92. Memorandum From the Deputy Assistant Secretary of State (Rubottom) to the Assistant Secretary of State for Inter-American Affairs (Holland)1
SUBJECT
- Economic Aid for Latin America in Future Years
Following your discussion with Dr. FitzGerald on August 16,2 I have been trying to analyze our needs for future economic aid in Latin America. I talked to Dr. FitzGerald once on the telephone and have discussed the matter once or twice with Phil Williams and Bob Sayre in our own bureau. We need to define our needs and set our policy goals promptly, both for the purposes of the NSC policy paper and in order to facilitate ICA planning.
For the purposes of clarifying my own thinking, I have devised the following table:
| Programmed Carry-Over end ’56 | (New Requests) | Total | |||
| ’57(Appropriated) | ’58(est.) | ’59(est.) | |||
| Bolivia | 16 | 20 | 10 | 10 | 56 |
| Guatemala | 8.5 | 15 | 12 | 35.5 | |
| Haiti | 3 | 3 | |||
| Miscellaneous | 1.5 | 2 | 5 | 5 | 13.5 |
| Totals | 29 | 37 | 27 | 15 | 108 |
| Smathers Amendment | 15 | ? | ? | ||
Starting with a carry-over at the end of FY 56 of $29 million, and adding to that the money appropriated for this fiscal year by the recent Congress of $37 million, plus $15 million for the Smathers Amendment, and projecting estimated requests for FY 58 and FY 59, we wind up with relatively large amounts of aid for Bolivia and Guatemala, as well as a total for the area of $108 million. I have not included the Smathers Amendment because of the very special conditions which apply to it and because of its uncertain future, and also because of my belief that it need not figure in our discussion at the moment, especially if we are successful in placing it under the Export-Import Bank for administration—actually, we should not forget that, whoever administers it, we are not limited in our loan authority to just 75 per cent of the $15 million, but could actually [Page 396] loan more than 75 per cent and up to the full amount, if we so decided.
Perhaps our real point at issue with ICA comes down to the question of future aid requests, that is, in FY 58, 59, and possibly beyond that time. The $29 million of carry-over now on the books is already actually programmed and, in most cases, actually contracted for. Certainly, Bolivia and Guatemala, as well as Haiti for its remnant, are counting on receiving the amounts programmed and carried over in the pipeline, as well as the amounts appropriated for FY 57. Perhaps with careful programming of these new amounts appropriated, it will not be necessary to request any new sums for aid in the coming years, except for “miscellaneous” purposes. Or, perhaps, we could leave in our estimate, say $10 million for Bolivia, and omit any future requests for Guatemala; in our knowledge that with $8.5 million carry-over plus $15 million of new money just appropriated, Guatemala would have enough to reach the point of economic independence. In any event, as I now see it, the unresolved question between ourselves has to do with the projected needs for new money in FY 58 and 59.
Our immediate problem is illustrated by the attached papers. Tab A is a draft letter from ICA to Under Secretary Hoover,3 based on Dr. FitzGerald’s understanding of the position you took in your conversation with him last Thursday. The memorandum has yet not been mailed. I told him that I would discuss this matter with you, and that we would attempt to arrive at a common understanding with ICA on future aid requirements. It appears to me that he has interpreted your remarks too literally insofar as expenditures for FY 57 are concerned. Actually, we would need to have an estimate or an educated guess, at least, as to how much of the $29 million carried over from FY 56 and previous years can actually be spent this year, plus whatever part of the newly appropriated $37 million (leaving out the Smathers Fund) would be spent and added to the carry-over funds. That could be $38 million, or it might be $43 million or $48 million. The real kernel of the problem is the underlined sentence in numbered paragraph 2 of the FitzGerald draft memorandum, which states that ICA was planning to request $30 million–$35 million when the Congress meets later this year. There is our basic difference, it seems to me. Whereas we assume a sharply diminishing requirement for aid, ICA seems to be assuming a continued state of emergency requiring relatively large amounts of aid in the years to come. Turning to the last paragraph of the draft memorandum on page two, I believe that we could agree with all of his language except the part where he again says that he thinks ICA should [Page 397] develop a $30 million to $35 million program request for the coming session of Congress.
Tab B is a memorandum from Mr. Hollister to Mr. Hoover4 in which, at the top of page two, ICA proposes to program $10 million for Guatemala, instead of the $15 million which has been appropriated by Congress, justifying this position on your statement to Mr. FitzGerald and on our figures in the annex to the NSC paper. Here again I believe ICA is making an extreme interpretation of our position.
Tab C is a proposed reply to a letter received from Ambassador Sparks several weeks ago.5 The issue is rather clearly defined by his letter and our proposed reply, in my opinion. We take the position that we should proceed with the programming of the $15 million of aid appropriated by the last Congress for FY 57, but at the same time, we urge him to educate President Castillo and other Guatemalans that this is the last of the aid from the United States and that any tapering off will consist of future deliveries from this year’s and previous years’ grant aid, rather than extended amounts to be appropriated in the future by the Congress.
I hope to have an opportunity to discuss this with you and with Phil Williams later this afternoon.