532. Memorandum of a Conversation Between the Former Peruvian Ambassador (Beltran) and the Assistant Secretary of State for Inter-American Affairs (Holland), Department of State, Washington, July 30, 19561
- Peruvian Matters
Mr. Beltran 2 opened by asserting that in his judgment the Prado Government would do everything that it could to assure good government and progress in Peru. He said that President Prado did not have the support of substantial sectors of the more prosperous people because they felt that he was too much of a politician. He, however, felt that this was important since President Prado would be able to elicit public support for his policies.
He listed the principal problems of the country as follows, saying that the Government could not solve them without the support of the United States:
He said that he had urged President Prado to bring down from the United States experts to advise him on how to go about a public housing program. He said, however, that it would be necessary for the United States to extend credit for it.
He said that it would be essential to avoid communism and to achieve reasonable progress in a number of areas of the country that the Government buy up some of the large land-holdings and resell them to local farmers. He insisted that he was not in favor of expropriation, but rather recommended, instead, conventional purchases of these large land-holdings for subdivision and resale. This again would require assistance from the United States for the financing.
He pointed out the inability of producers in many parts of the country to get their products to market and the need for roads to achieve this.
In response, I made more or less the following statement:
(1) The United States foreign policy is designed primarily to serve the interests of the people of the United States. It is essential that Peru understand the United States foreign policy in order to see [Page 1068] the ways in which United States assistance and aid can be obtained within the limitations of our policies.
On financing I said that the Export-Import Bank is today following what is perhaps the most liberal banking policy ever offered by such an institution anywhere in the world. Our policy is now to undertake to satisfy every application for a loan to finance U.S. goods and services for developmental projects where the project is sound and is in the interest of the two countries, where the loan is within the borrower’s capacity to pay and the Bank’s capacity to lend. I described in considerable detail the Bank’s performance over the past few years showing how generously this policy has been implemented.
As regards financing for the local currency costs of development projects, I described our PL–480 programs. Mr. Beltran pointed out that most of the cost of low-cost housing projects and of land reform would have to be incurred in soles and that dollar credits, therefore, would not be very useful for them. I pointed out how in the course of the present year the United States will sell approximately $150 million of agricultural reserves in Latin America and will lend back to the Latin American governments some $110 million of the proceeds of those sales. I pointed out that out of the loans to Peru of the local currency product of sales of agricultural reserves here, I was not aware that any substantial portion had yet been pledged by the Peruvian Government. In other words, it is probably true that the Peruvian Government can at this time plan to use the portion of these local currencies lent to it to finance low-cost housing projects and to finance land re-subdivision.
I was surprised to find that Mr. Beltran was apparently completely uninformed either as to Export-Import Bank policy and performance or as to the PL–480 programs in which we are engaged.
I went on to say that in my judgment no other area of the world had found itself in so favorable a position as regards economic progress if that area of the world was willing to undertake real self-discipline. As regards commerce, the policy of the U.S. Government is today to protect the access of Latin American products to the U.S. market. Until last month when the Congress passed the Agricultural Act of 1956 containing a provision restricting the access of Peruvian cotton to the U.S. market not one regulation or piece of legislation became effective reducing the access of one Latin American product to the U.S. market. Even in this one case, the President, in signing the bill, had stated that he would ask the next Congress to correct this pernicious clause and that, in the meantime, he would administer it with great caution so as not to prejudice the economies of friendly nations. Mr. Beltran was apparently unaware of this situation as well.[Page 1069]
Peruvian-Ecuadoran Boundary Dispute
I described to Mr. Beltran the conversation between the Secretary and President Prado, pointing out our anxiety that President Prado understand that the guarantors in recommending an aerial survey of the unmarked portion of the boundary, had no intention of reopening any other portions of the boundary. I explained that the parties were now blocked from any real progress by disputes over geographical facts. It is in the interest of both parties that the physical situation on the ground be defined in order that our discussions may be directed at the establishment of a boundary instead of in sterile disputes as to what the geography of the area is. He agreed that if he had an opportunity to do so he would urge President Prado to agree to such a survey and would point out to him the reasons behind the request of the guarantor that the survey be made.
I told Mr. Beltran that in my judgment it was a great mistake for Peru and Ecuador to be wasting as much of their assets in the purchase of arms as it appears that they are wasting. I pointed out specifically the loan requested and obtained by Peru of $15 million to buy two submarines which in my judgment are wholly unnecessary for the defense of the country. He agreed with some enthusiasm and asked why the United States would not take the initiative in urging a Latin American conference on disarmament.
I replied that our policy with respect to maintenance of peace in the hemisphere was as follows: Over a number of years we had made the mistake of intervening unilaterally in the domestic affairs of Latin American countries to reestablish peace when it had been disrupted. In such cases we did achieve the reestablishment of peace but we also reaped a harvest of ill-will not only in that country but in all other countries of Latin America. In recent years we have come to the conclusion that by far the best way to work toward the maintenance of peace in the hemisphere is through the OAS. There the United States’ influence can be made felt just as effectively, but without the prejudicial results that always flow from our unilateral intervention. I described to him in some detail the facts surrounding the settlement of the conflict between Nicaragua and Costa Rica. I also recalled to his mind the prompt and effective action of the OAS in the recent dispute between Ecuador and Peru. I pointed out to him how such a record of prompt and effective performance on the part of the OAS had actually achieved considerable relaxation of tensions between countries with traditional ill-will. I pointed specifically to Haiti and the Dominican Republic, to Nicaragua and Costa [Page 1070] Rica and to the problems between Ecuador and Peru. He agreed that this was, indeed, the best and most effective way to maintain peace.
Referring to his proposal of a disarmament conference I said that I felt that if the U.S. were to take the initiative in proposing such a conference our motives would be subject to suspicion and there would be considerable criticism. I said that, on the other hand, if President Prado, preferably accompanied by several other presidents of the area were to propose such a conference we would be in a position to respond favorably and to try to help out in achieving its holding. He said that he would discuss this with President Prado and undertake to get his support for the proposal.
I emphasized that in my judgment it was of great importance that Peru follow the sound economic policies which have given it a position of leadership in this field in Latin America. I pointed out specifically that Peru follow policies that will effectively control inflation and that will establish the integrity of Peruvian currency. I referred to the need to balance the domestic budget and to insure that the dollar income of the economy is not wasted in unessential imports. He replied that he was in complete agreement with me on these points, that he had worked to achieve them for some time and that he would continue to do so.
Mr. Beltran said that he was one of those who over the years had always argued that Peru had no communist problems. He said that as a result of the last elections he now saw that Peru had a very difficult and immediate communist problem. He said that in the course of the elections he asked from time to time why the Prado group selected certain individuals of whose background he had very unfavorable reports. The reply was that these individuals controlled the communist elements in certain parts of the country and would therefore be able to achieve an overwhelming majority of the votes. To his amazement this is exactly what occurred. This convinces him that communist leaders are able to control the majority of the votes in certain parts of the country, particularly in the Indian areas near Bolivia. He seemed to feel a great deal of concern about this problem and felt that one of the first steps towards its solution was that of raising the standards of living of the Indians in the highlands of Peru.
As regards his contacts with President Prado he said that he was not an intimate adviser, but that he felt that he had frequent and easy access to the President and that the President would listen to him without resentment. He said that he had known the President for many years and had always been able to talk to him in a very frank way and that he would continue to do so.[Page 1071]
I talked to him at considerable length about the need that the Government follow policies encouraging private enterprise in Peru. I said that the United States Government was devoted to the principle of private enterprise, not because of any doctrinaire reasons, but simply because we were convinced that better than any other system yet devised it had demonstrated its capacity to increase production and to raise standards of living. I said that to us private enterprise meant that type of private enterprise with a social conscience, private enterprise that realized that economic progress is meaningless unless it is reflected in raising the standards of living of the people who work for the various different enterprises. I said that in our judgment private enterprise meant private enterprise rooted in the people of a particular country. I said that it was essential that the Government of Peru adopt those policies and programs which are designed to inspire confidence in its own investors leading them to repatriate their capital from abroad and invest it in productive enterprises here in Peru. I said that in my judgment programs and policies designed to attract foreign investors are meaningless unless they are directed first at the creation of confidence among domestic businessmen and investors. If such confidence is achieved, then little additional need be done to bring private investors if they are wanted. He expressed agreement, of course, on these points as well.