199. Letter From Foreign Minister Martin Artajo to the Ambassador in Spain (Lodge)1

Your Excellency:

My Dear Sir: I refer to the program of economic aid to Spain which is presently under study in the House of Representatives and the Senate of the United States for the fiscal year 1956–57.

As Your Excellency is aware, the American Economic Mission in Madrid proposed for the past year a distribution of aid which was not in accord with the wishes of the Spanish Administration, but which had to be acepted in order not to delay the utilization of the funds. Notably, it was necessary to omit the inclusion of raw materials for the nation’s industries and to accept a significant proportion in agricultural surpluses under Section 402 of the Mutual Security Act.

In order to prevent as far as possible that the same criteria be applied to the economic aid for fiscal year 1956–57, I must make Your Excellency aware of the desire of the Spanish Government in the first instance that in the coming fiscal year the larger part of the aid which is granted to Spain by the Congress of the United States be devoted to the procurement of raw materials because of the following reasons:

In accordance with Article II of the Economic Aid Agreement, the Spanish Government is obligated to create or maintain internal financial stability and generally restore or maintain confidence in its monetary system. One of the most effective means which is available to do this is quite evidently the importation of raw materials which, by making possible production increases, has an immediate and intense effect on the country’s economy and indirectly on its financial stability and the strength of the peseta.
In present circumstances the importation of raw materials has a much more direct effect on the economy of the country than the importation of other commodities, since it is ineffectual to make investments in capital goods for industry if a sufficient supply of raw materials is not available to insure normal returns.
The inflationary pressures are already perceptible in the Spanish economy as a consequence of the recent freezes and of the increasing use of pesetas in the construction of the joint military bases [which?]could be effectively arrested by the importation of raw materials which would make possible an almost immediate increase in production.

In the second place, it is also the desire of the Spanish Government that in the program of aid to Spain in the coming fiscal year there be eliminated the portion for agricultural surpluses which, in accordance [Page 575] with the terms of Section 402 of the Mutual Security Act, has been included in previous programs. The reasons supporting this are the following:

Since the signature of the Agreements of September 26, 1953, the Congress of the United States has voted in favor of Spain economic aid amounting to a total of $220 million, of which $97 million, or 44.09 percent, has been used for the purchase of agricultural surpluses. If to this is added the purchases made under Public Law 480, the result is that of the $337 million that Spain has purchased or is going to purchase under the aid program and said Public Law 480, $214 million, or 63.501 percent is assigned to agricultural surpluses, a proportion which is excessive by any yardstick.
The Spanish Government has clearly demonstrated its spirit of cooperation with the Government of the United States by its participation in an outstanding manner in the programs of sales of agricultural surpluses under Public Law 480. In line with this same spirit, the Spanish Government wishes to continue acquiring agricultural surpluses under the referenced Act, while in turn excluding said surpluses under the programs precisely defined as aid with the objective of allowing a wider margin within these programs for the procurement of raw materials and capital goods.

I would appreciate Your Excellency’s transmitting the foregoing to your Government and advising me in due course of its reaction in this regard.

I take occasion, Mr. Ambassador, to repeat to Your Excellency the assurances of my highest consideration.2

  1. Source: Department of State, Madrid Embassy Files: Lot 64 F 64, 500, ICA 1956–1958. Official Use Only. The source text is a translation of the original letter.
  2. Printed from an unsigned copy.