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

SUBJECT

  • Peru—PL 480 Agreement for Rice

The attached memorandum from Bill Gaud and Orville Freeman (Tab A)2 recommends that you authorize a $10.7 million PL 480 sales agreement with Peru for 60,000 tons of rice. Charlie Zwick concurs (Tab B).3

[Page 1056]

This agreement will be the first major new aid for Peru in over a year. A proposed AID loan package of about $25 million will also be ready for your approval in the near future. This proposal serves three important purposes:

  • —to provide much needed food supplies after a severe drought struck Peru this year;
  • —to provide tangible political support for President Belaunde at a key point in his administration, after he has taken several difficult development decisions;
  • —to help increase US commercial sales of rice and counter Communist Chinese competition.

In recent months, Belaunde has shown real courage in tackling Peru’s economic problems, including putting through a major tax reform. He has also resolved the old and vexing dispute with the International Petroleum Company to IPC’s satisfaction, thereby removing it as an irritant from US-Peruvian relations. These acts have produced expected political turmoil, and a Cabinet shake-up has just occurred. However, the new Cabinet, headed by a respected close friend of Belaunde, includes the key Ministers from his predecessor’s Cabinet. It should continue the encouraging direction the Peruvian Government has recently followed.

Ambassador Jones has appealed for quick action on this request to help demonstrate our support for Belaunde’s position.4 I agree that a show of support at this moment is both warranted and needed.

As outlined in Charlie Zwick’s memorandum, there was a question last year as to whether Peruvian military expenditures would not warrant application of the Symington Amendment. Belaunde has held down the level of military spending since that time, however, and State/AID have now determined that Peru is not diverting any US assistance to military expenditures, nor investing its own resources unnecessarily to a degree that interferes with its development.

All interested parties agree in recommending that you approve the PL 480 program for Peru at this time. The only difference in view concerns whether some notice should be given to Congress that you are proposing new aid to Peru after a hiatus. Katzenbach and Zwick think it might be advisable to inform key members of the Congress, particularly Senators Symington and Morse, that Peru does not fall within the purview of the Symington Amendment. Gaud and Oliver prefer [Page 1057]not to take any initiative towards the Congress, but are fully prepared to defend the determination should any question be raised. Mike Manatos agrees with Gaud and Oliver that the less said the better at this moment. I also share this view.

Walt

Approve loan

Disapprove loan

Call me

Inform key members of Congress, particularly Senators Symington and Morse

Do not inform Congress

Call me5

  1. Source: Johnson Library, National Security File, Country File, Peru, Vol. III, 10/67–11/68. Confidential. Received in the President’s office at 4:55 p.m. Another copy indicates the memorandum was drafted by Lewis. (Ibid., Memos to the President, Walt W. Rostow, Vol. 97)
  2. Tab A was a memorandum from Gaud and Freeman to the President, September 20; attached but not printed.
  3. Tab B was a memorandum from Schultze to the President, September 30; attached but not printed.
  4. In telegram 7619 from Lima, October 1, Jones reiterated the importance of U.S. assistance: “It is urgent that I be authorized as soon as possible to make favorable response to Belaunde’s appeal for help as mark of confidence and support for him as constitutional President. I had hoped both PL–480 negotiating instructions and approval of Pucallpa–Aguaytia road project would have been in our hands by now. Belaunde needs help and needs it now. Swift approval of either or both these programs could be significant.” (National Archives and Records Administration, RG 59, Central Files 1967–69, POL 15–1 PERU)
  5. The President checked this option. When Rostow learned that the President had read the memorandum without taking positive action, he urged Larry Temple, Special Counsel to the President, to ask that Johnson read the “marked passages” again. Temple returned the memorandum to the President. (Memorandum from Temple to the President, October 2, 5:10 p.m.; Johnson Library, National Security File, Country File, Peru, Vol. III, 10/67–11/68) According to the President’s Daily Diary Rostow did not call Johnson until 11:45 p.m. (Johnson Library) No substantive record of this conversation, or evidence that it concerned Peru, has been found.