I concur in ARA’s attached memorandum of August 4 subject to these
comments:
We have reached agreement with Treasury that the costs of transition and
initial development in a Central American common market can be financed
by the DLF on a project basis in
cooperation with a “community fund” which can do planning and act as a
sponsor of development loan applications. I personally think this is not
a bad arrangement
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and in some ways is preferable to setting up a new development
corporation at this time. The question of whether it may later be decided by the Central Americans to set
up a separate development institution to borrow money and make loans on
its own account is not foreclosed at this time. The only issue is
whether we should make a commitment to finance through the DLF, sound projects totaling $15 million
per country or whether we should say orally something like this:
Attachment
Memorandum from the Assistant Secretary of State for
Inter-American Affairs (Rubottom) and the Assistant Secretary of
State for Economic Affairs (Mann) to the Acting Secretary of
State2
Washington,
August 4,
1959
SUBJECT
- Central American Common Market
Discussions
In recent months, the United States Government has left the
impression throughout Central America that it would like to see the
countries in this area form a real common market and that the United
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States is
willing to contribute material as well as moral support to this end.
Unfortunately, we have not as yet made much progress toward
fulfilling these expectations, and our continued failure to offer
anything tangible in the way of assistance can be expected to result
in a widespread feeling of disillusionment which will adversely
affect the whole range of our relationships with the countries
concerned. We are already faced with a rising tide of unrest, much
of it of economic origin, throughout the entire Caribbean area. It
would be most unfortunate indeed if the present political turmoil
were to be further intensified by a reaction of disillusionment
toward the United States Government over the apparent reversal of a
policy which we have so clearly endorsed.
The following chronically outlines the principal policy statements
which have created this impression:
- 1.
- On November 18, 1958 you stated
before the Committee of 21: “We have also supported a
free-trade area in Central America. We have also made it
clear that we are prepared, through the Export-Import Bank,
to consider the dollar financing required by sound regional
industries in Latin America.”3
- 2.
- On November 27, 1958 Dr. Milton
Eisenhower’s report recommended that the United States
“participation with the five republics of Central America,
and Panama, if possible, in a regional conference, either at
the enterprise, and private industrial enterprises, to take
a positive approach in helping Central America and Panama to
the end that new industries, guaranteed from across to the
entire market of the participating countries, would be
established.”4
- 3.
- In February, 1958 Messers. Frank
and Turkel visited
all the Governments of Central America5 and stated that the United
[Facsimile Page 4]
States desired to see a real
forward-looking, trade-creating common market in Central
America and was prepared to lend material as well as support
to bring it about rapidly. They urged starting with two or
three countries and then expanding it to five or six. The
Frank-Turkel mission aroused a tremendous amount of
enthusiasm and the United
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States was asked to
provide the countries with an outline embodying the United
States Government’s suggestions as to the form this
organization might take. We have agreed to provide this
outline.
- 4.
- At the close of the State Visit of the President of the El
Salvador on March 23, 1959, a joint
statement of President Lemus and President Eisenhower was made that
they agreed that a Central American common market “costs
make a significant contribution to the stimulation of
capital investment in these nations and to the steady
improvement of the welfare of the people. This subject will
receive continued study by the two Governments with a view
to taking approximate action to carry on these sound plans
already contemplated.”6
The discussion between the two Presidents was even more enthusiastic
than [illegible in the original] from the press release.7
Our immediate difficulty in carrying out the policy thus enunciated
is in obtaining Treasury’s concurrence in the paper we are preparing
for distribution to the five Central American countries, outlining
in very general terms to steps that should be taken to form a common
market. One of the principal issues with Treasury was whether we
would recommend the formation of a new Central American economic
development institution. To get a present to have agreed on a
“Community Fund” whose job it would be to facilitate the adjustment
of the economies of the member states to the new common market
conditions. This fund would derive resources from a fraction of the
[illegible in the original] revenues of the member states, but these
will obviously be inadequate to cope with the need for economic
development.
We consider it essential that a [illegible in the original] of basic
economic development projects proceed concurrently with the
transition to an integrated economy. Moreover, we feel that it will
be necessary to give the governments concerned [illegible in the
original] definite advance indication that U.S. financial assistance
will be available for this purpose; otherwise, the current
integration effort will never get off the ground.
Treasury has suggested that we tell our embassies that if any of the
governments concerned express disappointment over the absence of
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any
[Facsimile Page 5]
commitment or indication of U.S. financial assistance in the paper
we submit to them, the Embassy should say that we contemplate that
the DLF will work closely with the
Community Fund and would give priority consideration to requests for
financing sound development projects including joint projects.
Both ARA and I feel that this line
is inadequate to deal with the expectations our policy statements
have aroused. In order to effectively carry out policy of supporting
Central American Integration, we will need to finance projects
accounting to about $15 million per country with the possibility
that this might be execeeded if sound projects totaling more than
this sum were submitted. It is not proposed that any new regional
Fund be established; however, it is felt that the time has come for
us to make concrete commitments to finance sound development
projects related to the integration effort from existing
appropriations as through existing agencies.
Within the Governments of the Central American countries enthusiasm
for economic integration is high. Its need has been felt for a long
time. ARA has been active in the
area and has taken some steps toward furthering the integration
effort although in a manner which we regard as unsatisfactory. Even
if we do not take this opportunity to lead and guide this movement,
it is very likely that it may find other means of proceeding, but in
a way which would be instrumental to United States interests as well
as in the long-term interests of the countries themselves.
Recommendations:
That you discuss this matter with the Treasury Department with a view
to obtaining, in line of a Central American
Development Fund, (1) agreement that the U.S. will sympathetically
consider the financing of sound development projects relating the
integration effort, in the amount of approximately $15 million per
country, and (2) Treasury’s concurrence in making this position
known in a note of transmittal to the governments concerned when the
proposed recommends is sent.
