524. Letter From the Assistant Secretary of Defense for International Security (Gray) to the Acting Secretary of State1

Dear Mr. Hoover: I refer to your letter of 3 September 1955 requesting comments by the Department of Defense on a proposed diplomatic note from the Department of State to the Peruvian Government.

The Department of Defense interposes no objection to the sale to Peru on terms of cash payment in advance of delivery of any or all of the matériel itemized in your letter. However, with respect to [Page 1053] the equipment for the two submarines, it is believed desirable to leave open the question of financing for the following reasons:

To require the Peruvian Government to pay cash in advance may force them into a foreign market where credit is available and where the equipment can be procured at more favorable prices.
From a military standardization point of view it is desirable to insure that the equipment is of U.S. origin.
The equipment should be available to the Electric Boat Company on a phased schedule in order that the production of the two submarines will not be delayed.

The Department of Defense believes that all requests for credit should be considered on their merits and in the light of conditions existing at the time they are submitted. In approving the extension of credit to Peru, the Department of Defense does not commit itself to granting proportionate amounts of credit to other Latin American countries.

Representatives of the Department of Defense who are concerned with transactions with Peru have been instructed to avoid any implication that our decision on this case was based on Peru-Ecuador boundary considerations.

Sincerely yours,

Gordon Gray
  1. Source: Department of State, Central Files, 723.56/9–2355. Secret.