89. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Under Secretary of State (Hoover)1
SUBJECT
- Senator Smathers’ proposed $100,000,000 development fund for Latin America
Some days ago I was asked to suggest an administration position regarding Senator Smathers’ proposal to appropriate $100,000,000 to [Page 390] be utilized over the next 5 years in Latin America, one-half in loans and one-half in grants.2
I drafted a proposal which stated in substance that neither additional loan money nor additional grant money was needed, but that if, nevertheless, Congress insisted on appropriating funds for these purposes they should be appropriated in accordance with suggestions set out in the recommendation, i.e., loan funds to the Export-Import Bank and grant aid funds as a contingent fund to be managed by ICA. Before drafting the proposal I discussed it with Mr. Hollister.
Subsequently I was advised that a letter purporting to reflect the views of ICA and State had been sent to the Senate Foreign Relations Committee. I have not been supplied a copy of this letter, nor was I consulted as to its contents. If they are as reported to me I disapprove the letter and feel it would be a serious political mistake to send it.
At the Secretary’s staff meeting on June 14 I raised this problem. It was discussed in the presence of Mr. Hollister and the decision was made to withdraw the letter referred to and replace it with one in whose drafting I would participate.
I am advised that on the afternoon of June 14 Mr. Hollister instructed that the letter not be withdrawn because it had been seen by Senator Smathers. I was not consulted about this decision, nor was I advised of it.
I am advised that Senator Smathers is offended by the terms of the letter referred to and that he is determined to press his proposal. I am further advised that it might be possible to persuade Senator Smathers to abandon his existing proposal for something more reasonable such as a considerably smaller appropriation for something like exchanges of persons.
I strongly recommend:
- 1)
- that the decision made at the staff meeting be carried out and the letter withdrawn,
- 2)
- that in accordance with the decision at the staff meeting a new letter be drafted and sent to the Senate Committee today stating that no additional funds are needed either for loans or grant aid but that if, despite the administration’s advice, the Congress decides to appropriate additional funds, it should be done in accordance with suggestions set out in the letter. This does not constitute an approval of the Smathers proposal, but it does avoid the very unfortunate political consequences of a blunt disapproval of his proposal.
- 3)
- that you instruct Dr. FitzGerald (Mr. Hollister is out of the city) to coordinate with State in carrying out the foregoing staff decisions.
I would be happy to confer with you, Dr. FitzGerald and Mr. Barnes if you feel that this is desirable.