466. Memorandum From the President’s Special Assistant (Rostow) to President Johnson 1

Mr. President:

In the attached memoranda2

[Page 983]

Our ability to negotiate such a loan now comes at a critically important time:

  • —President Gestido under the new constitutional system has the authority and purpose to resolve Uruguay’s serious economic problems.3
  • —These problems were brought on by a decade of drift and unwise policies by weak collegiate governments which built up the income of the urban sector at the expense of the rural sector.
  • —Uruguay’s productive capacity is in agriculture and the solution to the problems must begin with modernization of policies and practices in this sector.

The conditions accompanying the loan require specific actions by the Uruguayan Government to remove the major disincentives to investment and production in agriculture. President Gestido has indicated willingness to take hard self-help measures. We have every reason to think that our conditions will be acceptable to his economic team and to him. In addition to the conditions, our negotiating position calls for release of loan funds in four tranches, each based on a prior review of performance.

Covey Oliver, Joe Fowler and Charlie Schultze have reviewed the loan package and recommend approval. I concur.




See me

  1. Source: Johnson Library, National Security File, Country File, Uruguay, Vol. I, 1/64–12/68. Confidential.
  2. Attached but not printed are memoranda to the President from Schultze, June 24, and Gaud, June 15.
  3. On November 27, 1966, the Uruguayan electorate voted to replace the National Council of Government with a one-man presidential system. President Gestido assumed office on March 1, 1967.
  4. The President checked this option.