94. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Director of the International Cooperation Administration (Hollister)1
SUBJECT
- Smathers Fund
Today I had a talk with Secretary Humphrey regarding the issue of whether the Smathers Fund should be managed by the Export-Import Bank or by ICA.2 We came to the following agreement which the Secretary asked that I submit to you and to other interested governmental officials.
We feel that the management of the fund should be entrusted to ICA and that ICA should take the following steps:
- (1)
- You personally should agree with the Acting Assistant
Secretary of State for Inter-American Affairs on two or three
loan projects which satisfy the following two tests:
- (a)
- First, the project should be one falling within the fields mentioned in the legislation setting up the Fund, i.e. such fields as health, social welfare or whatever the legislation recites;
- (b)
- Second, the projects should be of the kind that the Export-Import Bank is now financing. For example, the Export-Import Bank has in the past financed hospitals, irrigation systems and other projects which would qualify under the wording of the legislation.
- (2)
- You should then request the Export-Import Bank to investigate these projects identified by you in order to determine whether they are suitable for loans.
- (3)
- If the Export-Import Bank investigation indicates that a loan would be sound for these projects you should then instruct the [Page 399] Export-Import Bank to work out the loan agreement, make the loan and service it for you.
The foregoing plan has the following merits:
- (1)
- It avoids the problems with the Congress which some people feel would be sure to arise if the Executive were to assign the administration of this fund to the Export-Import Bank rather than to the ICA.
- (2)
- It ensures that the fund is devoted to purposes which are contemplated by the legislation.
- (3)
- This course would also ensure that the money is used for purposes for which the Export-Import Bank is using its other funds available for loan. That means that if a comparable or similar project is proposed in the next Congress we can take the position that it is unnecessary and point to the fact that the present fund was used for purposes for which all of the other funds of the Bank are already available.
- (4)
- This plan would enable you to dispose of the entire Smathers Fund without setting up any new organization, office or force within ICA for the purpose of administering the Smathers Fund. You would identify the projects yourself, and all the balance of the work would be done by the Export-Import Bank.
- (5)
- This plan would enable you to dispose of the Smathers Fund without having the ICA Mission Chiefs around the hemisphere make a survey of the lending possibilities in their respective countries, a survey which would surely produce an aggregate of hundreds of millions of dollars of possible projects and which could be used as a basis for urging the next Congress to authorize a vast ICA lending program in the hemisphere.
I believe that the solution outlined above is a good one. I have discussed it with Mr. Rubottom who will be Acting Assistant Secretary of State for Inter-American Affairs, and he also approves it.
The foregoing plan has not yet been cleared with Mr. Hoover or with Mr. Waugh. It simply reflects the results of a conference between Secretary Humphrey, Mr. Randolph Burgess, Mr. Andrew Overby and myself.