PE–26. Telegram from the Acting Secretary of State to the Assistant Secretary of State for Inter-American Affairs (Rubottom), Temporarily in Puerto Rico1
Ambassador Achilles will meet plane at Talara with Prime Minister and Mrs. Beltran. Beltran intends explain his “program” to Secretary2 and you, probably along following lines:
Immediate objective is restore sound economy based on balanced budget, exchange and price stability, private enterprise and stimulation of domestic and foreign investment. Longer range but concurrently will seek accelerated social evolution primarily through private housing, road construction into new areas and land reform.
Immediate financial program includes:
- (1)
- Complete stoppage of borrowing from Central Bank;
- (2)
- Expediting tax collection; and
- (3)
- Tightening tax enforcement.
Plans reduce expenditures by:
- (1)
- Some reduction in government employees;
- (2)
- Greater reduction through forced attrition; and
- (3)
- Cutting military expenditures particularly for equipment.
Has been promised cooperation of President and armed services on 3.
Anticipates achieving exchange and price stability by mid-1960. Despite expected saving from above measures and termination food subsidies and increased [Facsimile Page 2] revenues he expects need one billion soles ($40 million) to meet treasury operating expenses until then without recourse to Central Bank. Of this International Petroleum Co. is loaning $10 million. To make up balance hopes Eximbank will agree amend stabilization loan agreement permit Peruvian Treasury use sol proceeds (presently sterilized) from sale dollars borrowed from Exim.
Following cabled tonight to Achilles.3
Beltran intentions as outlined Embassy4 appear to contemplate significant steps towards coping with GOP economic and financial [Typeset Page 1077] problems. You may inform Beltran USG views his objectives with sympathy and desires to cooperate with him in his efforts restore financial stability, improve climate for private investment, and create conditions favorable to national economic growth. Beltran, of course, should understand that basic stabilization effort will have to be made by GOP itself within limits of current balance of payments availabilities including existing EximBank credit. As for loans for development assistance they will, of course, have to be considered on case by case basis.
“EximBank probably prepared amend loan agreement permit Treasury drawing soles provided Exim satisfies itself not inconsistent with stabilization program Peru is developing with IMF. Bank would, however, like have explanation rationale of this operation since using counterpart only different in form from any other recourse to Reserve Bank and since apparently necessary in any event obtain approval Peruvian Congress for changing loan agreement. We dubious about any attempt make the/use of counter-part appear to be method of avoiding inflationary impact direct borrowing from Bank.
[Facsimile Page 3]We note Beltran expects one billion sol budgetary deficit to mid-1960. Would appreciate your explanation gap this magnitude, which equal that anticipated 1959, in view anticipated additional tax revenues and economies.”5
- Source: Department of State, Central Files, 823.00/8–359. Confidential; Niact. Drafted by Silberstein and signed by Siracusa. Assistant Secretary Rubottom stopped at Ramey Air Force Base in Puerto Rico en route to the Santiago Meeting of Consulation.↩
- After an overnight stop at Ramey Air Force Base, August 10–11, Secretary Herter’s plane made a refueling stop in Talara, Peru, August 11, en route to the Santiago meeting.↩
- Telegram 100 to Lima, August 10, transmitted the quoted text. (823.00/8–359)↩
- In telegram 89 from Lima, August 3, the Embassy outlined the program Prime Minister Beltrán discussed with Ambassador Achilles, August 1–2. (823.00/8–359) This outline appears in the first part of the present telegram.↩
- By telegram 193 from Lima, August 29, the Embassy sent requested budget data to the Department of State. (823.00/8–2959)↩