Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

ETA–31. Memorandum of Conversation, by the Assistant Secretary of State for Inter-American Affairs (Rubottom)¹

Washington, March 31, 1960

SUBJECT

• Financial Assistance for Latin America

PARTICIPANTS

• The Under Secretary
• Vance Brand, Managing Director, DLF
• Assistant Secretary Rubottom

I asked the Under Secretary if I could give a brief outline of my concept of the problem regarding financial assistance to Latin America without going into specific cases, and, on obtaining his favorable reply, I said:

Latin America did exceptionally well from an economic standpoint during World War II and up until the last half of 1956, due largely to the good prices obtained for the raw materials exported; a decline set in in the last half of 1956 which was not arrested until the last half of 1959, this having come about by virtue of improved world market conditions and our own efforts in the commodity field, witness coffee and lead and zinc; most Latin American leaders still adhere to our own belief that investment and loans should be the main source of development capital, plus, of course, their own savings, but the longer we remain in the grant-aid business elsewhere in the world the more we will have to face the factor of the “invidious comparison” since all our efforts to explain the difference have been unsuccessful if we were to face the truth; unless we step up the tempo of loans to Latin America and increase the priority of the DLF in the area, we are almost certain to have amendments added by the Congress requiring that we do certain things in Latin America and we run the risk that certain countries, notably Guatemala, will successfully appeal directly to the Congress for grant aid.

Neither Mr. Dillon nor Mr. Brand voiced any contrary view to the above line. Both said that they felt that more needed to be done for Latin America. Mr. Dillon referred to the recent letter of Graydon Upton to me urging that we try to develop a “flow of funds” chart for Latin America,² showing repayments as well as loan disbursements in view of his fear that this year and in the near future we may on a net basis be lending little if anything to Latin America and this at a time when they need more than ever before.

Some discussion regarding detailed projects in the list prepared by Mr. Rosenson ensued.³ Mr. Brand said that the Honduran project is the only one ripe for decision. Mr. Brand recalled the earlier favorable attitude, as did Mr. Dillon, of President Black of the IBRD toward coordinated IBRD-DLF loan projects in Latin America, an attitude which seems to have changed to negative recently. Mr. Dillon adduced one reason for Mr. Black’s change was probably due to his desire that good economics require that the countries themselves furnish the local currency for any projects for which IBRD furnishes the foreign exchange costs. Mr. Brand recalled that DLF had had lengthy discussions with IBRD on their joint road project in Peru. The issue here was one of permitting the Government of Peru to select the U.S. engineering firm of its choice rather than being forced to accept a European engineering firm favored by IBRD whose qualifications did not appear as strong to DLF. It was agreed that this may have been a factor affecting Mr. Black’s current attitude.

Mr. Dillon suggested that the problem was a fundamental one and required an additional meeting possibly with Secretary Anderson to which all the pertinent agency heads would be invited.⁴ Messrs. Dillon and Brand agreed with Mr. Rubottom that a stepped-up consideration of viable loan projects in Latin America by any and all U.S. lending agencies, relative to their resources, was essential to improve our relations in the area. Mr. Brand noted that DLF has a positive and constructive attitude toward Latin American loan applications that meet the test of DLF’s statutory requirements.

Mr. Dillon suggested that we undertake to prepare the “flow of funds” chart as a part of our campaign to achieve the above objective.⁵

We all agreed that one problem in our loan policies toward Latin America was that we had taken essentially the commercial bankers approach to the area, waiting for applications to come in, while our good relations with these countries now require that we take some initiative in stimulating worthwhile projects for loans.

1. Source: Department of State, Secretary’s Memoranda of Conversations, Lot 64 D 199. Confidential. Drafted by Rubottom, and initialled for approval by Dillon on April 4.
2. The reference letter from Graydon Upton was not found in Department of State files.
3. No “list” matching the description here was found with the source text.
4. On April 8, 1960, at the request of Assistant Secretary Rubottom, Rosenson prepared a draft letter from Under Secretary Dillon to Secretary Anderson proposing such a meeting. (ARA/REA Files, Lot 62 D 303, “Latin America, General Development and Investment, Feb 1959–June 1960”) There is no information in the Department’s files, however, indicating that the draft letter was approved and sent out, nor is there any record of a subsequent meeting with Secretary Anderson matching the description here.
5. A memorandum entitled “Flow of Public Loan Capital to Latin America” war subsequently prepared by Rosenson under date of March 3. It showed, as of March 31, all loan applications from Latin American countries pending with the Export-Import Bank, the International Bank for Reconstruction and Development, and the Development Loan Fund, and it also gave the total amount of credits authorized during the three year period 1957–1959 by each of these institutions to each country. A copy of Rosenson’s memorandum is attached to a memorandum from Rubottom to Dillon, dated May 5, requesting approval to use it as a basis for discussion at a meeting of the National Advisory Committee on Inter-American Affairs scheduled for May 7. (ARA/REA Files, Lot 63 D 210, “National Advisory Committee on Inter-American Affairs”)