10. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon1 2
SUBJECT:
- Pan American Highway
During his State Visit to Washington last June, President Lleras of Colombia asked for assistance in completing the Pan American Highway. You told President Lleras of your great interest in completing the highway and asked Assistant Secretary Meyer to follow up on how the US might provide assistance for this purpose (Memorandum of Conversation at Tab A).
This issue has been carefully reviewed within the Executive departments and we now have the views and recommendations of the State Department (Tab B), Treasury (Tab C), and Bureau of the Budget (Tab D), the Export-Import Bank (Tab E), and the Department of Transportation (Tab F).
The estimated cost of construction for the Darien Gap road is $150 million: $90 million for the Panamanian section, $60 million for the Colombian section. Under the financing formula requested by Lleras, which the State Department recommends, the US would provide grant aid for 2/3 of the construction costs, or $100 million. This is the same formula which was used for the Central American portion of the Highway.
All of the agencies see serious drawbacks in proceeding now with assistance for the Pan American Highway under any financing formula. Their principal reservations are:
- —the absence of an economic feasibility study which demonstrates that the benefits of the project would exceed its costs.
- —this large foreign project is an easy target for critics who are calling for increased domestic spending, particularly at a time when domestic federal construction is being cut back by 75%.
- —the danger that Congress would offset any appropriation for the Pan American Highway by cutting other priority projects in the Transportation and/or AID budgets.
- —probable adverse Congressional reaction to an exceptionally large amount of aid for an unconstitutional military government in Panama.
The Treasury and Budget Bureau recommend that you not authorize construction financing until an economic feasibility study can be completed, recognizing that such a study may well indicate that the costs far exceed the benefits. The State Department notes that there are no realistic counter-offers you could make to Colombia in the event you decide not to proceed with this project now, but concludes that President Lleras would understand the difficult Congressional problem particularly in light of the positive action taken on additionally and proposed for modernization of his Air Force.
Should you wish, on the basis of foreign policy considerations and your commitment to President Lleras, to proceed with assistance for completion of the Pan American Highway, there are several alternative financing formulas. These are spelled out in Appendix I. In summary,
- —State Department proposes 2/3 grant aid by the Bureau of Public Roads, with the remaining 1/3 to be financed by the Export-Import Bank if requested. The Department of Transportation and the Export-Import Bank have reservations about this formula but would cooperate if you decide this is necessary for important foreign policy reasons.
- —Treasury proposes that the Bureau of Public Roads finance only the foreign exchange costs of the project—about 50%—on a concessional loan basis, the remaining 50% to be financed by Colombia and Panama.
- —Budget Bureau proposes that AID provide development loan funds for this project, with Colombia and Panama required to contribute a share based on their ability to pay.
- —Department of Transportation proposes a cost-sharing formula with the IDB and other Latin nations, under which the US would provide a 1/4 share.
In a related request, President Lleras asked for a “modest amount” of assistance for a proposed Choco Highway which he needs to “buy off” opponents of the route now proposed for the Darien Gap road. State believes that we should not be directly involved in this maneuver, and, therefore, recommends that we agree to provide “modest” assistance for projects in the Choco region, but not for the Choco Highway itself.
My own view is that it would be desirable on foreign policy grounds for the United States to assist in the completion of the Pan American Highway. Announcement of your intention to help close the Darien Gap would have a dramatic political impact in the hemisphere. Closing the Gap would have historical significance in terms of the physical integration and ultimate development of the hemisphere. Although the immediate cost/benefit ratio may not be favorable, the potential economic and political effects which a completed Pan American Highway will have by the end of the century cannot be foreseen. Moreover, a decision to provide such assistance would meet the commitment which President Lleras feels you gave him in his talks last June.
If you decide to go forward, I believe the only way to get this project off the ground within the next few years is for the United States to provide at least two-thirds of the construction costs on a grant or concessional loan basis. The 50–50 formula proposed by Treasury is not financially feasible for either Colombia or Panama.
Congressional considerations will bear heavily on three questions: timing of a legislative request, source of funding (BPR or AID), and form of assistance (grant or loan). The agency memoranda do not offer an adequate assessment of the Congressional outlook. Therefore, I would suggest that you ask Bryce Harlow to undertake careful consultations with the Congressional leadership. In the meantime, I would suggest that you inform President Lleras that:
- —you have decided to seek legislation to permit financing two-thirds of the cost of the construction of the Darien Gap Highway on a concessional loan or grant basis.
- —that Congressional and budgetary considerations must be reviewed before you can determine when and in what form such legislation can be requested.
- —you are authorizing the State Department to enter into consultations with the Governments of Panama and Colombia to confirm their willingness to participate in the project on the basis of a 2/3–1/3 financing arrangement.
- —that we are prepared to offer modest assistance for development projects in the Choco region rather than for the proposed highway per se.
RECOMMENDATIONS:
1. That you ask Bryce Harlow to undertake consultations with the Congressional leadership on the proposal to seek financing for two-thirds of the cost of the Darien Gap Highway, and to assess the outlook for such legislation in terms of the timing, source and form of funding.
Approve [RN checked]
Disapprove
See Me
2. That you inform President Lleras of your intentions concerning assistance for the Pan/American Highway as described above.
Approve [RN checked]
Disapprove
See Me
3. That you authorize the State Department to enter into consultations with the Governments of Colombia and Panama on their willingness to participate in completing the Darien Gap Road on a 2/3–1/3 financing basis.
Approve [RN checked]
Disapprove
See Me
4. That you reserve your decision on the timing of a legislative request, the source and type of funding until you have received Bryce Harlow’s assessment of the Congressional outlook and consultations with Colombia and Panama have been completed.
Approve [RN checked]
Disapprove
See Me
- Source: National Archives, Nixon Presidential Materials, NSC Files, Box 797, Country Files, Latin America General, volume 2, September–October 1969. Secret. Sent for action. Nixon initialed for approval on all recommendations on October 7. Attached but not published are Tabs A through F. Tab A is a June 13 memorandum of conversation; Tab B is an August 13 memorandum from the Department of State to the President; Tab C is an August 18 memorandum from Volcker to the President; Tab D is an August 20 memorandum from Hughes to the President; Tab E is a July 10 memorandum from Kearns to Secretary Rogers; and Tab F is a June 30 memorandum from Beggs to Secretary Rogers. Attached but not published at Annex I is a paper titled, “Alternative Financing Formulas.” In a December 8 memorandum to the President, Kissinger requested his support for a bill in the House of Representatives for funding to complete the Pan American highway. Nixon initialed his approval on December 10. (Ibid., Box 798, Country Files, Latin America General, volume 3, November 1969–May 1970)↩
- Kissinger discussed the 4 proposals regarding U.S. negotiations on financing the cost of the Darien Gap portion of the Pan American Highway. Nixon agreed to the 4 recommendations presented by Kissinger and agreed to inform President Lleras of Colombia of his intentions.↩