148. Editorial Note
The Hickenlooper Amendment to the Foreign Assistance Act of 1961 required that the United States terminate foreign assistance programs in countries that had expropriated U.S. citizens’ (corporate and personal) property without conforming to standards of international law, that is, without providing prompt, adequate, and effective compensation, submitting the dispute to binding international arbitration, or returning the property within 6 months. This amendment also required the United States to vote against loans from the international financial institutions (International Bank for Reconstruction and Development (World Bank), Inter-American Development Bank, and Asian Development Bank) to countries that had expropriated U.S. property. In the case of the Inter-American Development Bank, a negative U.S. vote would block the loan. The Hickenlooper Amendment was one of a number of “barnacles” in the Foreign Assistance Act taken up in the administration’s overall approach to foreign assistance policy.
On October 9, 1968, the Government of Peru expropriated assets of the International Petroleum Company (IPC), a U.S. entity, and administratively took over the remainder of IPC’s assets on January 28, 1969. The expropriation occurred in the context of a military coup that brought General Juan Velasco to power. The Sugar Act of 1948 also required suspension of the U.S. sugar import quota for countries that had expropriated U.S. citizen assets, and this act would apply to Peru. If the Peruvian Government did not pay compensation or otherwise resolve the dispute, termination of foreign assistance and suspension of the Peruvian sugar quota were imminent in April 1969.
In its closing weeks the Johnson administration was unable to resolve the issue and the Peruvian expropriation was one of the items on the agenda for the Nixon administration. On January 29, 1969, Henry Kissinger forwarded to the President a January 28 memorandum from the Department of State to Kissinger apprising him of the Peruvian/IPC situation. The section on “Consequences for U.S. Relations” in the State Department memorandum reads in part as follows:
“Up to now we have apprised the GOP quietly but forcefully of the existence in US law of the Hickenlooper amendments. We have sought [Page 383]to avoid confrontations so far, so as to give the Government room to maneuver and find a graceful way out. Unfortunately, the GOP’s reaction to our approaches has been truculent rejection of the sanctions as an intrusion in internal affairs.
“What has made the situation so tragic is the mandatory requirement of the US law. Were it not for that, the US would have more flexibility, more options, and greater time to handle the problem, and without the need to appear to ‘punish’ which makes the present confrontation so serious.
“Aside from the expectable consequences already noted, application of US sanctions will surely precipitate widespread and vehement criticism of the US throughout Latin America. The larger Latin American countries especially would view such action as ‘intervention’, and would see the power to sanction in this way as threatening to themselves. In short, it would almost surely provide impetus toward unifying the now fractionated anti-US sentiment that exists in the region.”
In his covering memorandum Kissinger told the President that the Latin American Interdepartmental Group had been asked to develop contingency plans should the “crisis” worsen. (National Archives, Nixon Presidential Materials, NSC Files, Country Files, Latin America, Box 794, Peru-Hickenlooper Amendment, Volume I 1/21-3/31/69)
At the end of January U.S. Ambassador to Peru J. Wesley Jones was called back to Washington for consultations. In the following weeks the Nixon administration attempted several initiatives to resolve the IPC situation with Peru, including discussions with World Bank President Robert McNamara, the dispatch of a special emissary to negotiate with high-level officials in the Peruvian Government, and economic pressures on Peru short of what might be considered overt economic aggression. In the meantime, because the Hickenlooper Amendment required sanctions if the expropriating government failed within 6 months to take “appropriate steps … to discharge its obligations under international law toward such citizen or entity, including speedy compensation for such property,” the administration argued that negotiations with Peru over the expropriation constituted “appropriate steps” and deferred application of the amendment.
When little movement resulted from these efforts, the Nixon administration introduced an amendment to the Foreign Assistance Act that would allow the President to waive application of the Hickenlooper sanctions when he found the waiver in the national interest. Administration officials held talks with a Peruvian commission in Washington and considered other measures to delay application of Hickenlooper sanctions against Peru. At the same time, new bilateral development loans to Peru were withheld, one of the requirements of formal application of the Hickenlooper Amendment.
A severe earthquake struck Peru on May 31, 1970; up to 30,000 people were killed and 200,000 were left homeless. While the IPC case and [Page 384]other contentious issues in U.S.-Peruvian relations persisted, the need for reconstruction assistance dominated the relationship. Unusually heavy rains in Peru in the early spring of 1972 caused extensive economic damage to the agricultural northern coastal plain and the neighboring mountains, again raising the question of reconstruction assistance and detracting attention from the IPC matter.
A further complication arose when, despite the administration’s opposition, Congress passed the Gonzalez Amendment on March 10, 1972 (Section 21 of the Inter-American Development Bank Act, P.L. 92-246; Section 12 of the International Development Association Act, P.L. 92-247; and Section 18 of the Asian Development Bank Act, P.L. 92-245). This amendment required the President to instruct his representatives to vote against any foreign loans to countries that expropriated U.S. investment without compensation and was even more restrictive in its exceptions than the Hickenlooper Amendment by substituting specific requirements, such as good faith negotiations, for the concept of “appropriate steps.” As the first Nixon administration ended, its officials were considering whether the Gonzalez Amendment also applied to the IPC expropriation, which had taken place before its enactment.
Documentation on the Peruvian situation is in the National Archives, Nixon Presidential Materials, NSC Files, Country Files-Latin America, Peru, Boxes 792 and 793, Peru-Hickenlooper Amendment, Box 794, and Peru-IPC-Hickenlooper Amendment, Box 795; ibid., NSC Files, Subject Files, IADB, Box 333; ibid., RG 59, Central Files 1967-69, AID (US) and AID (US) 5; ibid., Central Files 1970-73, AID (US), AID (IBRD) 9 PERU, and AID (IDB) 9 PERU; ibid., S/S Files: Lot 80 D 212, NSSM 18, NSSM 42, and NSSM 158; ibid., S/S Files: Lot 73 D 288, NSC Review Group; ibid., S/S Files: Lot 83 D 305, NSDM 11, NSDM 21, and NSDM 199; National Security Council, Secretariat, Boxes 90 and 91; and Washington National Records Center, Agency for International Development, AID Administrator Files: FRC 286 73 A 158, LEG 6 Foreign Assistance Act.