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

GT–10. Memorandum for the Files, by the Officer in Charge of Guatemalan Affairs (King)¹

Washington, November 24, 1958

SUBJECT

• Summary of Discussion at Development Loan Fund Regarding Loans for Guatemala

PARTICIPANTS

• DLF - The Hon. Dempster McIntosh
• Mr. William Ryan
• Mr. Hart Perry
• Mr. Gonzalez
• ICA - Mr. Rollin S. Atwood
• Mr. Grover Kincaid
• Mr. Oscar Powell, USOM Guatemala
• STATE - Mr. Herbert B. Leggett
• Mr. Bayard King
• Mr. Harry Conover
• Mr. Samuel Bogley, ICA Hosing Consultant

Ambassador McIntosh opened the meeting by saying that he believed loans to Guatemala were justified. Guatemala is a key country and should be helped. He asked Mr. Bogley, a private mortgage banker who had recently, at the request of ICA, made a three weeks’ survey in Guatemala, to describe how the money for the housing loan would be disbursed. Mr. Bogley explained that the funds would be lent to the Bank of Guatemala which in turn would discount mortgages of private individuals accepted by private banks in Guatemala. The mortgages would be carefully screened and guaranteed by an FHA-type organization for which Guatemalan legislation was now being sought. Without such an arrangement, the Guatemalan individuals would be unable to borrow money to build badly needed housing for themselves, as there was a scarcity of capital in Guatemala and prohibitive interest rates were the rule. For such loans, the house purchaser would pay about 7 1/2% interest. Mr. Bogley said he was very much in favor of such an arrangement which he thought would be workable.

Mr. Atwood strongly endorsed Mr. Bogley’s favorable view of this proposed loan ($12 million), and said he felt that it was necessary to give this kind of assistance to Guatemala for political and other reasons.

Ambassador McIntosh said he knew that many in Washington felt the DLF should not make housing loans in Latin America, because the need for housing all over Latin America was so great that the lending resources of the United States could never fulfill these requirements. He said the same argument could be used against making loans for highways, where need was also great. However, Mr. McIntosh said he did not believe this was a valid argument against making such loans, that each case should be considered on its own merits, and that in the case of Guatemala he was in favor of making a housing loan.

There followed a discussion of the rubber, industrial bank, and land purchase loan applications. Except for land purchase, Ambassador McIntosh was in favor of helping Guatemala in these fields as well. Although the DLF could not lend money to the GOG for land purchase, it was agreed that it might be possible to assist in the field of rural resettlement, possibly by lending Guatemala money for budgetary relief in the public works field or for construction of facilities on the lands to be acquired.

Mr. Powell said it might be possible for ICA to reprogram some $8 million of pipeline funds toward purchase of land for resettlement.

Ambassador McIntosh said he thought the DLF should lend Guatemala about $16 million in the near future from funds already appropriated to the DLF, and he tentatively suggested the following allocations:

Housing	$6 million
Industrial Development	2 or 4 million
Compensatory Funds for Rural Resettlement	to be determined; possibly $3 million
Rubber Development	5 million

Mr. Conover said that he fully recognized the political necessity for making loans to Guatemala. In response to Ambassador McIntosh’s queries as to the merits of these particular applications, Mr. Conover said that, in economic terms, he felt housing construction was less significant for economic development than prospects which more directly and immediately contribute to balance of payments improvement. Ambassador McIntosh agreed with this economic assessment, but felt, the political considerations were overriding.

Ambassador McIntosh said he wished to go ahead on these loans as soon as possible. He designated Mr. Ryan to go to Guatemala within a week to look into the pending applications and to work out with the USOM, the Embassy, and the Guatemalan Government, properly drawn-up loan applications which would meet DLF criteria. This, he said, would constitute the first step and would show the Guatemalans that we were really taking an interest in their loan applications.

Mr. Perry said that to make $16 million available now to Guatemala would require a cut-back in loan proposals for other areas. Ambassador McIntosh said such a cut-back should be made in order to accommodate Latin American needs which he felt had been neglected by the DLF.

1. Source: Department of State, Central Files, 714.5–MSP/11–2458. Confidential. This memorandum was routed through Rubottom, Snow, and Stewart. Rubottom noted on the source text: “Important, yes, but will need continued backing from ARA, E. & W.”