22. Editorial Note

Among the recommendations in the Rockefeller Report on Latin America, November 10, 1969, was a proposal on debt repayment. Regarding the Nixon administration’s initial reactions to this proposal, which recommended the use of local currency payments in lieu of dollars, see Document 12. A few months later Secretary of the Treasury Kennedy reported to President Nixon that he and George Woods had met several times and agreed on some general considerations, the first of which (as summarized by Kennedy) was: “We are dealing with the most sensitive subject in the financial field I can imagine.” They also opposed the term “debt rescheduling,” which “connotes a credit and balance of payments crisis and a bail-out,” and instead suggested using the term “amortization assistance,” which would “associate the scheme with development assistance.”

Kennedy continued that because of the large number of creditors and different kinds of indebtedness, he and Woods believed the amortization assistance would have to be done multilaterally and on an individual per country basis. Moreover, if an amortization scheme resulted in cutbacks by the donor countries, other capital sources, and U.S. bilateral assistance, “an increased net inflow of capital to Latin American countries, which is the basic purpose behind the scheme, will not be achieved.” Kennedy and Woods also recommended some next steps, [Page 52] most immediately to obtain Inter-American Economic and Social Council (IA-ECOSOC) agreement to have the Inter-American Committee on the Alliance for Progress (CIAP) and the World Bank jointly study the problem. Kennedy further noted that the use of local currency payments “has many attractions and I do not consider this an especially troublesome area. The application of the technique will have wide variation from country to country.” (Memorandum from Kennedy to President Nixon, January 17, 1970; National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 289, Treasury Volume I)

The Department of State generally agreed with Kennedy’s memorandum but added a few comments and suggested more specific initiatives to take to the IA-ECOSOC meeting. (Memorandum from Theodore L. Eliot, Jr., Department of State Executive Secretary, to Kissinger, January 23; ibid., RG 59, S/S Files: Lot 83 D 305, NSDM 41)

In National Security Decision Memorandum 41, February 18, President Nixon directed the creation of an interagency Special Task Force, chaired by Under Secretary of the Treasury for Monetary Affairs Paul Volcker, to study the debt service problem in Latin America and other developing nations, initiate an action program involving close cooperation with CIAP, the IDB, and other creditor nations and international agencies, and implement the action program “on a priority basis, including recommending to me such legislation as may be required.” The President also noted that he had authorized the U.S. delegation to the IA-ECOSOC to announce that he was prepared to appoint a special representative to work closely with CIAP and the IDB on the issue. He requested the first status report by March 15. (Ibid.)

In his first monthly status report, Paul Volcker stated, among other things, that the working premises of the Task Force were that the approach had to be multilateral, could not be limited to Latin America, and had to be implemented on a case-by-case basis. (Memorandum to President Nixon, March 13; Washington National Records Center, Agency for International Development, AID Administrator Files: FRC 286 73 A 518, IPS 7-1 FY 70 Feb-June 1970)