479. Memorandum From the Under Secretary of State for Economic Affairs (Mann) to President Johnson 1

SUBJECT

  • Allegations About Change in Our Aid Policy for Peru

Mr. Komer has a summary of the facts regarding the IPC problem as it affected our aid program in Peru. I hope you will have a chance to read it.2

From the beginning, our objective has been to prevent a confiscatory-type action. The record does not show any difference of objective or tactic between the Kennedy Policy in late 1963 and our policy in 1964–66.

This policy has been successful. We will have our maximum chance of ultimate success if we follow the three recommendations made in my memorandum of February 19. However, if the Peruvian press were to report Belaunde’s promise not to confiscate, Belaunde would be charged with having “sold out” the national patrimony. The danger is that Belaunde would then feel obliged to prove his “patriotism” by moving against the IPC property. This could, in turn, bring into operation the HickenlooperAdair Amendment, relations between the U.S. and Peru would then be in open crisis. And we would have failed to obtain our objective.

The proposed AID loans to Peru do not represent a change in policy or tactic. From the beginning we have been granting or withholding soft loans depending on whether we thought it would help us achieve our objective. In 1964, for example, we made larger loans than those now proposed.

The investor agrees with our tactic. Yesterday the highest officials of the IPC volunteered to me their appreciation. They expressed agreement with the tactics which have been recommended. Their hope is that they can go quietly to work and reach some kind of a modus vivendi which will postpone the problem of this particular oil field [Page 1006]while enabling them to get on with improvements they wish to make in other properties. I do not, therefore, expect any dissent from Senator Hickenlooper or from the private sector.

The Eder article is therefore incorrect in its major premise.3 But I do not think it follows from this that we help ourselves by debating details of delicate foreign policy issues in the press because, given Latin American realities, this would make it impossible to achieve our foreign policy objectives.

The difficulty we are having with press treatment of our Latin American policy stems from the fact that the other side has preempted the field. No knowledgeable person outside of government is willing and able to take them on and to counterattack by dealing with the real, and not the phony, issues. I have already spoken with you about my suggestions on how to deal with this. I expect to have something concrete on this soon.

Thomas C. Mann
  1. Source: Johnson Library, National Security File, Country File, Peru, Vol. II, 1/66–10/67. Secret. A notation on the memorandum indicates that the President saw it.
  2. At 11 a.m., Mann called the President to ask if he had seen the memorandum on the “IPC–Peruvian matter.” ( Document 478) Johnson admitted he had not, but instructed his staff to “get him an announcement that balanced this thing.” He told Mann “to get it on paper but to make sure that the President was not announcing that we have backtracked and made a bad mistake and Bobby Kennedy had forced him to change it.” The President further stated that “he did not object to the deal made” but “does object to announcing both deals which says that the MannJohnson policy has been abandoned and we are going to sit back and let them confiscate.” (Johnson Library, Papers of Thomas C. Mann, Telephone Conversations with LBJ, May 2, 1965–June 2, 1966)
  3. In an article attributed to Richard G. Eder, February 10, The New York Times disclosed that the United States had quietly reversed its policy of restricting economic assistance to Peru as a means to force a favorable settlement in the IPC case. President Johnson’s reaction was twofold: he demanded an investigation of the leak and instructed that “no new loans are to be made to Peru without [his] prior approval.” (Memorandum from Bowdler to the President, February 10; ibid., National Security File, Country File, Peru, Vol. II, 1/66–10/67) In a February 21 letter to Jones, Cutter explained: “The spate of newspaper articles concerning our AID policy in Peru caused considerable worry here coming as it did with the Viet Nam debates and other Senate criticism of our policies and the President became personally involved. In view of this high level interest, no decision could be made until fully cleared with the White House. The receipt of Belaunde’s letter has now made it possible to move ahead with recommendations to the White House.” (National Archives and Records Administration, RG 59, Lima Embassy Files: Lot 73 F 100, Cutter, Curtis C.)