56. Instruction From the Secretary of State to All Diplomatic Missions in the American Republics2

CA–5350

SUBJECT

  • Latin American Criticism of Proportionate Distribution of United States Aid

Joint State–USIA circular instruction. Criticism of the proportional amount of United States aid to Latin America, as compared with economic assistance in other areas, especially Europe and the Far East, is so persistent as to constitute a serious factor in our good relations with other governments of this hemisphere. The criticism is voiced by the press, by political campaigners, by delegates at inter-American and international conference tables, and, both publicly and privately, by official spokesmen at the highest level. An even graver potential than criticism, however emotional and inaccurate, is the popular conviction among many citizens of the other American Republics that most of their economic ills—whether due to inflation, falling world markets, unbalanced budgets, discouragement of foreign capital, or corruption in government—are due either to the asserted grasping, materialistic policy of the United States or to alleged United States blindness to Latin America’s needs in the eagerness to rebuild the economies of Europe and the Far East.

This latter theory has at present the wider acceptance. It is being stressed, for instance, in Brazil, a country that is traditionally our ally and that has a present administration which we can endorse and would be glad to assist, but that so far shows extreme reluctance [Page 301]to accept terms which would make U.S. assistance remedial and not merely alleviating; such as, for example, permitting private enterprise to develop the immense oil resources which Brazil possesses but cannot itself develop, and taking practical measures to balance the budget so as to check the inflationary process.

In view of the prevalence of this attitude in the hemisphere, the Department and the Agency consider it essential that officers of the Embassy, especially those in frequent contact with leaders in public life and public opinions, make a concerted, concentrated effort to prove that the effectiveness of United States assistance cannot be measured accurately by dollar totals alone. There are many possible angles of approach to a factual presentation of the official United States record. The most important is that any realistic comparison of the merits of assistance given by the United States to Latin America with that to other more strategically endangered areas must be made primarily on the basis of objectives and results, not of total expenditures. The vast bulk of such expenditures outside the western hemisphere has been largely emergency and reconstruction in nature. No valid comparison can be drawn between United States aid to Europe and to Asian and Middle Eastern areas and the assistance the United States has given Latin America over the last nine years. One might as well reproach the United States for stationing troops in Europe and not in Latin America.

The enormous volume of United States funds directed to the Old World—whether in the form of grants, loans, manpower, equipment, or military assistance—has all been poured out in response to one overwhelming emergency. It has been necessary to rebuild, to shore up, to consolidate, and to defend the forces of freedom against an actual threat of physical encroachment by Communist imperialism on one front after another. This has been and still is a race against time, to construct a viable system of free nations out of a complex of war-weakened powers and under-developed, exposed countries.

United States relations with Latin America in the economic sphere have been and are entirely different. Latin America is the one sizeable area where there has been no war devastation and no impending threat of armed Communist aggression. (Infiltration of arms is another matter.) In the other American Republics, United States assistance is motivated, not by the demands of an emergency, but by settled considerations of alliance and mutual interest, enunciated in the Good Neighbor Policy and adhered to ever since as a permanent part of foreign policy.

It is in Europe, in the Far East, that our tremendous expenditures for bases, for maintenance of armed forces, must be made; and the sums required are staggering. It should be remembered by [Page 302]western hemisphere critics, however, that in appropriating these sums, the United States Government is protecting not only itself but its sister nations; that what we spend for the maintenance of peace and protection of the free world is spent not for the United States alone but also for the peoples of every other American State from the Rio Grande to the Straits of Magellan. In other words, our expenditures in Europe and in the Far East are, in the long run, part and parcel of our good partnership with our more immediate neighbors.

Similarly our critics should not be permitted to forget that, with growing recognition of the communist menace, countries in both Europe and the Far East which are actual outposts of free world defense, have been forced by incontrovertible geographic and political circumstance to undertake and maintain vast military establishments which they could neither construct nor continue without the financial aid of the United States. Nor can it be forgotten that huge sums were spent by the United States—necessarily, unavoidably, spent, the condition of Europe and the nature of the American people being what they are—on the reconstruction of towns and countrysides utterly devastated by war.

In Latin America, the total sum of the technical assistance, the grants, and the loans, may be proportionately small in relation to the total of United States foreign aid; but every dime expended in Latin America is intended for better living conditions, enlarged opportunities, accelerated development. Such a dime is of more demonstrable personal benefit to the individual average citizen in Latin America than a defense installation dollar could be.

In Europe and the Far East we have jet planes and bases, thousands of troops, and defense stockpiles of which the nature of the contents may not even be hinted at. They are a tragic necessity of our era, and billions of United States dollars were required to put them there. No such sums were required in the other American Republics where no such installations are necessary, but the dollars of United States assistance in our good partnership with the sister American nations has increased life expectancy for millions of citizens of this hemisphere. They have given the newborn child a better chance to stay alive and a more healthful and hopeful environment in which to grow.

Moreover, in the case of countries so situated and constituted as the American Republics—contiguous, with free enterprise economies, and rapidly developing—the international transfer of resources and capital should be effected primarily through private initiative. The United States has demonstrated that it intends as a consistent policy to encourage this process where it is welcome, and to supplement it by the constructive, economically-defensible investment of public [Page 303]funds in the form of loans for development, the provision of technical assistance, etc.

The favored position of Latin America with the United States is written into the latter’s tax legislation. Certain corporate income earned in the Western Hemisphere, outside of the United States, is taxed at 38% instead of the 52% imposed on such income earned anywhere else in the world. In the post-war period, two-thirds of United States direct private investment abroad has been in Canada and Latin America. Today some $6 billions of private American capital is invested in Latin America, and over one and one-half billions of public funds. In the last year the International Bank, whose resources are now mostly provided by the United States capital market, made loans to six Latin American countries, totalling $111 millions.

It is not a simple matter to spend great sums in Latin American countries in ways that will demonstrably contribute to the national economy and raise the living standards of those who need it. It should be recognized that the capacity to absorb foreign capital depends upon the degree of development achieved by the individual country economies.

In the daily round of contacts, officers may and probably will encounter new and invidious comparisons as to the relative benefits of United States assistance in Latin America and in other areas. These officers may have ideas for developing additional arguments in refutation; and if so, should advise the Department and the Agency of the nature of such arguments, so that they may be made generally available to the missions.

Dulles
  1. Source: Department of State, Central Files, 820.00–TA/2–1555. Confidential. Drafted by Muna Lee, Public Affairs Adviser, Bureau of Inter-American Affairs, and approved by Sparks. Cleared by Robinson McIlvaine, Deputy Assistant Secretary of State for Public Affairs; Krieg; Corliss; Hilton; Selma G. Freedman, Bureau of Economic Affairs; and Charles F. Johnson and Louis C. Mattison, U.S. Information Agency.