13. Report by the Operations Coordinating Board to the National Security Council1


(Policy Approved by the President February 16, 1959)

(Period covered: From February 16, 1959 thru April 6, 1960)

Review of Policy—United States Regional Policy Towards Latin America (NSC 5902/1) has been reappraised in the light of the experience gained in the past year and for the most part the policy guidance has proven satisfactory.
Nevertheless, it is recommended that the policy statement be reviewed at this time in the light of the growing political and economic instability in some countries, primarily with respect to the current and prospective problems confronting the United States in the Caribbean which are of great importance to the national security; and with a view to assuring its adequacy in the light of increased Sino-Soviet bloc influence and expanding efforts to undermine the U.S. position in the area.
A review would also provide an occasion to reassess certain aspects of the policy, such as U.S. military and economic policy, and the adequacy of providing NSC guidance on a regional basis which, in the view of certain agencies, might be further refined. Moreover, it would provide an occasion for the President to reappraise the policy document following his tour to Latin America and to assure that it is reasonably current at the close of this Administration.
Political Situation
Non-intervention and the OAS—Although problems of great importance to the national security remain with respect to Cuba, and, to a lesser extent, the Dominican Republic, the basic U.S. policies of refraining from overt intervention and support of multilateral action [Page 135] through the Organization of American States (OAS) made an important contribution towards isolating these problems and, to date, of reducing the danger of the spread of the pattern of direct and indirect aggression among Caribbean countries which emerged in the first part of 1959. However, the apparent increasing influence of international communism in the present Cuban government, and the growing subversive and anti-U.S. activities of the Cuban government in collaboration with the Communists throughout the area, have raised serious problems which make advisable a review of NSC 5902/1 from the standpoint of the situation in the Caribbean.
Canal Zone—With respect to the situation in Panama, no sound alternative has offered itself to the policy of maintaining U.S. rights under the Treaty of 1903, but interpretive problems and severe operational difficulties, including violence against the Zone, arose in the implementation of this policy in the light of the increasingly volatile situation prevailing in Panama.
Other Areas—In Bolivia, with the approach of the 1960 Presidential elections there, the situation continued to be highly explosive. During the year political relations have improved with other Latin American countries, notably Argentina, Mexico, and Uruguay.

Communism—The past year was marked by intensification of Sino-Soviet bloc efforts to extend its political and economic influence in the area and by concerted activities of the Latin American Communist apparatus and of the Castro movement to establish neutralist and subversive revolutionary Latin American organizations and activities, especially in the fields of labor, youth, and women, which would bring pressures on Latin American governments to disassociate themselves from U.S. leadership of the hemisphere. This offensive was well calculated by the Communists to appeal to anti-American sentiment in Latin America, to the prevailing liberal philosophy, to the popular economic yearnings of the area, and to nationalist desires for a more independent foreign policy. This support factor was catalyzed in 1959 by the new U.S. public approach to Soviet Russia, with the result that respectable Latin American public opinion is increasingly complaisant toward the trend. U.S. representatives in the area found it increasingly difficult to impress Latin American governments with these dangers by diplomatic representations or other direct methods and, in fact, only in less than six instances during the period under review did the United States discuss cultural or other Bloc contacts with Latin American governments and these mostly at the initiative of the host government. In this field, the United States was inhibited from appearing to argue that its Latin American partners should not do what it was doing. The United States likewise refrained from any official statements [Page 136] or publicity critical of Latin American contacts with the Bloc. Emphasis was placed increasingly on less direct methods of discouraging or discrediting contacts considered dangerous to U.S. interests.

Nonetheless, there has persisted among certain Latin American groups—especially those of liberal orientation—the feeling that the United States is urging on Latin America a purely defensive attitude toward the Soviet world, an attitude which these elements find unacceptable especially when the United States itself is expanding contacts. This image of the United States is the result of many factors, some of which are: that the United States press and U.S. public officials place the spotlight on the dangers of Communist penetration of Latin America to a much greater extent than the Latin Americans themselves; that the U.S., in fact, makes numerous representations to Latin American governments with respect to contacts with and attitudes toward Communist China which Latin American opinion does not sharply differentiate from contacts with and attitudes toward the Soviet Bloc; U.S. visa laws and regulations which take participation in Communist and Communist-front meetings into account; on the residual impression of the more direct actions taken by the United States to discourage Latin American-Bloc contacts when the United States itself was engaged in such contacts. It is recognized that, in view of the varying degree of danger or advantage to U.S objectives presented by various types of contacts with the Soviet Bloc and differing psychologies of Latin American peoples and governments, the action—if any—which the United States should take must necessarily be flexible and adjusted to each particular contact.

Information and Cultural Situation
Priority Programming—Appreciable progress was made in implementing the policy guidance that calls for an increase, as a matter of urgency, in informational and cultural activities. The advance, in the sense of increased resources, was mainly attributable to a special program designed primarily to influence Latin American student leaders, under which the number of university students brought to this country at U.S. Government expense was doubled and a number of student centers under binational supervision were established. The approach to priority audiences was also strengthened, however, by raising the intellectual level of radio and television programming, expanding the support given to local cultural activities in U.S.-Latin American binational centers, and further refining the selection of cultural presentations sent to the area under the President’s Special International Program. Modest but helpful progress took place in obtaining cooperation from U.S. nationals in support of the purposes of the policy. All departments and agencies concerned made increased efforts to stimulate and participate in demonstrations within the United States of interest in Latin America.
Latin American Reaction—Receptivity to all of these approaches was good and it is not to be expected that such ideological gain as they may have achieved could, except in a few clear instances, be estimated. It is obvious, however, that they have not yet attained enough scope even to approximate their potential effectiveness in supporting U.S. political objectives, and especially to rival the rapid expansion of Communist efforts in their field.
Labor Situation
Communist Activity—Stronger Communist initiative, supported by the labor movements of Cuba, Venezuela and Chile, and by significant Communist segments throughout Latin America, to undermine domestic democratic-oriented labor movements and establish a nationalistic anti-U.S. regional organization, represented a net setback to the achievement of U.S. objectives in the important labor sphere.
Adequacy of Programs—The programs of the United States and Free World labor movement to counter these trends have had only a limited effect. Despite the fact that the Operations Plan calls for special and urgent efforts in encouraging the development of non-totalitarian, non-Communist labor organizations, United States action in this regard has been inadequate.
Economic Situation
Trade—Latin America enjoyed more stable conditions as the 1957–58 decline in commodity prices leveled off and, in some cases, was reversed. Coffee was an important exception to this trend, but in some cases increased sales made up for the continued decline in prices. Cocoa and sugar were also exceptions. Trade between the area and the United States achieved a level of $3.5 billion for exports by the United States and $3.6 billion for imports into the United States during 1959, as compared with $4.1 billion for exports and $3.6 billion for imports during 1958, despite continued U.S. restrictions on the imports of non-ferrous metals and petroleums which continued to present problems—though not acute ones—with Latin American exporters of these items.
Stability—A number of Latin American countries made progress in stabilizing their economies through stabilization and economy reform plans and other devices, and moved further toward sound free enterprise economies, although the radical programs instigated in Cuba reversed the progress there. The progress made, however, has not removed the severe economic strains in the area attendant on underdevelopment.
Technical Assistance—Inclusive of contributions to the OAS, Technical Cooperation increased from $30,541,000 in FY 1958 to $35,513,000 in 1959, while during the same period Special Assistance decreased substantially from $44,710,000 to $24,360,000.
Capital Flow—The flow of U.S. investments to Latin America last year is expected to be less than the capital flow for 1958, at which time aggregate U.S. private ($11.1 billion) and public ($1.7 billion) investments in the area were $12.8 billion. On the basis of data for the first three-quarters of each year, the net flow of public and private capital declined from $684 million in 1958 to $448 million in 1959, and it is expected that the net flow during the fourth quarter of 1959 may be less than during the comparable period of 1958. Gross disbursements in 1959 for Latin America by the Eximbank, DLF, IBRD, and IFC totaled $405 million. Allowing for repayment of principal on prior year loans, net loans were $216 million. The net increase in direct private investments in the area was about the same in 1959 as in 1958, but there was a substantial net repayment of private short term capital to the United States in 1959 as compared with the net outflow of private short term capital in 1958.

Financing Development—In sum, the indications are that there was some decrease in the flow of private and public capital to Latin America in 1959. In the case of private capital this situation was attributable, in part, to expropriation, tax, and other restrictive measures, and disturbed political conditions in Cuba and elsewhere. In the case of public capital, 1959 was principally a year of preparation for the future. The United States was instrumental in the establishment of the Inter-American Development Bank, in achieving the substantial increase in the resources of the IBRD and the IMF, and in moving towards creation of the International Development Association. Together, these institutions will have substantial resources for loans to Latin America within the framework of their respective lending policies and thus be in a position to contribute to the additional flow of capital to the area which the policy statement recognizes as required.

Problems remain, however, with respect to financing of “social overhead” projects, such as schools, housing, roads, and other public projects which along with such questions as agrarian reform and industrialization are particularly active issues in current Latin American political life. Latin American governments at present generally lack the means from taxation and other local resources to finance these items and would like more foreign help. There is, however, no unanimity among or within these governments as to what priorities should be established within their capacity to service foreign loans on borrowing for projects designed to increase productivity directly and on borrowing directly for “social overhead” projects to meet the current demands for quicker progress in this area. The United States has given assistance to Latin America in meeting this “social overhead” problem through its Technical Assistance programs, its contributions or loans to [Page 139] the Inter-American Highway and to the Rama Road and other roads and in the form of modest loans to assist in other sectors. With regard to the future it is to be noted that the IBRD Directors’ report notes that

“the Association is authorized to finance any project which is of high developmental priority, that is, which will make an important contribution to the development of the area or areas concerned, whether or not the project is revenue-producing or directly productive. Thus, projects such as water supply, sanitation, pilot housing, and the like, are eligible for financing, although it is expected that a major part of the Association’s financing is likely to be for projects of the type financed by the Bank.”

When the IDA and the IADB begin lending operations (in the case of IADB within the year and somewhat later for IDA), they will include in their resources substantial amounts of subscribed national currencies which could, if authorized, be utilized for these purposes. It must be recognized, however, that in the years of rapid population growth and social revolution which lie ahead, the Latin Americans are confronted by a formidable task in mobilizing from domestic and foreign sources the capital necessary to provide the productive enterprises and social overhead projects needed if the area is to make progress towards its objective of more rapid economic development. It must likewise be noted that while recognizing that the United States can provide only a small portion of the capital required, it will have to assure to the maximum extent possible that its economic and financial policies towards the area are well adjusted to the situation as it unfolds.

Military Situation
During the reporting period, the United States has continued to provide military assistance to Latin American countries in accordance with foreign policy guidance and legislative requirements. Both grant and sales transactions have been used to provide equipment, matériel and training. However, there has been substantial debate on such matters as:
Whether over-all U.S. and Latin American interests are best served by the Hemisphere Defense concept and policy and program actions relating thereto;
How to discourage the tendency of some Latin American countries to divert resources from economic development to military purposes, particularly by purchasing excess arms from non-U.S. sources;
How to counteract the growth of tension and military rivalries in several areas by such means as international arms limitation arrangements;
Whether U.S. policies and actions are designed, or result in, the perpetuation in power of elements which do not encourage the growth of democracy.
Congressional concern has been reflected in the adoption of the language in Section 105(b)(4) of the Mutual Security Act of 19602 which, in part, reads as follows: “Military equipment and matériels may be furnished to the other American Republics only in furtherance of missions directly relating to the common defense of the Western Hemisphere which are found by the President to be important to the security of the United States. The President annually shall review such findings and shall determine whether military assistance is necessary. Internal security requirements shall not, unless the President determines otherwise, be the basis for military assistance programs to American Republics.”
Increased international tension in the Caribbean following the installation of the Castro government in Cuba and its increasing servitude to Communist objectives, and heightened military rivalry between the countries on the West Coast of South America, have particularly contributed to an armaments race in these areas, led several Latin American governments to procure arms and equipment in excess of planned strategic military needs for hemispheric defense, and resulted in a continuance of excessive expenditures for military purposes. At the same time, there has been an increasing interest in the South American region to find an effective international formula for arms limitation.
  1. Source: Department of State, S/S–NSC Files: Lot 62 D 1, NSC 5902 Series. Secret. Prepared by the OCB Working Group on Latin America. At its meeting on March 23, the OCB reviewed an earlier draft version, and referred it back to the Working Group for additional revisions, in light of a briefing by Assistant Secretary Rubottom and subsequent discussion concerning President Eisenhower’s trip to Latin America, February 23–March 7, 1960. The Working Group submitted a revised draft under date of April 4, and the OCB concurred in that draft at its meeting on April 6. (Memorandum by Bromley Smith, undated; ibid., S/S–OCB Files: Lot 61 D 385, Latin America—Documents (1960)) The OCB transmitted the report to the NSC under cover of a memorandum from Smith to Lay, April 7.

    Annexes A and B, entitled respectively “Sino-Soviet Bloc Activity in Latin America,” prepared by the CIA, and “Loan Disbursements and Repayments—U.S. and International Lending Agencies, 1956–1959,” are not printed.

  2. For text of the act (P.L. 86–472), approved May 14, 1960, see 74 Stat. 134.