78. Memorandum From the Special Assistant for Mutual Security Affairs (Hill) to the Acting Secretary of State1

SUBJECT

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

S/S has referred Mr. Holland’s memorandum of December 13, 1955 to this office for comment.

Mr. Hollister’s letter to the Budget Bureau of December 7, 1955,2 which had the concurrence of this Department, requested new obligational authority for non-military programs of $1,906.8 million. It is our understanding that the Budget Bureau has accepted this figure (rounded down to $1,905 million). Attached to Mr. Hollister’s letter was a tabulation of the country-by-country figures underlying his recommendation for the $1,906.8 million total for non-military programs. As Mr. Holland notes, the figure for bilateral technical cooperation for Latin America appearing in this tabulation is $32 million.

In his letter, Mr. Hollister noted that the country figures for non-military programs “should be considered at illustrative only.” He went on to say, “In fact, it should be recognized that even the major division of the total Mutual Security request of $4.9 billion among (a) military assistance, (b) direct forces support and (c) other programs will need to be reviewed and may need to be readjusted prior to the actual presentation of the FY 1957 Mutual Security Program to Congress.”

It is my understanding that there will be a careful review of all figures on a country-by-country basis before we proceed with the drafting of the presentation to the Congress.

The recommendation that the figure for development assistance in Bolivia be increased to $30 million was contained in Mr. Lyon’s memorandum which, along with other memoranda from NEA and FE, were transmitted to you on December 2 for consideration in connection with your final session with Mr. Hollister on the country figures. I understand that E believes, on the basis of available information, that a program of assistance in FY 1957 substantially above the $20 million level would have the effect of increasing consumption levels beyond those existing before the collapse of tin prices and beyond those which can be sustained by Bolivia from its [Page 360]own resources over the long run. I assume staff level discussions are continuing among E, ARA, and ICA in an attempt to reconcile divergent views.

The presentation and justification for the President’s $100 million global contingency fund has not yet been discussed in detail. However, the earmarking of specific amounts for specific countries or areas, within the funds requested for contingency uses would tend to vitiate one of the principal arguments for such a global contingency fund. The Secretary, yourself and Mr. Hollister have all expressed the opinion that a greater measure of flexibility in the use of funds appropriated for mutual security would be desirable. The specific earmarking of contingency funds could run contrary to the proposition that funds should be available to meet high priority requirements that arise during the course of the fiscal year.

  1. Source: Department of State, ARA/REA Files: Lot 63 D 87, FY 1957. Secret.
  2. Not found in Department of State files.