64. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Under Secretary of State (Hoover)1
- Are Investment Guarantee Programs Desirable?
Although there was originally some hesitation in ARA to endorse fully the investment guarantee program,2 it is our present view that this program offers limited advantages which should be exploited.
When the investment guarantee program was first announced in 1952, the following reasons were adduced for not putting it into operation in the other American republics:
- The program seemed to take away from the Latin American countries some of the responsibility for taking the initiative themselves to improve the climate for private investment.
- As the program envisaged allowing the United States Government to take over a claim of one of its nationals and settle it through diplomatic channels rather than through the courts of the foreign country, its acceptance to some extent would involve an abandonment by the Latin American countries of their traditional support for the Calvo Doctrine; we were reluctant to press them too hard on this score.
- The guarantee against expropriation might in a sense encourage foreign countries to expropriate private foreign property and relieve the entrepreneur of the responsibility of so conducting his affairs as to avoid expropriation.
- The plan was to apply only to new investments and hence appeared to discriminate against existing investments.
As a compromise measure, information regarding the program was furnished to eight of the other American republics but did not arouse much interest. The only country which signed an agreement was Haiti. More recently, I decided to support the program on the ground that accepting the program is one concrete step the Latin American countries can take to attract private capital.[Page 325]
As a result of a trip throughout the area by Mr. Pittman of FOA,3 several countries expressed interest and in recent months agreements have been signed with Costa Rica, Guatemala and Ecuador providing guarantees of currency convertibility and against expropriation, and with Peru covering currency convertibility only.4 No insurance policies have as yet been written under any of these agreements.
- Source: Department of State, OCB Files: Lot 62 D 430, Latin America—1955. Confidential. Drafted by Krieg at the request of Max Bishop, in response to an inquiry from Under Secretary Hoover concerning the desirability of the investment guaranty program.↩
- For a statement of ARA’s position regarding the investment guaranty program, made at the Secretary’s staff meeting on September 18, 1952, by Assistant Secretary of State for Inter-American Affairs Edward G. Miller, Jr. see the minutes of that meeting, printed in Foreign Relations, 1952–1954, vol. iv, p. 189.↩
- Steuart L. Pittman.↩
- For text of these agreements, see 6 UST 665, 673, 843, and 678, respectively.↩