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

SUBJECT

  • Asuncion Meeting on Latin American Economic Integration2

Covey Oliver and his Latin American Common Market experts to review the results of the Asuncion meeting which the press has reported as a failure.

Two things emerged:

  • —until we have a fuller picture of what took place at the LAFTA (South American countries, plus Mexico) session, where we do not have observer status, it is premature to draw conclusions about the lack of success at Asuncion and what country was responsible.
  • —despite inability of LAFTA to reach agreement on the first try on certain key issues, interest in the economic integration movement [Page 150]has not slackened and the timetable agreed at Punta del Este has not been irretrievably upset.

The Asuncion Goals

We had hoped the Asuncion meeting would agree on three major issues:

  • —programmed tariff reductions among LAFTA members.
  • —preparations by LAFTA members for a common external tariff.
  • —mechanism for joint LAFTACACM exploration of gradual merger into a Latin American Common Market.

Up until the last two days of the meeting, it seemed that agreement would be reached on the first two points based on a compromise formula which would give the poorest countries (Bolivia, Ecuador and Paraguay) free access to the markets of all the other LAFTA members in five years.

At the last moment, Peru asked to receive similar treatment as the poor countries. The other LAFTA members balked, and Peru’s continued refusal to drop its request worked as a veto. This, in turn, seems to have triggered a veto by Paraguay of other decisions relating to programmed tariff cuts and preparations for a common external tariff.

We do not know why Peru took this inflexible position. It had not been enthusiastic about a common market from the start, and recent financial problems probably compounded its fears about competition from other countries. Significantly, none of the big three—Argentina, Brazil, Mexico—opposed the concession to the poor countries. They would have been harder to turn around than Peru.

The Asuncion Round in Perspective

Disappointing as the results were, it is important to look at the Asuncion round in perspective:

  • —the meeting showed that most of the LAFTA countries are prepared to move rapidly toward a common market.
  • LAFTA gave its blessing to the formation of an Andean subregional group (Venezuela, Colombia, Ecuador, Peru, Bolivia and Chile) which plans to reduce trade barriers among themselves at a faster pace than provided in the President’s timetable.
  • —at the joint LAFTACACM meeting the Foreign Ministers agreed to recommend annual meetings to consider acceleration of execution of the Punta del Este decisions and decided to establish a Coordinating Committee to study on a priority basis five key aspects of the merger of the two groups.
  • —the Meeting of Presidents envisaged an 18-month period or more for the Latin Americans to negotiate all the specific arrangements leading toward a common market.
  • LAFTA members, while disappointed at the inability to reach agreement on all issues, do not look upon the meeting as a failure. This is reflected in public statements by the Argentine and Colombian Foreign Ministers.
  • —the European economic integration movement faced several complex negotiating sessions before basic obstacles were removed.

What Needs to be Done

To keep the momentum of the movement going, two things must be done:

  • —get Peru turned around.
  • —have the LAFTA Foreign Ministers renew negotiations as rapidly as possible, preferably before the second quarter of 1968 which they have set for their next meeting.

Among the opportunities we will have to use our influence with the LAFTA group are:

  • —the Meeting of Foreign Ministers in Washington on September 22–23 to consider Venezuela’s complaint against Cuba.
  • —the World Bank and Fund meetings in Rio de Janeiro in mid-September. Tony Solomon and Don Palmer (Covey Oliver’s Common Market man) will attend.
  • —a special CIAP meeting in Rio at the end of September to consider the financial aspects of economic integration.
  • Tony Solomon is going to Peru after the Rio Bank–IMF meeting to address a group of Peruvian businessmen. He will speak on the advantage of economic integration. He will also be able to talk to Belaunde about the Peruvian attitude.
  • —We may help Peru overcome its integration fears by supporting the Andean subregional group, with necessary adjustment assistance if they take specific action cutting tariffs among themselves.

Before deciding how to use these opportunities, we need a full reading of what took place at the LAFTA meeting. State has asked our Embassies for this assessment.3

Walt
  1. Source: Johnson Library, National Security File, Country File, Paraguay, Vol. I, 1/64–8/68. Confidential. A notation on the memorandum indicates the President saw it.
  2. A joint meeting of the Latin American Free Trade Association and the Central American Common Market was held in Asuncion August 28–September 2. Additional documentation on the meeting is in the National Archives and Records Administration, RG 59, Central Files 1967–69, ECIN 3 LA, ECIN 3 LAFTA, and ECIN 3 CACM.
  3. The President wrote the following instructions on the memorandum: “Let’s follow these carefully & keep me informed. L