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

ETA–44. Memorandum from the Acting Secretary of State to the President¹

Washington, August 1, 1960

SUBJECT

• Latin American Program.

To fulfill your announcement in Newport and to meet the need for a positive United States approach at the September 5th meeting in Bogotá, we should now press forward with a broad program for Latin America designed to bring the benefits of economic and social progress to a wider segment of the population.

To insure the success of this program and to enable the United States to speak authoritatively at the Bogotá conference there is need for bipartisan support. I suggest, therefore, that you consider laying the program which is outlined in the following paragraphs before the leadership of both parties at an early date.

The specific elements in the program which should be discussed are the following:

a) Size of the Program: Given the magnitude of the need, I believe that it should be couched in terms of a minimum of $600 million. It should be made clear that this amount would not be expended in any particular fiscal year but is intended to be used over a period of time as sound opportunities for its use arise. It should also be made clear that, depending on the impact of the program and on the performance among recipient countries, this would be the first installment on a long-term program, and that additional amounts would, therefore, be required in the future to meet demonstrated needs.

b) Use of Funds: Adequate “hard-loan” funds for sound economic development projects are already available in various national and international lending agencies, such as the Export-Import Bank and the International Bank for Reconstruction and Development. Because of the increasing difficulty most Latin American countries have experienced in servicing “hard” loans, the Development Loan Fund has also been extending “soft” loans for sound economic development projects in certain categories. There is, however, an immediate need which has not heretofore been met for substantially more financing of social development projects such as land settlement, improved land use, pilot and self-help housing, basic community facilities, and vocational training. While existing programs have reasonably met the capital needs of industrial expansion, there has been very little foreign assistance available for social development projects. Although the primary responsibility for social development must rest with the country concerned, the Latin American countries are not in a position to carry the entire burden of programs adequate to meet demonstrated needs. If such programs are not initiated promptly, unrest with violent political consequences is likely in a number of Latin American countries. Substantial United States assistance is required to give reasonable hope of success. Such United States assistance should go primarily to those countries that are willing and able to undertake satisfactory programs of self help. In this way United States assistance can promote the fiscal and tax reform in Latin America which is a necessary prerequisite for successful development.

c) Administration: The program should be so administered as directly to facilitate the achievement of our foreign policy objectives in Latin America. The responsibility and authority for directing the program should rest in the Department of State. In determining the amounts and terms of financial assistance under this program the Department of State shall consult with the National Advisory Council on International Monetary and Financial Problems.

The funds should be made available to the President as a Special Fund to be used exclusively in Latin America and under flexible and nonrestrictive provisions. These funds would be available in either grant or loan form and would be used through such agencies as the President may designate including the Inter-American Development Bank.

Loans rather than grants would be made to the maximum extent practicable. It is expected that the principal lending instrument will become the Inter-American Development Bank which has an inter-American character and will be in the best position to encourage recipient countries to increase their own efforts to achieve maximum economic growth and social progress. United States financial and technical assistance to Latin America can only achieve their purpose if they are used to stimulate Latin American governments to mobilize their latent resources and to utilize them to achieve more rapid and balanced economic growth.

d) Terms: Repayments of loans would ordinarily be required in the currency of the borrowing country in order to minimize the burden on countries’ resources available to service external debt. Aid funds should be available to meet local as well as external costs.

Rehabilitation of Chile

It is planned that of the total package of $600 million, $100 million will be used to assist the government and the people of Chile in their present task of rehabilitation. This task is the result of the recent series of disastrous earthquakes which left great destruction over wide areas of the most populous regions of Chile. Homeless people are counted in hundreds of thousands. Total damage has been estimated to be almost $500 million leaving a massive burden of reconstruction on the Chilean people.

Congressional Action

We would obviously be in the strongest position in Bogotá if Congress were to pass a $600 million authorization bill when it reconvenes in August. The Latin Americans hope for and expect concrete evidence of an intention on our part to create a new, special fund to be used exclusively in Latin America; a statement that the funds already authorized for the Development Loan Fund are adequate for the time being would not be well received. I would hope that the leaders of both parties would agree to the authorization procedure. No appropriation would be sought until the next session of Congress in 1961 by which time the results of Bogotá would be available and the Inter-American Development Bank would be in business. In the event agreement could not be obtained I would then recommend that their agreement be sought to obtain a Joint Resolution phrased in the most definitive way possible, again having in mind an adequate basis for the Bogotá meeting. The Bureau of the Budget prefers that we not seek an authorization, but limit ourselves to a joint resolution.

a) Short term action: In order to start some projects immediately in Latin America and to meet other emerging needs in the present world situation, it is important that the total Mutual Security Program appropriation request be obtained from the Congress, particularly the full $700 million requested for the Development Loan Fund. (The House has cut this $700 million request by $150 million.) How the final appropriation of the $700 million for the Development Loan Fund can best be achieved is a matter of legislative tactics that can best be worked out with the legislative leaders, including (a) action by the Senate, either within the Appropriations Committee, on the floor of the Senate or within the Conference Committee to assure a $700 million appropriation, or (b) an increase by the President in his pending $700 million request. Such a request could be made under the existing Development Loan Fund authorization.

b) Presentation to the Congress: There are differing views regarding the manner in which either an authorization or a joint resolution should be presented to the Congress. The Vice President has informed us that he feels strongly that there should be a special Presidential message on this subject in order to indicate clear administration initiative. On the other hand, the Secretary of the Treasury feels strongly that any presentation should be by the State Department and that there should be no special messages on the subject from the President. From the point of view of the State Department a special message from the President would improve the United States position at the OAS Foreign Ministers Meeting at Costa Rica when the subject of Soviet intervention in Cuba comes up.² However, the major interest of the State Department is in securing the necessary legislation rather than in the method of its presentation.

Douglas Dillon
Acting Secretary

1. Source: Eisenhower Library, Whitman File, Dulles-Herter Series. Confidential.
2. Apparent reference to the Seventh Meeting of Consultation of Foreign Ministers of the American Republics, which met in San José, Costa Rica, August 21–29, 1960; for documentation, see Foreign Relations, 1958–1960, vol. VI, Cuba.