515. Letter From the Deputy Secretary of Defense (Anderson) to the Under Secretary of State (Hoover)1

Dear Herb: I refer to our conversation of 5 May concerning the possible purchase of two additional submarines from the United States by the Government of Peru and your request by telephone for some additional background information.

Peru has an extensive history of submarine operation. They initially contracted for two submarines in April of 1924 which included in the contract equipment for the establishment of a small submarine base. The first two submarines were completed and delivered in 1926. The contract was then extended for two additional submarines which were delivered in 1928. These four boats were built by the Electric Boat Company of Groton, Connecticut, and were of the 450 ton R-class submarines. The total cost of these four submarines was approximately $6 million and were financed through arrangements with the Electric Boat Company during the course of construction. The period of payment extended during the course of [Page 1037] construction plus several years. The four boats are still operational; however, they are limited to the depth they can dive due to their age. In 1950 Peru contracted with the Electric Boat Company for the overhaul of these submarines and at that time it was estimated by the company officials that the boats had approximately five years of service life before they should be decommissioned for safety reasons. As a matter of interest, Peru utilized these submarines during the last war in the protection of sea lanes along the Peruvian Coast in coordination with our own Navy.

Looking forward to the eventual replacement of these submarines, the Peruvian Government contracted in July 1951 with the Electric Boat Company for the construction of two new submarines. These two were delivered on 1 March 1954 and 14 June 1954, respectively. They are of about 1,000 ton displacement and have considerable operational capability. In fact, they are approximately two-thirds of the tonnage of our own fleet type submarines. The purchase price of these two submarines was approximately $15 million which the Peruvians paid during the period of construction. The Peruvians then broached the Electric Boat Company about the possibility of purchasing on credit two additional subs to allow them to decommission their old submarines.

It is of interest to note that Peru equipped the two submarines delivered in 1954 with U.S. Navy-type equipment which was not readily available from commercial sources such as periscopes, fire control equipment, etc. This equipment was purchased from the U.S. Navy at a cost of approximately $350,000 per boat.

During the construction period, our Navy and the Electric Boat Company provided training for the submarine crews. Peru is also furnished officer spaces in the regular U.S. submarine school. With this and previous training, the Peruvians have developed considerable proficiency in the operation and maintenance of submarines and have established in Peru a rather complete submarine base, including a small training school.

In the Peruvians’ latest approach to the Electric Boat Company for two additional submarines, they indicated a desire to purchase the boats on extended terms of repayment. The company was unable to handle this matter, either through their own resources or through commercial banks, and informally approached the Department of Defense in an attempt to determine if some other means of financing were available. The Electric Boat Company representative was advised that under existing legislation, we could not directly loan money to the Peruvian Navy for the purchase of these subs with [from] the Electric Boat Company. It was suggested that the Peruvians’ desires be made known to the United States Government through normal diplomatic channels. In this respect, the Peruvians [Page 1038] have indicated through the Electric Boat Company representative they do not desire to make a formal request unless there is a reasonable chance of favorable consideration. This entire matter was discussed at a recent interpg_al conference and was covered in a letter dated 1 April to Mr. Henry Holland of your Department.2

The foregoing constitutes the background of the Peruvian acquisition of submarines from United States sources. Any other information you desire about this subject, we will be glad to furnish.

Sincerely yours,

  1. Source: Department of State, Central Files, 723.5621/5–1055. Confidential.
  2. Document 512.