76. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Secretary of State1

SUBJECT

  • Report on Visit to Six South American Capitals by Representatives of State, Defense, Treasury, Export-Import and ICA2

The objective of United States’ inter-American policy is to persuade the Latin American Governments and peoples to adhere to our political and economic philosophies. Looking farther, we hope to produce a spectacle of peace and economic progress in this hemisphere as will make governments and peoples elsewhere in the world want to follow the American example.

We believe that a nation which accepts our philosophy as a condition to receiving gifts is a weak and undependable convert. We, therefore, try to persuade the American Republics that they should take our road because it is the best way to achieve their aspirations.

We have, therefore, pursued a policy whose major features are:

1)
Defense of Latin America’s existing access to United States markets, coupled with a real effort to expand inter-American trade.
2)
A generous and vigorously implemented policy of Export-Import Bank credit for sound economic development loans.
3)
Intensified United States participation in those technical assistance programs in which the other governments are genuinely interested.
4)
Proof by every reasonable means (visits, speeches, conferences, etc) that the United States accords real importance to the inter-American system.
5)
Resourceful and aggressive support of the OAS to make it an organization actually capable of preserving the peace of America.

The foregoing policy has been successfully applied for the last two years, at times in the face of most difficult obstacles. In the course of our visit to the capitals of Colombia, Ecuador, Peru, Bolivia, Chile and Argentina, I believe that we saw unmistakable, durable fruits of that policy:

1)

A long-term trend toward state controlled economies has been slowed and the private enterprise system enjoys respectability without precedent in my experience. Economists like Dr. Prebisch of [Page 355]the United Nations’ Committee for Latin America; government officials like Villaveces,3 Finance Minister of Colombia, who were in the past aggressive exponents of state socialism, talked to us in the terminology of private enterprise that one would expect from a United States official. Other government officials devoted to the socialistic philosophy like Nebot4 of Ecuador and Prat5 of Chile have left the scene.

Our meetings with private businessmen, both local and United States, were attended by numbers far exceeding those I held fourteen months ago in the same cities. Participants were vocal and intensely interested in opportunities to expand their businesses.

2)
Governments formerly cautious or wavering in their condemnation of Communism are now far more outspoken and appear to be willing to undertake anti-Communist programs which we would have thought impossible fourteen months ago.

The President of Argentina assured us that his Government will ratify the Caracas Anti-Communist Resolution; he asked for our assistance in setting up an effective organization to combat Communism. The President of Chile vigorously described Communism as one of his country’s most important problems. Government officials in Ecuador are realizing that Communists are inspiring some of their most difficult domestic problems.

The developments described above are not peculiar to the six countries that we visited. To a greater or lesser degree I believe they are apparent throughout the Latin American area. The trend is such that there is reason to hope that in the near future we can achieve the following objectives in Latin America:

1)
A notable strengthening of the private enterprise philosophy as contrasted with that of state control.
2)
A notable weakening of the Communist effort in the area, particularly in the key countries of Argentina, Chile and Bolivia.
3)
An unprecedented relationship of friendship and cooperation with Argentina. As you know, Argentina’s attitude towards the United States has traditionally been one of aloofness and suspicion. In so powerful a nation, this attitude has been a major obstacle to our achieving our foreign policy objectives in the area. I foresee no honeymoon, but the new Government badly needs our support and frankly offers to follow a course of close cooperation and friendliness. I believe that this opportunity is unique and, if not seized now, may not recur in the foreseeable future.

Our chances of achieving the foregoing objectives are imperilled by a number of factors over which we have only limited control, but also by several that we have the power to eliminate completely: [Page 356]

1)

Our Export-Import Policy

There being no grant aid or soft loan features, the heart of our economic policy in Latin America is our oft repeated assurance of generous Export-Import Bank credit. The Latin Americans have accepted this policy with good grace because figures which we have published indicate it is being aggressively applied. The figures we disclosed are those for fiscal year 1955 which show new credits authorized in Latin America of $284 millions versus $52 millions in the year preceding. However, the operations of the bank during the first six months of fiscal year 1956 are alarming—a total of $18 millions of credits. Regardless of how sound our justifications may be, this level of Export-Import Bank operation, if it becomes known in the area, will mean that the Latin American governments will accuse us of repudiating our announced policies and will renew their demands for grant aid, soft loans, price support programs and other devices prejudicial to United States’ interests in the area.

2)
Technical Assistance and Grant Aid

Our announced policy on aid is:

a—
to strengthen our participation in programs of genuine technical assistance and
b—
to extend grant aid to meet temporary emergencies.

Only two countries qualify for grant aid in the next fiscal year—Bolivia and Guatemala.

Because of the exacting standards we ourselves apply, our budget requests for technical and grant aid are small: $32 millions for technical assistance and $40 millions for grant aid (30 in Bolivia and 10 in Guatemala). This is the last year we expect to give grant aid to Guatemala. The objectives these programs are intended to achieve are, however, very important. Our technical assistance programs are effectively convincing large masses of people in Latin America and many of their public and private leaders that the United States wants to see them achieve their aspirations and is willing to help them do so. Our two grant aid programs are keeping the anti-Communist government in power in Guatemala and are preventing a Communist take-over in Bolivia. These objectives must be achieved. Some people feel that they can be achieved for less money than we have estimated. I hope that is true. However, our estimates of the needs of each country are rather hard, and I would urge rather strongly against our gambling on the assumption that they are inaccurate.

My conclusions are:

1)
We are reaping the benefits of a sound economic policy in Latin America.
2)
The demonstrated success of our policies abundantly justifies their continuance. This means a vigorous Export-Import Bank program and the establishment of aid levels that we know are adequate.

  1. Source: Department of State, Central Files, 611.20/12–1355. Secret. A handwritten notation on the source text indicates that the Secretary saw this memorandum.
  2. This trip took place between November 17 and December 3. Assistant Secretary Holland and the representatives of the other agencies made the trip to confer with Embassy officers and to prepare for the Buenos Aires Economic Conference. Documentation on the trip is ibid., 033.1120/10–2555.
  3. Carlos Villaveces.
  4. Jaime Nebot Velasco.
  5. Jorge Prat Echaurren.