73. Memorandum From the Director of the Office of Regional American Affairs (Cale) to the Assistant Secretary of State for Inter-American Affairs (Holland)1

SUBJECT

  • Preliminary Meeting with Bureau of the Budget on ICA’s Program for Technical Cooperation and Development Assistance in Latin America for Fiscal Year 1957

The following notes have been prepared to assist you in your appearance before the Bureau of the Budget with reference to ICA’s presentation of its fiscal year 1957 budget request for Mutual Security funds.

For Latin America ICA–O/LA is requesting:

Bilateral Technical Cooperation

$32,035,000

Development Assistance

$35,000,000

Special Projects

$35,000,000

Total: $102,035,000

The portion of the world-wide military funds which will be requested for Latin America has not yet been determined.

1. Bilateral Technical Cooperation. Our objective under the Bilateral Technical Cooperation Program remains that of cooperating with Latin American countries, whenever requested by them and whenever they are willing to pay their fair share of the costs, in demonstrating how, with the aid of modern technology, they can improve the utilization of the resources available to them to further their economic development and financial stability. It is impossible for the United States to assume responsibility for the economic and social development of all the under-developed areas of the world, but we are in a position to carry out, on a cooperative basis, pilot projects in certain technical fields which can be expanded through the efforts and at the expense of host countries and which can make substantial contributions to their development. It is our purpose to make a [Page 348]contribution to the establishment in each of the Latin American countries of a stronger, self-reliant and durable national economy. We believe that it is in our national interest to carry out such programs of technical cooperation.

The illustrative amount of $32,035,000 has been developed by ICA–O/LA in cooperation with State–ARA desk officers. It represents a preliminary agreed position at Office Director level. It is a reduction from $37,284,600, the total requested in joint messages from the USOMs and Embassies in the field. Basically, it represents a continuation of present programs with a slight increase from the $30 million presentation made to Congress last year. The increases seem sound, normal and justifiable. They represent adjustments in individual country programs.

The following table gives the amount requested for each country together with the amount requested for FY 1956 and the present program level in the country:

Country FY 1956
Congressional Presentation
FY 1956
Level of Implementation
FY 1957
Proposed Presentation
(In thousands of dollars)
Bolivia 2,507.9 2,408.6 3,194.7
Brazil 3,485.5 3,399.5 4,689.5
Chile 2,354.9 1,997.6 2,175.0
Colombia 1,550.7 1,318.1 1,410.6
Costa Rica 1,052.1 949.1 1026.0
Cuba 621.7 528.4 671.8
Dominican Republic 433.7 508.2 530.1
Ecuador 1,605.4 1,507.9 1,970.2
El Salvador 1,006.8 912.3 1,024.8
Guatemala 1,830.0 1,555.5 1,628.2
Haiti 1,503.7 1,278.5 1,225.0
Honduras 1,053.4 1,163.6 1,290.4
Mexico 1,762.0 1,508.0 1,504.7
Nicaragua 910.1 873.3 878.9
Panama 1,268.8 1,024.5 1,164.8
Paraguay 1,453.2 1,297.1 1,494.5
Peru 2,704.7 2,369.0 2,896.3
Uruguay 425.9 392.6 523.9
Venezuela 175.1 123.8 175.0
DOTs 1,095.0 979.3 1,395.3
Regional 1,199.4 1,024.5 1,166.0
Unallotted Reserve 380.6
Total 30,000.0 27,500.0 32,035.7
[Page 349]

The increase should enable us to meet the political and economic objectives of U.S. policy in Latin America, insofar as technical cooperation is concerned.

The Department’s policy considerations have been taken into account by O/LA in the development of the program and there are only two countries on which questions arise:

Mexico. For purposes of budgetary planning only, MID had no objection to the use of a total of $1,504,700 for the fiscal year 1957 program in Mexico. However, an outline of the entire Mexican program has been submitted to the President of Mexico for his review and comment. The future ICA program in Mexico will have to be based on the answer received from the President. Consequently, the budget for FY 1957 may have to be adjusted accordingly. Any change is likely to be downward.

Venezuela. For purposes of budgetary planning, OSA and O/LA agreed on a total of $175,000 for a continuation of the program in Venezuela. It is understood that there is some desire in ICA to eliminate the whole Venezuelan program. It is OSA’s strong belief, based on consultation with our Ambassador in Caracas, that this small program should be continued and we should support this position.

It is believed that you can fully support the level of aid requested for the Bilateral Program of Technical Cooperation for fiscal year 1957.

2. Development Assistance. $35 million is being requested for FY 1957.

(a)

Of the $35 million requested, $30 million would be used for the program of Development Assistance to Bolivia which began in November 1953 and which is in addition to the regular Technical Cooperation Program in that country. OSA, for budgetary planning purposes, agreed with ICA’s requesting $30 million, but feels that a thoroughly detailed justification from the field is needed. This amount has been presented on the assumption that an increase in FY 1957 will make possible a reduction in the programs for 1958 and subsequent years. The Embassy and USOM in La Paz have been instructed to make a thorough study and provide complete political and economic justification for whatever level they recommend, considering the need to hold U.S. expenditures to an absolute minimum consistent with the accomplishment of U.S. policy objectives in Bolivia. This study, when received, may require an adjustment of the FY 1957 budget estimate.

In general, as you know, the purpose of Development Assistance to Bolivia is to enable that country to obtain the supplies needed to assure that minimum food requirements will be met, and to begin to diversify its economy so that its dependence on minerals exports, principally tin, may be reduced. The ultimate objective is the development in Bolivia of a stable self-supporting economy. The country’s presently available resources are still not sufficient to [Page 350]achieve this, but the measures which the Bolivian Government has taken and is expected to take, with our help, are overcoming these conditions and a stable situation should be achieved within a few years. Bolivia, however, continues to be dependent on imported foods which it cannot obtain with its foreign exchange receipts until the program of Development Assistance to that country is more advanced than at present. The U.S. should be prepared to continue to extend economic aid until the program can continue without external assistance. We have invested considerable sums in Bolivia, much progress has been made, but the full fruits of our efforts are yet to be realized.

(b)
The remaining $5 million of the $35 million requested for Development Assistance would be used for the program of economic aid extended to Guatemala, which began in the latter part of 1954. This is in addition to the program of Technical Cooperation which this government is carrying out in Guatemala.

MID agreed to ICA’s requesting $5 million, but it should be noted that the Embassy in Guatemala believes this will be insufficient and feels that $10 million may be required. Without full justification for the additional $5 million, MID agreed to the ICA figure, provided an additional $5 million is reserved to meet possible contingencies.

As you remember, the pro-communist Arbenz regime, which Castillo Armas overthrew in July 1954, left behind it a stagnant economy, growing unemployment and a barren treasure. Falling prices for coffee, Guatemala’s principal export, intensified the new Administration’s economic difficulties. Guatemala’s government then sought help from the United States. This was provided by an emergency grant in the latter part of 1954 and a Development Assistance Program in fiscal year 1956 of $15 million. It is hoped that the amount now being requested for FY 1957 will be all that is needed to enable the Castillo Armas Government to assume, on its own, the full cost of the emergency projects begun with U.S. aid. By the end of FY 1957, it is expected that normality will have been restored and the emergency period passed.

3. Special Projects. The total amount of $35 million requested for these Special Projects has been drawn up within ICA and not cleared with ARA at any level. It has, however, been discussed in general terms with AR, but no agreement reached.

The total sum is understood to be broken down into two parts:

(a)

Latin America Security Fund, amount requested $30 million. This sum includes $5 million for a program to combat communist subversion, a reserve of $5 million for Guatemala, in accordance with MID’s understanding with O/LA mentioned above, and $2.5 million as a contingency should Argentina request a program of technical assistance now that the Peron regime has fallen. The balance, $17.5 million, is understood to be included by ICA for programming purposes in the belief that PL 480 assistance to a number of Latin American countries will, in effect, result in Development Assistance programs in those countries through the accumulation of counterpart funds. ICA feels that this will require additional aid from the U.S. in [Page 351]the form of planning, technicians, and dollar funds for development purposes. We have as yet not seen the justification for this, but believe it would probably not be in accordance with our present policy to request the $17.5 million unless a solid justification is presented by ICA at the Hearings.

The $5 million for combatting communism is based on internal security studies, made pursuant to an NSC action on a world-wide basis, which are being reviewed by OCB. Of some 44 countries reviewed, 22 were selected for analysis. Of these, 6 were in Latin America, but only 4 were studied because there seemed to be no danger of any immediate threat in the other 2. These reviews, which have received wide general support within the Government, are expected to result in FY 1957 in an action program, of which part will be in Latin America and will aid some of the countries to bolster their internal security forces. The Department is understood to go along with the concept. The cost factor apparently used, $250,000 to $500,000 per country, does not seem excessive. ARA, however, cannot at this time estimate the number of countries in its area in which such programs might be established, if NSC approves of the program. ICA is understood to be working closely with the Bureau of the Budget on this aspect of their budget and it is felt that you can support this part of the request, provided NSC approves the program as a whole. You can also support the amount of $7.5 million to meet the contingency in Guatemala and Argentina.

(b)
President’s Atoms for Peace Program, amount requested $5 million. This sum is included for budgetary planning purposes to meet the anticipated requests from Latin America under the President’s Atoms for Peace proposals. The Department, (S/AE), is conversant with the program and is understood to go along with the general concept. We in ARA, however, have no real basis for estimating the cost of component parts of this program as developed by ICA. ICA is understood to be including funds to cover one-half the cost of 8 research reactors ($2.5 million), based on the fact that 7 Latin American countries have expressed an interest in the program and 3 others (names undisclosed) are expected to do so. This would make a total of 10 countries. ICA reportedly expects that 2 reactors will be provided during fiscal year 1956, leaving a balance of 8. It is a moot question whether the Latin American countries will be in a position to participate in the purchase of such a large number of reactors during FY 1957. In addition, the total is said to include $1.5 million for a regional development center. The amounts (total $1 million) for training and basic surveys are understandable and do not seem excessive. Unless there is a conflict of responsibility with the Atomic Energy Commission over who conducts the program (S/AE is looking into this), ARA can no doubt go along with this amount.

  1. Source: Department of State, ARA/REA Files: Lot 63 D 87, FY 1957. Secret. Drafted by Williams.