206. Memorandum From the Director of the U.S. Operations Mission in Spain (Aldrich) to the Ambassador in Spain (Lodge)1

SUBJECT

  • Net Impact of U.S. Activities in Spain

There is one aspect of the Spanish economic situation which frequently comes up in discussions. That is the statement that the net impact of U.S. activities in Spain have been inflationary. Among the considerations relevent to such a discussion would be the following:

a)
The total use of Spanish resources by the U.S. in connection with the construction and operation of the military bases, including peseta expenditures of U.S. personnel;
b)
Increased Spanish military costs, to the extent these can be attributed to U.S. incentive or the additional costs of maintaining and operating Spanish units re-equipped through U.S. military aid; and
c)
Set against these two, the amount of commodities which have been imported through U.S. financing during the same period.

According to the figures available to this Mission, these various factors compare about as follows, for the period from 1953 through June 30, 1957:

[Page 590]
1. U.S. resources provided for Spain (in millions $)
a. PL 480 imports 243
b. Defense Support imports 226
Total 469
2. Utilization of Spanish resources as a direct or indirect result of U.S. programs in Spain.
a. Direct U.S. resources.
(1) Base construction costs 51
(2) All other 40
Sub-total 91
b. Additional Spanish military costs attributable to U.S. military aid 32
Total 123
3. Excess of U.S. financed imports over Spanish resources used as a result of U.S. activities 346

From these figures it would appear to us that the U.S. has succeeded by a very substantial margin, approaching 4 to 1, in more than offsetting the use of Spanish resources attributable to U.S. activity in Spain. It would, therefore, appear to us that the impact of U.S. activity has been very clearly anti-inflationary.

It would not, of course, be accurate to attribute to U.S. influence the total increase since 1953 of about $124 million in Spanish military costs, since a very large share (about 75%) of that increased cost would have occurred anyway as a result of wage increases, price increases, etc., even if there had been no U.S. military activity in Spain. Nevertheless, even if the total increase in Spanish military costs is included, arrivals of U.S. financed commodities still more than equal all such diversion of Spanish resources by a margin of more than 2 to 1.

This sort of aggregate analysis does not, of course, take account of specific impacts such as that on rental housing, maid salaries, food supply, etc., in the areas where there are the largest concentration of U.S. personnel—that is Madrid, Seville, and Zaragoza. These are matters it is almost impossible to measure quantitatively, but the numbers of our people are so small in proportion to the Spanish, even of similar income groups, that I cannot feel that our impact on these selected areas is very decisive, though, of course, they would contribute to the problem in any area where these matters were already problems. So far as food consumption is concerned, I am certain that our net impact is negligible since the great bulk of food stuffs are procured through the Air Force Commissary and the only items commonly procured from the Spanish market are vegetables and other items in relatively ample supply.

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I thought you would find this analysis of interest and would be glad to discuss its implications with you further at any time you so desire.

Richard S. Aldrich 2
  1. Source: Department of State, Madrid Embassy Files: Lot 64 F 64, 500 Spain 1956–58. Attached to the source text is a memorandum from Aldrich to Lodge of November 22 which states that this memorandum reflected some thoughts on how to deal with the Spanish allegation that U.S. activities in Spain contributed to Spain’s inflation problem.
  2. Printed from a copy that bears this typed signature.