Foreign Relations of the United States, 1969–1976, Volume E–10, Documents on American Republics, 1969–1972

624. Memorandum From Secretary of the Treasury Connally to the President’s Assistant for International Economic Policy (Peterson)¹ ²

Washington, April 26, 1971

Subject:

• U.S. Foreign Economic Policy Towards Peru

I have reluctantly approved a favorable U.S. vote in the Inter-American Development Bank covering an $11.8 million road loan to Peru. I did so only because I saw no immediate alternative in the context of our past and present approach toward Peru. However, this approach runs counter to my strongly held view that our present policy towards Peru, and certain other foreign nations, is not productive in terms of our over-all national interest. I believe it makes little sense for the U.S. to provide assistance, or help in other ways, to those countries who are taking action against U.S. economic interests.

In the particular case of this loan to Peru, I have agreed, as an exception, for the following reasons:

(1) I believe that, instead of acting forcefully in the face of expropriation action and meeting this issue head-on by invoking the Hickenlooper Amendment or other overt action, we have, by default, been placed in an acquiescing stance. Since we have not acted overtly bilaterally, a negative vote in the Inter-American Bank now would mean we are doing in a multilateral institution what we have not had the resolve to do bilaterally. The potential repercussions for the IDB are obvious.

(2) The amount of multilateral assistance going to Peru is not large. Our policy toward the country can now be reviewed in the more critical context of bilateral support for large Peruvian mining ventures.

(3) Our comments of disagreement with Peru’s actions, which we will make at the time of approval of the loan, will lay the way open for future strong actions in the Bank, should no favorable resolution occur shortly of the innumerable economic problems now at stake.

(4) I understand that our favorable vote now in no way compromises our freedom of future action, regarding invocation of Hickenlooper or any other actions which may be deemed appropriate.

I believe our economic policy towards Peru, and other countries following similar policies, urgently needs review. Here is a country which has moved against our investments in petroleum, mining, construction, fishing and other industries. I can foresee no prospect of change in attitude or behavior on their part, given our present posture, and I believe this attitude will spread unless we act.

John B. Connally

1. Source: National Archives, RG 59, Central Files 1970–73, AID (IDB) 9 PERU. Confidential. Printed from a copy that bears Connally’s stamped signature.
2. Connally outlined his reasons for reluctantly supporting an Inter-American Development Bank loan to Peru because he saw no other alternative. He argued it was counterproductive for the United States to provide assistance to nations that were hurting U.S. economic interests.