Office of the Historian

ETA–13. Memorandum from the Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Deputy Under Secretary of State for Economic Affairs (Dillon)1

Washington, December 19, 1958

SUBJECT

  • Priorities for DLF Loans in Latin America.

Mr. Turnage2 has invited our attention to the fact that with the scheduled allocation of $21.75 million for Argentina the remaining free balance of appropriated DLF funds will total $73 million. He has requested the views of ARA as to the priorities appropriate for processing outstanding Latin American loan applications in relation to this balance as a guide for the DLF staff. I am pleased herewith to respond to this request.

You will recall that last February Mr. Mann and I discussed with you the importance in terms of our relations both with Latin America and with the Congress of assuring adequate consideration for applications from that area in DLF loan approval action. At that time, we suggested the DLF establish an administrative target of 10 to 15% for loans to Latin American applicants. You agreed with this assessment and objective but wisely pointed out the administrative difficulties and potentially inadvisable implications of earmarking any specific percentage of DLF funds for a particular country or region. You emphasized the uncertainties as to the likely volume of meritorious economic development loan applications from Latin America at that time and I fully concurred in your observations. Since then there have been filed with the DLF applications by Latin American countries in volume in excess of our earlier suggested administrative percentage target. These have been recognized by the DLF staff on examination to qualify for DLF financing. This circumstance reflects both the initiative of the Latin Americans and their increased dependency on external financial assistance.

In my memorandum to you of November 14 I reaffirmed my concern for the need to assure an adequate flow of DLF funds to the ARA region,3 particularly in light of increasing Congressional interest in this subject. Discussions in the “Committee of 21”, with which you are [Typeset Page 47] thoroughly conversant, have since that date further underscored the importance of such DLF action in terms of improvement in U.S. relations with the other American Republics.

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The DLF Board has so far approved loans to Latin American applicants totaling $18,940,000. I recommend prompt and favorable action on an additional seven applications in the amount of $27,840,000 as a minimum. Even including the $21.75 million for Argentina, which is a very special case, the combined total for Latin America would thus be only $68,530,000, or less than 10% of the current $700 million DLF appropriation.

The priorities for Latin American projects in relation to the remaining $73 million DLF balance are as follows:

1. Uruguay Telecommunications $5,500,000
2. Haiti Artibonite Valley 5,000,000
3. Guatemala Industrial credit 5,000,000
4. Bolivia El Alto Airport 3,000,000
5. Chile Pudahuel Airport 6,300,000
6. Costa Rica Agricultural credit 2,500,000
7. Nicaragua Matagalpa public utilities 540,000
$27,840,000

Brief comment on the status and significance of each of these projects is attached hereto as Tab A.4 Your attention is invited to the fact that I have not included in the foregoing list a number of other important project applications which are well along in the DLF staff processing and which have both valid political and economic justifications. Should any DLF funds remain after earmarking my recommended total of $27,840,000 for Latin America, I would urge consideration be given the following additional Latin American projects in the priority sequence listed below. In any event the following priorities are recommended for DLF staff work in connection with now Congressional appropriations:

1. Haiti Sugar mill $3,000,000
2. Bolivia San Aurelia sugar mill 500,000
3. Paraguay Telecommunications 1,000,000
4. Panama Telecommunications 3,050,000
5. Guatemala Housing finance institution 2,000,000

The foregoing are offered as recommendations for work planning purposes at this time. Developments between now and the availability of new DLF funds very likely will merit modification and review.

  1. Source: Department of State, Central Files, 820.10/12–1958. Limited Official Use. Drafted by Harry Conover, Deputy Director of the Office of Inter-American Regional Economic Affairs.↩
  2. William V. Turnage, Deputy Director, Office of International Finance and Development.↩
  3. Not printed; OAS Files, Lot 60 D 665, “Development Loan Fund.”↩
  4. Not printed.↩