreign business operations and opened portions of the country to private petroleum companies, although the contracts are still pending subject to approval by the Argentine Congress. In contrast, Brazil showed little indication of relaxing its monopoly on petroleum exploration and exploitation, and Uruguay continued to follow a policy of subsidizing national and nationalized industry to the detriment of the economy in general and foreign private investors in particular. There are indications of a tendency on the part of the Venezuelan Government to engage in industrial activities formerly conducted by private enterprise.
Information and Related Activities: The policy of concentrating on priority countries was continued, while the impact of the information program was sharpened throughout the area by a system of planning activities around short-term goals. New binational centers, financed mainly from local sources, were founded in seven countries. The Educational Exchange Program was intensified and consistently improved.
Willingness to cooperate in the exposure of Communism has increased in many countries and a reversal of anti-U.S. attitudes has been achieved on the part of numerous key groups and individuals. The coordinated work of USIS and other agencies accelerated the trend of the major Mexican labor federations towards aggressive anti-Communism. In Chile, the habit of laying all economic ills at the door of the U.S. has begun to yield to more reasonable press treatment of economic issues. On the other hand, Marxism continues throughout the Continent to exert a pervasive influence among “intellectuals” of all social levels, alienating important segments of labor and youth from the U.S. and facilitating Communist maneuvers against our policies.
Military: Generally speaking, satisfactory progress has been made in carrying out the military courses of action: the military [Page 11] grant aid program continued; military missions were continued in eighteen countries; and approximately 2,900 Latin Americans attended U.S. military schools in the past year. However, standardization of Latin American military equipment and forces along U.S. lines continues to be threatened by European competition for the Latin American military equipment market. For example, only about 12% of Latin America’s jet aircraft are U.S. type; the remainder are British, and British jet equipment was acquired in greater numbers throughout Latin America over the past two years. In addition, several countries have acquired or are acquiring destroyers from the U.K. and other European countries. Due to the long life of ships, this type of transaction has a long-term adverse effect on standardization efforts. If this trend continues, it may lead to a substitution of military missions from other countries for U.S. military missions.
Paragraph 13, NSC 5432/1, states in part, “The United States should encourage acceptance of the concept that each of the Latin American states is responsible for maximizing its contribution by military and mobilization measures, to: … support of collective actions in other theaters by forces beyond the requirements of hemisphere security.” Inter-agency consideration between State and Defense is proceeding as to whether we should continue along this course of action in view of the difficulty each Latin American country has in meeting its more immediate requirements, unless the United States is prepared to support a much larger grant aid program to Latin America than at present.

C. Emerging Problems and Future Actions

The general statement of emerging problems as it appeared in the first Progress Report is still applicable. This is: in the political field, to find the means of associating the United States with the aspirations of the peoples of Latin America, thus counteracting communist propaganda that the U.S. “exploits” Latin America in opposition to the interests of the common people; in the economic field, to deal with the desire of Latin Americans to have the U.S. assume a larger share of the financial burden involved in solving their economic problems than the U.S. is willing to bear; in the military field, to find the means for implementation of the policy of standardization.
The specific problems which may be expected to arise during the next six months include:
Depending on readjustments in the Argentine Government that may result from the recent unsuccessful revolution there, questions regarding our policy toward that country may arise.
The Department of Defense has indicated that, in principle, a military assistance agreement with Argentina would be desirable at the appropriate time. Decisions will be required as to (1) the political desirability of such an agreement, and (2) the size and financing of a military assistance program.
The U.S. military assistance program for FY 1956 worldwide is currently under study. It appears that, because of limited funds generally and the low priority of Latin America, sufficient funds will be available for this area for support of existing programs only. An estimate of the dollar amount is not available.
Brazil is now in the midst of a presidential campaign, and it remains unclear whether presidential succession will take place by constitutional or other means. The political situation there will require continuing close attention and possibly decisions on our policy toward Brazil.
The unsettled economic situation in Brazil may require consideration on our part of further financial assistance in order to prevent a breakdown of the Brazilian economy.
The dispute between the U.S., on the one hand, and Peru, Ecuador and Chile, on the other, over the latter’s claim to jurisdiction over 200 miles of high seas off their coasts remains a problem in our relations with those countries. Some progress has been made, but continued consideration of solutions to the problem is required.
Spot prices in New York for green coffee have returned from a high of 97¢ per pound in April, 1954, to the 1950–1953 level of around 52¢ and future quotations are at a considerable discount below spot prices. If this downward trend continues, it will create serious economic problems for the thirteen coffee producing countries in Latin America. Decisions may be required on the attitude of the United States toward efforts to stabilize the coffee market.
There is continuing pressure to restrict petroleum imports, as well as lead and zinc imports, into the United States. This might force consideration of the possible use of the “security clause” of the Reciprocal Trade Agreements Act, as amended.12 Such restrictions would adversely affect Venezuela (petroleum) and Mexico and Peru (lead and zinc) and our relations with those countries.
Continuing consideration will be required of problems arising out of differences in the position of the Administration and the domestic sugar industry with respect to the revision of the Sugar Act. The Administration’s position, while not entirely satisfactory to foreign suppliers, is appreciably more favorable than the industry position and would result in doubling the quota for sugar from full duty countries. However, the treatment of Cuban sugar would be considerably less favorable than that now being accorded.
The energetic efforts being made by European countries to become suppliers of military equipment to Latin America threaten [Page 13] standardization along U.S. lines and indirectly the predominant U.S. military influence in the area, including military missions.
Problems will continue to arise in connection with the longstanding efforts to negotiate civil air agreements with Mexico and Colombia.
Soviet capabilities for the dissemination and direction of propaganda are increasing through the expansion of the diplomatic staffs and of cultural institutes. The Argentine-Soviet Cultural Institute has established four new branches during the past year. Uruguay has decided to reopen its diplomatic mission in Moscow. Sino-Soviet Bloc commercial missions in Latin America are being expanded.
Any change in the atmosphere of relations between the U.S. and the Soviet bloc will require a careful review of the content of our information and related programs.
Latin American governments may become unfriendly to ORIT under Jauregui (exiled member of the outlawed Peruvian Aprista political party) who may involve ORIT in Aprista politics.
Incidents will continue to occur in connection with the long-standing boundary dispute between Peru and Ecuador until the undemarcated portions of the border are agreed on. These incidents will involve the guarantors of the 1942 Rio protocol13—the United States, Argentina, Brazil and Chile.
  1. Source: Department of State, S/PNSC Files: Lot 62 D 1, NSC 5432 Series. Top Secret. A title sheet and a transmittal memorandum from Staats to Lay, August 24, are not printed. This progress report, the second on NSC 5432/1, was drafted by the Working Group on Latin America under date of July 19 and reviewed at a Board Assistants meeting on July 29. As a result of the meeting, the Board prepared a revised version on August 3. Thereafter, the Department of State recommended to the OCB Secretariat additional revisions, and these were incorporated into the report. The changes requested by the Department were described in a memorandum from Holland to Hoover, dated August 5. (Ibid., S/SOCB Files: Lot 62 D 430, Latin America—1955) The new version, dated August 10, was submitted to the OCB for discussion on that date. The OCB approved the report with a few minor revisions, and concurred in its transmission to the NSC.
  2. Apparent reference to the Conference of Heads of Government, held at Geneva, Switzerland, July 18–23.
  3. Since the cutoff date of this report, through further appropriations, Congress made the total amount of $62,980,000 available for completion of the Highway in three years. The Bureau of Public Roads had requested a total amount of $74,980,000 to complete the Highway in three years. No decision has been made as to when, if ever, additional appropriations will be requested. [Footnote in the source text. The last sentence of paragraph 2 was revised upon the recommendation of the Department of State. In the August 3 version of the progress report, the line contained no footnote and it read as follows: “Congress has authorized $75 million to complete the Highway in three years and appropriated one-third for the first year.”]
  4. For text of the Inter-American Treaty of Reciprocal Assistance (Rio Treaty), opened for signature at Rio de Janeiro, September 2, 1947, and entered into force for the United States, December 3, 1948, see 62 Stat. (pt. 2) 1681.
  5. Reference is to “The General Military Plan for the Defense of the American Continent”, approved by the Council of Delegates of the Inter-American Defense Board (IADB) on November 15, 1951; see Foreign Relations, 1951, vol. ii, pp. 10281029.
  6. For text of the Charter, signed at Bogotá, April 30, 1948, and entered into force for the United States, December 13, 1951, see 2 UST (pt. 2) 2394.
  7. Reference is to the meeting of Ministers of Finance or Economy of the American Republics as the Fourth Extraordinary Meeting of the Inter-American Economic and Social Council (commonly called the Rio Economic Conference), held at Quitandinha, Brazil, November 22–December 2, 1954; for documentation, see Foreign Relations, 1952–1954, vol. iv, pp. 313 ff.
  8. For text of the Act (Public Law 388), enacted August 8, 1947, see 61 Stat. 922.
  9. In a memorandum to Hoover, August 5, Holland noted that the Guatemalan authorization had been granted.
  10. In the August 3 draft of the progress report, the last line of paragraph 13, which was subsequently expanded into three lines in the final version, reads as follows: “During the period, Congress authorized to be appropriated $17 million more for FY 1956 than the $21 million previously programmed for FY 1956, as against the $18.4 million programmed for FY 1955.”
  11. In the August 3 draft, the figures provided in the first line of paragraph 14 are, respectively, “$22.5 million” and “$28.1 million”.
  12. Apparent reference to section 7 (national security amendment) of the Trade Agreements Extension Act of 1955 (69 Stat. 162), which authorized the President, upon the advice of the Director of the Office of Defense Mobilization, and after an appropriate investigation, to “adjust” the level of imports for any product deemed as threatening to impair the national security.
  13. For text of the protocol between Ecuador and Peru regarding peace, friendship, and boundaries, signed at Rio de Janeiro, January 29, 1942, and signed also by representatives of Argentina, Brazil, Chile, and the United States as guarantors, see 56 Stat. (pt. 2) 1818.