Foreign Relations of the United States, 1977–1980, Volume II, Human Rights and Humanitarian Affairs

108. Action Memorandum From the Assistant Secretary of State for Human Rights and Humanitarian Affairs (Derian) and the Legal Adviser (Hansell) to the Deputy Secretary of State (Christopher)¹

Washington, January 24, 1978

Human Rights Reports and OPIC

Issue for Decision

Should the human rights reports the Secretary of State will submit to Congress by January 31 include reports on five countries, including Brazil, where the Overseas Private Investment Corporation (OPIC) is engaged in financing, insurance or guaranty activities, but which otherwise are neither receiving nor proposed to receive assistance for which human rights reports would be required?

Essential Factors

Statutory Requirements

Section 116 of the Foreign Assistance Act of 1961, as amended (FAA), prohibits assistance under part I of that Act to the government of any country which engages in a consistent pattern of gross violations of human rights, unless the assistance will directly benefit the needy people in the country concerned. As amended in 1977, section 116 also requires that the Secretary of State report to Congress by January 31 of each year on the status of human rights in countries that receive assistance under part I of the FAA.² The question here is limited to whether a human rights report should be submitted on the five “OPIC only” countries; no decision is required as to whether any of these countries are engaged in a consistent pattern of gross violations. The full text of the statute is attached at Tab 1.³

OPIC

OPIC is established by title IV of chapter 2 of part I of the FAA as an agency of the United States under the policy guidance of the Secretary of State. According to the authorizing legislation, the Corporation is governed by a board of directors appointed by the President, with Senate advice and consent, and chaired by the Administrator of AID. Section 231 of the FAA provides that the purpose of OPIC is to complement the development assistance objectives of the United States by mobilizing and facilitating the participation of United States private capital and skills in the economic and social development of less developed friendly countries and areas. The Corporation provides financing, insurance and guaranties to private U.S. investors in less developed countries with which the United States has agreements covering such programs. The government-to-government agreements (required by section 237(a) of the FAA) normally provide that projects and activities are subject to approval by the government in whose territory the project or activity will take place. (See, e.g., U.S.-Brazil Investment Guaranty Agreement at Tab 2,⁴ 18 U.S.T. 1807, TIAS 6327.)

OPIC does not program the issuance of loans, insurance or guaranties in specific countries on an annual basis. The guaranteed and insured projects are selected, developed and financed in the first instance by private investors. The Corporation provides coverage for eligible and acceptable investments, upon application by investors and payment of a premium, on a case-by-case basis. OPIC loans are also considered on a case-by-case basis. OPIC has maintained that its activities do not constitute assistance to foreign governments and, therefore, are not governed by section 116 of the FAA (except when a foreign government is directly involved in a project).

Since section 116 of the FAA was originally enacted in 1975⁵ OPIC has initiated steps to take human rights considerations into account in its programs. Arrangements have been made to keep OPIC apprised of actions taken in furtherance of United States human rights policy objectives. Pursuant to recommendations by the Interagency Committee on Human Rights and Foreign Assistance, the Corporation suspended negotiations last year on program agreements with Uruguay and Chile.

Pending Legislation

OPIC’s insurance and guaranty authorities under present law lapsed on January 1. A bill pending in the House (H.R. 9179)⁶ which will renew those authorities through September 30, 1980, was amended on the floor to include a provision which would make section 116 of the FAA expressly applicable to “any insurance, reinsurance, guarantee or loan by the Corporation.” This amendment was adopted on November 3 following an extensive debate, during which the sponsor, Congressman Harkin, asserted that his intent was to make explicit an application of section 116 which was intended when that statute was originally enacted. OPIC supported an unsuccessful alternative amendment, sponsored by Congressman Bingham, which would have made section 116 applicable only to projects in which a foreign government participates financially.

The companion Senate bill (S. 1771), which has passed the Senate, contains no comparable provision.⁷ Accordingly, the Administration will probably have an opportunity in February to express its views to the House-Senate conference committee on what the law should be in this regard. This issue will be addressed separately at a later date.

Need for Decision

An immediate decision is needed on whether reports should be submitted to Congress by January 31 with respect to the status of human rights observance in those countries where OPIC had been issuing insurance and guaranties until the lapse of its authority, but which do not receive any other assistance subject to the FAA’s reporting requirements. The countries concerned are Barbados, Brazil, Grenada, Trinidad-Tobago and Western Samoa.⁸

Legal Considerations

According to its terms, the reporting requirement in section 116(d)(1) of the FAA is applicable to foreign countries that receive assistance under part I of the FAA. It is clear that OPIC operates under authority of part I of the FAA; OPIC’s authorizing legislation comprises title IV of chapter 2 of that part. The inclusion of OPIC’s authorization within the chapter of the FAA entitled “Development Assistance” and the statement of its purpose in section 231 of the FAA are indications that the Corporation is intended to serve, among other objectives, the purpose expressed in section 102(a) of the FAA “That the United States, through private as well as public efforts, assist the people of less developed countries in their (development) efforts . . .”

These indications are reinforced by the relevant legislative history. The 1969 legislation which created OPIC was first considered in the House Committee on Foreign Affairs.⁹ The Committee’s report described the Corporation as “a new instrumentality complementing other assistance programs by encouraging and promoting U.S. private enterprise in contributing to the development of less developed countries.” H. Rep. No. 91–611, 91st Cong., 1st Sess., p. 23 (emphasis added).

That Congress still regards OPIC primarily as an instrument for carrying out foreign development assistance purposes is evidenced by the Senate and House reports on the pending OPIC amendments. These provide:

“OPIC’s chief purpose is to mobilize the resources of the U.S. private sector to promote economic and social development in the developing countries . . .” S. Rept. 95–505, 95th Cong., 1st Sess. 5 (1977).

“According to the legislation authorizing OPIC, its primary goal is to encourage the flow of U.S. capital and skills into less developed friendly countries, thereby promoting the economic and social development of those countries.” H. Rept. No. 95–670, 95th Cong., 1st Sess. 9 (1977).

The foregoing considerations suggest that section 116(d)(1) should be construed so as to require the submission of reports on countries where OPIC is engaged in financing, insurance or guaranty activities. L believes this is the better interpretation of the law.¹⁰

However, an argument could be made that these reports are not legally required. Congress has not always been consistent in its treatment of OPIC activities as “assistance” for other purposes under the FAA and, despite Congressman Harkin’s assertion as to the intent of section 116, there is no specific legislative history on its application to OPIC. Legislation concerning OPIC which clearly addresses human rights issues is pending and, in the meantime, it is not clear what kind of reporting Congress expects or will require.¹¹

Policy Considerations

The decision on whether or not to submit reports on the five “OPIC only” countries ultimately depends upon a choice between competing policy interests.

On the one hand, a failure to report would probably be criticized by some in Congress as being in violation of the law and evidence of a lack of sincerity and consistency in the Administration’s human rights policy. This could have broad undesirable consequences as further legislative proposals on human rights are considered. In particular, it might adversely affect the currently pending OPIC authorization bill. Legislation directed specifically against Brazil is also a possibility.¹²

On the other hand, the submission of a human rights report on Brazil would be strongly resented by the government of that country, which has already informed us that it will reject any security assistance which is conditioned upon the submission to Congress of such a report. Brazil’s denunciation of virtually all bilateral military cooperation agreements was a direct and emotional response to the FY 1978 human rights report on that country. We believe Brazil would respond similarly to a human rights report tied to any other program.¹³

OPIC is currently engaged only in a few projects in Brazil. Existing OPIC expropriation coverage in Brazil as of June 30, 1977, was around $200 million. Further, under present policy, OPIC would accept future applications concerning investments only in a few areas—energy and mineral resources, small business, and “exceptionally developmental” projects. The program is probably not of great importance to the Brazilian government and, therefore, might well be denounced if it became the cause for a further human rights report.¹⁴ Furthermore, the Brazilians could—and probably would—point out that OPIC’s programs in the first instance benefit U.S. investors in return for fees paid by them; the Brazilian Government would not consider OPIC programs as assistance to Brazil.¹⁵ Retaliatory action by Brazil in other fields is also possible.

A further deterioration in our relations with Brazil over the issue of human rights could detract from our ability to deal effectively with that country on many important issues (including continuing nuclear discussions). The Brazilian Government has recently asked us for confirmation that we do not intend to submit a human rights report because security assistance will be terminated.¹⁶ Our reply should address whether a report will be required because of any other program, i.e., OPIC.

If a policy decision were made to defer the submission of a human rights report on Brazil and the four other “OPIC only” countries, Congress might nevertheless specifically request such a report concerning any of them. It would, of course, be very difficult and probably counterproductive to resist a specific Congressional request for a report on any country. In this regard, a request made under section 502B(c) of the FAA would have to be honored within thirty days or we would have to suspend all security assistance in the pipeline (including licensed exports under commercial contracts).

Bureau Views

HA, L and H favor including reports on the OPIC only countries. These bureaus believe submission of the reports is the action most clearly consistent with current law, and will avoid a potentially damaging dispute with Congress (especially in seeking a favorable outcome on the pending OPIC authorization bill). L further points out that submission of a report would remove an impediment to other forms of continued U.S.-Brazilian cooperation, including FMS cash sales of spare parts, which the Brazilians desire but which they cannot now request without openly acquiescing in a human rights report on Brazil. Once a report had been submitted, Brazil could decide what, if any, U.S. assistance it wished to request and we could decide on an appropriate response based on the merits of any proposed transaction.

(A question has also arisen as to whether failure to file a human rights report would bar Brazil from purchasing military equipment through commercial channels. The definition of “security assistance” in section 502B includes licenses for the export of commercially-sold Munitions List items, and it may be argued, as DOD does, that failure to submit a human rights report would preclude the issuance of such licenses. The better view is that inasmuch as commercial exports are not, and have not been, “proposed” as part of the annual congressional presentation materials, Congress should not be presumed to have intended such an anomalous result in the absence of clear legislative history to the contrary. Thus for example, countries receiving only commercial exports are not included in the Congressional Presentation Document. It is our considered view that section 502B does not prevent the licensing of commercial exports to a country for which no human rights report has been submitted.)

ARA and EB believe a report on Brazil should not be submitted to Congress absent a clear legal requirement or a specific request from the Congress. These bureaus believe that, because the Brazilians have gone to such lengths to remove the reasons for our submitting one (by rejecting security assistance), a voluntary submission would be interpreted as a deliberate and gratuitous offense which would do lasting harm to our bilateral relations.

OPIC’s primary concern is to avoid a Congressional objection which might prejudice its efforts to secure an acceptable human rights provision, tailored specifically for OPIC, in the pending authorization bill. OPIC believes that the reporting requirement of section 116(d)(1), referring as it does to “countries” receiving assistance under Part I of the FAA, can be read as requiring a report solely because of the availability of OPIC programs, without necessarily concluding whether, at present, section 116(a) applies to OPIC absent foreign government participation. OPIC, therefore, is neutral as to the report-filing options set forth below, as OPIC understands that each would be pursued in such a way as to avoid prejudicing issues to be resolved in the House-Senate conference on the OPIC bill.

Recommendation

That you decide whether—

(1) The Department should include human rights reports on the five “OPIC only” countries, explaining to Brazil in advance that we will do so because of OPIC insured and guaranteed projects in that country;¹⁷ or

(2) The Department should include human rights reports on the five “OPIC only” countries, explaining to Brazil in advance that we will do so primarily because we do not wish to foreclose legally the possibility of cooperation with Brazil in FY 1979 (favored by HA and L);¹⁸ or

(3) The Department should not include human rights reports on the five “OPIC only” countries, explaining to Congress, if asked, that the lack of clarity in the present law, and the fact that legislation on this subject is now under consideration in Congress warranted deferral in our judgment.¹⁹ (We would comply with any Congressional request for reports on these countries.) (Favored by ARA, EB and S/P.)²⁰

1. Source: National Archives, RG 59, Central Foreign Policy File, P780027–0324. Limited Official Use. Sent through Cooper. Drafted by Michel on January 12; cleared by Boerner, Schneider, Arellano, AID/GC, Roberts Smith, Hunt, Stahnke, Jennone Walker, and Frank Bennett. Michel initialed for the clearing officials, with the exception of Arellano, who initialed the document. Anderson’s initials appear on the memorandum.
2. Section 502(b) of the FAA establishes a similar reporting requirement with respect to countries where security assistance programs are proposed. A single report will be submitted on each country either receiving assistance under part I or proposed to receive security assistance, or both. Exclusive of countries with only OPIC programs, reports will be submitted on 109 countries. [Footnote in the original.]
3. Not found attached.
4. Not found attached.
5. Public Law 94–161 amended the Foreign Assistance Act of 1961 and added Section 116. For additional information regarding P.L. 94–161; see footnote 4, Document 1.
6. Congress, in 1974, extended OPIC’s charter and ordered the corporation to turn over its investment functions to private corporations. By 1977, members of Congress concluded this provision had proved unsuccessful and introduced companion bills (S. 1771 and H.R. 9179) to reverse the phase-out of these functions and renew OPIC’s charter. The House suspended action on H.R. 9179 in November 1977 following the introduction of two amendments by Long and Harkin, yet anticipated that debate would resume early in 1978. (Congress and the Nation, Volume V, 1977–1980, p. 268)
7. Introduced by Sparkman on June 28, 1977, S. 1771—the Overseas Private Investment Corporation Amendments Act—passed the Senate on October 25, 1977.
8. An unknown hand bracketed the portion of the paragraph listing these countries.
9. Reference is to the Foreign Assistance Act of 1969 (P.L. 91–175); see footnote 5, Document 81.
10. An unknown hand bracketed the portion of the paragraph that begins with “insurance” to the end of the paragraph.
11. Debate resumed on H.R. 9179 on February 23, 1978. (Congress and the Nation, Volume V, 1977–1980, p. 268)
12. The FY 1979 Foreign Assistance Appropriation Act (P.L. 95–148) already prohibits the use of funds for FMS credit to Brazil and other Latin American countries which have rejected U.S. security assistance in whole or in part because of our human rights reports. [Footnote in the original.]
13. An unknown hand bracketed this paragraph. For information regarding the Brazilian rejection of bilateral military aid, see footnote 6, Document 42.
14. An unknown hand bracketed the portion of the paragraph that begins with “‘exceptionally developmental’” and ends with “became.”
15. An unknown hand bracketed the portion of the paragraph that begins with “investors” and ends with “assistance.”
16. See footnote 4, Document 91. In telegram 10185 from Brasilia, December 13, 1977, the Embassy noted that the Brazilian Foreign Ministry’s Department of the Americas had requested written confirmation from the Carter administration that a human rights report on Brazil would not be submitted to Congress. (National Archives, RG 59, Central Foreign Policy File, D770464–0332) In telegram 10534 from Brasilia, December 27, the Embassy repeated the request for written confirmation, noting “further delay in responding to Itamaraty’s [common reference to the Foreign Ministry; Itamaraty is the palace that houses the Ministry] request may indicate to the GOB that the USG is still debating the consequences of a human rights report on Brazil, and that we will not honor their specific request not to be considered for security assistance.” (National Archives, RG 59, Central Foreign Policy File, D770482–0263)
17. H favors submission of reports, and has no position as to how this is handled with the Brazilians. [Footnote in the original. There is no indication as to whether Christopher approved or disapproved this recommendation.]
18. H favors submission of reports, and has no position as to how this is handled with the Brazilians. [Footnote in the original.]
19. An unknown hand, presumably either Lamb or Oxman, crossed out parts of this sentence and revised it to read: “The Department should not include human rights reports on the five ‘OPIC only’ countries, because legislation on this subject is now under consideration in Congress.” The following handwritten comment appears in the left-hand margin of the paragraph: “This is basis for Dep. Sec’s approval of option 3.”
20. An unknown hand initialed Christopher’s approval of this recommendation; a stamped notation reads: “Jan 30 1978.”