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

PE–19. Memorandum of Conversation, by the Ambassador in Peru (Achilles)¹

Lima, December 11, 1958

SUBJECT

• Petroleum Price Increases

PARTICIPANTS

• President Prado
• T. C. Achilles

During my call on the President this morning, he expressed hope of my support for U. S. financing for a number of development projects, which gave me an opportunity to say that the U.S. attitude toward both public and private investment in Peru could not but be greatly affected by a number of factors, including the strength and stability of the Government and its ability to secure legislation from Congress, a balanced budget, and the treatment of foreign investment as exemplified by the petroleum price problem.

I continued that I recognized the domestic political problems involved but that petroleum prices had long been held by the Government at an abnormally low level and that a level permitting continuation of a viable petroleum industry in Peru could not but be of great importance to the future U.S. attitude toward investment here.

He replied that he was fully aware of the importance and difficulties of the petroleum industry and of the need for petroleum price increases. He would see that they were granted. There was currently a tremendous political uproar over the budget but the Government would nevertheless push through a balanced budget before the end of the month. Then it would take up the petroleum price increases. There would be a similar uproar, probably with strikes and demonstrations, but the price increases would nevertheless be granted.

I said I had been disturbed by Prime Minister Gallo Porras’ statement to me yesterday that Congress would not approve the legislation and that the increases should be enacted by decree after Congress had adjourned, subject to approval next July.² The Company had repeatedly been promised some such action without results and believed that legislation was necessary. Without specifically stating that it would be done by legislation, although he said there would be another extraordinary session of Congress in January, the President reiterated that the price increases would be put through as soon as the budget had been passed, no matter what the uproar might be.

1. Source: Department of State, Central Files, 823.2553/12–1158. Official Use Only. The source text was transmitted to the Department of State under cover of despatch 566 from Lima, December 11.
2. The memorandum of conversation between Prime Minister Porras and Ambassador Achilles, December 10, was transmitted to the Department of State with this memorandum of conversation.