523. Letter From the Acting Secretary of State to the Assistant Secretary of Defense for International Security Affairs (Gray)1

Dear Mr. Gray: The Department of State is transmitting to the Defense Department through established channels, several recent [Page 1051] requests from the Peruvian Government for the purchase of military equipment,2 including:

Thirty-five medium tanks, with supplementary equipment;
One-hundred-pound, two-hundred-and-fifty-pound and one-thousand-pound bombs desired for the Peruvian Air Force;
Twenty-two B–26 and four F–86 aircraft;
Equipment desired for installation in two submarines currently being constructed for the Peruvian Government by the Electric Boat Division of the General Dynamics Corporation.3

With the exception of Item No. 1, all of the equipment is desired by the Peruvians for purchase on deferred payment terms. It is understood that the total price of the equipment desired on credit would be about $11 million. If this amount should be added to the $15 million in credit recently approved for the construction of two submarines and to the $6 million approved for the purchase of fighter aircraft, the total military credit extended Peru during the last twelve months would reach a figure of approximately $32 million. This would be about one-half of the total amount of military credit approved for the entire Latin American area to date.

Although the State Department would have no objection to Peru’s being sold the equipment itemized above on terms of cash payment in advance of delivery, either of the following two reasons would appear to argue strongly against our approving additional military credit to Peru at the present time. First, it will not be possible to deny the claims of other Latin American countries for proportionate amounts of military credit and at the same time maintain friendly relations with them. It is assumed that the Defense Department would not be prepared to make available the funds necessary to finance proportionate amounts of credit for Ecuador, Brazil, Chile and other Latin American countries likely to request similar treatment.

Secondly, relations between Peru and Ecuador are at the present time severely strained because of the boundary dispute between the two countries. Recent acquisitions of armament by both countries have intensified this unfortunate situation. Although we are not at present prepared to deny to either country the opportunity to purchase United States armament on a cash basis, we cannot afford to expose ourselves to the charge that we facilitated the acquisition [Page 1052] of armament by either party by offering equipment on easy payment terms.

The State Department desires to transmit the enclosed note to the Peruvian Government, indicating that we are prepared to sell Peru equipment on a cash basis but cannot extend additional military credit at the present time.4 In order that the Peruvian Government may be promptly advised of our views, we would appreciate receiving the comments of the Defense Department as soon as possible.5

We consider it essential that the United States diplomatic and military representatives avoid implying to Peruvian representatives that our decision on this case was based on Peru-Ecuador boundary considerations. The State Department is requesting its officers in Peru and the United States to avoid making such implications, and we hope that the Defense Department can take similar precautionary measures.

Sincerely yours,

Herbert Hoover, Jr.6
  1. Source: Department of State, Central Files, 723.56/9–355. Secret. Drafted by Spencer on August 30. Transmitted to Hoover as an attachment to a memorandum from Holland, dated August 30, also drafted by Spencer. The Holland memorandum dealt with the problem of selling more arms to Peru on credit while that country was engaged in a serious boundary dispute with Ecuador. In the memorandum, Holland recommended that Hoover sign the letter to Defense and also request Defense’s comment on an attached note to the Peruvian Government. The proposed note to Peru explained that the United States was unable to offer additional credit for the purchase of military equipment because a relatively large share of the limited amount of credit available for the American Republics had already been used to finance military equipment for Peru. Peru could, however, purchase military equipment for cash, subject to the availability of the equipment requested. (Ibid., 723.56/8–3055)

    According to a handwritten note at the end of the source text, it was delivered to the Department of Defense on September 3.

  2. The requests are attached but not printed.
  3. In a memorandum to Holland, dated September 6, Barnes informed the Assistant Secretary that after signing the letter to Defensitem, Hoover had expressed some doubts about whether equipment for the submarines should be included in the proposal. At Hoover’s request, an official at Defense was informed by telephone of his doubts, and he replied that that point would be taken into consideration when a reply was drafted. (Department of State, Central Files, 723.56/9–355)
  4. Not printed, but see footnote 1 above.
  5. In an earlier version of this letter, this sentence read: “In order that the Peruvian Government may be promptly advised of our views, I would appreciate the comments of the Defense Department being communicated to me or to Assistant Secretary Holland by telephone today, if at all possible.”
  6. Printed from a copy which bears this stamped signature.