49. Memorandum of a Conversation, Department of State, Washington, August 29, 19561
SUBJECT
- Guatemala: Electric Power Situation
PARTICIPANTS
- Ambassador Cruz Salazar of Guatemala
- ARA—Assistant Secretary Holland
- MID—Mr. Bayard King
The Ambassador mentioned that he had talked to President Castillo on the telephone last night and that he was planning to go to Guatemala on September 7 in order to discuss with the President problems of mutual interest to the two countries. Mr. Holland said he hoped the Ambassador would take that opportunity to tell the President of our continuing concern and interest in the electric power problem in Guatemala. Mr. Holland said that as the Ambassador knew, Guatemala was suffering from a critical power shortage which was retarding the economic development of the country. He described the Empresa Electrica’s offer to supply interim power expansion pending the construction of the permanent hydro-electric plant at Jurun-Marinala. He said the Department had been informed that on August 28 President Castillo, at a press conference, had announced that within a few days the government would be ready to discuss with the Empresa the furnishing of this interim power, and he was happy to note that progress seemed to have been made in this respect.
Mr. Holland said that in addition to the furnishing of additional interim power, we were deeply interested in the basic problem of the construction of the Marinala plant. He said we strongly believed this plant should be built by private enterprise and not by government financing. It would, in his belief, be a mistake for the Guatemalan government to use its scarce resources for a project of this nature when private capital was available. The money which any government financing of the Marinala plant would require could better be used for other projects which would bring a higher standard of living for the people of Guatemala. He said also that if agreement were reached on the construction of Marinala by private enterprise, [Page 129] it could well encourage many potential foreign investors to invest in Guatemala. Mr. Holland said he appreciated this decision presented a political problem for the Guatemalan government, and that we were not favoring any particular private enterprise group.
Ambassador Cruz said he would be glad to transmit the views of Mr. Holland to President Castillo. He said he himself was considerably more optimistic now about eventual agreement being reached on the construction of Marinala than he had been 6 months ago. He said the political problem facing the Guatemalan government was largely the result of the unpopularity of the Empresa Electrica. A steady stream of anti-Yankee propaganda had been directed against the major American companies in Guatemala during previous regimes, and although these companies had, to varying degrees, improved their public relations, this propaganda was still effective among the Guatemalan people. He intimated the government is doing all it can to arrive at agreement for construction of additional power-generating facilities and that various technical studies are now being made. He said one of the problems in dealing with the Empresa Electrica was that its managers had had what he termed “a 1920 attitude in 1956.” In general, however, he was optimistic over eventual solution of the electric power situation.
Mr. Holland said he appreciated the fact that in the past some of the policies of the American companies in Guatemala may have been short-sighted. However, he had met and talked with Mr. Henry Sargent, President of American and Foreign Power, and Mr. Sargent had impressed him as a man who had “1956 and not 1920 ideas.” He reiterated our deep interest in the electric power problem and our belief that the solution was a responsibility of private enterprise.
- Source: Department of State, Central Files, 814.2614/8–2956. Confidential. Drafted by King and initialed by Holland indicating his approval. In a memorandum to Holland, August 29, Neal suggested that the Assistant Secretary discuss the following with Ambassador Cruz: “It is our strong conviction that the Marinala plant should be built by private enterprise capital, which is available, instead of the Guatemalan Government using its scarce resources to finance this construction.” (Ibid.)↩