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

NI–8. Paper Prepared in the Bureau of Inter-American Affairs¹

Washington, undated.

SUMMARY OF DISCUSSIONS DURING DR. EISENHOWER’S VISIT TO NICARAGUA²

July 21–24, 1958

Discussions in Managua were held with President Luis Somoza, members of his Cabinet, General Anastasio Somoza, representatives of various political groups, Government supporters and opposition parties, labor and management, Chamber of Commerce, and others. Similarly, others in Dr. Eisenhower’s party met with various Nicaraguan officials. Neither the President nor General Somoza put forth specific proposals in their talks with Dr. Eisenhower. President Somoza seemed genuinely concerned with the accusations of being a dictator levelled against him and anxious to prove that he was returning the Nicaraguan Government to democratic practices.

It was notable that members of the political opposition spoke quite freely and unrestrictedly to Dr. Eisenhower concerning the Somoza Government. On the first day, when Dr. Eisenhower visited the Bi-National Center, a small crowd carried posters denouncing the Government in various forms and General Somoza himself translated these signs for Dr. Eisenhower. Similarly, during the meeting with the University graduates, one of them, Dr. Zelaya, made a sharp attack on United States policy paralleling the Communist Party line. At first, it was alleged that he was speaking on behalf of the University graduates, but this was subsequently denied. Considerable reference was made by these same opposition groups not merely to alleged United States support for the Somozas but also to similar alleged support for other dictators.

Among the points raised by the Nicaraguans were what they believed to be unfair competition regarding the marketing of cotton. Complaints similar to those encountered in other Central American countries were made regarding the instability of the coffee market and the low prices thereof. Some belief was expressed by Nicaraguan businessmen that the United States because of its enormous wealth could absorb the financial cost of lost cotton markets. Again there appeared the belief that the United States fixes industrial and agricultural prices. Some feeling was also expressed that through Marshall aid the United States had stimulated coffee production in Africa which was competitive with Central American coffee.

Business and other private sectors expressed concern regarding the great increase in the Government’s expenditures without corresponding increase in the country’s productive capacity. Recognition was given of technical and other assistance rendered by the United States. These same circles complained that the persistent fear of Government interference, increases in taxes, bureaucracy, and scarcity of credit facilities, greatly hamper the economic growth of the country. The agricultural production which is the basis of the country’s economy was suffering severely from depressed international prices. Some complaint was made of the size of the military budget and President Somoza on two separate occasions referred to the fact that he had been able to reduce military expenditures on two occasions due to the cooperation of his brother who was the Commander of the National Guard.

Coffee growers of Nicaragua presented a special memorandum to Dr. Eisenhower relating to the problems of coffee which earned approximately half of Nicaragua’s foreign exchange.³ There are some 4,800 plantation owners out of a population of nearly a million and a half. In the opinion of these coffee growers, the present difficulties were due to internal and external causes; Internal: inadequate credit, high cost of production, lack of rural roads, high taxation. External causes: low prices in world markets, high sales cost to the American consumer, low world consumption, lack of preferential treatment for Central American coffee by the United States, lack of a broad scale United States assistance program for Latin American countries. To remedy the situation they recommended United States cooperation for stabilization of prices and volume of sales, granting of long-term credits at low rates of interest to improve the coffee industry (current rates being from 9% to 13%), and long term credit to the Government of Nicaragua for the construction of rural roads.

The labor groups received by Dr. Eisenhower expressed their concern at the low standards of living in the country and the acuteness of the housing shortage. They expressed great interest in an ICA-sponsored program for self-help, low-cost houses to be built by the prospective inhabitants of the houses during their spare time. With labor being furnished by the prospective inhabitants and the land donated by the Nicaraguan Government, the only cost would be for materials. It was indicated this would run between $800 and $1500 per house.

The Government’s presentation was made through the National Economic Council. It indicated that at the present time public as well as private investment had reached the highest level in Nicaragua’s history. The per capita income had risen from $140 in 1950 to $208 in 1955. Cotton production increased from 22,000 bales in 1950 to 205,000 in 1954. Industrial production rose three-fold in the same period. During the same period there was a 53% rise in the cost of basic foodstuffs. In 1956 Nicaraguan economy suffered a severe setback in all fields. The drop in coffee prices became more severe and the Government resorted to measures of fiscal and monetary correction which tended to reduce the country’s economic activity. During this period the number of unpaid debts to the National Bank (which controls 80% of the credit in the country) rose to some $12 million. This is a sum equivalent to one-third of the outstanding agricultural credit in the country.

The Nicaraguan Government stated that it had maintained an unchanged policy of cordiality toward foreign investors. The general law for exploitation of natural resources as well as the law of incentive and protection of interest gives equal treatment to foreigners and Nicaraguans. The foreign investment law of 1956 guarantees the right to send profits abroad and the Nicaraguan Government states that it recognizes that private investment flows only to those countries where attractive conditions prevail. Nicaraguans stated they believed Central American economic integration was indispensable and that only the formation of a common market would permit satisfactory economic development. The National Economic Council requested assistance in measures to stop price declines and in measures to diversify national production and place its traditional crops in a better position to compete internationally. The ravages of the Panama disease practically destroyed banana production in the Atlantic Coast area and this is a seriously distressed area within Nicaragua. The Nicaraguans, in summing up, requested the United States to view the following favorably: (a) broad financial assistance in solving the problems confronting the country; (b) assistance in stabilizing coffee prices; (c) special consideration for the problem which confronts Nicaragua in the sale of its cotton; (d) help in securing a higher sugar quota for Nicaragua on the world market; (e) assistance to the Central American countries in moving toward economic integration.

Request for assistance in a general way were as follows: $7,700,000 for economic development programs of the National Development Institute, $8,500,000 for special works such as hydroelectric power and water supply programs, and $10 million for school construction and an undetermined amount for public health.

There appeared to be among Nicaraguans of all classes the usual misconception concerning the role of the United States in determining commodities prices and industrial prices. There appeared particularly on the part of opposition groups the same misconception regarding United States policy in regard to non-democratic regimes. There was no recognition of any possible failure on the part of the Latin Americans in regard to their policies with respect to the United States. Where fault was found it was always with United States policy.

CONCLUSIONS: — Requests for financial assistance were made as specified above. Requests were made for United States assistance in stabilizing coffee and cotton prices. Criticism was addressed by opposition groups to alleged United States support for the Somoza regime. Widespread support was found for the idea of Central American integration. The usual belief that the resources of the United States were unlimited and that all problems could be solved if only the United States would be less “stubborn” was encountered. There was some grudging consent on the part of the opposition groups to the idea that the President may be moving toward the democratization of the regime. Labor groups carefully took no position for or against the Government and there seemed to be a generalized feeling that United States assistance thus far had not filtered down to the masses.

In Nicaragua, as in other countries visited, there seemed to be a need for a broad inventory of national resources, both human and material. Similar needs exist for adequate study of the feasibility of agricultural diversification, for an analysis and appraisal of the potentials of domestic and foreign markets, including tourism, for more organized planning with respect to government policies in the economic field, for a review of the tax and trade policies of Nicaragua, and for an examination of the structure and functioning of governmental agencies.

1. Source: Department of State, ARA Special Assistant’s Files, Lot 60 D 513, “Eisenhower, Milton-Nicaragua 1958.” Confidential. The source text indicates no date or drafting officer.
2. Dr. Milton Eisenhower, brother of the President and Personal Representative of the President with the rank of Special Ambassador, visited Nicaragua during the course of a three-week fact finding trip to Panama, Honduras, Costa Rica, El Salvador, Guatemala, and Puerto Rico. See Document NI–4, footnote 4.
3. No memorandum matching the description here was found in Department of State files.