Office of the Historian

HO–3. Telegram from the Ambassador in Honduras (Newbegin) to the Department of State1

Tegucigalpa, July 18, 1958, 6 p.m.

53. Dr. Eisenhower, study group members met President Villeda Morales, Cabinet, Economic and Financial Officials of Honduran Government and representatives of private sector.2 Meeting with Economic and Financial officials held in afternoon Wednesday, July 16. This followed by meeting between private sector and Mcintosh, Coughran and Waugh.

On Thursday morning, July 17, Dr. Eisenhower and members of Mission met with the Present and Cabinet for further discussions. Brief meeting held Thursday afternoon between private sector representatives and Mcintosh, Coughran and Waugh.

The President, Cabinet members and Economic and Financial officials of the Honduran Government requested that consideration be given to provide financial assistance to economic development and social development program of present government. Hondurans reluctant establish priorities although suggested by Rubottom.

Assistance desired includes:

1.
Rio Linde hydroelectric power project-first stage assistance $15 to $17 million of which $10–$11 million to IBRD, French or other external loan for “offshore” costs and $5–$6 million DLF loan to cover “local” costs. Director, autonomous power and light agency3, indicated Honduras might be able to cover half local costs if DLF provides $2.5 million. Proposal similar in principal to recent IBRD/DLF road loan for $10.5 million.
2.
Highways-construction of Central Highway to cost $6 million. Roads to run between Talanga-[illegible in the original] with branch from Yoro to Progreso. This request is in substitution of previous application for DLF assistance $3.3 million for construction of “low cost” roads in other parts of Honduras. These latter [Facsimile Page 2] “low cost” roads to be undertaken by Honduran Government with own resources.
  • DLF loan to National Development Bank (Banco Nacional De Fomento). $2 million to provide credit to the private sector, principally agriculture.
    • 4.
    Housing-total amount foreign assistance requested equal to $6.3 million. During first year $2.4 million, second year $2.2 million, third year $1.7 million.
    5.
    Health-assistance to amount to $5.5 million during next four years. Although amount and type of foreign assistance not specified, U.S. grant aid for total implicit.
    6.
    Education-during next ten years total cost equal to $51.5 million. Honduran Government to provide $40 million and U.S. financial assistance for balance. Although not explicit, U.S. grant aid implied.

    In addition to requests for assistance, Honduran Government officials indicated interest in revising U.S.-Honduran trade treaty.4

    At meeting with President and Cabinet Hondurans finally agreed to submit schedule of priorities, memorandum re proposed revision of U.S.-Honduran trade treaty, and full explanation of new proposal for central highway program. See above.

    Dr. Eisenhower and Mission members avoided commitments to government although expressed sympathetic interest and understanding Honduran economic development problems. Honduran officials understand no commitments possible but are hopeful for future.

    Representatives of private enterprise presented request for establishing special $25 million fund over a period of years to be used for loans to industry and agriculture. Stated such action necessary to stimulate investment in private sector now short because of curtailing of flow of capital from U.S. formerly brought in by fruit and mining companies. They requested such loans to be repayable in lempiras not dollars without maintenance of value [Facsimile Page 3] clause or guaranty. Banking and financial members of mission told private sector representatives $25 million special fund not possible and loans must be repayable in dollars or guaranteed or contain maintenance of value clause. Suggested that other alternatives be explored as means of stimulating private under-takings which contribute to national economy. Private sector representatives disappointed about special fund and terms of repayment but agreed other possible approaches to problem should be studied.

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    1. Source: Department of State, Central Files, 120.1580/7–1858. Official Use Only.↩
    2. Dr. Milton Eisenhower, brother and Personal Representative of the President with the rank of Special Ambassador, visited Honduras, July 16–18, 1958, in the course of a three week fact-finding trip that also took him to Panama, Costa Rica, Nicaragua, Puerto Rico, and El Salvador. See Documents PA–7; CR–6–9; NI–4, 7–9; ES–2. (Compilation on Milton Eisenhower Trip) Additional documentation concerning his stay in Honduras is in Department of State file 120.1520 as well as in the ARA Special Assistant’s Files, Lot 60 D 513, “Eisenhower, Milton Honduras 1958” and in ARA/OAP files, Lot 61 D 110, “Economic Development—Honduras—March–July 1958.”↩
    3. Luís Bogran.↩
    4. Presumably the reference is to the trade agreement that the United State and Honduras entered into on March 2, 1936. For the text, see 49 State 3851.↩