Mr. President:
The attached memoranda from Bill Gaud and Charlie Schultze recommend that
you approve a $5 million Supporting Assistance loan to finance an
emergency urban development program in Santo Domingo. Linc Gordon and Ambassador Crimmins are the originators of the
request.2
The loan is designed to buy some insurance against social unrest and
political tensions in Santo Domingo by generating employment for some
3,000 people through city improvement projects.
The funds for the loan are available. While I would like to see us get
away from Supporting Assistance in the Dominican Republic, I think it is
in our interest to make this small investment to head off a potential
source of trouble.
I recommend you approve the loan.
Attachment
Washington, April 24, 1967.
Memorandum From the Director of the Bureau of the
Budget (Schultze) to President Johnson
SUBJECT
- Proposed $5 million Supporting Assistance Loan for the
Dominican Republic
Bill Gaud has asked you to approve a $5 million
Supporting Assistance loan to finance an emergency urban
development program in Santo Domingo, Dominican Republic.
This will be in addition to the $40 million Supporting Assistance
loan authorized last June to finance investment expenditures in the
Dominican budget. The final part of that loan was released last
month and is fully committed to high priority programs in the rural
sector.
AID Supporting Assistance funds for
FY 1967 have been fully programmed, but the $5 million requested for
this emergency loan is available from the Contingency Fund.
The justification for this loan is purely
political.Ambassador Crimmins reports that growing unemployment in Santo
Domingo and increasing radical activity by the leftist opposition
have created political tensions which threaten the stability of the
Balaguer regime. The
purpose of the loan is to reduce the possibility of a political
explosion in Santo Domingo.
In January 1967 the cityʼs budget situation forced the firing of
2,700 people. The emergency program to be financed by the loan will
generate employment for 3,000 people on street and sewage projects,
initiate an urban community development program, and expand loans to
small businesses.
Unfortunately, President Balaguer does not regard the problem in Santo
Domingo as seriously as does Ambassador Crimmins. Balaguerʼs position is as follows:
- 1.
- He views the problem as basically one of security.
- 2.
- He is not willing to spend his own funds for this
program.
- 3.
- He is not convinced that this kind of program will improve
his position in Santo Domingo, where opposition elements
dominate the city.
In view of Balaguerʼs position,
and the lack of self-help provisions, I would normally be reluctant
to recommend this loan for your approval. But I do not feel in a
position, in the case of a small $5 million loan, to go against the
judgment of Linc Gordon, Bill
Gaud, and the [Page 473]
CIA, all of whom agree with
Ambassador Crimminsʼs
assessment of the situation. The loan will be made from the Supporting Assistance appropriation which
authorizes funds to promote political
stability with no specific requirement for self-help as is required
for development loans.
Bill Gaud, Linc Gordon, and
Ambassador Crimmins agree
that any future assistance to the Dominican
Republic for urban programs should require greater self-help and
be provided as a development loan.
Balance of Payments
The dollars made available under this loan will be tied to U.S.
procurement. We, Treasury, and AID
believe that the existing arrangements for the use of aid funds in
the Dominican Republic could be improved to further protect our
balance of payments. While there are political problems in doing so,
AID is attempting to work out
improved procedures with the Dominicans. Secretary Fowler concurs in
authorizing this loan at this time.
Recommendation
We recommend that you authorize this loan with the understanding that
every effort will be made to assure appropriate self-help efforts by
the Balaguer regime in
connection with any future assistance for urban programs.
