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

GT–16. Memorandum of Conversation by the Officer in Charge of Guatemalan Affairs (King)¹

Washington, March 25, 1959

SUBJECT

• Guatemalan Economic Situation; Development Loan Fund Rubber Loan to Guatemala

PARTICIPANTS

• Mr. Roberto Alejos, Former Coordinating Minister in Guatemalan Government
• Lic. Perez Galeano, Guatemalan Representative to Inter-American Banking Institution Meetings
• Col. Carlos S. Antillón, Ambassador of Guatemala
• ARA - Assistant Secretary R. R. Rubottom, Jr.
• OAP - Bayard King, Officer-in-Charge, Guatemalan Affairs

Mr. Rubottom welcomed Mr. Alejos, who was spending a few days in Washington and New York enroute to Europe. The conversation was devoted largely to economic and financial problems confronting Guatemala. Mr. Rubottom said the United States has tried to be as helpful as possible, within the limits of its capabilities, to the economies of the other American Republics. He said he felt that considerable progress had been made in this endeavor during the past year. For instance, the Inter-American Development Bank was nearing reality, and plans were going ahead for the setting-up of a common market in Central America to which the United States hoped to be able to lend financial assistance. The United States had played a leading role in the Coffee Study Group, and was trying to be helpful to our Latin American friends in the cotton marketing problem. The Department was supporting the adoption of measures and procedures that would avoid the very wide fluctuations in the prices of commoditize produced in Latin America and consequent damage to Latin American economies. Mr. Rubottom said that while it would probably be impossible to avoid some fluctuations in the prices of these commodities, the object would be to hold them within reasonable extremes.

Mr. Alejos raised the matter of the 5 3/4% interest rate on the $5 million loan for rubber development recently offered to Guatemalan by the Development Loan Fund. He said that this interest rate was too high and was higher than ordinary commercial loans. It would mean, he said, that the rapper planters would have to pay 8% for funds from this source, and that only the wealthy planters who had other sources of income could afford to pay this interest rate for perhaps seven years before getting any return from their rubber trees. Mr. Rubottom said that he did not believe that 5 3/4% was higher than commercial loans. He said that he personally had strongly supported Guatemala’s application for the rubber loan, and that he could not help but be disappointed at Mr. Alejos’ remarks about the interest rate.

Mr. Alejos said that while in Washington he planned to try to negotiate a lower interest rate on this loan with the Development Loan Fond. However, if he was unsuccessful, Guatemala would accept the loan at 5 3/4% “because she could not afford to refuse”. Mr. Alejos said one of the primary policies of the Government of President Ydígoras was to help the poorer classes in Guatemala, and better their lot, thus making them less susceptible to communist pressures. This the Government could not, under present economic and financial conditions, afford to do adequately, and outside capital was essential. Mr. Alejos indicated that he was planning to discuss loans with commercial banks in New York, as well as seek development capital in Europe. He emphasized the necessity for the Guatemalan Government to do something soon far the poorer classes in Guatemala, and that these classes could not exist indefinitely on unfulfilled promises.

Mr. Alejos referred to the comparatively large amounts of ICA money in the Guatemalan pipeline. He said this was not being spent, and it was doing the country no good as it was. He said that in his opinion there had been an overemphasis on rural development and resettlement in Guatemala, and that this program was now stalled because of lack of suitable land. He said that the Guatemalan Government wanted to have the pipeline funds re-allocated to other more urgent projects, such as housing, and mentioned that the Guatemalan Congress was about to pass a law authorizing the establishment of an FHA-type organization.

Mr. Rubottom said the U. S. Government had Guatemala’s housing needs under study, and again disagreed with Mr. Alejos remarks regarding the interest rate on the DLF loan.² Mr. Alejos said that he would discuss the question on the pipeline funds with Mr. Atwood of ICA, with whom he had an appointment.³

1. Source: Department of State, Central Files, 814.00/3–2559. Official Use Only.
2. The agreement of August 17, 1959, for a DLF loan of $5 million to Banco de Guatemala for rubber production had a 5% Interest rate, but the DLF disbursed only $1.1 million of the loan. For information regarding disbursement, see Agency for International Development, Office of the Controller, Status of Loan Agreements as of March 31, 1964, p. 18. No explanation for the 5% interest rate, rather than the above-discussed 5 3/4% rate was found in Department of State files. The incomplete disbursement of the loan was due to the assigned rate of interest.
3. No record of Roberto Alejos meeting with Atwood was found. In instruction A–56 to the Embassy in Guatemala on November 5, 1959, the Department stated that the DLF had formally communicated to Alejos disapproval of Guatemalan loan applications for housing and rural resettlement in March. (611.14/11–559)