77. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Secretary of State 1


  • Mutual Security Funds for FY 1957 for Economic Assistance to Latin America

Our Latin American policy is clearly beginning to pay off. The trend toward State-controlled economy has been slowed down and the private enterprise system is being given a greater opportunity to function than it has for many years. Moreover, Governments formerly cautious in their condemnation of communism are now far more outspoken and several appear to be willing to undertake vigorous anti-communist programs. One of the most important developments in the hemisphere is that Argentina appears to be ready to abandon its long, traditional attitude of suspicion and coldness toward the United States in favor of a relationship of frank friendship and cooperation. If we do not exploit the present opportunity I fear that it will not recur.

Such progress as we have made in the Latin American field is attributable to a policy whose principal features are a generous Export-Import Bank policy, a policy of strengthening our participation in technical assistance programs and a policy of grant-aid to the pro-US and anti-communist Governments in Bolivia and Guatemala until, in our judgment, they can stand without that kind of assistance.

I understand that you and Mr. Hollister have agreed to request Bureau of the Budget approval of the Mutual Security economic program for FY 1957 as follows:

Technical Cooperation $32 million
Development Assistance Bolivia 20 million
Guatemala 5 million
Security 2 million
Atoms for Peace 2.5 million
Technical Cooperation of OAS 1.5 million
Total Economic 63.0 million

I understand that the Bureau of the Budget has proposed to reduce the $32 million item for technical cooperation to $28 million, and has not commented on the balance of the proposal.

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It is my stronglyng feeling that a Mutual Security Program of the dimensions set out above may imperil the gains that we have made in Latin America and weaken the anti-communist Government in Bolivia just when we hope that it is achieving the strength to stand alone.

Specifically, I make the following recommendations:

That the technical cooperation item be held at $32 million. We have laid great stress throughout the hemisphere on the commitment undertaken by the United States at the Rio Conference to strengthen its participation in technical cooperation programs. Our program for this year was $28.5 million (including a $1 million carryover). An increase to $32 would be rather niggardly implementation of our announced policy, and an appropriation of $28 million would simply demonstrate an abandonment of that policy.
I recommend that the grant-aid for Bolivia be returned to the $30 million figure. It is our best judgment that this amount of money will actually be required. Some people think that we can accomplish our objectives with less money. I would be entirely satisfied to put $10 million into a contingency fund clearly earmarked for Bolivia, and not touch it unless necessary. However, I feel that it is very necessary that we be assured access to $30 million for Bolivia by one means or another.
I recommend an additional contingency fund earmarked for Latin America of $10 million. This would cover any or all of the following contingencies which I feel strongly that we may have to face:
A technical assistance program for Argentina.
An increase in the amount of money that we may have to spend in Guatemala to keep the present anti-communist Government in power.

Crises might arise which would make us lay claims exceeding $10 million on any contingency fund that is established; however, I feel it essential that we be insured first claim on such a fund up to the figure of $20 million described above.

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