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

GT–8. Summary of Discussions in Guatemala during Milton Eisenhower’s Visit, July 30 to August 1, 1958¹

Undated.

In Guatemala Dr. Eisenhower had discussions with the President, the Cabinet, government officials, bankers, leaders of commerce and industry, labor leaders, women of the market, etc.

President Ydígoras expressed his gratitude for the extent of assistance which the United States had rendered to Guatemala since its liberation from Communist domination. He spoke of a sum of $70 million that had been given, but said that in view of the difficult situation which had been inherited from the Communist-dominated regime things were not yet satisfactory. There were serious shortages in housing, welfare and education. He hoped that the U.S. aid would continue at present levels. The President brought up the subject of coffee and the detrimental effects on the Guatemalan economy of present low prices. He also explained that the Guatemalans had difficulty in establishing markets in Germany because of a still unresolved dispute with Germany concerning German coffee plantations nationalized as enemy alien property during World War II. He mentioned that when he had been in Washington in February 1958 he had spoken about possible establishment of quotas for the coffee-producing nations, and it was with some satisfaction that he saw the Coffee Study Group leaning in this direction.²

The President then discussed the Communist situation in Guatemala and said he was reluctant to “squeeze” them any further as this would only drive them underground and make them more dangerous. The President said that following the Liberation of 1954 the working-class Communists had been left leaderless by the flight of their leaders and no new ones had appeared. He spoke of divisions within the Railroad Workers’ Union (SAWP) indicating a weakening of the Communist position. He said that he feared Communist infiltration in intellectual circles far more, particularly among the University students who where resentful of cramped old-fashioned quarters in the University. The equipment in the laboratories was old. If something could be done to provide more modern equipment, to go ahead with construction of the University city, and to provide adequate scholarships on a repayment basis over 20 years, this would do a great deal towards stemming the spread of Communism in University circles. President Ydigores discussed the question of scholarships at some length and indicated he would like to have an organized program with a fixed number available each year. He spoke several times of the desire not to have these as charity, which would cause resentment, but to put them on a paying basis, requiring the beneficiary to repay the amount of the scholarships over 20 years.

The President said he would like to establish a system of cooperation with the governments of the other republics of Central America in keeping track of and controlling the movements of Communists. He was setting up an agency in Guatemala for this purpose and then intended to seek regional cooperation. He could not include Mexico as he did not trust that country.

The president then expressed his support for the idea of greater Central American unity. He felt this could best be achieved first in the economic field, but felt that local vested interests and nationalisms might make political unity something which only our children or grandchildren might see.

At the Rotary luncheon expressions of gratitude were forthcoming for the U.S. share in making possible the new vocational school which will be devoted to the development of special skills among Guatemalan workers.

At a meeting with representatives of agriculture they stressed the importance of coffee in the Guatemalan economy, pointing out that this provided three quarters of the value of all Guatemalan exports. A great deal was said about the fact that lower coffee prices might result in a drop in farm wages and stimulate a recrudescence of communism The agricultural representatives indicated that they are approaching a position of agreeing to the principle of withholding a portion of production providing other coffee-producing countries would agree to do likewise. They felt that such an idea could only he effective if African producers also agreed to cooperate. They expressed fear that African coffee growers because of lower labor costs might take over a part of the traditional Guatemalan market in the U.S. These representatives of agriculture also expressed agreement with the program of the Government aimed at diversification of agriculture in order to be self-sufficient in food. They were thinking in terms of a loan of unstated size to help out in this process of diversification to other crops such as rubber and cocoa.

In the meeting with the representatives of industry and commerce, the Guatemalans pointed up the lack of incentive for industrial development under existing legislation and a shortage within the country of long-term credit. It was indicated to the Guatemalans that it was hoped that an official of the Export-Import Bank would be able to visit the countries of the region at least once a year.³ Again the matter of the price of coffee was brought up, and it was indicated that two years ago it sold for 70 cents a pound, whereas now it was selling for 40 cents a pound. Some thought was expressed that the U.S. might be discouraging oil prospecting in Guatemala, it was made quite plain to the Guatemalans that there was no such U.S. policy.

At a meeting with the President and members of the Cabinet a formal program for continuing the social and economic development of Guatemala was presented. The President referred to the summary table which shows direct aid projects suggested for financing by currently available but unallocated ICA funds. This table lists $655,000 for agriculture projects; $4.5 million for educational programs; $1,650,000 for public health programs; $1,600,000 for highway programs. This makes a total of $8,405,0000. Unallocated ICA funds total some $9 million. The Guatemalans are seeking to obtain the $8.4 million without being required to put up the matching funds for which there is no provision in the 1959 budget. Reference was then made to Guatemala’s long-term credit needs which were indicated as amounting to $95.7 million which would be divided as follows: agricultural development $9 million; housing, $15 million; electrification, $6 million, highways, $14.7 million; hospitals $6 million; industrial development, loans, $17 million; Guatemala City water supply $18 million; development of province of Petén, $10 million.

Inter-American Highway

The Inter-American highway was discussed, and it was indicated that the total cost of the highway would be $40 million of which the U.S. is contributing $24 million and Guatemala $16 million. The Minister made a plea for the inclusion of maintenance costs in order to be eligible for Bureau of Public Roads financing. In view of BPR’s policy of not financing the paying until the entire highway was opened, it was difficult for Guatemala to protect that part of the road already constructed. In view of the BPR’s choice of route the highway will be subject to unusual maintenance. With regard to the area of special difficulty on the highway, known as the Tapon, it was estimated that another $2 million would be needed before it could be completed and opened to traffic. The importance of this highway was pointed out to the Guatemalans in that it could lead to a great influx of American tourists with consequent economic benefit to Guatemala. The President of the Bank of Guatemala commented that Guatemala would need assistance over the next three or four years. Thereafter activities and programs would ease the balance of payments problem.

At a meeting with members of Congress the claim was made that the Wrigley Company discriminates against Guatemalan chicle, paying a substantially higher price for Mexican chicle in spite of the fact that the Guatemalan product is of better quality.

Members of the Railway Union complained of the practices of the International Railways of Central America. They pointed out that the prevailing wage of $1.50 for an eight-hour day is insufficient to provide a decent living. They hoped that the United States could bring pressure on the IRCA to reach a settlement of the current dispute as this would have a great importance on the development of attitudes in Guatemala towards the U.S.:⁴

Guatemala students spoke of the need to “return” Belize to Guatemala or at least grant its independence. They also mentioned the fact that the University had been trying to seek a $15 million loan in the U.S. to complete the University City. Then the students spoke also of the need to develop the province of El Petén.

The market women who called on Dr. Eisenhower spoke of the difficult conditions of the poor of Guatemala and the need to make sure that U.S. assistance filtered down to the poor and the working class.

A delegation of the Central African Unionist Party called in an attempt obtain a U.S. declaration that it looks with favor on the re-establishment of a Central American federation.

At a press conference, Dr. Eisenhower was asked to comment about a Pro-Communist student communiqué which mentioned alleged U.S. tutelage of Guatemala. He replied that he regretted the fact that technical assistance, grant aid and loans might be interpreted by some as constitution tutelage. The U.S. never aspired to nor had tutelage over any people.

Conclusions

Guatemalans felt that the period of Communist-dominated rule entitles them to a special position. They frankly express their hope for a continuation of U.S. aid at approximately the same levels. The study presented in Guatemala appeared to be well coordinated and integrated and concisely presented. The program was presented as whole at a meeting with the Cabinet rather than in a series of separate requests. It was evident that in Guatemala as in some other Central American countries, there was considerable confusion as to the purpose and policies of the various lending organizations in the U.S. as well as a lack of understanding of the potential of private investment. No mention was made of attracting home large amounts of Guatemalan private capital held abroad. While perhaps more mention was made of the possible benefits of tourism in Guatemala than in other Central American countries, nevertheless it did not appear that the full potential that might be derived from the industry was realized. Considerably more seemed to have been done in Guatemala than in the other countries of the area towards evaluating properly the potentials of Guatemala in all fields. The effects of the Klein-Saks mission in the field of advising the Government on public administration was evident.⁵

The Government of Guatemala has very ambitious plans for the development of the country, and evidently feels that large-scale U.S. assistance will continue (no grant aid is being requested for Guatemala in the Mutual Security Appropriation Bill for FY 1959). It has the largest population of any country in the area, and its potentialities are great (land, timber, possible petroleum, agriculture, light industry, some minerals, etc.). This appears to have made the size of the requests for assistance considerably greater than elsewhere encountered during the mission.

Because of Guatemala’s past association with Communist-type policies, and the Government’s tendency to try to regulate non-agricultural enterprises more and more, some many possible private investors may have been discouraged from placing their money in Guatemala, although the country’s official policy is to private investment, both foreign and domestic.

1. Source: Department of State, ARA Special Assistant’s Files, Lot 60 D 513, “Eisenhower, Milton: Guatemala, 1958.” Confidential. The source text is an unsigned carbon copy. Between July 12 and August 1, President Milton S. Eisenhower of Johns Hopkins University made a three-week factfinding trip, as Personal Representative of the President, to Panama, Honduras, Costa Rica, Nicaragua, El Salvador, and Guatemala. He was accompanied by Roy R. Rubottom, Jr., Assistant Secretary of State for Inter-American Affairs; Tom B. Coughran, Assistant Secretary of the Treasury, Dempster McIntosh, Manager, Development Loan Fund; and Samuel C. Waugh, President, Export-Import Bank. For further documentation on the trip, see Document ES–2, footnote 1. Detailed reports and memoranda of conversations held by him and members of his group, were enclosed with despatch 85 from Guatemala City, August 18, 1958; 120.1520/8–1858.
2. For documentation on U.S. participation in the Coffee Study Group, see Document CO–30, footnote 2.
3. In a letter of August 12 to Ambassador Mallory in Guatemala, Waugh stated that he found the amount of credit requested by Guatemala “staggering.” He added that the Export-Import Bank would like to increase the $2.6 million it had loaned to private business firms in Guatemala since 1956. (814.10/8–1258). In a memorandum to Henry A. Hoyt, Special Assistant in the Bureau of Inter-American Affairs, August 12, Waugh restated the Eximbank’s willingness to make loans to Guatemalan industrial firms, but he had “no suggestions to offer” on President Ydígoras’ request for some $100 million in credit. (814.10/8–1258).
4. Guatemalans attributed the railroad’s policies to the United States because U.S. nationals owned and headed the company. An agreement, based on Guatemalan court decisions, ended the dispute effective March 1, 1959, in favor of the company’s position. In despatch 487 of March 11, the Embassy pointed out that grievances persisted and “the men willing to exploit them are prepared to do so when the time seems ripe.” (814.062/3–1159).
5. A report by the consulting firm of Klein and Saks is in file 814.00/2–858.