2. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon1 2

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  • Reallocation of AID Funds from Housing to Highway Construction in Latin America

At your suggestion I requested a memo from AID on whether it would be sensible to transfer AID resources for Latin America from housing and to the highway sector. Attached at Tab A is a memorandum from Rutherford Poats, the Deputy AID Administrator, on this subject.

The memorandum concludes essentially that it would not be sensible to shift resources from housing to highways. It points out that substantial levels of aid (roughly $1.1 billion over the past decade) have been available for highway construction in Latin America, while direct US lending for housing construction has been relatively small and decreasing. AID has increasingly directed assistance in the housing field to strengthening institutions which will mobilize private and public savings for housing (e.g., creation of savings and loans systems with seed capital loans), rather than providing resources for direct construction. AID is also beginning to look into a multi-disciplinary approach to urban problems, of which housing would be one element.

The memorandum concludes, therefore, that there is little opportunity for a meaningful trade-off between the housing and highway sectors.

The memorandum also concludes that there are some serious limitations to increasing aid for highway construction in the area. These include:

—the inability of the Latin countries to make counterpart contributions for new construction, and

—already strained highway maintenance capabilities which cannot readily absorb new construction programs.

Thus the pace of highway construction is much more limited by institutional capacity to plan, construct and maintain roads than by shortage [Page 2] of funds. On the contrary, there appears to be a greater availability of resources to finance highway construction among the various international lending agencies than there is for projects in other sectors.

  1. Source: National Archives, Nixon Presidential Material, NSC Files, Box 797, Country Files, Latin America, LA General, volume I 1–7/69. No classification marking. At the end of the memorandum the President wrote: “1) I expected this. 2) I am not satisfied. 3) In all our Latin program I want to turn away from Housing and other welfare handouts—and toward highways, etc.—which produce wealth and where we know our money does something tangible. 4) Have Meyer et al give me a report on this.” A report was not found.
  2. President’s Assistant for National Security Affairs Kissinger summarized a memorandum from AID regarding the possibility of transferring funding from housing to highways in AID programs in Latin America. Kissinger informed Nixon that AID Administrator Rutherford Poats thought it would be difficult to transfer funding and outlined his reasoning. Nixon disagreed with AID’s conclusion and asked the State Department for a new study.