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

UR–5. Memorandum of a Conversation¹

Washington, June 18, 1958

SUBJECT

• Export-Import Loans to Uruguay

PARTICIPANTS

• Mr. Samuel C. Waugh, President, Export-Import Bank
• Mr. Walter C. Sauer, Executive Vice President, Export-Import Bank
• Mr. Hawthore Arey, Director, Export-Import Bank
• Mr. Vance Brand, Director, Export-Import Bank
• Mr. George A. Blowers, Director, Export-Import Bank
• Mr. R. R. Rubottom, Jr., Assistant Secretary of State for Inter-American Affairs
• Mr. Maurice M. Bernbaum, Director for South American Affairs

Mr. Rubottom described in some detail the difficulties in our relations with Uruguay arising from the belief in that Government and in that country that the United States is indifferent to its problems and is not ready to be helpful in their solution. He thought that an important breach had been made in this attitude by the conversations which had taken place in Montevideo during Vice President Nixon’s visit and that it was important for us not to lose the momentum then created. He thought that this would depend largely on the outcome of current negotiations for a balance-of-payments loan. Mr. Rubottom said that he had discussed this problem frequently and at length with Tom Taylor of International Packers and that there was an important difference in their approaches to the problem. Whereas Taylor was indignant over the treatment accorded his firm by the Uruguayans and felt that a solution to his specific, as well as the overall problem, could be reached only on a strong quid pro quo basis, Mr. Rubottom believed that the interests of Mr. Taylor’s company and of the United States as a whole would best be served by a solution of the political problem.²

Having said this, Mr. Rubottom said he had heard from Mr. Dillon regarding the outcome of his conversations a few days earlier with Mr. Waugh. This indicated an agreement between the two that the Bank was ready to announce a $25 million line of exporters credits contingent upon a settlement of the meatpackers problem. After a discussion of the matter, Mr. Dillon had authorized Mr. Rubottom to let Mr. Waugh know that he had misunderstood the primary importance of the balance-of-payments loan, the granting of which would, in accordance with conversations in the Vice President’s office, be made contingent upon settlement of the meatpackers claim. Mr. Rubottom stressed that the line of exporters credits represented normal business and should be handled without any reference whatsoever to the meatpackers problem.

Mr. Rubottom then made the following specific proposed in response to Mr. Waugh’s request:

1. That the Bank agree to announce a line of exporters credits.

2. That the Bank agree to consider a balance-of-payments loan on the basis of partial gold coverage and commitments by the Uruguayan Government to undertake necessary stabilization measures.

He added that the Department was, in the meanwhile, working strenuously on other aspects of the Uruguayan problem, including elimination of the countervailing duty on wool tops and compliance with our agreement in GATT to make concessions on three canned neat items.

Mr. Waugh stated that he agreed thoroughly with Mr. Rubottom’s analysis of the political problem. The only area in which he differed was the amount of reliance to be placed on Uruguayan promises. He stated categorically that he had no confidence whatsoever in promises made by the present Government. He felt that a loan at this time to that Government would serve only to strengthen and perpetuate it, thereby rendering less likely any of the remedial measures which must be taken to extricate Uruguay from its difficulties. He conceded, however, that this was a political problem and that he would, in deference to Mr. Rubottom’s views, agree to the following, subject to the concurrence of his Directors:

1. Prompt announcement, if desired, of a line of exporter credit in the amount of $25 million, of which $15 million would be covered by the Export-Import Bank.

2. The prompt negotiation of $20 million balance-of-payments loan backed by the Uruguayan gold now in the United States.

3. Agreement by the Bank to consider, although without commitment, further assistance to the Uruguayan Government on the basis of stabilization measures to be taken by it.

Mr. Waugh added that since the foregoing would be done in deference to the recommendations of the Department of State on the basis of political considerations, he felt that it would be only right for the Department to submit a letter requesting such action. He felt that such a letter would be required by the Bank to meet the undoubtedly strong pressure and criticism that would inevitably arise from the meatpackers and other American interests.

Mr. Rubottom responded that he thought a request for a letter was fair. He stated that he wanted to think about the whole matter, and that we would get in touch promptly with the Bank.

It was suggested that the stabilization measures to be undertaken by the Uruguayan Government might, if feasible, be worked out by that Government infernally with the IMF, although the latter organization would not enter into a formal agreement.

Mr. Bernbaum then clarified various points raised about the Uruguayan attitude and the manner in which Ambassador Lacarte was reporting the problem. He stated that he had yesterday brought to Ambassador Lacarte’s attention the statement in Mr. Burgess’ letter to Mr. Waugh quoting Mr. Fullgraff as having stated that he could not understand why 100 percent gold backing was required by the Bank since that matter had never come up. Bernbaum stated that Ambassador Lacarte was amazed to hear this and stated that Fullgraff was a fool and that we should not pay any attention to him. As regards Mr. Waugh’s fears that Lacarte was not reporting accurately to Washington, Bernbaum stated that Lacarte had let him know that he was refraining from recording any negative news on the Bank’s attitude to Uruguay until clarification of the Bank’s attitude toward the possibility of considering a loan on the basis of stabilization measures to be undertaken by the Uruguayan Government. Mr. Rubottom interjected that Lacarte was one of the best Ambassadors Uruguay had ever sent to the United States, that he had a great deal of confidence in Lacarte, and that one of his fears regarding the present situation was that the failure of the negotiations might lead to Lacarte’s recall. M. Waugh agreed with this estimate of Ambassador Lacarte. Mr. Bernbaum stated that Lacarte was to visit the Department on Friday June 20 and inquired whether Lacarte should then be asked to resume his conversations with the Bank. Mr. Waugh said that he certainly hoped that would be the case and that no commitments would be made by the Department.

1. Source: Department of State, Rubottom Files, Lot 60 D 553, “Uruguay 1958.” Confidential. Drafted by Bernbaum. The source text is an unsigned carbon copy.
2. In a memorandum to Dillon dated June 4, 1958, prepared as a briefing paper for the Deputy Under Secretary’s meeting with Thomas Taylor that afternoon, Assistant Secretary Rubottom stated the following: “The packers believe that there is no hope of coming to a fair settlement with the Uruguayan unless the U.S. Government intervenes energetically. As a first step, the packer propose that the U.S. freeze exiting Uruguayan assets in the United States, as was done with Egyptian assets during the Suez crises.” Rubottom further stated, however, that he doubted the wisdom of these tactics, and noted that Uruguayan President battle Beres had already assured Vice President Nixon in Montevideo that the matter would be equitably settled, that the issue between the meatpackers and the Uruguayan Government was primarily a legal one, and that any attempt to “Bludgeon Battle into meeting the packers’ terms would be the single most effective way of assuring the failure of our efforts for better relations.” (Rubottom Files, Lot 60 D 553, “Uruguay 1958”). In a covering memorandum to Dillon, Rubottom added the following point: “The action proposed by the packers would also add fuel to the fires of ‘review’ of our Latin Americas policies now going on on the Hill. Badly as they have been treated, I doubt that the steps they want would get very much public or political support.” (Rubottom Files, Lot 60 D 553, “Uruguay 1958”)