2. Report From the Operations Coordinating Board to the National Security Council1

REPORT ON LATIN AMERICA (NSC 5613/1, September 25, 1956)

(Period Covered: September 12, 1957 through May 21, 1958)

A. Summary Evaluation

1. Despite encouraging2 developments in several countries leading to more representative forms of government, continuing political instability and intensified economic problems in most of Latin America (which were reflected in the Vice President’s recent trip to South America—See Annex C)3 have overshadowed other progress in the political field and have led to increased social unrest. These adverse factors, coupled with increased Soviet Bloc attention to the area, call for prompt effective action to help solve some of the economic problems and to give greater political and psychological emphasis to U.S. policy in the area.

2. During the period, the principal factors deterring more substantial progress were: a sustained and widespread decline in markets and prices for basic export commodities deriving in part from the slackening of business activity in the United States; reduction in the foreign exchange holdings in most countries; the continued danger (and the imposition in certain cases) of U.S. restrictions on imports from Latin America; the failure of some Latin American governments to put their own economic and political houses in order; an increase in the propaganda and activities of the Soviet Bloc and local communist groups following the sputnik launchings; the failure of most countries effectively to curb communist activities; an intensification of ultranationalist, [Page 3] anti-U.S. sentiment; and the increased political instability in some countries, notably Venezuela, arising principally from efforts to achieve representative governments.

3. On the positive side strong Latin American support for major U.S. and Free World policies continued. Bilateral relations with the various American Republics were genuinely friendly, and increased multilateral cooperation was achieved through expansion of the activities of the Organization of American States (OAS). Improved cultural, technical cooperation and labor programs, utilizing local resources and working through national institutions, helped offset anti-U.S. criticism by ultra-nationalists and others. The value of U.S. private direct investment is expanding by $1 billion per year. Export-Import and IBRD loans continue to be a significant factor in Latin American development. U.S. trade with Latin America amounting to $8 billion in 1957 was greater than with any other area in the world except Western Europe. The communists remained incapable of seizing power in any country through their own means.

4. The Board recommends that the Council review NSC 5613/1 in the light of this Report and the intensification of problems noted herein, the impact of possible Congressional actions, such recommendations as the Vice President may make in connection with his recent trip to South America, and the difficulties which have been encountered in the implementation of policy as set forth in Para. 24.4

B. Major Operating Problems or Difficulties Facing the United States

5. Political

Political Instability. A vital factor limiting progress and long-range economic planning was the political instability which continued to plague the area. Economic deterioration in the area has, in turn, aggravated political instability in countries such as Brazil, Chile, Colombia, and Peru. Even in those countries which made substantial advances toward more representative government (Argentina, Colombia, and Venezuela) political instability, intrigue and turmoil at times were heightened rather than diminished. Civil strife in Cuba, Colombia, Haiti, and Paraguay further emphasized that the achievement of political stability in Latin America remains a long-range goal toward which the United States must continue to direct its policies and efforts.
Difficulties in Adhering to the Policy of Non-Intervention.
Charge that U.S. Supports Dictatorships. Despite continued strict adherence by the United States to its policy of non-intervention in the internal affairs of Latin American countries, there were increased unfounded [Page 4] charges during the period that the United States was supporting dictatorships. The cumulative effect of the overthrow or termination of dictatorial regimes in Argentina, Colombia, Haiti, and Peru in recent years, and particularly the overthrow of Perez Jimenez in Venezuela in January, has generated a particularly strong wave of anti-dictatorial feeling in the hemisphere and intensified criticism of U.S. non-intervention policies. The tense situation in Cuba was used as the principal example by anti-Batista and liberal groups in the U.S. Congress, press and general public to attempt to prove the charge of U.S. support for dictatorships. Statements by U.S. Government spokesmen praising steps taken in Latin America toward democracy only slightly mollified these groups, many of whom advocate the abandonment of the policy on non-intervention insofar as the dictators are concerned. Yielding to these great pressures would, of course, place in jeopardy one of the cardinal doctrines of our inter-American relations—noninterference in the internal affairs of other countries.
Arms Shipments. Related to the foregoing is the question of shipment of arms to countries involved in internal strife—particularly those having dictatorial regimes. Again, Cuba is the principal case in point. Anti-Batista forces call for a complete embargo on arms shipments to the Cuban Government—despite our bilateral military agreements. The Cuban Government counters with the assertion that these arms had been purchased or promised before the present situation and that their denial has an important bearing on the constituted government’s ability to maintain internal security and to protect the lives of Americans and American property. The United States has called to the attention of the Cuban Government restrictions against the use of MAP grant equipment against rebel forces without obtaining United States concurrence in their use and has suspended temporarily a shipment of rifles because of the existent tension in Cuba. It has also taken action to stop clandestine arms shipments destined for the rebel forces.
U.S. Advice and Direction. A continuing difficult problem faced by U.S. representatives in the field is the necessity for affording friendly advice to Latin American governments on important problems without incurring charges on intervention. The effective implementation of economic stabilization programs in several countries and the efforts of the United States to encourage Latin American governments to take salutary political and economic measures, for instance, call for careful discreet action by U.S. officials.
Problems of Ultra-Nationalism. Agitation by ultra-nationalist groups, particularly in Brazil and Argentina, has helped encourage adoption or continuance of protectionist policies which hinder economic development in several of the countries, e.g., state oil monopolies. This ultra-nationalist agitation has become more serious because of the strong anti-U.S. themes developed, and because the communists [Page 5] have been able to align themselves with ultra-nationalist groups and encourage or direct their programs into a “Yankeephobia” line. In so doing, the communists have been able in many cases to pose as local patriots. Opportunities still exist for the United States to develop an effective program to prevent these nationalist feelings in Latin America from becoming the focus of anti-U.S. fervor which they are in certain other underdeveloped countries of the world.
Latin American Complaint of Neglect of the Area. Many Latin Americans continue to feel that the area is being neglected or taken for granted by the United States. They point with resentment to the disproportionately small share of our total foreign economic and military assistance which Latin America has received and they tend to use these as a measure of our respect and consideration for them. These charges and complaints are highlighted by the economic difficulties now being experienced by Latin America and there have been indications that some Latin Americans believe the solution is to seek help from other sources, including the Soviet Bloc. Latin Americans charge that the United States accepts their solidarity and help in the United Nations and elsewhere but gives little recognition to this solidarity in considering Latin American problems. Failure adequately to dispel it through effective courses of action could have important repercussions on United States-Latin American relations and cooperation.
Impediments to the Free Trade Union Movement. The free trade unions in Latin America lack resources and capable leadership to carry on the educational, training and publicity activity necessary to effectively meet the communist challenge or to efficiently represent the interests of workers with employers and governments. International free trade union organizations do not have the means fully to supply the deficiency, even if available means were applied more efficiently. Workers are still generally unaware of the methods, implications and purposes of communism; in many cases they regard communists merely as fellow workers. Indeed they often consider communist workers or labor leaders as even more dedicated to the interests of labor than other workers or labor leaders. Legitimate trade unions are obstructed by efforts of political parties to utilize them for political ends and by management attitudes resisting modern concepts of employee representation and consultation. Frictions between the International Confederation of Free Trade Unions (ICFTU) and its regional organization, ORIT, particularly those deriving from the tendency of the ICFTU to seek to over-centralize direction of its labor activities in Latin America, handicapped their effectiveness in the area.
Industrial Relations. Aside from economic conditions unfavorable to workers, industrial relations are aggravated by the scarcity of managerial and administrative skills, lack of advanced personnel practices, the deficiency of capable and responsible trade union leadership, and the agitation of communist elements.
Communism and Relations With the Soviet Bloc.
Increased Soviet and Communist Political Propaganda and Cultural Activities. As a result of developments generally favorable to Latin American communists during 1957 and early 1958—Soviet sputniks,5 Latin American economic difficulties and preparations in several countries for national elections—overt Soviet-communist political and propaganda activity increased in parts of the area.6 Emphasis on ultra-nationalist and anti-U.S. themes, accelerated cultural exchange programs and an increased use of national liberation front tactics and alliances were noted. The communist propaganda efforts were designed to make the USSR appear to be dynamic and positive in contrast to an allegedly static, negative U.S. position. Increased and more intelligent efforts to play on local themes were evident, and intensified efforts of local communists to infiltrate and control labor organizations were important. Efforts to gain acceptability and legality for local communists increased and were particularly important in Brazil and Venezuela. In the latter country the Communist Party is emphasizing its part in the recent revolution and its cooperation with the incumbent government as well as the other political parties, and has increased its efforts in the government, in labor organizations, in the university, and in the press. The establishment of economic and diplomatic relations with the Soviet Bloc was a favorite communist propaganda theme. In addition, the continued overt and covert activities of Soviet Bloc missions were intensified, particularly in Mexico, Argentina, and Uruguay, where there are Russian missions. Details concerning these efforts are included in Annex B.7
Intensified Soviet Efforts to Increase Trade Relationships. Coupled with the foregoing has been a highly publicized increased effort on the part of the Soviet Bloc to expand trade relations with Latin America. While Soviet Bloc trade constitutes less than two per cent of total Latin American foreign trade, it is evident that the Soviets hope to take advantage of Latin American economic difficulties to gain [Page 7] greater entree into Latin America and at the same time to press anti-U.S. themes. The Soviets have made it plain that their offers of trade are closely connected with the question of the resumption of diplomatic relations. To date, most of the rumored trade offers have not materialized into concrete agreements and their greatest effect has been in the propaganda field. Nevertheless, there is no doubt the Soviets are concentrating more attention on Latin America and will be increasingly alert to take advantage of any mis-step by the United States or difference of opinion between the United States and its Latin American neighbors.
East-West Trade. Many Latin American countries continued their small participation in Soviet Bloc-Latin American trade; i.e., principally Argentina, Brazil, Cuba, Uruguay, and to a lesser extent Chile, Colombia, Mexico, Peru, and Venezuela. In order to push exports of products not readily disposable to Free World countries because of the existence of surpluses or price differentials, these countries increased somewhat the percentage of their total export sales in 1957 which went to the Soviet Bloc countries. On the other hand, lack of availability of suitable merchandise in the Bloc countries resulted in a decrease of percentage of total Latin American imports originating in the Bloc.

Impact of Expanding Soviet-U.S. Cultural Relations on Latin America. This is one of the most important developing problems and one which will necessitate further close consideration by the United States. In the past, most Latin American countries have had only limited cultural contact with the Soviet Bloc and most interchange has consisted of the travel of known communists or pro-communists behind the Iron Curtain. Recently there have been increased approaches by the Soviet Bloc for travel of cultural groups to Latin America. In line with the Caracas Resolution on Communism, the United States has furnished information on communists to the Latin American governments and has urged these governments to restrict cultural and other types of exchanges. The recently concluded U.S.-Soviet cultural agreement will, however, make it increasingly difficult to request the Latin Americans to refrain from accepting the visits of Soviet Bloc groups and may even make it counter-productive in certain cases for the United States to approach the Latin American governments.

The expected increase in this type of contact between Latin America and the Soviet Bloc will provide the latter with more opportunities for infiltration, subversion, propaganda and other activities detrimental to United States activities in Latin America. It will be necessary for the United States to develop programs and policies to offset the increased Soviet influence which can be expected in the cultural field. Failure of the United States to take appropriate measures and to develop effective courses of action could certainly prejudice the United States position in Latin America.

Overseas Internal Security Program (OISP). The concept for Overseas Internal Security Programs is to develop the capabilities of internal security forces and agencies to enable them to counter communist subversion. The problem arises as to whether public safety programs in Latin America may be initiated where the immediate threat derives from ultra-nationalism or political and economic instability in the absence of any immediate threat from communist subversion.

6. Military

During the period covered by this report, military policy developed to implement U.S. policy towards Latin America has been fully disseminated to U.S. field representatives to provide the necessary guidance to place current and future U.S. military programs in the Latin American area in consonance with national policy and objectives. However, because of the generally restrictive guidance contained in current national policy compared to that contained in previous national policy, it will require the continuing efforts of U.S. agencies and representatives at all levels to gain the acceptance and understanding of the Latin American countries for the reduced active military role that they will be expected to have in defense of the western hemisphere in accordance with current U.S. strategic concepts. On November 8, 1957 the OCB concurred in a special report on the interpretation of military assistance policy toward Latin America.8

Obtaining Military Rights in the Latin America Area. The year-old military discussions with Brazil arising out of the Fernando de Noronha Agreement9 have reached the counter-proposal stage. Brazil has requested a list of military equipment valued at $600 million as a quid pro quo for the establishment of a U.S. missile tracking station on the Brazilian island of Fernando de Noronha. The Departments of State and Defense are currently considering a counter-proposal involving military assistance, primarily equipment, valued at $___,10 of which a substantial amount would be matériel excess to U.S. service and MAP needs. If this proposal is adopted by the United States and negotiated with the Brazilians it would probably be implemented through the provision of $15 million of equipment in FY 1959 with the balance to be made available in the next two or three years. At such time as a U.S. position is developed on this matter, the procedure will be to have the Chairman, U.S. Delegation, Joint Brazil–United States [Page 9] Defense Commission (JBUSDC) proffer the list to the Brazilian Delegation in expectation of providing mutual settlement of Article 6 of the Noronha Agreement. With respect to U.S. desires for military rights in Mexico, the long-awaited agreement from the Mexicans for an early Joint Mexican-United States Defense Commission (JMUSDC) meeting to revise the Mexico–United States Emergency Defense Plan11 has only reached the stage of discussing an agenda. The United States has a continuing requirement for rights to over-fly Mexican territory in connection with U.S. air defense operations.
Latin American Interest in Excessive Military Equipment. It is the general policy of the United States not to provide Latin American countries with military equipment, through either grant or sale programs, which is not suited to the objectives envisaged in U.S. national policy and current strategic concepts. Despite U.S. efforts to discourage Latin American countries from excessive military equipment purchases, it can be expected that their desires for such equipment will continue as will their procurement from non-U.S. sources, principally Western Europe.
Inter-American Military Relations. An increasing problem is resistance of Latin American Republics to suggestions that they tailor their military forces to roles and missions of maintaining internal security and territorial integrity with minimal military equipment best suited to these tasks. There is a further problem of assuring that the savings resulting from the elimination of unnecessary military expenditures will be diverted to economic development. The dominant position the military occupies in political matters in their respective countries not only makes the foregoing problems difficult of solution, but makes the maintenance of good relations with them a problem in itself.

7. Economic

Problems of Financing of Economic Development.
Financing Dollar Costs with U.S. Assistance. Most of the Latin American countries have generally been able to obtain Eximbank, IBRD, or IFC financing for the dollar costs of sound development projects. Some countries, however, notably Bolivia, Haiti, and Paraguay, have exhausted or nearly exhausted their current dollar debt servicing capacity. Such countries are characteristically those with the lowest levels of economic development in the area. Despite the fact that existing institutions have financed the dollar costs of some projects in the following categories, consideration is being given to the need for loans for dollar costs connected with municipal water supply and sanitary installations, rural electrification, scientific and technical [Page 10] schools and colleges, hospitals and health centers. This is one of the problems that will be considered in the review of Para. 24 of NSC 5613/1. The Development Loan Fund (DLF),12 which among its other powers, can make loans for dollar costs on a local currency repayment basis, provides a means for meeting these problems in appropriate cases.
Financing Local Development Costs With U.S. Assistance. There is a scarcity of funds in most of Latin America available for medium or long-term local currency development loans at reasonable rates to cover local costs of projects in the private and public sectors. In the public sector this applies to projects not ordinarily financed by private or government lending institutions such as farm-to-market or feeder roads, municipal water supply and sanitary installations, rural electrification, scientific and technical schools and colleges, hospital and health centers. Local currency generated by PL 48013 sales has made and is expected to continue to make a useful contribution in regard to local currency financing of development projects in both the private and public sectors. However, the supply of such funds is limited and there are no PL 480 programs in many of the countries. In those few countries where Special Assistance programs prevail, local currency generated thereby can also help finance development. The DLF has approved two loans to help cover local currency costs of projects in Paraguay and Honduras.
Congressional Appropriations Limitations. During the first ten years of the existence of the Institute of Inter-American Affairs (1942–1952) it was possible to carry over funds from one year to another for the Latin American Technical Cooperation program, and for the Institute to adjust allocations between countries and projects in carrying out the program. As a consequence there was a flexibility in the utilization of the funds and it was possible to plan projects with the host governments on longer than a one-year basis. At present the amount of the funds made available for the Latin American program is reduced in an amount equivalent to those carried over from the previous year. In these circumstances, the inability to obtain Congressional authorization and appropriation beyond a one-year basis deprives the [Page 11] region of the flexibility previously enjoyed both in respect to longer range planning with the host governments and in utilization of the funds.
Scarcity of Skilled Human Resources. Scarcity of managerial and administrative personnel, as well as technicians, scientists, economists, researchers, teachers and engineers, exists because of the lack of business and public administration schools and education training facilities in the scientific and financial fields. This impedes economic development in both the private and public sectors and results in frustrations and resentments which give rise to excessive nationalism in many countries.
Economic Development Problems.
Diversification. In countries whose economies are based on one or two commodities (i.e., Bolivia, tin; Brazil and Colombia, coffee; Chile, copper and nitrate; etc.), sudden or violent fluctuations in the demand or prices for these commodities bring about difficult economic situations. While steps to diversify the economy of these countries have been taken, diversification is a long-term problem affecting most of the area.
Basic Commodity Problems. During the period under review rising production combined with a decline in prices and/or sales of most of Latin America’s basic export products, i.e., sugar, coffee, fibers and minerals, has accentuated the economic problems of the area. The decline in mineral prices reflects in part a reduction in the U.S. stockpiling program and the slackening of business activity in the United States. Prices of minerals and other industrial raw materials may be expected to improve when economic activity in the United States resumes its normal growth. Coffee prices, on the other hand, are likely to continue downward since supplies in prospect over the next five years greatly exceed world requirements. In view of its long production cycle and the relatively inelastic short run demand for coffee, producing countries feel that they are faced with the alternatives of: (1) a sharp drop in coffee prices and decline in foreign exchange receipts; or (2) limiting exports to maximize dollar receipts and assuming the heavy financial burden of stockpiling surpluses. Any long term solution to the coffee problem must take account of the fact that at current prices world production of coffee is being stimulated beyond existing demand. Latin American countries have urged the negotiation of international commodity agreements in certain basic products as a means of stabilizing raw material prices. The United States has usually opposed this approach as at best offering only a temporary solution while limiting the function of the free market. The U.S. does, however, participate in the International Sugar Agreement14 and the International [Page 12] Wheat Agreement15 where important U.S. producing interests are involved. Since coffee accounts for almost twenty-three per cent of the total value of exports from Latin America and economic problem of this magnitude has serious political implications for U.S. relations with the area, the State Department has been authorized by the CFEP to participate in an international coffee study group and, as an exception to general policy, to discuss an international coffee agreement if proposed by another member of the group, provided that it does not imply either directly or indirectly that the United States would either participate in or assist in policing such an agreement.16 As regards metals, the recent proposal of the Secretary of the Interior to subsidize domestic production of certain metals as an alternative to increasing restrictions on imports received some favorable comment in Latin America, but there were also expressions of fear that this may stimulate U.S. production and further reduce world prices.
Foreign Private Development of Petroleum Resources. The resistance of certain countries, such as Argentina and Brazil, to admitting foreign capital in the development of the petroleum industry is another important problem. These countries have neither the capital nor the know-how to develop their petroleum resources at a rate which would keep pace with their increasing needs for petroleum products. They are, therefore, forced to allocate a very large portion of their dollar exchange for imports of petroleum in its various forms. If foreign interests were admitted to the full development of the oil resources, not only would savings in foreign exchange be effected, but the receipts from investments and from eventual exports of petroleum would produce additional foreign exchange for other needed imports. In view of the importance of the problem and because of the varied statements made by Frondizi, there is considerable interest and speculation as to the policy with respect to the development of petroleum resources which the new Argentine government will adopt. The Soviets are known to desire to exploit against the United States this problem of petroleum policy.
Foreign Investment Climate. Notwithstanding the fact that U.S. private investment in Latin America is greater than in any other area, economic development has been retarded in certain countries where the climate is such as to discourage foreign private investment because of (a) unstable political conditions; (b) restrictive regulations governing the entry of foreign capital; (c) unreasonable impediments to remittance [Page 13] of profits and repatriation of capital; and (d) pressures of various kinds on foreign investments in order to force sale to domestic private or Government enterprises.
Trade and Commercial Problems.
Import Restrictions. Increased restrictions have been imposed on trade within the area and further restrictions are in prospect. The United States is considering proposals which would increase restrictions on imports of commodities important to the Latin American countries such as copper, lead, zinc, petroleum and tung oil. The outcome of the Administration’s bill for the renewal of the Trade Agreements Act remains uncertain. On the Latin American side a number of countries have taken restrictive action in the form of higher duties, increased import restrictions and tighter exchange controls. Frequently these measures are designed to check the tendency toward higher imports generated by internal inflation. In some cases they are intended to protect domestic industry, reduce balance of payments difficulties and produce more government revenue.
Other Limitations Affecting Trade. U.S. export trade to Latin America continues to be confronted by a number of adverse factors, such as (a) limitations on the freedom of the exporter in placing insurance on goods shipped to Latin America where he chooses (i.e., Argentina, Colombia, Cuba, Mexico, etc.); (b) legal difficulties in connection with the termination of services of agents or legal representatives (i.e., Cuba, the Dominican Republic); (c) extremely detailed and exacting requirements for documentation of shipments, and penalties for infractions thereof (Argentina, Brazil, Colombia, Cuba, Ecuador, etc.). The early completion of the Inter-American Highway will accentuate a problem regarding commercial use of this highway, arising from legal provisions in Mexico requiring trucking and bus firms to be composed of native-born Mexicans.

[Here follows a list of the Attachments. A Financial Annex and Pipeline Analysis are not printed.]

Annex A


8. Increased Communist Activities. There were increased communist activities throughout the area during the period. A conference of northern communists was held in Mexico in March; an increased number of Latin Americans attended conferences behind the Iron Curtain during the period; and there were increased offers of Soviet bloc trade. A meeting of Latin American communists in Moscow during the 40th Anniversary Celebration stressed the need for increased coordination of communist activities within Latin America. The surfacing of Brazilian [Page 14] communist leader Luis Carlos Prestes after a court charge against him was revoked spurred communist political activity in Brazil. A Uruguayan trial purchase of crude oil from the Soviets and a Soviet offer to take an increased amount of wool tops directly from Uruguay were among the commercial agreements concluded. An increasing number of cultural visits from the bloc, the proposed visit of ten Soviet journalists to Latin America and the high-ranking delegations sent by the Soviet bloc to the Frondizi inauguration17 were further evidence of increased USSR attention to the area.

9. Soviet Bloc Diplomatic Relations. No country in the area resumed diplomatic relations with the Soviet bloc during the period, although a Rumanian Legation was opened in Uruguay and a third Polish Consulate in Brazil in the last half of 1957. On the other hand, the governments of Ecuador and Peru expelled Czechoslovakian diplomats from their countries, and Peru actually broke diplomatic relations. Both Ecuador and Peru gave as reasons the interference in domestic affairs by the Czechoslovakian diplomats.

10. Copper, Lead and Zinc. The Secretary of Interior18 presented a five-year Domestic Minerals Stabilization Plan, with the President’s endorsement, intended as a substitute for proposals before the Administration for increasing barriers to importation of these minerals, which had been severely criticized in Latin America as a departure from U.S. liberal trade policy. He indicated the plan would shortly be introduced in Congress. Initial response to the proposal in Latin America was favorable in many countries; in others it met with serious misgivings.

11. Development Loan Fund. The first loans for Latin America by the Development Loan Fund (DLF) were authorized during the period. These were for road construction of $2.5 million in Paraguay and $5.0 million in Honduras.

12. Engineer Construction Unit Program. Engineer construction units are in process of being trained and equipped in Bolivia and Honduras culminating an effort over a period of three years to launch a program under which the Latin American military forces actively participate in projects contributing to economic development. These units are being trained in the use of civilian type construction equipment which is supplied under the program. They engage in public works projects of the host government such as roads, bridges, sewage, irrigation, rural electrification, airports, river navigation and port development.

Under the Technical Cooperation Program a number of related activities are being carried on. Units of the Paraguayan Army engaged in road building and maintenance are being assisted by a U.S. highway [Page 15] engineer and are being provided technical advice and demonstration equipment. An agricultural experimental project renders advice to military units in El Salvador. The U.S. Army Mission has been requested to submit recommendations for the organization of an engineer construction unit from Salvadoran Army personnel. A project has been included in the Guatemalan program for FY 1958 which provides for agricultural and vocational training of army recruits.

Costa Rica and Mexico have expressed interest in engineer construction units under the President’s program to help Latin American countries use their military forces for the construction of useful public works projects.

14. [sic] Financial Reform. The United States, in cooperation with the International Monetary Fund (IMF) and with private U.S. banks in some countries, entered into, or extended, financial arrangements with Bolivia, Chile, Nicaragua, Paraguay and Peru in support of efforts by these countries to achieve internal financial stability and balance of payments equilibrium. Colombia adopted various internal and external reform measures in the financial field and received assistance from IMF, Exim Bank and various commercial banks in connection with arrangements for consolidating its external commercial debt. Discussions are now being held with Brazil and Haiti regarding financial reforms. Latin American countries are increasingly utilizing the resources of the IMF to deal with temporary swings in their external payments positions.

15. Training. In the increased emphasis that is being placed on training of nationals within their own countries, important steps have been taken to build up local institutions, to assist local nationals in attending these institutions and to employ qualified local teachers trained under U.S. and UN programs instead of using additional American technicians. For instance, the Public Administration School at Sao Paulo is helping to strengthen the business community in Brazil by training persons in managerial and administrative skills. A Smathers loan19 provides scientific and technical laboratory equipment for seven universities in Chile. Two technical universities in Chile are being aided in developing an industrial training program for skilled industrial personnel. We have assisted in the establishment of an agricultural college in Paraguay and are providing scholarships enabling local nationals to enroll in the college at about one-eighth the cost of training in the United States.

[Page 16]

16. Petroleum. At the suggestion of the U.S. Government, consultations were held in March at Caracas, Venezuela between high-level representatives of the United States, Venezuela and Canada, regarding the U.S. voluntary limitations program on crude oil imports.20 The U.S. objective for these discussions was to explain the need for a further slight curtailment in the level of crude oil imports and to obtain the tacit concurrence of Venezuela and Canada to continuance of the U.S. program on a voluntary basis without disruption of other trade relations, or challenge of the program as being in violation of the spirit if not the letter of basic trade agreements. The consultations were successful. Legislation has been introduced to substitute mandatory for voluntary limitation on crude oil imports and to extend controls to petroleum products. An important factor in avoiding possible enactment of such legislation, which would have serious foreign policy implications, will be the success which the voluntary program, with government-to-government consultation, has achieved.

17. Implementation of Recommendations of the Inter-American Committee of Presidential Representatives. Following the submission of its recommendations to the Presidents of the American Republics, the Inter-American Committee of Presidential Representatives adjourned and left to the governments and the Organization of American States (OAS) the implementation of their recommendations. In November 1957 the Council recorded approval in principle by the governments of these recommendations and appointed a number of committees to plan their implementation. Consideration is now being given to the statutes of an Inter-American Nuclear Energy Commission and to the revision of the Convention of the Inter-American Institute of Agricultural Sciences. The OAS fellowship program has been approved by the Council, and it is hoped that the program will first get under way in the fall of the current year.

18. OASNATO Exchange. At the Heads of Government Meeting in December 1957, the Secretary proposed that NATO and other Free World regional organizations establish informal contact with each other and exchange information of mutual interest.21 After approval by the NATO Council, Secretary General Spaak of NATO wrote on February 24, 1958, to Secretary General Mora of the OAS, asking his views on such an exchange. Despite some initial coolness, the General Committee of the Council of the OAS approved Mora’s draft reply, and it was dispatched to Spaak on March 26, 1958. This reply agreed [Page 17] to an exchange of information but underlined the separate and distinct natures of the OAS and NATO. The net effect was thus to accept the NATO initiative, but without enthusiasm.

19. Additional developments during the period were:

In April, on the eve of his departure for Washington, President Ibanez of Chile cancelled his official visit to the United States. Although internal political conditions were given by Ibanez as the official reason for the cancellation, the immediate cause was believed to be a public statement by the United States Secretary of Interior a few days earlier endorsing proposals to reimpose at this time the import duty on copper rather than await its automatic reinstatement on July 1, 1958.22 Chilean press and public reaction was overwhelmingly in support of President Ibanez’ action and provided eloquent proof of the sensitiveness of Latin Americans to issues affecting their basic commodities. Ibanez’ decision evoked demand in Chile for increased trade with the Soviet bloc.
Dr. Jose Ramon Villeda Morales, head of the Liberal Party, was named President of Honduras in November 1957 by a freely elected Constituent Assembly. It was the first time in twenty-five years that a Liberal government had been in power, and the Constituent Assembly election constituted one of the most important steps in Honduras’ history toward representative government. The Villeda Government replaced a military junta which had ruled since the overthrow of the previous Lozano23 regime.
Gen. Miguel Ydigoras Fuentes, the candidate supported by rightist elements, was elected President of Guatemala in January 1958. This election followed an election only three months previously which had been nullified after Ydigoras groups and leftist mobs took to the streets to protest the announced election of the Nationalist Democratic Movement (MDN) candidate. The January election was a culmination of a period of unrest and political turmoil following the assassination of President Castillo Armas. The election campaign saw the return to an active role of extreme leftist and communist groups. It has produced a situation in which the extreme left has now gained a powerful position in Guatemala’s political scene.
Francois Duvalier was inaugurated as President of Haiti in October 1957 replacing the military government of General Kebreau, thus restoring constitutional civilian control to Haiti. Nevertheless, political and economic instability continued. The assassination by Haitian military and police authorities of an American citizen in September [Page 18] further complicated the political situation and caused strained relations with the United States until a satisfactory settlement of the United States diplomatic demands was reached.

Early in January 1958 the dictatorship of General Marcos Perez Jimenez was overthrown in Venezuela and a junta composed of military and civilian members assumed power and promised to hold elections within the near future. All political parties, including the communists, became active once again and a delicate political situation developed in which there was a tenuous balance between military and civilian groups. A few days after the Nixon trip the two civilian members of the junta resigned and were replaced by two other civilians, and the military seem to have assumed a stronger role. Further possible shifts in the junta have been rumored. On May 27 several important cabinet changes were made. The failure of the Venezuelan Government to take a responsible position concerning the causes for the violence against the Vice President is believed to be principally the result of the political turmoil and uncertainty which is continuing as Venezuela attempts to establish a more democratic form of government. The increasing importance and activity of the communists in Venezuela in practically all walks of life is being viewed with concern in the United States.

The ex-Chief of National Security Police, Pedro Estrada, departed voluntarily from the United States on May 17. Ex-President Perez Jimenez, whose visa case along with that of Estrada has been a serious point of issue between the Venezuelan Government and the United States, still remains in the United States. The Venezuelan Government has not as yet taken any steps to request extradition, even though Vice President Nixon made it clear that the responsibility for such action lay entirely with the Venezuelan Government.

On May 1, 1958 Dr. Arturo Frondizi was inaugurated as the new President of Argentina. The support of Peronists and communist groups made Frondizi’s election a landslide. His future policies are a matter for conjecture. Frondizi succeeds the provisional government of General Aramburu24 which assumed power in the aftermath of the overthrow of dictator Peron.25 The latter is in the Dominican Republic. There are rumors he hopes to return to Argentina under a Frondizi amnesty, or failing this, go to Europe to live. Argentine-Dominican relations were “interrupted” prior to the Frondizi inauguration because of the presence of Peron in the Dominican Republic. The Argentine Government, however, renewed relations with Venezuela after Perez Jimenez was overthrown and Peron left that country.
Dr. Alberto Lleras Camargo was elected President of Colombia on May 4, 1958 after bitter debate between the traditional Conservative and Liberal Parties over the selection of a single candidate. Political turmoil in Colombia continued and an attempted coup in which former dictator Rojas Pinilla was believed involved, two days before the elections, resulted in the arrest by the rebel forces of four of the five members of the governing junta and also of Dr. Lleras. Quick action by loyal army troops prevented the coup from succeeding. The election of Dr. Lleras presents a unique experiment in which the two dominant traditional parties of Colombia have agreed to rule the country jointly for the next 12–16 years in an effort to bring about political stability.
Violence and political turmoil increased in Cuba during the period. Constitutional guarantees were suspended, reinstated, and suspended again as a fight for power developed between Batista’s government forces and those of rebel leader Fidel Castro. Castro’s call for a general strike and a fight to the finish in April failed and his “army” was forced to flee again to its mountain stronghold. Batista has called for elections in November, but many opposition groups refuse to participate in “Batista-conducted” elections.

  1. Source: Department of State, S/PNSC Files: Lot 62 D 1, NSC 5613 Series. Secret. Transmitted to the NSC under cover of a June 3 memorandum from OCB Executive Officer Elmer B. Staats to NSC Executive Secretary Lay. The memorandum states that NSC 5613/1 was “consistent with National Security Policy (NSC 5810/1) except that Paragraph 6. g. of the latter policy clarifies Paragraph 15. d. of NSC 5613/1.”

    Paragraph 15. d. of NSC 5613/1 reads as follows: “Reduce and eventually eliminate Soviet bloc and Communist influence in the area.”

    Paragraph 6. g. of NSC 5810/1, “Basic National Security Policy,” approved by President Eisenhower on May 5, 1958, reads as follows: “To destroy or neutralize the international Communist apparatus in the Free World.”

  2. As approved on May 21, this word read “increasing”, but on June 16, at the request of the OCB, it was revised to read “encouraging.” (Memorandum by Lay, June 16; ibid., S/S–NSC Files: Lot 63 D 351, NSC 5432—Memoranda)
  3. Not printed. Regarding the Vice President’s trip, see Documents 42 ff.
  4. Paragraph 24 of NSC 5613/1 relates to the extension of soft dollar loans and the provision of grant economic assistance to resolve emergency situations affecting U.S. interests in countries where the local government’s resources were inadequate.
  5. Reference is to the launching of earth satellites by the Soviet Union on October 4, 1957 (Sputnik I) and November 3, 1957 (Sputnik II), ostensibly in connection with the Soviet Union’s participation in the International Geophysical Year (IGY), 1957–1958.
  6. On March 14, Director of Central Intelligence Allen W. Dulles sent a report on the subject “Soviet Bloc Efforts at Penetration of Latin America” to the White House, under cover of a memorandum to Brigadier General Andrew J. Goodpaster, White House Staff Secretary. A copy of the memorandum and attached report, both dated March 14, is in the Eisenhower Library, Staff Secretary Records.
  7. Not printed.
  8. This special report is presumably the paper entitled “U.S. Military Planning Guidance—Latin America,” prepared by the Joint Chiefs of Staff in mid-1957; for documentation on the subject, see Foreign Relations, 1955–1957, vol. VI, pp. 213 ff.
  9. Reference is to the “Agreement for establishment of a guided missile facility on Island of Fernando de Noronha,” effected by an exchange of notes at Rio de Janeiro, January 21, 1957. For text, see 8 UST (pt. 1) 87.
  10. No figure is provided in the source text.
  11. Not printed.
  12. The Development Loan Fund was established pursuant to a provision in the Mutual Security Act of 1957 as part of the International Cooperation Administration, to assist free peoples abroad to develop their economic resources and to increase their productive capacities. Its responsibilities were carried out subject to the foreign policy guidance of the Secretary of State. The Under Secretary of State for Economic Affairs served as Chairman of the Board of Directors of the DLF. For text of the Mutual Security Act of 1957 (Public Law 85–141), enacted August 14, 1957, see 71 Stat. 355.
  13. Reference is to the Agricultural Trade Development and Assistance Act of 1954, enacted July 10, 1954; for text, see 68 Stat. 454.
  14. For text see 6 UST (pt. 1) 203.
  15. For text, see 7 UST (pt. 3) 3275.
  16. Reference is to CFEP 569, an action taken by the Council at its meeting on May 20, 1958. The minutes of the meeting and the record of action are in the Eisenhower Library, CFEP Records.
  17. Arturo Frondizi was inaugurated President of Argentina on May 1.
  18. Fred A. Seaton.
  19. Smathers loans were authorized by an amendment to the Mutual Security Act of 1956, named after Senator George A. Smathers (D-Florida), designating a portion of defense support funds to promote health, education, and sanitation programs and land resettlement projects in Latin America. For text of the act (Public Law 726), enacted July 18, 1956, see 70 Stat. 555.
  20. These consultations were held in Caracas, March 12–14, 1958; the Canadian Ambassador to Venezuela attended as an observer. Documents pertaining to this subject are in several Department of State Central Files, principally 411.006 and 831.2553.
  21. For documentation on the Heads of Government Meeting held in Paris, December 16–19, 1957, see Foreign Relations, 1955–1957, vol. IV, pp. 1 ff.
  22. Regarding Seaton’s statement, see the microfiche supplement to this volume.
  23. Julio Lozano Diaz, Honduran Head of State, December 6, 1954–October 21, 1956.
  24. Major General Pedro Eugenio Aramburu, Provisional President of Argentina, November 1955–February 1958.
  25. General Juan Domingo Perón, President of Argentina, February 1946–September 1955.