23. Letter From the Acting Secretary of State to the Chairman of the Senate Armed Services Committee (Russell)1

Dear Senator Russell: I am communicating with you regarding Public Law 85–532, of July 18, 1958, which provides that a specified number of United States naval vessels from the reserve fleet may be loaned for periods not exceeding five years to foreign nations named in the legislation, including eight Latin American countries.

Section 3 of the Act provides that all expenses involved in the activation, rehabilitation and outfitting of the vessels, including repairs, alterations and logistic support, shall be charged either to funds programmed for the recipient government under the Mutual Security Act of 1954, as amended, or to funds provided by the recipient government under the reimbursable provisions of that Act.

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The ship loan program proposed for Latin American countries named in Public Law 85–532 was first presented to your Committee over two years ago as a project intended to: (a) increase the capabilities of recipient nations for collective hemispheric defense by providing them with modern-type vessels in replacement of some of their overage ships; (b) encourage a reduction of Latin American naval expenditures by offering recipient nations ships less costly and less expensive to maintain and operate than those being offered at the time by European suppliers; and (c) maintain the effectiveness of our naval training missions in Latin American countries. When such countries procure non-standard European vessels, they develop a requirement for European military missions capable of furnishing them with technical advice in the maintenance, repair and operation of European equipment, and for replacement parts from European sources. The result is to diminish the capability of Latin American navies to participate in collective hemispheric defense, under the Rio Treaty.

Prior to the enactment of Public Law 85–532, it was our intention, in the event that the Congress should enact enabling legislation, to loan Latin American countries vessels on terms requiring them to bear rehabilitation costs. When this intention was discussed with Latin American countries two years before the enactment of Public Law 85–532, they reacted favorably. When they were advised last year that they could have the ships on the terms previously discussed, they replied that during the intervening two years their financial resources had declined substantially, whereas rehabilitation costs had mounted, and accordingly, urged that we extend them credit permitting them to make payment over an extended period.

After reviewing all aspects of the proposed ship program, we have concluded that over-all United States interests in Latin America will be best served by making vessels available to eligible Latin American countries on a non-reimbursable basis under the Mutual Security Act, except in the case of Argentina, which is discussed below. Accordingly, we plan to rehabilitate the ships in United States shipyards (except in the case of Argentina) with funds programmed for the grant military assistance program we are conducting in Latin America. We believe that the following important considerations require that we implement the program in this manner.

Since the proposed program was first discussed with Latin American countries two years ago, depressed commodity prices and inflation have substantially reduced the dollar resources of countries eligible to receive ships. It would not, in these circumstances, be economically desirable to burden them with the credit they would require from the United States to finance rehabilitation costs.
Of the countries named in the enabling legislation, only Germany, Japan and Latin American countries are being asked to bear rehabilitation costs. Ships loaned to Greece, Italy, Norway, Spain, Turkey, Thailand and Taiwan are to be rehabilitated at United States expense. Latin American countries, which are no better off financially, may be expected to charge that the United States is discriminating against them when they become aware that ships are being provided other countries without charge.
Rehabilitation costs quoted to Latin American nations during informal discussions two years ago have increased.
By offering ships on a non-reimbursable basis we will be in a better position to bring about the scrapping of obsolescent Latin American naval tonnage and the maintenance of small but more efficient and modern naval forces in the area.

Argentina presents a special problem, inasmuch as the United States does not have a military defense assistance agreement with that country of the type required to establish its eligibility for grant military assistance under the terms of the Mutual Security Act of 1954, as amended. However, in order to meet the hemispheric defense requirements of the Argentine Navy, the Argentine Government strongly desires two submarines and is prepared to pay the cost of essential rehabilitation in the United States. Remaining rehabilitation would be completed in Argentina, at Argentine expense, after delivery. We consider this a critical request in view of the character and friendly orientation of the present Argentine Government, which it is in the United States interest to assist and encourage insofar as practicable.

The Bureau of the Budget has been informed of these views, which have the support of the Department of Defense and the Department of the Navy. I will be glad to provide you with any additional information you may require regarding our plans for implementing this program, and, at your request, to discuss it personally with you.

A similar communication has been addressed to the Honorable Carl Vinson, Chairman of the Armed Services Committee, House of Representatives.2

Sincerely yours,

For the Acting Secretary of State:
William P.Snow3
Deputy Assistant Secretary
for Inter-American Affairs
  1. Source: Department of State, Central Files, 720.5621/5–2659. Confidential. Drafted by Spencer on April 16.
  2. Not printed. (ibid.)
  3. Printed from a copy that bears this typed signature.