Foreign Relations of the United States, 1969–1976, Volume E–11, Part 1, Documents on Mexico; Central America; and the Caribbean, 1973–1976

448. Action Memorandum From the Assistant Secretary of State for Inter-American Affairs (Kubisch) and the Assistant Secretary of State for Economic and Business Affairs-Designate (Enders) to Secretary of State Kissinger¹

Washington, June 24, 1974.

Jamaica: AID Loan for Rural Education

Problem:

What action should be taken on a pending AID loan for Jamaica in light of the bauxite problem?

Background/Analysis:

AID has ready for possible authorization this fiscal year a $9.1 million loan to Jamaica for rural education. The loan project has been developed over the last year in close collaboration with the Jamaican Government which gives it a high priority. Because of its continuing involvement the GOJ is aware of where the loan stands and has been expecting authorization momentarily. Ambassador Fletcher has been inquiring almost daily as to the status of the loan.

The Country Team recommends proceeding to authorization and signing as originally planned. The argument here is that deferral would be regarded by the GOJ as an attempt to coercion—as penalizing poor Black children in the interests of rich corporations—and would produce no positive effect on the future of the bauxite negotiations (Tab A). AID also favors proceeding normally and is concerned that deferral or tying the loan to the negotiations would be seen as an inappropriate use of development resources to support U.S. company interests.

ARA and EB do not believe this small loan provides any real leverage, but consider it neither timely nor wise to proceed under the circumstances on a “business as usual” basis. Such a course could be misinterpreted in Kingston and here as USG acquiescence in Manley’s bauxite impositions. At the same time, shelving or cancelling the loan could have a harmful effect on our ability to influence the bauxite negotiations.

ARA and EB therefore propose AID authorization now from FY 1974 funds, while concurrently informing the GOJ that the signature of any bilateral agreement can not be unrelated to developments in the negotiations. The authorization would be presented as evidence of our presumption that a resolution to the differences with the companies will be found and that conditions will permit us to go ahead in the near future with the rural education loan. L concurs in the proposed signing delay but does not favor tying final actions to progress on the bauxite front.

Ken Rush agrees that we should not go ahead with business as usual. He also favors authorization of the loan but holding off signature until the bauxite situation improves.

L notes with respect to legal issues that, while the passage of the Jamaican revenue legislation probably constitutes a “step to repudiate or nullify existing contracts” as set forth in the Hickenlooper amendments, assistance to Jamaica is not yet foreclosed. The GOJ has six months to “take appropriate steps” to discharge its obligations.

If the loan is to be authorized this fiscal year, a decision to go ahead is needed as soon as possible.

The Options:

1. Proceed with loan authorization in FY 1974 and signing thereafter in accordance with standard procedures.

Pro:

—Would have a positive effect on U.S./GOJ relations and would demonstrate our desire to maintain these relations on a cooperative basis in the spirit of your hemispheric policy.

—Could have a favorable effect on the atmosphere for the bauxite negotiations.

Con:

—Could be viewed by the GOJ and others as an indication of relative indifference on the part of the USG toward GOJ unilateral action in increasing bauxite revenues and its expressed intent to reject ICSID authority on matters involving natural resources.

2. Shelve loan authorization for the time being.

Pro:

—Would signal to the GOJ and others that the USG is seriously concerned about Jamaica’s actions in the bauxite field.

—Would demonstrate USG support of the interests of U.S. companies and the American consumer.

Con:

—Would be viewed by GOJ as punitive action, would antagonize friendly elements in GOJ, and adversely affect U.S./GOJ relations.

—Would not cause the GOJ to modify its legislation on bauxite revenues.

3. Proceed with AID loan authorization but tie execution of the bilateral loan agreement with Jamaica to developments in the bauxite negotiations.

Pro:

—Would indicate to the GOJ a desire to proceed with the loan and a presumption that we will do so, but would also make it clear that the USG cannot be indifferent to actions adversely affecting its nationals or its interests.

—Would indicate USG support for aluminum company and American consumer interests.

—Would leave open the option of using the loan as part of a large package of “incentives” for leverage with the GOJ.

Con:

—Would relate our assistance efforts to the bauxite negotiations and could result in Jamaica claiming coercion by the U.S.

—Could result in the GOJ rejection of the assistance because of economic pressure with a harmful effect on future bauxite negotiations.

Bureau Views:

AID recommends proceeding with the loan as scheduled in FY 1974 (Option 1). ARA and EB recommend authorizing the loan but tying execution of the loan agreement to developments in the bauxite negotiations (Option 3). L recommends that the loan be authorized in FY 1974 but that the agreement only be delayed sufficiently to avoid the impression of “business as usual” without tying it to the bauxite negotiations (variation of Option 1). If this is too fine a line, Carl Maw feels we should go ahead with the authorization and signature on schedule. No one is recommending shelving the loan indefinitely. (Option 2)

Recommendation:

That the loan be authorized by AID in FY 1974 but execution of the subsequent bilateral agreement with Jamaica be tied to developments in the bauxite negotiations (Option 3).

Alternatively, that the loan be authorized in FY 1974 and the subsequent agreement negotiated and signed normally (Option 1).

Alternatively, that the loan be authorized in FY 1974 and tied to progress on bauxite, but that the agreement be delayed sufficiently to avoid the impression of “business as usual” variation of Option 1).

Alternatively, that the proposed loan authorization be indefinitely shelved (Option 2).

1. Summary: Kubisch and Enders requested a decision from Kissinger on how to proceed with a planned AID loan to Jamaica in light of the bauxite problem.

   Source: National Archives, RG 59, Central Foreign Policy File, P800080–1424. Confidential. Drafted by Shlaudeman on June 22 and cleared in substance by Kleine and Maw. Telegram 1909 from Kingston, June 4, is attached but not published. An unknown individual hand underlined “but consider it neither timely nor wise to proceed under the circumstances on a ‘business as usual’ basis;” and “until the bauxite situation improves.” Kissinger approved the first recommendation (option 3) on June 25. In telegram 162106 to Kingston, July 25, the Department reported that Kubisch had informed Fletcher that the loan had been approved but that “our ability to provide assistance is not unrelated to developments in the bauxite negotiations.” (National Archives, RG 59, Central Foreign Policy File, D740202–0526) In telegram 2613 from Kingston, July 29, the Embassy expressed concern about the possible reaction of the Jamaican Government to the linkage between the loan and the bauxite negotiations. (Ibid., D740205–0824)