517. Letter From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Assistant Secretary of Defense for International Security Affairs (Hensel)1

Dear Mr. Hensel : I refer to your letters of April 12 and April 133 and to our several conversations relating to the financing by this Government of the construction of two submarines in this country by the Government of Peru on terms which would permit the estimated total cost of $15 million to be repaid over a six or seven year period. It is understood that the Department of Defense considers the acquisition of these vessels by Peru to be in the interest of hemisphere defense and that their sale will be subject to agreement [Page 1041] by Peru to commit them for designated hemisphere defense tasks through amendment of the secret military plan between Peru and the United States.

The Department of State concurs in your proposal that the Electric Boat Company be informed that they may advise the Peruvians to submit in accordance with established procedures a formal request to the Department of State for the purchase of two submarines. As stated in your letter of April 1, 1955, it is understood that such terms of contract as may be worked out with the Peruvian Government will be subject to National Advisory Council approval.

In view of the importance of ensuring a coordinated approach to the handling of similar requests from Latin American Governments for the purchase of military equipment on credit terms, a draft statement of conditions and procedures which should be applied to these cases is being prepared and will be submitted to the Department of Defense for consideration at an early date.

Sincerely yours,

Henry F. Holland 4
  1. Source: Department of State, Central Files, 723.5621/4–1355. Secret. Drafted by Jamison and cleared by S/MSA, OSA, and e. On May 17 a copy was transmitted to Samuel C. Waugh, attached to a memorandum from Jack C. Corbett. The final paragraph of Corbett’s memorandum read: “Although the NAC question did not come up specifically in connection with the Peruvian submarines, the phrase was in the Defense Department’s letter and Mr. Jamison thought it would be useful to include it in our letter. I see no harm in requiring the Defense Department to submit the terms of the contract to the NAC, although customarily the NAC does not consider loan contracts. However, it will increase our information about this operation somewhat and it may produce some useful discussions in the NAC in connection with military credits in general.” (Ibid., 723.5621/5–1755)
  2. Document 512.
  3. See footnote 2, Document 513.
  4. Printed from a copy which bears this typed signature.